Amid Tucson housing shortage, Airbnbs fill up whole apartment buildings | Subscriber
When he wasn’t hanging out with the Russian president’s relatives, Eduard Gomberg says he made $1.5 million last year running a network of 66 Airbnbs from Tucson to Tel Aviv.
That’s how the University of Arizona business school alumnus described his fortunes in a 2021 episode of “Millennial Millionaires Through Real Estate,” a podcast run by one of his friends.
Technology allows Gomberg, 27, to run his tourist rental empire from anywhere in the world, he said. Last year he ran it from his hometown east of Moscow during a trip that included “snowmobiling with (Russian President Vladimir) Putin’s nephew,” he said.
Running dozens of Airbnbs in different countries takes very little time and effort — no more than “five to 10 hours a week” he said.
“Once you taste the wealth, once you taste the freedom, you can never go back,” he said.
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Gomberg’s story illustrates how Airbnb, the popular online booking site that began as a way for homeowners to rent spare rooms, has become a magnet for far-flung wealth-seekers who are turning entire Tucson housing complexes into vacation rentals, an Arizona Daily Star investigation found.
In the midst of a critical housing shortage, they are further shrinking the number of homes available for city residents and adding to concerns about soaring rents and house prices.
Ed Gomberg was featured in a 2021 episode of the “Millennial Millionaires Through Real Estate” podcast with Jonathan Farber.
Airbnb’s business practices make it virtually impossible to measure the extent of such activity. A company official wouldn’t comment when asked about it, and the firm doesn’t publicly disclose the number of units for rent in Tucson, their specific addresses or the full names of operators.
The Star identified dozens of Airbnbs being run by out-of-state interests by reviewing Pima County property records, state business registration records, Airbnb listing photos and company maps that show tourists the general areas in which units are located.
In one Tucson neighborhood, two California-based operators are running 26 Airbnbs under a single roof, the Star found.
Gomberg, a dual citizen of Russia and Israel, said he lives full time in Tel Aviv and runs a total of 20 Airbnbs in Tucson. Most are in aging multifamily housing — a few duplexes, a triplex, a four-plex and a six-plex — and within walking distance of the UA or the downtown core.
Gomberg told the Star he’s boosting Tucson’s tourism economy and providing stability for landlords “who are tired of renting to students, tired of dealing with annual tenant turnover and maintenance issues.” Instead, they rent to Gomberg, who fixes them up — at his own expense, he said — and hires locals to clean and manage them.
Leasing houses and apartments to rent them to vacationers is known as “Airbnb arbitrage” — a method Gomberg detailed in an 2019 episode of the “Millennial Millionaires” podcast. The practice is banned in many U.S. cities including San Francisco, home of Airbnb headquarters, where an operator must live in a dwelling at least nine months a year to legally rent to tourists the rest of the time.
Olga de Jong, 80, of Tucson, said she and her sister lease a total of nine apartment units to Gomberg, a 1948 tri-plex on East Lee Street and a 1949 six-plex on North Fremont Avenue. She said the arrangement is working well.
“He’s a nice young man and he seems to be doing a good job,” she said. “And he always pays on time.”
A two-story apartment building at 4302 E. Bellevue St. has all 26 units listed to rent on Airbnb. It is owned by Oradell Portfolio Associates LLC, an Arizona firm founded and run by two Californians.
“Equivalent to a demolition”
Dowell Myers, a University of Southern California professor who has researched housing shortages, said renting a whole house or apartment to tourists “is like tearing it down” in terms of impact on the local housing supply.
“It’s equivalent to a demolition,” Myers said an interview. “It’s one thing if you rent out a room in your house. But when you rent out the whole house you’ve removed it from the residential market and transferred it to the hotel market.” If local housing is scarce “that’s going to make it worse,” he said.
Though it doesn’t release exact figures, Airbnb’s website says “over 1,000″ stays” are available in Tucson. Entities that track the industry say the number is substantially higher.
The Old Pueblo has close to 4,000 “active” listings — defined as units for rent at least one day in the past month — according to AirDNA, a firm that scrapes data from the public websites of Airbnb and similar operators and often is cited in university research on the impact of the so-called sharing economy.
About 90% of the Tucson listings on Airbnb or Vrbo, a similar online platform, are for an entire dwelling rather than a room in an occupied home, AirDNA said.
Inside Airbnb, a nonprofit that tracks the industry by somewhat different metrics, said Pima County has more than 4,000 listings including 2,182 in Tucson, 523 in the Catalina Foothills, 299 in Oro Valley, 249 in Casas Adobes and 124 in Green Valley.
Jake Wegmann, an associate professor of urban planning at the University of Texas at Austin, said “the jury’s still out,” on the extent to which rents and house prices are affected by a heavy presence of vacation rentals.
A study published last year by three researchers from Purdue University, the University of Denver and the UA in Tucson found rents and home prices went down about 3% in three cities where Airbnb operators were restricted to using a single address. Other research has found modest impacts, such a 2016 study that found rents rose slightly when 12 Airbnbs were added to a Boston census tract.
But study results from one part of the country don’t necessarily translate to other areas with different local characteristics, Wegmann said.
A triplex at 2725 E. Lee St. has a duplex and a guest house, both built in 1948. University of Arizona graduate Eduard Gomberg, who runs 20 Airbnbs in Tucson, said one of them is in this complex.
Big profits at stake
Vacation rental listings “exploded” in Arizona between 2015 and 2021, from around 4,000 listings to nearly 28,000 — a 706% increase statewide, a recent Arizona State University study found.
