With lofty white walls, Scandinavian-style mini-kitchens and ever-mod Eames dining chairs, Andres Paglayan and Solange Serquis’ mini-hotel in Santa Fe’s Baca Street Arts District is any modernist’s dream.

With an average occupancy rate of 95 percent, it’s any hotelier’s dream.

When Paglayan and Serquis started planning the 6,000-square-foot building at 922A Shoofly St., which houses Opuntia Cafe and anchors the Railyard’s southern annex, they designed it with short-term rentals in mind.

It was 2016, and Airbnb.com, the online home-sharing titan, already had started upending the worldwide hotel industry, shifting revenues from corporate mega-chains and mom-and-pop-owned guesthouses to property-owners-turned-entrepreneurs. Paglayan and Serquis wanted in on the action.

“The main goal was to make the building sustainable economically, so it will cover its costs, the land lease and the mortgages for the construction loans,” Paglayan said. “Short-term was ideal.”

The duo’s short-term rental units, which together bring in between $5,500 and $6,000 in monthly revenue, Paglayan said, are two of an estimated more than 1,600 available for rent on platforms like Airbnb and vrbo.com within Santa Fe’s city limits. A study released last week on short-term rentals found that the number of “whole-unit” short-term rentals, or rentals of entire houses or apartments, has grown by 380 percent between December 2014 and December 2018.

In a city crippled by lack of affordable housing — and lack of housing in general — housing experts long have wondered what impact those 1,600 units, many of them converted from long-term rentals, have had on the housing crunch.

The new study, ordered by affordable-housing nonprofit Homewise and undertaken by a University of New Mexico professor, finally provides some insight.

The report, released Wednesday, finds the conversion of houses and apartments into short-term rentals is causing an increase in rents and home prices citywide.

“Since 2014 … rents increased by an annual average of 4.9 percent and median home prices rose by an annual average of 10 percent,” the report states.

The report states that the extent to which short-term rentals have contributed to the “rapid escalation” of Santa Fe’s housing costs is uncertain.

“But, based on results of a national study, it appears that about 20 percent of the city’s housing cost growth since 2014 can be attributed to the proliferation of” short-term rentals, the study states.

The report also finds the city is losing out on some $3.8 million in lodgers and gross receipts taxes annually as a result of “noncompliance” by property owners or hosts.

A look into Airbnb

Mike Loftin, who, as CEO of Homewise, works to connect families with affordable housing options, commissioned the study earlier this year, hoping to fill a knowledge gap encountered by communities around the world. (Homewise also is in the business of building homes).

“We hope this report will help Santa Fe understand that there are very specific, actionable steps we can take to affect the impact of short-term rentals on both our neighborhoods and access to affordable housing,” he said Friday in an email. “Some easy steps we can take now is to require short-term rentals to register with the city, pay their fair share of taxes, and dedicate the $1.6 million we are currently losing in gross receipts tax to the city’s Affordable Housing Trust Fund.”

There have been scant studies looking at the impact of Airbnb on cities’ housing markets. And of those undertaken, results are mixed.

A 2016 working paper by researchers at the University of Massachusetts-Boston found that with every 12 Airbnb listings added within a Boston census tract, rents increased 0.4 percent. Projected forward, they said, Airbnb’s presence alone could result in a mean increase to asking rents of $178 a month over the course of the next three years.

Using a different regression, another study found a somewhat smaller effect. Researchers at McGill University found Airbnb caused a 1.4 percent increase in New York City rents between 2015 and 2017. For that city’s median renter, that’s $32 a year in extra rent.

The studies come amid increasing scrutiny of Airbnb. From Los Angeles to Amsterdam, cities — and even whole countries — around the world are enforcing stricter regulations on the home-sharing site and its competitors.

In Los Angeles, a December ordinance restricts hosts to renting out one home — their primary residence, where they must spend at least six months of the year. Japan enacted a series of laws this past year, requiring hosts to register their short-term rentals with the federal government, and restricting the number of rental nights per year at each property to 180.

For Daniel Werwath, the chief operating officer for the New Mexico Interfaith Housing Corp., using analyses developed in other cities is less than helpful.

Werwath said he consistently feels “irked” by the overemphasis on short-term rentals’ impact. Rather than being a central problem, Airbnb and other platforms, he said, are more like icing on a multilayered cake of housing market distress.

In 2014, when Airbnb offered one-sixth the number of global listings it does today, Santa Fe’s rental market passed what Werwath described as a “critical threshold.” The rental vacancy rate dipped below 5 percent, spurring a rapid rise in rental rates.

“That’s, like, the going-over-the-waterfall of housing problems,” Werwath said.

Since then, rental rates for multifamily housing complexes have risen 45.6 percent, according to a market survey conducted by CBRE Group Inc., an Albuquerque-based commercial real estate firm. And the impact likely has been greater for single-family homes in highly desired neighborhoods.

Santa Fe’s study found that a majority of short-term rentals are clustered in the downtown area.

“The immediate impact of [short-term rentals] is concentrated in the areas of town most popular with tourists,” the study says.

Loftin said it’s not surprising short-term rentals are concentrated in the downtown area.

“The good news here is that short-term rentals are not consuming more affordable long-term housing outside of the downtown area,” he wrote. “The bad news is that they may be having a disproportionate impact in the downtown area, making it even more important that the city step up its enforcement of its existing short-term rental regulations.”

Airbnb is “certainly a problem,” Werwath said. “It’s come at a terrible time in terms of overall market conditions, but it pales in comparison to the problem that we have that we haven’t kept housing growth up with market growth.”

