Mammoth Real Estate Q&A — The RMF-2 Moratorium And Get Out And Vote!

This Mammoth Real Estate Q&A appears in the Easter Weekend 2024 issue of The Sheet.

Q: Now that the RMF-2 moratorium looks to be coming to an end, what are the impacts you see to these properties, the market, and the industry? Or has it had any impacts at all?

A: This saga has really just begun and the citizenry of Mammoth Lakes should be paying attention to it. Or they will be. As economic cycles begin to repeat, the local businesses and local employment could be seriously impacted by the upcoming decisions made in November. And the discussions that occur between now and then may be even more critical. And all of it will be sending messages to those who have, or are contemplating, investing in the community and region.    

The November election will include a proposed additional 2% taxation on almost all activity in Mammoth Lakes. I haven’t seen the exact wording and scope, but it alone could provoke a variety of unsuspecting sectors within the community. This could impact general spending within the community, down to things like the purchase of a new pair of skis. The consumer has the right to vote with their feet. The law of unintended consequences can find its way into so many areas. In November there are also two Town Council spots open and inevitably the additional taxation will be a campaign issue with potential candidates running for or against (you better have your arguments in order). 

The candidates will also have to ponder the “what ifs” if it doesn’t pass. The current Council has channeled The Terminator and has promised “We’ll be back” to propose STR caps, other restrictions, additional STR owner fees, etc.. (STR—short term rentals for those who can’t keep the new, regularly used acronym in their minds.) All of these threats come in an era of inevitably decreasing guest volume, guest spending, general inflation and ever-increasing Town expenditures. (The website Strong Towns recently reiterated their seminal piece titled “6 Principles for Building a Strong Town”. The #1 Principle; Financial solvency is a prerequisite for long-term prosperity.) The recent STR moratorium exercise failed to produce any real answers or solutions except more taxes and more spending. I can’t wait for any potential candidate’s ideas and proposals.

Of course, sending the Town back into the direction of a bankruptcy process could certainly help this pro-moratorium crowd meet their housing goals—let’s drive condo values down substantially. But then again their favored constituents might be unemployed or certainly underemployed. History can repeat. Qualifying for a mortgage, or even paying rent may become difficult at best. But it might be fun to go back to the 1980s where nobody had any money but there was plenty of time for skiing and hiking (the only golf course was in Bishop).

I’ve been approached by several second homeowners (and not necessarily STR owners) who have asked about financially supporting recall efforts of current Council members. While it is a good idea, I believe waiting to see how this election process unfolds. There will be the opportunity for candidates to support the referendum position, or not, and other future ideas (threats). From there second homeowners can decide for themselves. Some position holders may be able to raise substantial war chests from the second homeowner crowd, to levels never seen in local elections. 

Imagine if 3,500 local STR owners each threw in $20, that would be $70,000. Other second homeowners may throw in more. In this day and age that could finance buying votes, or paying sophisticated cheaters, or who knows what? The Sheet could be salivating over this type of campaign advertising expenditures (60 page issues!). Money like this has never been seen in a local election. This alone could motivate potential candidates and position holders.    

But maybe through the process there will be some fruitful discussion and maybe some emerging solutions, or reality. Rather than having something jammed down our throats.

Focusing on real estate, the whole moratorium process also brought some other absurdities. The consultants, staff members, and even Council members seem earnest in arguing about the diminishment of some properties in town (the “5-minute city” area) because of the “portal” concept. Many seem duped into believing it is real. I’ve been selling real estate in Mammoth now for 38 years and my old concept of Mammoth condos being “31 Flavors” has never been more exact. Every buyer, owner (and even our guests) have a different preference. It is like assuming everybody wants a Tesla. Some people want a 4Runner, or a Silverado, or… 

Sure, getting “on” the Ski Area (like actually getting on a ski run) has become more difficult in the IKON era. But experienced owners and guests have their own strategy. And it isn’t necessarily staying near a portal to the Mountain. Staying downtown and riding the shuttle can be just as easy as many other strategies. And later in the day walking across the street to après ski happy hour or dinner can be a valuable tradeoff. The preferred portal concept for STRs is naive and poorly informed. For those who think it is real, just “save it”, you sound ridiculous. 

