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RESORT TOWN HOUSING DILEMMA: With increased demand for vacation homes and not enough housing to go around, Lava Hot Springs is at a crossroads

December 26, 2018
Mark Lowe looks over the new LavaLowe Subdivision that’s taking shape west of Lava Hot Springs. Residences there will have to be lived in at least nine months out of the year and must not be used as rentals.

LAVA HOT SPRINGS — It’s well documented that the housing market in Southeast Idaho is booming, with home prices soaring.

Nowhere is this more true than in Lava Hot Springs, where houses are being bought up before they’re even listed, sometimes for well-above asking price.

That’s mostly because in Lava Hot Springs second homes are a hot commodity. There aren’t many houses to begin with, and because of Lava’s layout it’s hard to build new homes there.

Plus, most of the people moving into town really only want vacation homes. One local real estate agent said 8 out of 10 people who ask her about buying a home in this tourist town are looking for second homes. And most of those people are also looking to rent out their homes when they’re not around to recoup some of the costs of the mortgage.

That has resulted in a conflict over housing.

There isn’t enough housing in Lava for the people who live there, and even if those people manage to snatch up a house, they’ll likely be paying a much higher mortgage than they would have two years ago.

For people needing to rent a house, there are even fewer options.

So some of the residents of Lava are leaving, especially families with young children, and this has resulted in the Lava Hot Springs Elementary School’s student population decreasing — a major worry for many people in town.

More tourists

Mark Lowe is a Lava Hot Springs resident who has lived in Southeast Idaho his whole life. For two decades, he led the Lava Hot Springs Foundation — the state agency that runs the town’s public hot pools and Olympic-sized swimming pool — and he’s as much of a proponent of tourism as he is in favor of getting more and varied housing in Lava.

On a recent December day, he drove around his hometown in his old pickup, pointing out the things that have changed.

“When I was a kid growing up in Lava, there were lots and lots and lots of families,” Lowe said. “Now, those homes have been converted into overnight rentals. … Right now, we can go door to door to door to door. That house is empty — it’s brand new. The one that’s being built right next door to it will be empty because it’s a vacation home.”

Lowe was referring to the vast number of Lava Hot Springs houses that are empty for much of the time because they aren’t primary residences and often when they are occupied they are being rented out on a short-term basis.

Whereas before people would come up and stay in Lava’s hotels or just make a day trip out of their visit to the town and go back home, now many of them are staying in overnight rentals such as Airbnbs.

“The tourists — God love them. I spent 20 years running the hot pools and swimming pool and worked really hard drawing tourists to town,” Lowe said. “You create this need, so people were buying homes and converting them over into overnight rentals and it’s just not conducive to a neighborhood to have this transient population through the place all the time.”

Lowe says the outcome of the influx of tourists staying in so many of the town’s houses is that it’s hard to feel a sense of community when your neighbors are either never there or those houses have a constant flow of transient people.

“The negative aspect of it is you don’t have the community,” Lowe said.

Jill Dempsey, a Lava resident who is a Realtor with Idaho Rocky Mountain Real Estate based in Chubbuck, is a proponent of overnight rentals in Lava. She runs one herself in addition to owning a hotel and a long-term monthly rental there.

But she says she can understand some of the downsides Lava residents see regarding overnight rentals.

“I’m saying this as someone who owns a vacation rental myself, not all of our guests are the kinds of guests you want next door,” Dempsey said. “We get a lot of people who come up from Utah who are here to party and they don’t care who they offend (or) what they do. They’re not very good guests. … People don’t want to live next door listening to people party until 2, 3 o’clock in the morning — their loud music, their drunken talk, their beer bottles that get left all over town.”

Dempsey emphasized that the majority of the tourists in Lava are well-behaved, but those bad visitors are memorable to the residents of Lava.

“It only takes a couple of them to ruin it for everyone,” Dempsey said. “And that’s what’s happened is there’s that party atmosphere that’s really offended a lot of people.”

Additionally, the tourists take a toll on the town and its infrastructure, leaving Lava residents to pay for the damage left behind.

