You know about “the problems” in Lake Tahoe, right? Of course you do. It’s been covered ad nauseam by the local and national media.
It’s an irresistible story: quaint small town (in this case, towns) live quietly, out of the spotlight, for eons and then suddenly something happens to change all of that. Something makes it so that the town is overwhelmed with new residents.
People from The City.
For these new people, actually living in the mountains — breathing in the clean air, skiing whenever they feel like it, on a Tuesday, if the whim strikes them — was always an impossible dream. They sat in their cars for years, crawling up I-80 with everyone else, convincing themselves that the three-hour drive (hardly ever; more like five hours on a Friday afternoon), was worth it. You get up there Friday night, ski all day Saturday, ski more Sunday morning, spend five more hours coming home on Sunday.
That was their reality and then came COVID. Now, freed from the tyranny of their offices and flush with big-city money, they want that Tahoe feeling all the time, not just on weekends and not sandwiched between 10 hours of traffic. Who can blame them, really?
The locals, that’s who. This is the part of the story you already know, because it’s the irresistible part.
You’ve seen the pictures of rugged mountain people toting signs reading “Go back to the Bay Area!” and the like, sharing their fears with reporters, telling tales of blasé young tech workers, new to town, speaking loudly in restaurants, throwing money around, lodging their Teslas in snowbanks and generally acting gross. I’m going to skip this part. If you want more, go find Rachel Levin’s excellent piece, “When the Techies Took Over Tahoe,” in Outside. It’s really good.
I’m going to skip it because these sorts of culture clashes are inevitable, and it’s not like Tahoe was some kind of secret paradise anyway, not for the past few decades. Granted, I’ve never been there on a rainy Tuesday in October, but generally my sense about the place was that moving there to escape The City was kind of like moving to St. Helena because you want to live in a slow-paced small town; both places are sort of adjunct Bay Area, preferred city people getaways, and thus are well past their “secret” stage.
What I’m interested in is the economic impact of the change in how real estate operates in Lake Tahoe.
While we know that real estate is very hot — the Tahoe area saw $612 million in real estate sales for Q1 of 2021, including a record-setting $264 million March, and was recently tapped as Redfin’s “hottest market in the country” — we don’t yet know what plans these new buyers have for their purchases. Anecdotal evidence suggests they’re all moving to the mountains, installing home offices and setting up for the long haul. If this is true, it’ll mean a serious shift in the Tahoe short-term rental market and take a sizable chunk out of Tahoe’s tax revenues.
Look at these numbers: according to the Insights Collective, which is a tourism economy think tank, “available units in western mountain resorts” declined 5.5 percent this past winter, at first likely because of COVID but now perhaps also because of owners deciding to move into their second homes? Insights Collective did the math; a 5.5 percent decline equals $75 million in total revenue.
How does that translate to Lake Tahoe? VFRs (visiting friends and relatives/home rental properties) and hotels in Tahoe are charged a 10 percent Transient Occupancy Tax. In the 2018-19 fiscal year, the TOT generated $7.5 million for area governments. Last year, thanks to COVID, that number fell by 20 percent. It could’ve been much worse had the region not rallied late in the year.
But will it continue to rally if new buyers want to live locally year-round and second homeowners convert their properties to primary residences? It doesn’t seem likely that Lake Tahoe, whose ambivalent relationship with VFRs has led to new, strict ordinance proposals for South Lake Tahoe, El Dorado County and Placer County, will step in to “save” this tax stream. If you take away the Airbnbs, but increase your restaurant, retail and resort revenue, is it a wash?
I guess we’ll find out, and I guess we’ll also find out if the new “permanent“ residents are truly permanent, or if they’re snap out of their mountain fever dream when their employers invite them back into the office… leading to a glut of VFR properties in Lake Tahoe.
Larry Rosen is a San Francisco-based writer, editor, podcaster and recovering former Realtor. He is a guest columnist and his viewpoint is not necessarily that of the Examiner. The Market Musings real estate column appears every other week.