Winter Park and Breckenridge are offering big incentives to homeowners who convert their short-term rental properties to housing for locals.
A program called “Short-Term Fix” offers homeowners up to $20,000 for converting their Winter Park vacation homes to housing for locals.
The Town of Breckenridge and Summit County last week unveiled a similar program. The “Lease to Locals” program offers short-term rental owners up to $27,000 if they ink a year-long lease with local workers. That’s on top of rent they collect from their tenants.
“Just like any industry, there has to be some checks and balances to manage the benefits and minimize the disruptions,” said Tamara Pogue, a commissioner in Summit County, where one-third of homes are rented by vacationers.
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The incentive programs in Winter Park and Breckenridge are the latest strategies deployed by Western Slope communities grappling with a critical lack of housing that is the prime suspect in an equally painful shortage of workers. The regulatory tinkering with short-term rental growth spans the country as the American tourism economy rebounds with a tsunami of visitors renting private homes.
It’s hard to find any community in Colorado’s high country that is not yanking levers on short-term rentals. Councils are suspending permits. Capping numbers. Raising taxes and fees. And now offering big dollars to owners of vacation homes willing to pull their properties off the short-term market.
Voters in Avon will weigh special taxes on short-term rentals to fund workforce housing. Crested Butte’s ballot includes a proposal to raise excise taxes on short-term rentals to 7.5% from 5%. Voters in Crested Butte also will consider an annual $2,500 tax on in-town home owners who don’t live full-time in their properties and don’t rent at least half the year to local workers. Ouray also is asking voters to raise taxes on short-term rentals. Frisco voters could see a citizen initiative asking for an outright ban on short-term rentals in homes not occupied by working locals.
Telluride has two competing ballot questions: A citizen-initiated ordinance — Question 300 — would cap short-term rentals in the town at 400, which would cut more than 300 from the existing stock of homes rented to visitors. A second ballot question proposed by the town council doubles the fee for short-term rental license and freezes vacation home permits at the current level.
Gregory Craig, a 30-year Telluride local who has crunched historic licensing data on short-term rentals in his valley, said “the pell-mell rush to policy change over STRs is worrisome and that complete lack of data and analysis across the board is frightening.”
“Bad decisions are going to be made in haste and a lot of people may be damaged by it … and governments are going to regret it in the next downturn, if not sooner,” Craig said.
Craig’s examination found that the backers of Question 300 — which would cut the number of short-term rentals by more than 40% — overstated the problem. They say the number of short-term rental properties has grown by 75% since 2016. Craig says it’s actually up about 31% since 2016 to 2018.
The number of permits can be high because when a property sells, he said, its existing short-term permit remains on the books while the buyer applies for a new permit. And a large hotel that was managed under a single license sold its 45 units in 2019, adding 45 new permits without adding to the number of condos available for vacation rentals. Craig’s analysis of lodging revenue from short-term rental taxes and visitors shows a 40% cut in vacation home rentals would deliver a $48 million loss to Telluride’s town coffers and businesses.
“It will likely blow a self-induced hole in Telluride’s economy, including Telluride and San Miguel County government budgets,” Craig wrote in a report detailing his research.
A state lawmaker is joining the mountain community movement toward increasing regulation of short-term rentals. Sen. Chris Hansen hopes his plan to shift short-term rental properties from residential taxation to commercial taxation — which would more than triple property tax bills for vacation home owners — will deliver more revenue to schools, libraries, hospitals and other districts that rely on property taxes.
“If this is something we don’t get ahead of, it’s going to spiral out of control for the state,” Hansen said.
Ask locals in towns like Breckenridge, Crested Butte, Salida, Steamboat Springs or Telluride and you will likely hear that short-term rentals are already a tornado, wreaking havoc on housing and hiring.
This is a national issue. Tourist-dependent communities are facing housing and labor crunches. Home prices are spiking, especially in rural resort areas. Second-home owners are moving in full-time. And short-term rental bookings are climbing as the appeal of outdoor recreation grows during the pandemic. So tourist towns are more crowded and working locals are finding fewer places to live.
Leaders and employers in those towns are increasing spending on affordable housing, but in the near term, they are looking to slow the growth of short-term rentals. There are dozens of approaches to short-term rental regulation underway in Colorado’s mountain communities. Some will work. Some may not.
In a few years, the diverse palette of policies will reveal a more clear path for regulating short-term rentals, said Jon Stavney, the head of the Northwest Colorado Council of Governments .