That may be because landlords can reap big profits renting to tourists instead of locals, said the study, which provided a Tucson example based on statewide industry averages from June 2021.
That month, Arizona visitors who booked short-term rentals stayed an average of three nights at $282 a night, a timeframe in which the occupancy rate was nearly 68%. At those rates, a Tucson landlord could make $5,750 a month on a tourist rental that would only fetch an average of $1,059 a month from a long-term tenant, the ASU study said.
Sweet deal in Arizona
Rental platforms that do business in Arizona have one of the sweetest deals in the country thanks to the state Legislature: the right to operate anywhere free of local government oversight. Only five other states — Florida, Idaho, Indiana, Tennessee and Wisconsin — had similar open-door policies last year.
Arizona’s law, passed in 2016, left Tucson with no say over where vacation rentals can locate, how many days a year they operate or how many is too many when there isn’t enough housing for local residents.
The 2016 change, sought by Airbnb, had strong bipartisan support, said state Rep. John Kavanagh, R-Fountain Hills, who was in the state Senate at the time and cast the lone vote against the move to strip cities and towns of their regulatory role.
Republicans liked the change because it meant fewer restrictions on private property owners and Democrats saw it as a way for aging empty-nesters to earn extra income from spare bedrooms, Kavanagh recalled in an interview.
“I distinctly remember a sponsor saying right before the vote that this was going to be a great thing for grandma and grandpa,” he said.
More than 30 Arizona mayors — including Tucson’s Regina Romero, South Tucson’s Bob Teso, Oro Valley’s Joe Winfield and Frederick Mueller of Sierra Vista — sent a letter 18 months ago to CEOs of Airbnb and Expedia, which owns Vrbo, that called on the firms to drop their longtime opposition to local oversight of the industry.
“Your companies have actively and cynically opposed needed reform through public relations and paid lobbying efforts,” the letter said.
“Affordable housing stocks are being gobbled up by investors who are focused on short-term commercial uses of their properties, rather than neighborhood stability and prosperity,” said the letter, which also cited problems with noise, lack of street parking and frequent police calls in some communities.
Airbnb spokesman John Choi said tourists who stayed in Arizona rentals added $500 million in tax revenue to state and local coffers last year. Choi did not answer questions about the extent to which Airbnbs are being run by corporate interests rather than mom-and-pop operators.
“Families across Arizona rely on short-term rentals to supplement their incomes and support the state’s tourism economy, and we remain focused on working with leaders across the state to protect these benefits and develop real solutions to address concerns raised by some local leaders,” Choi said in an email.
He said the company is supportive of a proposed update to the 2016 Arizona law that would allow municipalities to fine Airbnbs that cause repeated problems. But the measure, due to be voted on soon, stops short of restoring the oversight power local governments lost when the Legislature took it away.
26 Airbnbs in one building
Ruth Rinehart, interim pastor of First Universalist Church of Denver, recently booked a four-night stay at a Tucson Airbnb while in town to help her sister move. On arrival, she was shocked to learn her $60 unit was one of 26 filling an entire apartment complex.
“No wonder Tucson has a housing shortage,” Rinehart said in an interview. “Flipping an apartment complex into Airbnb units shouldn’t be allowed.”
The complex at 4302 E. Bellevue St. has been operated since 2016 by two Arizona firms linked to a California real estate broker and his associate, public records show. The two also have six other Airbnb listings in Tucson: a gated four-plex at 6020 E. Second St. with two recreational vehicles in the parking lot also used for tourist stays.
The broker, Richard Bui of Fountain Valley, has an active California license that lists his business address as a Newport Beach office that was torn down 10 years ago according to a former co-worker. His associate, Kim Bui, is the registered agent for his Arizona firms and her business address is a “suite” on North Campbell Avenue that’s actually a rented mailbox at a commercial mailbox firm that closed in 2020, records show. It isn’t clear from public records if the Buis are related.
The addresses of their Airbnbs were used to obtain a $54,000 federal pandemic relief loan at their Bellevue Street complex and a $33,000 loan for their six units on East Second Street, public records show. Both loans are now listed as “paid in full or forgiven.”
Neither Bui could be reached for comment. They didn’t respond over a 10-day period to three email messages sent to the link on their the Airbnb booking site or to two text messages sent to a California phone number linked to their Tucson operations.
Another state vote
State lawmakers have voted several times in recent years on reform measures that stalled, some criticized as too soft on the industry, others as too harsh. This year 14 vacation rental bills were introduced, some of which called for a full repeal of the state’s 2016 law. Of the few bills that made it past the starting gate, only one seems poised to become law.
Senate Bill 1168 is backed by the industry and was introduced by Republican Sen. J.D. Mesnard, whose district includes Chandler, Gilbert and Sun Lakes. His bill, and a companion measure in the House, allows local governments to impose fines of $500 to $3,500 on operators for things like municipal bylaw violations. Repeat offenders could see their state business tax licenses suspended.
Mesnard said doesn’t think Airbnbs are to blame for the housing crunch. He said his bill fixes what’s broken by creating financial penalties for “party houses” and other bad actors.
State Rep. Morgan Abraham of Tucson, a Democrat, called the measure a good idea that doesn’t go far enough. He thinks Tucson is being overrun by Airbnbs and intends to push for further changes.
“If this is how things are now,” Abraham mused, “can you imagine what they’ll be like five years from now if we don’t do anything about it?”
Contact reporter Carol Ann Alaimo at 573-4138 or [email protected]. On Twitter: @AZStarConsumer
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