Dempsey said, “There’s no denying it that the basis of our business and the people who live and work there is tourism. And it’s kind of a love-hate relationship. Our busy season is during the summer, and by the time the end of August rolls around, Labor Day, we are so glad to have it over. It’s not that we don’t appreciate people. But it’s a lot of work. … I think it’s really hard for a town our size to go from having 500 people on a day-to-day basis to on weekends in those busy summer months to swelling to several thousand. It’s tough. It’s a lot of wear and tear on things, and the residents here end up paying for a lot of that infrastructure and the cost.”

Tourism is the life blood of Lava Hot Springs, and no one wants to see it disappear, but the Mayor of Lava Hot Springs, T. Paul Davids, hopes a balance can be reached to both grow tourism and keep — and draw — families and affordable housing.

“I’m very positive in the outlook for Lava, but I’m also just making sure that both aspects grow equally together — that one doesn’t grow faster than the other as far as tourism and housing for people to come and raise their families,” Davids said. “We just want to keep the town growing and also have our identity.”

Changing demographics

According to statistics from the U.S. Census Bureau, the total population of Lava Hot Springs has fluctuated over the years from 521 in 2000, to 407 in 2010, to an estimated 419 in 2017.

The under-18 population has gone down from comprising 27.4 percent of Lava’s overall population in 2000, to 16.7 percent in 2010, to an estimated 15.3 percent in 2017.

According to information obtained from Lowe, Lava Hot Springs Elementary School’s student population has gone from a peak of 152 students in 1996 to a low of 59 students in 2013. There are currently 64 students at the school.

Lowe said the reason for the student population decline is that couples are having fewer children than they were a few decades ago and housing in town is too expensive for young families.

“Families just starting out, they can’t afford to compete with the tourists in town,” Lowe said, pointing out that the availability of lower cost housing in other Bannock County towns is attracting many young couples who might otherwise live in Lava.

Lava Hot Springs Elementary School’s shrinking student numbers have many of the town’s residents scared that the school will shut down.

Davids knows exactly how important the school is to his town.

“In these little communities, that is really the hub of the community because there are activities and things going on that people attend at Christmastime and attend during the school year and it brings that identity,” Davids said about Lava’s elementary school. “But if you were to lose that because you don’t have any families here with kids, then you just kind of lose your identity as a town that raises families along with the tourism.”

Additionally, Lava Hot Springs Elementary School is very well rated within the state. Niche.com ranks it as 43rd best out of Idaho’s 376 elementary schools, with 85 percent of the school’s students being proficient in English and 75 percent being proficient in math. The state average is 53 percent in English and 43 percent in math.

A lacking housing market

According to Dempsey, about a year ago, the cost of housing in Lava Hot Springs really spiked. Housing prices all over Bannock County increased at that time, but in Lava, there is much more demand than there is supply.

“We’ve hit a growth spot,” Dempsey said. “Houses that sat on the market for a couple of years were sold like that.”

She said any houses that hit the market in Lava Hot Springs quickly attract multiple offers.

Some Lava houses, Dempsey said, are sold before they even make it to real estate websites like Zillow.com or Realtor.com because homes in the town are in such high demand and many houses sell for higher than the asking price.

“Word of mouth gets around town and there’s people in town who want to buy and (the houses) get sold before they even get on the multiple-listing service,” Dempsey said.

Dempsey said many of the buyers are from outside of Southeast Idaho and are able to pay with cash.

“Because there has been such competition, I’ve had a lot of cash offers this year from people who come in from outside the area and that frustrates the locals because they go in and make an offer on a place and most of them don’t have that kind of cash sitting around,” she said. “They’re working people like the rest of us and they need to take out a loan, a mortgage, and can’t afford to pay cash. When someone comes in and offers cash, it’s more appealing to a seller because it’s not dependent on an appraisal and any contingencies the bank may make for the purchase of the property. So (local people) have lost out on properties because of that.”

But Dempsey said the housing market is only bad if you’re looking to buy.

She said, “On the one hand, if you live here, you’re frustrated by it, but when it comes time for you to sell, you appreciate it. It depends on what shoe you’re wearing at the time.”

The median household income in Lava is estimated at $53,942 — about $11,000 per year more than Pocatello. But BestPlaces.net, which uses recent home sales data to put into a cost of living calculator, estimates the median home price in Lava is $185,700, 28.6 percent above Pocatello’s median price of $144,400.