“I applaud places that are jumping into the fray and making decisions,” Stavney said. “Let’s find out in a year or two after data tracking. This is experimentation with policy that addresses something we know is impacting us. Having all these different councils taking actions is part of a regional laboratory. All policy, really, is an experiment and a work in process.”
Colorado state Rep. Julie McCluskie, a Democrat whose district spans Delta, Gunnison, Lake, Pitkin and Summit counties, said she hears “a lot of tension and frustration” when she talks with high country residents about short-term rentals. She hears concerns that heavy-handed regulation could impact tourism-dependent economies. And she hears that the growth of vacation rentals has exacerbated the mountain-town housing crisis.
“I think the bottom line, which is definitively clear, is that we can’t sit by and not do something,” she said. “Like most challenges we face in this state, there is no silver bullet. We need to be open to new and different ideas and we have to be brave enough to try new ideas. The workforce housing crisis is such that failing to take action in a clear and decisive way will leave our communities losing out in the long run.”
Winter Park Town Manager Keith Riesberg said early interest in his town’s incentive program has exceeded expectations.
So far the town has fielded 59 applications from property owners, who can get $5,000 for a six-month lease of a one-bedroom condo and up to $20,000 for a year lease of larger units. The town has budgeted $325,0000 for the program and hopes to convert 40 bedrooms from vacation rentals to workforce housing.
Riesberg emphasized the name of the program as an indication that it’s not a long-term solution.
“This effort is only to get us through the next year or two,” he said. “To address the workforce housing needs of our community, we need to see substantial workforce housing projects move forward.”
Summit County projects it will be 2,600 rental units short of what it needs to house local workers by 2023 and converting short-term rentals is one of the strategies for reducing that shortfall.
Breckenridge’s council has capped its permits for vacation rentals that are not part of a hotel-like complex at 2,200. Summit County, like Steamboat Springs and other communities, has temporarily suspended issuing new permits for homes in unincorporated parts of the county.
The Lease to Locals program offers property owners with short-term rental permits $13,000 to $27,000 for signing leases with working locals by Dec. 1. Property managers can earn $2,700 per unit on top of what the owner gets and up to $40,000 if the manager inks leases for multiple units.
The goal is to convert 100 short-term rental units for the 2021-22 ski season and add even more by next summer.
Summit County received $6 million from the federal government’s American Rescue Plan and has directed about half of that toward affordable housing. A sales tax approved by voters in 2016 has generated more than $45 million and a ballot question in November seeks a 20-year extension of that 0.6% sales tax for the Summit County Housing Authority.
The Lease to Locals program will be funded by that local tax, Pogue said. She is quick to point out that the program, like Winter Park’s, is not permanent. She hopes the new state legislation, if approved, could do a better job in converting short-term rentals over to local housing.
“But for now, compared to buying and building, this is actually a pretty good deal for us,” Pogue said.
Pam Knudsen, with Avalara MyLodge Tax, said the crackdown on short-term rentals is nationwide, especially in places with economies that depend on tourists.
Avalara software is used by Airbnb, Vrbo, HomeAway and many other rental platforms to collect and remit local lodging taxes to thousands of municipalities. Those communities, Knudsen said, are trying to balance the benefits of taxes and spending from tourists in short-term rentals with the impacts of vacationers in neighborhood homes. And it’s not just small towns.
Southern Nevada’s Clark County, home to Las Vegas, tried to ban short-term rentals in unincorporated areas last year. About 6,000 property owners ignored the ban. State lawmakers stepped in and required the county to regulate and tax the rentals.
The city of Las Vegas has new rules that limit the density of short-term rentals in some areas. Other major tourist destinations, like New York and San Francisco, have increased regulations in recent years.
“I think everybody is watching everybody,” Knudsen said. “All these jurisdictions across the country are trying different and similar things. I’m not sure anyone has figured out the answer just yet.”
Knudsen said it’s hard for communities to accurately measure the economic impact of short-term rentals. The tax payments her company collects for towns, cities and counties are steadily climbing. That’s evident in most every Colorado community’s lodging tax collections. The impact of spending by visitors in vacation homes can be harder to chart, she said. She thinks a better glimpse of the contribution from short-term renters will become clear with regulations that limit the number of visitors in rental homes.
“There are a lot of moving pieces here and we need to dive into the impacts and do some more studies,” she said. “At some point, someone will need to do a study into the economic impacts of all these new rules and scenarios.”