What about the current values of STR properties and especially in the RMF-2 zone? Ironically, persistent inflation will likely drive more guests to many of the older RMF-2 properties. It is simple economics and has happened in the past. This is simply why these properties have thrived over the years to begin with. Mammoth and SoCal have experienced plenty of rocky economic times in the past. The proponents of this moratorium and whatever they hoped for in an outcome, have a shallow historical perspective. And as we know “those who do not learn from history are doomed to repeat it.” 

For now, condo values are holding. Some RMF-2 owners/sellers may have panicked during this moratorium period and sold “short.” But time will tell, there are certainly other dynamics at play in the market. Some, more desirable properties may actually be going up in value. Inventory continues to be on the low side in Mammoth. Attractive properties are selling.

Historically, if it wasn’t for the STR capability of these RMF-2 zoned condo projects, many of these projects would never have been built in the first place. The demand and affordability simply would not have existed. In the 1970s when many of these projects were developed, the extra rental income/financial help as well as the property and reservation management made it all work. It created invaluable bed base in the resort as it grew. And decades later it ultimately worked to stuff the Town coffers with almost excess revenues.

And other impacts of this moratorium? The process has created a new level of distrust and doubt with the Town, including both the staff and the public officials. Investors often refer to it as jurisdictional risk. Those who are considering bringing capital to this community now have some concern about the maturity and cooperation (or lack of cooperation) from the municipality. The old business axiom; capital flows to where it is treated best. California alone makes this a challenge. And in this era of much needed redevelopment in Mammoth, the recent Town mentality and behavior isn’t really inviting. This alone could affect the future of many segments of the community. 

Those looking at commercial investment in Mammoth are constantly taking the “temperature” of the local government. These investors expect challenges, but don’t want to go anywhere near “arbitrary and capricious” obstruction. After decades of evolution to get to an investor-friendly environment here in Mammoth, the actions of the last six months has now raised new concerns. Whether this was an unfortunate bump in the road, or whether it gives new enlightenment for the public policymakers, or whether it marks a new era and potential downward spiral of intelligent investment in the community, is yet to be seen. The upcoming election process could be a turning point, either way.

The RMF-2 moratorium has also affected the more “grassroots” real estate investors in Mammoth. They might not be the most affluent owners in Mammoth in this very typical mountain resort community, but they are profoundly important in many ways. These properties are the core for TOT and TBID. They are, relatively speaking, the highly-occupied transient properties with paying guests, owner stays, and the owner’s favored guests. All of these people are significant spenders throughout the whole community. These are the “bread and butter” properties in the community. Many of the current owners are clearly pissed off at this new discrimination. And they are seriously concerned about both the referendum, which could compromise their revenues and values, or the unknown future actions taken after a potential referendum loss. Buyers in the RMF-2 segment are also hesitant, and you can’t blame them. The “market hates uncertainty.”  

What our leaders also don’t grasp; these RMF-2 properties are typically from the 1970s era. They require a higher level of maintenance—roofers, painters, carpenters, plumbers, electricians and on-and-on. And the recent BAE study suggests about 50% of these properties are being serviced by STR-related companies including a high level of housekeeping and linens turnover. A great majority of this cash flow stays in the community and region. And goes around and around. The value of this local velocity of money is lost on those who proposed this moratorium. This moratorium could be affecting local small businesses and they don’t even realize it.    

And then there is the new STR certification process that should be rolled out this summer. This really isn’t controversial and is part of the STR evolution and maturation in town. We’ll see how it goes. The Town has a poor track record for following through on these compliance mandates. A revolving door of Town employees hasn’t helped. The local real estate industry has dealt with the inconsistency and poor communication for decades. But with the upcoming tax referendum and uncertain future Council action, many condo owners should consider applying for and securing certification as soon as possible. That would include RMF-2 owners and others. Who knows what future Councils will dream up? 

I don’t currently own a property in the RMF-2 zone, but I have in the past. If I was an RMF-2 owner I would be insulted by this recent Town exercise. And I’ve heard from many who are. The true economic damage and variety of loss is yet to be seen. It didn’t have to be this way. Let’s hope between now and November we can hear from more rational minds.

Happy Easter! 

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