And even if you can afford a home in Lava, there just isn’t much in the way of available housing.

A search on Zillow.com on Dec. 12 showed just six homes for sale in the greater Lava Hot Springs area with a median price of $274,950. Only two of those homes were within Lava Hot Springs city limits.

That’s because, according to Lowe, the residents of the small town are loathe to give up their homes.

“People have emotional attachments to Lava,” Lowe said. “They’ve lived here a while, they got (their home) from their parents or whatever else.”

Lowe says the increase in overnight rentals has put a strain on the market for single-family homes.

“The problem you run into in Lava is that there’s not a lot of new construction and whatever new constructions comes in people are using for vacation homes,” Lowe said. “They only come up on weekends. So when you live here, (a lot of times) your next-door neighbor doesn’t live here.”

Recent estimates weren’t available, but numbers from the U.S. Census Bureau from the last two censuses show an increase in vacation rentals in Lava. Housing set aside “for seasonal, recreational, or occasional use” went from 44 units or 14.2 percent of the town’s 309 housing units in 2000 to 61 or 19.2 percent of Lava’s 317 housing units in 2010. Presumably, that number has increased in the last near-decade.

Lava also has some terrain restrictions, with mountains on either side and state-owned land taking up a large amount of the available area the city could conceivably annex.

Dempsey said another problem with the housing market in Lava is that it’s hard to build there.

“If you’re in city limits, the city is pretty difficult to deal with — their whole process and their requirements and their costs and everything,” Dempsey said. “We’re a town of 500 people and we have an ordinance enforcement officer. That right there speaks volumes. It’s tough.”

In addition, a lot of Lava, even within city limits, lacks infrastructure and doesn’t have access to city services, adding a lot of cost to people wanting to build in town.

“Anything that’s on the hillsides or the outskirts, you’re in city limits but the city has not developed services to that point … (so) you have to (pay to) install all that infrastructure up to that point because it’s not there,” Dempsey said.

Additionally, the long-term rental market in Lava is suffering.

“Do I think there’s a problem with housing? Yes. Even finding affordable rentals is difficult,” Dempsey said.

She added, “Most jobs in Lava when you work in Lava are minimum wage. Trying to live on that is very difficult. … My concern as someone who owns a business is if we don’t have affordable rentals in town, we’re not going to have employees.”

Overnight renting just makes sense

While Dempsey understands the frustrations Lava residents have regarding overnight rentals, she said overnight renting just makes sense from a homeowner’s standpoint.

The 12-year resident of Lava said the income she makes off her nightly rental is much more than she would make if she rented it monthly.

Dempsey said simple economics is the reason why so many Lava homeowners are renting out bedrooms in their homes for over $75 per night as opposed to renting out those residences for $500 per month to a single renter.

“I can make more as a property owner on that property nightly than I can monthly,” she said.

Dempsey said there’s also another added benefit to Airbnbs: It’s easier to get rid of bad tenants.

“It’s harder to get out a monthly tenant than it is a nightly tenant,” Dempsey said. “I have a problem with somebody who’s in there for one night? Guess what? They’re gone the next day.“

She said the local residents get upset when she talks about turning her monthly rental in town — a tri-plex — into an Airbnb.

“I don’t want to be the pariah of Lava, but I’ve got to do what I’ve got to do what makes sense for me,” she said.

Dempsey said there is no incentive for people in Lava to do monthly rentals, even if there is a need for them in town. She also said she would be on board with talking to the city about some of those incentives. But so far, nothing has happened.

Giving Lava options

Mark Lowe and his wife, Lorrie, think they have an idea that might solve some of Lava’s problems by adding housing and hopefully bringing in families with young children to populate the elementary school.

Right now, it’s mostly just snow-covered dirt, but the Lowes hope that before long a patch of land they own just west of Lava Hot Springs — a beautiful spot overlooking the winding Portneuf River and the mountains surrounding — will be a thriving community of people who live there year-round.

The LavaLowe Subdivision is different than your average housing development because of a clause that requires homeowners to make the houses their primary residences. That means no overnight rentals like Airbnbs and even no long-term rentals. The houses there have to be lived in by the property owners.

