DEADWOOD, S.D. – Several Black Hills communities have revisited their short-term rental ordinances since the COVID-19 pandemic spurred a surge in visitors looking for their own private space.
In Rapid City alone, Airbnb listings have shot up by 75% in the past three years, according to Elevate Rapid City.
That growth is likely contributing to the housing shortage. And while the short-term rental industry represents a business opportunity for local property owners, the patchwork of local policy can complicate matters.
Nathan Derksen knows this firsthand. He runs Bear Property Management and oversees both long- and short-term rentals throughout the Hills.
Bart Pfankuch
"It's very, very difficult, in that Pennington County has their rules, Rapid City is in the process of rules, Custer has their rules, Custer County has different rules," he explained. "Hill City has rules. Lead has rules. Deadwood has rules. Lawrence County does not have rules. Meade County does not."
Derksen added that many of those rules differ from each other.
"We're a licensed, fully state-compliant company, and we're trying to comply with laws, but it feels like the target is constantly moving," he said.
Derksen would prefer a statewide approach to short-term rentals in some capacity.
South Dakota law provides for licensing of short-term rental properties that comply with various health and safety requirements, but awareness and enforcement of these regulations is limited.
As a Rapid City advisory committee considers municipal regulations, some are looking to other communities in the region for ideas on regulation and the true impact of short-term rentals on the local housing market.
Local priorities drive local policy
Deadwood first began regulating vacation home rentals 30 years ago. Demand has only grown since then.
“Deadwood, being a National Historic Landmark, has a lot of visitors come to town. We have about 3-1/2 to 4 million visits a year. And with that, we’re a town of around 1,300 people," said Kevin Kuchenbecker, the planning and zoning administrator as well as the historic preservation officer for the City of Deadwood.
"We have a large tourism industry here and, at times, it’s challenging when you have that many visitors into a small community, to balance between the housing needs of the community and the needs of our transient vacationers and our visitors that come to our community.”
In 2023, a task force revisited Deadwood's approach to short-term rentals. The city matches its short-term rental property definitions to the state’s with three different classifications.
"We have bed and breakfasts, where the owner lives on a site, provides a homestyle meal. Then we have vacation home establishments. And then there are specialty resorts. All three of those take a conditional use permit to operate in the city limits," explained Kuchenbecker.
That means a planning and zoning review, action from the city commission and annual reviews where any complaints can be taken into account. Deadwood also introduced a 200-foot buffer between short-term rental properties to avoid too many in one neighborhood.
“To date, we have nearly 40 short term rentals throughout the community. And, they are 100% compliant," said Kuchenbecker. "We have a software program that does third-party monitoring, so we can see when somebody leases a property or advertises it on Vrbo or Airbnb. And so we on a regular basis monitor the use of those properties as well.”
But in a place like Deadwood, where so much of the appeal is its historic look, some standards conflict with others.
The most common culprit: egress windows. State law requires every bedroom in a licensed vacation home to have either an exterior door or at least one window large enough to allow occupants to escape in the event of a fire. The state also has specific measurement requirements for egress windows.
“One of the challenges we have with historic preservation and in our community, being a National Historic Landmark, is any exterior, change or alteration goes through a review process. And when a use of a property goes from primarily as a residential unit or house to a vacation home establishment, there are different rules and regulations that are set up by the Department of Health when it comes to egress," said Kuchenbecker.
Though windows on homes built 120 years ago or more met standards of the day, they might not meet the current egress requirements the Department of Health has put on vacation homes.
"When you put in a larger opening on a historic resource, it could have an adverse effect," Kuchenbecker explained.
Deadwood officials hope to compromise with the Department of Health in some capacity, such as by requiring hardwired fire alarms and clear exit paths in old houses where replacing windows would compromise its historic nature. But those discussions are still playing out.
Home rentals highlight housing needs
Vacation rentals exacerbate another challenge. Basic geography and proximity to federal forest land make additional housing development in the Black Hills a challenge.
Emma Garvin, executive director of the Lead-Deadwood Economic Development Corp., said a 2022 housing study for the area anticipated up to 6% population growth. That would require up to 75 housing units for workers and up to 35 for rentals.
Part of the challenge is simply finding the space to develop.
"We do have some pocketed areas of land, and certainly you can blast anything," said Garvin. "But, you know, is that kind of development what we really want to do in this area? It’s also very expensive. And so, when you’re taking a look at those projects, you really have to be guaranteed that that’s right for your community.”
