Colorado voters in several resort communities approved increased fees and taxes meant to squeeze more revenue for affordable housing from short-term rentals. But voters in end-of-the-road Crested Butte and Telluride stopped short of heavier restrictions intended to slow and limit short-term rentals in the tourist-dependent communities.
Jim Day, who is retired and lives part time in a home he and his wife bought in Crested Butte 30 years ago, has attended several town council meetings this year, speaking out against the “community housing tax” that would levy a $2,500 annual fee on homes that are not occupied half the year by owners or locals.
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Last week he and another second-home owner spent several hours in front of the local post office, handing out flyers that read “If the town administrators and attorneys will not listen to us, you are next.”
“I’m sure we swayed many locals,” Day said. “Town admins continue to increase spending and ask for more money from homeowners, but are unable to cut their budgets at the same time. If only our personal household budgets could operate in such a wanton manner.”
In Summit County, voters approved a 20-year extension of the sales tax that funds the local housing authority. Avon voters approved a 2% excise tax on short-term rentals to raise at least $1.5 million for affordable housing. Voters in Ouray also approved a new 15% excise tax on short-term rentals for both workforce housing and wastewater treatment facilities. Leadville voters also approved an increase in lodging taxes on short-term rentals.
A citizen-led petition that would have banned short-term rentals in single-family homes in Frisco missed the ballot.
“Hopefully people are inspired to participate in the process and demand a voice,” said Frisco resident Hayes Walsh, who turned in a petition last month calling for a ban on short-term rentals but was rejected because many signatures did not qualify. “Majority consensus within the community should be the guiding factor determining how to approach solutions.”
Crested Butte voters overwhelmingly approved a 2.5% increase in lodging taxes on short-term rental units to help pay for more affordable housing. With the increase, Crested Butte will soon collect a 7.5% excise tax on short-term rentals to support workforce housing, which is part of a 20.9% total tax on lodging. As of September, lodging tax revenues are up 59% over the same stretch of 2020, which set an all-time record. Crested Butte caps the number of short-term rental licenses in town, so the tax bump this year is not from new units but from visitors staying longer and paying more for rental units.
Voters in Crested Butte rejected the community housing tax. The original proposal by town staff pitched a $10,000 annual fee on unoccupied homes that would generate as much as $1.9 million a year for affordable housing development.
State lawmakers last week nixed a plan to impose commercial tax rates on residential homes that owners rent to vacationers. That leaves regulation of short-term rentals to towns and counties. And just about all the mountain municipalities in Colorado are doing something with new rules, taxes or fees. The idea is to slow the growth of vacation rentals while communities address a labor shortage made more critical by the lack of affordable housing for local workers.
The statewide proposal would have more than tripled property taxes for owners of short-term rental homes, creating a deeper revenue stream for schools, fire departments, libraries and other districts that rely on property taxes.
As more communities crack down on short-term rentals, the industry’s leaders — like Expedia and Airbnb — are motivating owners to speak up and defend the business of renting homes to visitors.
In Colorado, that means email blasts to thousands of property owners urging them to speak up. Many hosts and property managers answered the call last Thursday, a day after the Legislative Oversight Committee Concerning Tax Policy rejected the proposal to change the property tax formula for vacation rental homes. The committee’s task force heard from dozens of local leaders and investors.
“There is quite a bit of advocacy work across the entirety of the industry right now,” said Philip Minardi, the head of public affairs for the Expedia Group, which owns Vrbo and Homeaway.
Minardi said his team has been speaking with property managers and hosts in 17 Colorado vacation rental markets in recent months.
“A lot of them are asking where this animosity is coming from. They ask us ‘How do we explain to elected officials and the community that we are good actors and we are responsible members of this community?’ We’ve been around a long time and ultimately we want a solution that addresses these housing and labor concerns but does not push the industry underground.”
The short-term rental industry rallied in Denver in 2016 as the city’s leaders measured possible regulations for vacation rentals. Industry leaders have launched similar efforts recently in Seattle, San Diego and Louisville, Kentucky, meeting with locals and property owners to help work through housing struggles.
“What we learned … is that the animosity — the us-versus-them, winner-take-all philosophy — that does not work,” Minardi said. “Communities across Colorado are trying to experiment with different solutions and ultimately the answers will come through consensus.”
