Bar Harbor's crackdown pushed short-term rentals into nearby towns without regulations - Bangor Daily News

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Bar Harbor code enforcement officer Angela Chamberlain still gets plenty of calls from potential investors looking to scoop up properties and turn them into lucrative vacation rentals.

But after voters this fall capped the number of non-owner occupied short-term rentals, she often has to tell them to look elsewhere.

They may be doing just that.

With Bar Harbor already out of space for new short-term rentals, real estate agents and vacation buyers are looking at neighboring towns, potentially pushing the accompanying financial gains and socio-economic pitfalls of short-term rentals to new heights in other parts of Hancock County.

The explosion of short-term rentals in the region is likely to create battles over the soul of a tourist mecca already grappling with a housing crisis and larger questions about its future.

“Whether because of the new and existing regulations in Bar Harbor or higher home prices and limited inventory, we have seen more prospective vacation rental owners expand their search radius in recent years to communities like Blue Hill, the north side of Acadia on the Schoodic Peninsula and right outside Mount Desert Island,” said Jason Schlosser, the director of sales at Vacasa, a nationwide vacation rental management company.

Rob McKenney, a real estate agent in Ellsworth, knows of several investors that had been keen on Bar Harbor but are now shopping elsewhere.

They could turn to Mount Desert, Southwest Harbor and Tremont — the three other towns on the island — or communities just on the other side of the bridge, such as Trenton, Lamoine and Ellsworth. But it’s been hard to know what the fallout from the Bar Harbor vote will be because the area’s real estate market has been so tight.

Hancock County towns that have or are considering rules on short-term rentals:
— Bar Harbor has a cap on the number of non-owner occupied units in town and has minimum stay lengths.
— Stonington has a task force that is scheduled later this month to present several potential ways to regulate rentals to the town’s Select Board.
— Sedgwick has enshrined short-term rentals in its site plan review process, giving the town a chance to monitor the number of new rentals.
— Mount Desert has a committee looking at potential ordinances and is pondering a survey to identify how many short-term rentals are in town.
— Sorrento’s planning board has been holding public meetings to poll residents on what they think should be done, if anything, about short-term rentals.

“I think it’s too early to tell because inventory is so low,” McKenney said.

Mount Desert Island has been a getaway for city dwellers since the 1800s, and tourism remains Hancock County’s biggest economic driver.

While Bar Harbor has been the locus for decades, one town that’s increasingly seeing interest in short-term rentals is Southwest Harbor.

The town on the “quietside” of Mount Desert Island was earlier this year named the 10th best place to invest in a rental property in the entire U.S. by AirDNA, a platform that tracks short-term rentals. The company also suggested Ellsworth, a 30-minute drive from Bar Harbor, and Bernard, a village in neighboring Tremont.

Jesse Dunbar, the Tremont town manager, said he’s received an increasing number of calls about his town’s rules for rentals since Bar Harbor’s vote in the fall.

Like almost all of Hancock County, which totaled $37 million in Airbnb earnings in 2021, Tremont has no rules in place.

Only a few communities are actively considering regulations or initiating discussions on the topic, prompted by concerns that an influx of short-term rentals could choke the already limited supply of year-round housing. Bar Harbor decided to enact its limits to slow down the conversion of its year-round rental housing into short-term rentals.

But several town officials across the county said that rentals either simply haven’t come up as a concern — some are actually welcomed addition to their economies — or they were reluctant to wade into these sticky property rights discussions.

“I don’t know if the [select] board is quite ready to tell people what they can do with their property,” said Marilyn Lowell, the town manager in Southwest Harbor.

The weekly rental pressure on MDI has spilled across the island’s causeway to the Ellsworth area, which has about 440 weekly rental homes, ranking it among the top-10 vacation rental markets in Maine, according to AirDNA. That figure includes weekly rentals in seven surrounding towns, most notably Trenton and Lamoine.

The issue of regulating weekly or short-term rentals has yet to come up in Ellsworth, the largest municipality in Hancock County, according to City Planner Elena Piekut. Several pending high-density housing projects in Ellsworth, where such development has far outpaced other Hancock County towns in recent years, have helped to reduce weekly rental pressure on the city’s existing housing stocks, she said.

