STR Policy Series: STRs Are Micro-Enterprises, Not Passive Assets

by Barb Culligan Sullivan, Nashville STR Association

At its core, short-term rental activity is small business activity.

Operating an STR requires capital investment, ongoing operating costs, compliance, maintenance, insurance, and customer service. Hosts pay utilities, property taxes, insurance, furnishings, and repairs, and often hire local cleaners, contractors, and service providers.

From an economic perspective, STR hosting looks far more like running a micro-enterprise than extracting value from a passive asset.

That distinction matters, because policy outcomes differ significantly depending on whether STRs are treated as businesses to be regulated responsibly or as housing abuse to be eliminated.

How STR income is actually used

One of the most persistent misconceptions in the STR debate is that host income is largely discretionary.

The data suggests otherwise.

The report underlying this series shows that the typical U.S. STR host earns about $14,000 per year from short-term rental activity. That figure alone undercuts the idea that most hosts are operating large-scale or speculative enterprises.

More importantly, how that income is used tells the real story:

• 65% of hosts use STR income to cover rising costs of living

• 43% of hosts rely on STR income to stay in their homes

• 11% of hosts report that STR income helped them avoid eviction or foreclosure

In other words, for a substantial share of hosts, STR income functions as a financial stabilizer — not a bonus.

What happens when that income disappears

When STRs are prohibited, the financial impact is not abstract.

In New York City alone, the report estimates that strict STR enforcement resulted in approximately $197 million per year in lost host income. That loss did not come from corporate operators. It came from individual households whose budgets previously depended on that revenue stream.

Removing STR income does not just change how properties are used. It changes whether some households can afford to remain owners at all.

Why STR bans don’t automatically create long-term rentals

A common assumption in STR policy debates is that restricting STRs will push those units into the long-term rental market.

In practice, that conversion is far from guaranteed.

When STRs are prohibited, owners still face choices. They can sell, retain the property for personal use, convert it to a long-term rental, or leave it vacant. Which option they choose depends on market conditions, risk tolerance, and personal circumstances — not policy intent.

The report notes that in many resort and high-amenity markets, 40–75% of housing stock is already classified as seasonal or second homes, far exceeding the share used as short-term rentals. In those contexts, STR bans often result in properties shifting toward non-rented second-home use rather than becoming long-term rentals.

The housing shortage remains — while household income disappears.

The uneven impact on middle-income households

The effects of STR restrictions are not evenly distributed.

Households that rely on supplemental income to make ownership feasible are the most exposed. These are often middle- or upper-middle-income families who use STR income to offset high mortgage costs, taxes, and insurance.

Higher-net-worth buyers are largely insulated. They can afford to own without rental income and absorb rising costs more easily.

Over time, this dynamic can narrow the pool of potential owners, favoring those who need income the least — while doing little to expand housing options for renters or local workers.

STRs and the broader local economy

STR hosting also supports a wider economic ecosystem.

According to the report, STR activity:

• supports roughly one million U.S. jobs

• generates more than $80 billion in local guest spending

• contributes over $85 billion in total economic activity nationwide

That spending is typically dispersed across neighborhoods rather than concentrated in hotel districts, supporting local restaurants, retail, maintenance services, and small hospitality businesses.

When STRs are restricted, some of that activity shifts — but a meaningful portion simply disappears.

A more accurate way to frame STR policy

None of this suggests that STRs should operate without rules. Basic safety standards, tax compliance, and nuisance enforcement are appropriate and necessary.

But framing STR hosting as inherently abusive or speculative ignores how it functions in practice for many households. It substitutes moral judgment for outcome-based analysis and treats small business income as a problem rather than a tool.

Housing affordability will not be solved by eliminating supplemental income opportunities while leaving supply constraints untouched.