Summit County Commissioner Tamara Pogue told the task force last week that while her county’s tourism economy is dependent on the nearly $80 million impact of short-term rentals, “the burden on our infrastructure is unfathomable.”
“We have entire neighborhoods in Summit that have gone from being owned primarily by locals to being owned by people who do not designate their primary residence as Summit County,” said Pogue, whose county is building workforce housing, leasing hotels for local workers and offering up to $24,000 to owners of short-term rental homes who ink year-long leases with locals. “As a county we simply do not have the tools to mitigate the financial impacts. We can’t keep up with building at the pace that it would take to mitigate the impact on our workforce housing that short-term rentals have created for us.”
Property managers and vacation home owners also spoke in support of their role in rural resort economies. They questioned numbers showing significant increases in short-term rentals and the impact of those visitors on law enforcement calls and sewer infrastructure. Every one of them urged the committee to more closely study hard numbers of short-term rental growth on the Western Slope.
“Data issues keep coming to the top of our discussion,” said state Sen. Chris Hansen, a Denver Democrat who crafted the proposal to shift short-term rentals to commercial tax status.
Sarah Bradford has managed properties in Steamboat Springs and Winter Park for 15 years and urged the task force of lawmakers to weigh the financial contributions of visitors who stay in private homes. If owners of those homes were required to pay commercial property tax rates, they would likely take management into their own hands or just leave their homes empty, Bradford said.
“What you would gain in property tax you would lose in sales tax,” said Bradford, who employs 50 people and returned more than $1 million in bookings when resort communities closed to control the spread of COVID-19 in March 2020. “If you tax a (short-term) property as commercial, I know for a fact that mountain communities will suffer greatly.”
Property managers happy to see “knee-jerk” short-term rental regs voted down
San Miguel County Commissioner Hilary Cooper called the fight over short-term rental regulation in Telluride “pretty ugly.”
“I would not want to subject anyone to the social media that is going on around here,” Cooper said last week while speaking before the legislative task force studying tax policy.
Cooper said the animosity over vacation rentals at the local level can be attributed in part to a lack of regulation at the state level. It’s not uncommon to find a local town’s rules conflicting with a local county’s regulations, which, she said, “is bad for governments and it’s bad for communities.”
“It’s time to regulate this industry like the lodging industry,” said Cooper, describing her town’s struggle to find workers to even build affordable housing. “It has reached a crisis level here. Short-term rental regulation is not going to solve this problem, but it’s one of the approaches we need, especially at the state level. If we don’t have a blanket approach at the state level we will see impacts shift to local communities.”
That’s already happening in small, end-of-the-road resort communities like Crested Butte and Telluride. Voters in both towns this week tapped the brakes on aggressive regulation of investors and second-home owners but green-lighted increased fees and taxes for vacation rentals.
The citizen-initiated Question 300 in Telluride asked voters to cap short-term rental licenses at 400 and create an annual lottery for permits. The town has about 790 licenses right now.
Keith Hampton, who started the SilverStar Luxury Properties company in Telluride in 1995 and now manages about 80 homes as vacation rentals, helped organize a competing ballot question that called for a two-year pause on vacation rentals. That ballot measure, which voters approved this week, suspended Telluride’s total number of short-term rental licenses at the current level.
“When I talked with voters, they did feel like the proposed cut to rental licenses that was proposed in Question 300 was pretty radical and really had the danger of creating unintended consequences,” said Hampton, who estimated cutting 337 licenses from Telluride would cost the valley’s tourist economy many millions. “And maybe that cut would not create housing like they wanted. I think they thought maybe there’s a better way to work through these issues as a community versus pulling a pin on a hand grenade, throwing it in a room and seeing what happens.”
Brian Egan founded Denver-based Evolve property management company a decade ago and now the company manages more than 15,000 short-term rentals and has about 750 employees. He said the short-term rental industry was happy to see voters in Crested Butte and Telluride “reject knee-jerk measures that act more as a hacksaw than a scalpel and can have very real and damaging unintended consequences on local economies and property values.”
Outright bans of short-term rentals will force owners to leave their properties empty for most of the year, Egan said, which will hurt local tourist economies “without helping to address the housing and labor shortages.”
Egan said short-term rental industry leaders and hosts “have a huge role to play” as local communities craft regulations for vacation rental properties.
“We’re doing our part every day as we help thousands of our Colorado owners comply with local regulations, pay local taxes, and make positive contributions to the communities they love,” Egan said.