A popular tourist town in central Arizona is betting it can lure short-term rental investors away from potentially higher profits in exchange for a subsidy for renting to locals.

Short-term rental owners in Sedona who provide a lease to a local worker or long-term resident and who don’t use their property as a short-term rental for three years can receive up to $10,000 for a three-bedroom house.

That may not be enough to lure investors who can make nearly that much per month using short-term rental platforms like Airbnb and Vrbo.

But the move comes as typically lower wage workers fail to find housing options they can afford near the businesses that keep the towns moving and keep visitors coming. It’s also an attempt to work around legislation that prohibits most regulations on short-term rentals.

“Businesses in Sedona regularly complain of difficulty finding employees, often resulting in reduced operating hours,” the city said in announcing its approach earlier this month. “Residents recognize the problem as they find their favorite dining spots, grocery stores, and pharmacies closed during non-peak hours.”

The city set aside $240,000 in its annual budget for the program, as first reported by 12News in Sedona.

Owners would also have to charge no more than $2,200 per month for a three-bedroom home — far below the average rent for the area, according to rental portal Zumper.

If a property sells during the lease period, they must either return the money they received or the new homeowner must continue the lease agreement.

The popular desert community south of the Grand Canyon had previously banned short-term rentals, a prohibition that was overturned by the state law that took effect in January 2017.

Since then it has worked on a housing plan to try and generate more workforce housing. That plan included subsidies to see whether landlords are interested in passing up potentially higher revenues to help create stable workforce housing.

The popularity of short-term rentals, meanwhile, has exploded. 

“The 3,829 total rooms in STRs in greater Sedona have been added in the last approximately five years and exceed the 2,789 traditional hotel rooms in the ame area,” the city said in a report. “These additional STR rooms did not exist as lodging prior to 2017 and they play a large part in the visitation influx in recent years.”

Those rentals are also potentially highly lucrative for investors earning a premium on short-term rentals.

The average daily rate in Sedona is $301, according to short-term rental data tracker AirDNA. The occupancy rate, to the number of nights per month investors can expect to rent out their listings, is 77 percent.

Hosts can expect to earn an average of up to $7,300 per month if they maximize their rentals.

On the other hand, the town is hoping some investors take the assurance of having long-term renters at a relatively high price point to help land workers some stable housing options.

City housing officials say short-term rentals make up about 15 percent of housing in Sedona.

Single-family homes in Sedona are now valued in excess of $1 million, according to the Zillow Home Value Index and Redfin.

Email Taylor Anderson

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