Bart Pfankuch
In the same way the Old West shaped Deadwood, mining shaped Lead. The Homestake Mine sustained the community for more than a century. Much of the existing housing stock originated from the mining days.
"All of the expense and anything infrastructure, anything that needed to be done in the community was done by Homestake Mining Co. to keep their people happy and keep them safe and keep their kids educated so that they would stay working in the mine," said Garvin.
When mining operations ended and Homestake left the area in the early aughts, Lead was at a crossroads. The Sanford Underground Research Facility meant new industry opportunities, but that hasn’t necessarily translated into new or updated housing.
“Rapid City deals with this a little bit because (when) you have flat land, economic growth looks like a new Best Buy or a bigger medical facility or some of these other larger housing complexes. We don’t see our economic growth quite that in-our-faces because of lot of it has been happening underground for the last 10 years," Garvin said.
Lead had the most short-term rental listings of any South Dakota community five years ago, she said. Since then, many in-town units have shifted to long-term rentals or been sold to permanent residents.
"We have larger short-term rentals that are being built outside the city limits. Some of them are privately owned. Some of them are investment properties that are used for short-term rentals predominantly," Garvin said. "That meant that these little short-term rental owners and littler houses in the city that could have been sold for a family housing or workforce housing just couldn’t compete with that.”
Luxury housing developments like Powder House Pass and Deer Mountain Village outside of town are underway, but those are less likely to meet the average resident’s needs. Garvin said hospitality is the No. 1 industry in Lead. It’s also one of the lowest paying jobs.
Meanwhile, the first million-dollar lot sale in South Dakota was finalized in the nearby Deer Mountain development. Garvin notes a benefit to the local economy beyond housing.
"Those people are coming into Lead to get their groceries, and they're coming into Lead to eat dinner, and they're coming into to Lead to, you know, shop or do whatever they need to do," Garvin said. "I think our largest issue with workforce housing is just being able to preserve the inventory that we have."
Another challenge Garvin noted was appropriate housing for senior citizens.
"Seniors aren't moving out of their homes that could become family homes because we don't have zero-degree entry (ground-level) apartments for them, and they don't want to leave the area," she said. "They don't want to leave their church. They don't want to leave their grocery store. They don't want to leave their bank."
Places like Hill City, Lead and Deadwood use local ordinances and zoning to ensure there’s some housing stock left available for residents as the short-term rental market continues to attract visitors. But both Garvin and Kuchenbecker said it doesn't solve the problem of affordability.
"That's a challenge when the market is driven by people coming into the community, maybe from outside where the housing is a lot more expensive, coming here and thinking, 'Oh, this is very affordable,'" said Kuchenbecker.
"Yet people working on Main Street may not be able to afford those. So it becomes a challenge for the community and it’s something that we know exists and have been working toward. But again, there are some constraints just with the environment that we have, the surrounding federal lands and the available land for development.”
Rapid City considering short-term rental regulations
According to an online survey Rapid City conducted earlier this year, most residents who responded support a basic licensing and registration requirement for short-term rentals, much like the City of Lead.
It's unclear if other regulations – like Deadwood's 200-foot buffer or conditional use permits – would have the necessary support. An advisory committee is expected to make a recommendation to the city council yet this spring.
Though some Rapid City residents are quick to scapegoat the short-term rental industry, property owners generally deny contributing to a lack of affordable housing stock in the region. Instead, they point to the economic benefit of short-term rentals, both thanks to visitor spending and the largely local property owner base.
Plus, many properties serve other South Dakotans enjoying the region.
"Most of our renters come from a 200-mile circle," said Derkson, of Bear Property Management. "And in the off-season, it's a much smaller circle."
How to watch 'South Dakota Focus'
The next episode of "South Dakota Focus" airs on Thursday, March 27, at 8 p.m. Central time / 7 p.m. Mountain time. It can be viewed on SDPB-TV1, Facebook, YouTube and SD.net. The episode includes.
- A comparison of housing needs and policy in Hill City, Lead and Deadwood
- What Rapid City residents weigh while considering a proposed short-term rental ordinance
- What short-term rental owners hope full-time residents understand about their business
This story was written by Jackie Hendry, host and producer of South Dakota Public Broadcasting's "South Dakota Focus," to preview the next show. It was produced by South Dakota News Watch, an independent, nonprofit organization. Read more stories and donate at sdnewswatch.org and sign up for an email to get stories when they're published. Contact us at info@sdnewswatch.org.
