Federal judges have dismissed two lawsuits filed by property owners in Summit County challenging recent regulations on short-term rentals from the county and the town of Breckenridge.
A coalition of more than 100 property owners in Summit County in September sued in federal court in Grand Junction, calling county rules that limit short-term rental property owners to 35 bookings a year and imposing a 2% tax “a blunderbuss response” of “successively more severe, wide-ranging, misguided and unlawful regulations.”
In October, residents and property owners in Breckenridge filed a lawsuit in federal court in Denver, arguing a new cap of 2,200 short-term rental licenses was a form of rent control prohibited by state law.
The short-term rental business was born in Summit County in the 1990s when entrepreneur David Clouse built a website and started renting nights in his Breckenridge condo. Today the county is ground-zero for a local government crackdown on vacation rentals, with new regulations, caps and taxes designed to hobble short-term rentals as locals scramble to find housing. Summit County is also a hotbed for homeowners irked by recent regulation of short-term rentals.
The Colorado Property Owners for Property Rights group also argued that the town’s 2021 and 2022 ordinances that created zones that allowed for varying levels of short-term rentals were “arbitrary and irrational, discriminatory, lacking support from study or data, (and) there is no reasonable relation between the ordinances and the town’s stated objective of providing employee housing, and ultimately, unlawful.”
U.S. District Court Judge Nina Wang on July 9 dismissed the Breckenridge property owners’ lawsuit, ruling the town’s limits on short-term rentals “are at least rationally related to controlling associated noise, parking and waste disposal” and that the town’s “desire to limit the perceived ill effects of STRs is a legitimate purpose and the ordinances are rationally related to this end.”
“Second-guessing by a court is not allowed,” Wang wrote, citing legal precedent.
U.S. District Court Judge Gordon Gallagher on June 25 dismissed the county owners’ lawsuit, ruling that Summit County is allowed to treat properties in various zones differently, including occupancy requirements for obtaining short-term rental licenses. Gallagher also dismissed the owners’ challenge to a county limit of 35 bookings a year — which the owners argued violated their property rights — ruling that owners’ failed to prove they have a fundamental right to a short-term rental license.
Both judges dismissed the notion that the regulations created different rules for Colorado residents and nonresidents. The property owners in both lawsuits argued the recent crackdown on short-term rentals by county and town policymakers violated the equal protection clause in the U.S. Constitution’s 14th Amendment, which prevents local laws that discriminate between U.S. residents.
Gallagher wrote in his June 25 ruling that the court was “aware of the significant consequences” of Summit County’s short-term rental regulations and his ruling for property owners, residents and visitors to Summit County “and perhaps in similar communities across Colorado.”
The property owners had attended local meetings and united residents and other owners in a political process challenging the county’s regulations, Gallagher wrote, noting that “their grievances, concerns, and the potential financial repercussions of the ordinance are valid.”
“It is important to clearly denote the role of this court, which does not include second-guessing the legislative process or creating policy,” Gallagher wrote, ruling the court’s role is to “determine the constitutionality and legality of the ordinance — nothing more and nothing less.”
Todd Ruelle, a Summit County homeowner and member of the Summit County Resort Homes Inc. nonprofit group that sued the county, said the homeowners disagree with Gallagher’s ruling and they are “considering potential next steps” before a late-July deadline for an appeal.
Gallagher cited a 1926 decision by the U.S. Supreme Court that declined to interfere with local policymakers who have proven reasons for adopting rules.
“We have nothing to do with the question of the wisdom or good policy of municipal ordinances,” the Supreme Court ruled in its 1926 decision in the Village of Euclid v Ambler Realty Co. “If they are not satisfying to a majority of the citizens, their recourse is to the ballot — not the courts.”
The number of nights booked in short-term rental homes has climbed faster than the number of listings over the past four winters in Aspen, Breckenridge, Crested Butte, Steamboat Springs, Telluride and Vail, according to Key Data and Avantio, a property management software company with clients in Colorado’s resort communities. And owners are collecting much higher payments from visitors.
- In and around Aspen, the number of active listings in the winter of 2023-24 — 1,705 — was down from 1,941 in 2020-21, while the number of nights booked in Aspen short-term rental homes reached 60,240 in 2023-24, up from 45,241 in 2020-21. The average daily room night in Aspen’s short-term rentals in 2023-24 was more than $850, a 94% increase from 2020-21.
- In and around Breckenridge, the number of active listings in 2023-24 — 8,174 — was up from 7,448 in 2020-21, while the number of nights booked climbed to 480,061 in the winter of 2023-24, up from 294,553 in 2020-21. The average daily rate in Breckenridge last winter topped $500, up 20% from four winters ago.
- In and around Crested Butte, the number of active listings in 2023-24 — 519 — was up from 439 in 2020-21, while the number of nights booked in Crested Butte short-term rentals in 2023-24 reached 23,661, up from 19,702 four winters ago. The average rate for a Crested Butte short-term rental last winter was $506, up 22% from 2020-21.
- In and around Steamboat Springs, the number of active listings in 2023-24 — 5,786 — was up from 4,875 in 2020-21, while the number of nights booked in Steamboat short-term rentals in 2023-24 reached 300,543, more than twice the number of bookings in 2020-21. The average rate for a Steamboat short-term rental last winter was $620, up 42% from four winters ago.
- In and around Telluride, the number of active listings in 2023-24 — 1,198 — was up slightly from 1,103 in 2020-21, while the number of nights booked in 2023-24 reached 60,802, up from 40,027 in 2020-21. The average rate for Telluride short-term rental last winter was $680, up 42% from 2020-21.
- In and around Vail, the number of active listings in 2023-24 was 4,003, up from 3,840 in 2020-21, while the number of nights booked in 2023-24 was 198,772, up from 137,797 in 2020-21. The average night in a Vail short-term rental was $939 in 2023-24, up 53% from 2020-21.
The Western Mountain Resort Alliance, a collection of real estate broker associations in Western U.S. mountain communities, studied short-term rentals in Summit County in 2023. The alliance found that roughly 80% of the county’s lodging units are short-term rental homes and guests in those units support 7,700 workers who earn $416 million a year. Spending by short-term rental guests generates a $1.7 billion in annual economic impact in Summit County. (It’s important to note that real estate brokers have a financial interest in protecting short-term rentals that are big parts of mountain town real estate markets. Selling homes to buyers who will be off-setting costs with short-term rental revenues is a big part of the mountain market.)
The alliance’s study of short-term rentals in Pitkin and Summit counties and Teton County in Wyoming and their economic impact — which was published in March — showed revenues from taxes on vacation properties delivered record sums to affordable housing efforts. The alliance studies also showed home prices soaring while the number of short-term rentals remained relatively steady.
“Massive socioeconomic shifts related to the pandemic, strong national economy, western migration and demographic trends have played a larger role in driving housing prices than the presence of STRs in any given market,” reads the alliance’s report. “If STRs are banned, the housing supply would likely not increase measurably.”
Toby Babich, who manages several dozen vacation rentals in Summit County, said his visitors and owners are crucial contributors to the county’s economy.
“I think that the second homeowner community, the majority being Colorado residents, held a hope that their rights would be protected by a competent court, and at the very least their arguments would be heard,” Babich said. “The dismissal is a disappointment to the Colorado tourism industry, the vacation rental industry, and an affront to thousands of Colorado property owners who deserve protection from the incessant overreaching arm of local government always in search of more control and revenue.”