But she thinks it is just a matter of time before she and other city officials broach the topic. A recent local controversy about whether people should be allowed to moor floating structures in lakes in Ellsworth has shown that demand for weekly vacation rentals could lead to complications in the city.

“So the short-term rental conversation is coming sometime, unless the economy cools it down first,” Piekut said.

Bucksport teacher Ed Hatch recently started an Airbnb at his camp in Ellsworth to help cover the costs of owning the second property, which is common.

Like others, he expected more short-term rentals in Ellsworth now that Bar Harbor’s closed to all but owner-occupied rentals.

“I think you will see more people getting involved,” he said. “It’s a guaranteed income if you want to do it.”

The town that’s currently considering the most action on short-term rentals outside of Bar Harbor is Stonington, a small island fishing community that has a scenic downtown along the water. While summer vacation rentals have an integral piece of the island, town officials are starting to worry that things are falling out of balance.

A view of downtown Stonington from across the harbor. The town has a task force coming up with potential ways to regulate short-term rentals as it becomes increasingly hard for people to find a place to live in town. Credit: Ethan Genter / BDN

About 55 percent of the town’s downtown is owned by non-residents, and only about 15 percent remains commercial property. That has led to concerns that further degradation could lead to the hollowing out of the town, all while the lobster fishery, the town’s economic driver, faces its own challenges.

“We have to save our community,” said Linda Nelson, Stonington’s economic development director. “We don’t want Deer Isle-Stonington to become a place that is used only for investments.”

Stonington’s task force on short-term rentals is expected to bring several regulatory options to the town’s select board later this summer.

Some towns are dipping their toes into the issue by considering registrations for Airbnb-like properties. Gathering this type of data can give them a sense of what’s actually within their borders and help decide if there is a problem or not.

This spring, Sedgwick voted to enshrine short-term rentals into its site plan review process, allowing it to better understand how many are being built. Mount Desert and Sorrento are both looking at requiring permits for buildings used as short-term rentals.

Though nowhere else in Hancock County has gone this far, Bar Harbor isn’t alone in such caps. Other municipalities in Maine have implemented them, and they’re becoming more prominent in resort communities across the country.

Around the same time as Bar Harbor, Breckenridge, Colorado, limited the number of short-term rental licenses to 2,200.

Like in Maine, that has sent investors looking at nearby neighborhoods that historically haven’t been a big part of the rental market and at properties that could have once been considered a starter home are also increasingly turning into rental cash cows.

“It’s pushing buyers into these outlying areas,” said Elisabeth Lawrence, a county commissioner for Summit County, Colorado. “We’re seeing it bleed into bedroom communities. Those areas are also getting purchased and also becoming vacation rentals.”

If other Hancock County towns do decide to try and regulate rentals, it could be a painful process.

The months leading up to the Bar Harbor vote were filled with contentious public hearings, battles between the town’s planning board and town council and property owners decrying the move as government overreach.

Some were vehemently against prohibiting the transfer of the short-term rental license. Right now, if a property that has operated as a rental is sold, the new owners have to apply for a new license. But with the town currently over the cap, there are no licenses to be had, essentially shutting down investment properties.

Owners also argued that many homes in Bar Harbor, especially larger ones on the water, were never going to be affordable and implementing these caps isn’t going to help.

The regulations even drew a lawsuit from a local real estate agent, who argued that the town didn’t follow the right process in the vote.

“It’s really divided the community and created some deep gashes,” said Michele Gagnon, the Bar Harbor town planner.

In a recent discussion with another Maine community that wanted to learn how Bar Harbor’s new rules were going, Gagnon suggested that any towns that are considering action shouldn’t wait too long to make a move.

“If you guys are going to get into vacation rentals, and you’re going to reel it back, you’ve got to do it as soon as possible,” she said. “Because once that train has left the station, reeling things back is extremely difficult.”

Bangor Daily News reporter Bill Trotter contributed to this story.