Navigating a ‘perfect storm’

Alexandra Ladd has been Santa Fe’s affordable housing chief since 1999. During that time, she said, she’s seen the city adopt a slew of forward-thinking approaches to tackle its long-running housing shortage for lower-income residents.

The city was one of the first, she said, to adopt a controversial inclusionary zoning ordinance, which mandates that affordable units make up a certain percentage — in this case, 15 percent — of all new multifamily housing built in a city. In Santa Fe, developers may choose to pay a fee in lieu of adhering to the ordinance.

And yet, the problem persists. In 2016, the most recent year for which data was available, researchers logged an affordable-housing shortage of more than 2,600 rentals, according to the city’s 2018 Consolidated Plan.

And that’s to say nothing of the shortage of housing for residents capable of paying more. Werwath said he’s heard estimates that, in total, Santa Fe needs in the realm of 6,500 new homes to ease the crunch.

For Ladd, it’s a problem of culture — “a perfect storm” of privilege and trauma.

“We have a historic anti-growth approach,” she said. “Some of that’s born out of the historic trauma of people being displaced, and part of it is people moving here and wanting to shut the gates behind them.”

Residents long have shown an aversion to the kinds of dense-infill developments that have proven vital to quickly easing housing shortages, especially on the lower end of the income spectrum.

Werwath noted there are more than 2,100 units either under construction or in the pipeline in Santa Fe. If those proposed but not yet permitted pass muster, he said, the city might begin to see an easing on its rental crunch. But in a city where project approval traditionally has been a marathon process, a fast solution is not likely.

Reducing or eliminating Airbnb rentals is unlikely to help either, he said. The units logged in the Homewise study primarily are located in the city’s wealthy downtown core — an area unlikely to offer moderately priced housing in the first place.

There may be a small trickle-down effect, with displaced downtown residents forced into less expensive parts of town, but even still, most Airbnbs are too expensive and too small to meet the needs of the city’s families, Ladd said.

“I don’t think the number of short-term rentals we have really make an impact in terms of that trickle-down effect,” she said. “It’s really easy to paint it black and white — ‘It’s all bad, it’s all bad.’ But I don’t think it is.”

Getting the whole picture

In the year and a half since Paglayan and Serquis first listed their two Baca Street Arts District units on Airbnb, more than 200 guests have walked through the doors.

For Paglayan, a software developer, and Serquis, a landscape architect, the investment has more than paid off. The units, they estimate, could fetch about $1,800 per month on a yearly lease. Through Airbnb, even with about $1,500 a month in expenses related to maintaining the properties, Paglayan and Serquis pocket an extra $1,000 every month on top of what they’d make with long-term rentals.

That’s money they’re pouring into their next venture, a neighboring property that will house five long-term rental units.

“When the city says [short-term rentals] take housing out of the market, I kind of think they’re somehow not seeing the whole picture,” Paglayan said.

Proponents of the platform argue Airbnb is an economic boon to host cities. According to the company’s own statistics, Airbnb users are more likely to stay outside cities’ core tourist zones than other visitors. They also stay, on average, 2.1 times longer than other tourists and spend 2.1 times more in their host cities.

Airbnb reports that 81 percent of its hosts list the homes in which they live, and 53 percent say that home-sharing through the website helped them keep their homes.

For other property owners, Airbnb has become a source of income steady and substantial enough to more than pay the bills. According to the Homewise study, in Santa Fe, more than 100 hosts list two or more entire homes, though 80 percent of hosts list only one short-term rental property.

“A surprise to me was what a big commercial enterprise [Airbnb] is, and how it’s starting to look an awful lot like the hotel industry and not a home-sharing thing,” O’Donnell, the study’s author, said. “That suggests there’s a lot of money to be made doing this.”

In Santa Fe, home-sharers earned $54 million in short-term rental revenue in 2018, an average of more than $80,000 per host per year, according to the study.

Researchers nationwide also have expressed concern that short-term rentals disproportionately benefit wealthy — and often white — homeowners. White, wealthy people are more likely to have the capital to invest in new properties. Home-sharing, the researchers argue, helps broaden an already gaping wealth gap in the United States.

Paglayan sees things differently.

“We’re in a capitalist and free market, and we have to give thanks for that,” he said. “It’s not like we can take the parts that we like and box out the parts that we don’t like.”

Still, Paglayan thinks Santa Fe could benefit from a bit more muscle on the ground.

Enforcement of short-term rental regulations in the city has been spotty at best since the city in 2016 increased to 1,000 the number of short-term rentals allowed in parts of the city that aren’t commercially zoned.

A year after that cap increase, in 2017, The New Mexican reported that city officials still hadn’t started policing unpermitted rentals. Three jobs created to handle that task remained unfilled. The city had contracted with a software company to match permitted units with those advertised on sites like Airbnb.

That software license expired in September.

Carol Johnson, the city’s land use director, said compliance since then has been reactive, resulting only from resident complaints about noncompliant properties.

The city currently is reviewing proposals to provide that software-driven enforcement service anew.

For Ladd, the affordable housing director, enforcement is key, but in the end, Santa Fe’s housing woes will require a much deeper dive.

“There is no silver bullet,” she said. “We could build new units until we ran over the edge of the horizon, and it’s still not going to affect the basic part of the problem, which is that people don’t make enough income to afford housing.”

The New Mexican’s Daniel J. Chacón contributed to this report.