“So the whole idea here is ‘No, this is a neighborhood.’ You’re living here. You know your neighbors. You don’t have renters. You can’t rent the place out,” Mark Lowe said. “You own it. You have to live in it. It’s just a way to really establish a neighborhood and a community.”

Hopefully that means lower and more reliable housing costs for the people of Lava Hot Springs.

“This is set up to be a community,” Lowe said. “Our schools are suffering. The population of the school has gone way down. (The new subdivision) will give people a chance to move into town without paying that inflated price.”

The nine-month residence clause will be enforced by the homeowner’s association with legal backing from Bannock County.

“I believe in my heart that this is something that Lava needs,” Lowe said. “Something that is really going to take off and redefine this community somewhat, too. … I grew up here. I’d like to see it back to being a vibrant town again instead of just transients.”

The Lowes bought the property after Wally and Alice Whitehead, two staples of the Lava Hot Springs community, died.

“They both passed away within a couple of months of each other and it was like, ‘Geez, that would be a perfect place for this type of development,’” Lowe said. “I’m not a developer. My wife’s a seventh-grade math teacher. It’s not our life ambition to go into business and develop property. But when this came up, it was like, ‘Somebody should do that.’ And I was like OK and bit the bullet.”

The Lowes are in the process of making arrangements with the county for approval of the final plat for the subdivision, which will allow people to purchase a lot and start construction of their new home. Mark Lowe said that final approval will likely happen by Jan. 1. Water, sewer, electricity and natural gas have all been installed in the subdivision and are ready to use.

The only major things left to be done are the paving of the subdivision’s road and the construction of a walking path that will connect the subdivision with a park that fronts the Portneuf River.

Eventually, the property will likely be annexed by the city of Lava Hot Springs, and the Lowes have already signed the paperwork giving their approval for that inevitability.

Phase 1 of the LavaLowe project has 10 lots for houses, but when it is finished there will be 29 lots in the subdivision. Most of the subdivision’s lots are a third to a little under half an acre. But one of those lots is larger — about 1.5 acres — and the Lowes are planning on re-subdividing it into about 10 lots with twin homes.

The Lowes are selling the lots for single-family homes for between $42,500 and $47,500. That’s just for the land. It’s up to the buyer to then pay for the construction of the home.

“I used to always say when I ran the (Lava Hot Springs) Foundation that you’re either moving forward or you’re moving backwards. There’s no static position,” Lowe said. “And this is going to help Lava move forward. It’s going to bring some vitality into the community, some growth of families and people and a sense of community. That’s the biggest thing is a neighborhood that’s got that sense of community in it. You know who your neighbors are. You’re there for the long-term. It’s not just a transient get together.”

Lowe continued, “I think it really will pay dividends in the long run for the people that live there and that sense of community for the area as a whole. It’s not just going to be the local people relocating to here. There’s a lot of influx of people from out of the area. That’s always been one of the real attractions of Lava is the vitality here because of that outside blood coming in. It really was and is still a great place to live for that reason.”

Mayor Davids, a Lava Hot Springs native who has lived there most of his life, said the city of Lava Hot Springs is on board with the idea of the subdivision.

“We think it’s a great idea,” Davids said. “We’re trying to attract more families to live in the area just so we don’t lose our little town to just tourism. Tourism is the main thing, and we love that. We love people coming to Lava. But we want to remain a town where families will come to raise their kids and we can still have our elementary school and still have some of those things that identify us as a community.”

Dempsey said she understands why the Lowes are creating the subdivision like they are, but as a realtor she said a lot of people are wary of the no-rental clause.

“I always tell when I have people looking, ‘There’s this subdivision but here’s the rule,’” she said. “And when you’ve got the majority of the people who are looking to move here from outside the area, two things: They don’t like that they can’t rent it nightly, but more importantly, what if they were to lose a job in the future? Or if they were to get relocated for work and they weren’t able to sell the home based on the market conditions at the time? They are prohibited from renting it out. And that’s a scary thought to not be able to make your house payment.”

But, she added, “When you create a subdivision, you get to create the rules. It’s like your own utopia. You get to decide how it’s going to be.”

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