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Patrons visit local businesses along East Colorado Avenue in Telluride Thursday July 15, 2020. (William Woody, Special to the Colorado Sun)

This story first appeared in The Outsider, the premium outdoor newsletter by Jason Blevins.

In it, he covers the industry from the inside out, plus the fun side of being outdoors in our beautiful state.

Telluride will let its moratorium on new short-term rental licenses expire and plans to impose a new $857 annual per-bedroom regulatory fee on property owners who rent to vacationers. 

The increase in regulatory fees is intended to generate revenue for housing, Mayor Pro Tem Meehan Fee said during a town council meeting Tuesday, and while it was not perfect “it’s a step forward … continuing the momentum in helping to put the people who live and work here in homes.”

A recent study by Economic and Planning Systems provided the council with a chart of possible per-bedroom regulatory fees that would mitigate the impacts of the short-term rental, with funds to support new affordable housing to accommodate employees required to keep that property renting. 

For example, a 100% mitigation rate would charge a $2,608 fee for every short-term rental bedroom in the town and generate $3.9 million for affordable housing. A 20% mitigation rate would charge $522 per bedroom and generate $778,000. The council ultimately landed on a mitigation rate that should generate about $1.5 million a year for the town’s affordable housing fund. The new fee passed first reading Tuesday in a 4-2 vote. 

The Telluride council approved three levels of short-term rental licenses, with owners and residents who rent for fewer than 29 days a year not having to pay the new per-bedroom regulatory fees while “classic” license holders would pay full regulatory fees. 

Telluride has 760 short-term rental licenses in the town and about 55 property owners are in line, waiting for the two-year suspension of new licenses to expire next month. More than 450 of the licenses are for owners who rent one- or two-bedroom condos.

The council members spent five hours on Tuesday — their fifth work session wrangling a new short-term rental policy for the community of 2,600 residents. Members who were recently elected after promising a crack-down on short-term rentals leaned toward higher rates while some council members said they could not support any regulatory fees. 

“I’m really questioning why we keep being so onerous on this specific industry when I think it’s a broader community issue to address,” said councilwoman Jessie Rae Arguelles, who was elected in 2021. 

The vote in Telluride marks a turn in Colorado’s short-term rental crackdown that began two years ago as a flood of new residents spiked home prices, which displaced local workers and triggered a labor shortage. 

Telluride joins three other communities with regulatory fees that generate money for affordable housing. 

Estes Park charges $1,390 per unit. (A property owner has sued the town challenging that fee.) Breckenridge charges $756 per bedroom. Pagosa Springs charges $500 a bedroom. At least a dozen other communities have increased annual license fees on short-term rentals, ranging from a $1,000 fee in Salida to $125 in Breckenridge. 

Several communities have asked voters to approve excise taxes on short-term rentals, ranging from 2% in Avon to 15% in Ouray.

 The Telluride council also is considering a ballot measure in 2024 that will ask voters to approve an excise tax on vacation rental homes.

After two years of local tinkering, Colorado Gov. Jared Polis recently suggested it was time to once again try legislation that would shift short-term rental properties from a residential property assessment rate, which is 6.765% for 2023, to the rate for commercial lodging properties, which is currently 27.9%.

During a discussion last month with Colorado Sun reporter Jesse Paul at the inaugural SunFest, Polis called short-term rental properties paying residential property taxes “a loophole” that he supports closing. Residential properties that work like hotels should be taxed as a commercial business, he said. 

“The tax treatment should be uniform,” Polis said. ”We shouldn’t be subsidizing (short-term rentals) vis-à-vis other legitimate businesses.”

But Polis was uncertain what the legislation would look like and how many days of rental would move a property from residential to commercial taxation. 

“I totally think there is a way to come up with a reasonable threshold,” he said. “I don’t think it’s that hard and I’m open to any reasonable discussion about what that is. You just want to have a cutoff that is reasonable. Maybe it’s 60 days, 90 days, 100 days, something like that.”

Jason Blevins lives in Eagle with his wife, daughters and a dog named Gravy. Topic expertise: Western Slope, public lands, outdoors, ski industry, mountain business, housing, interesting things Location: Eagle, CO Newsletter: The...