A committee in the Colorado legislature on Monday killed legislation that would have allowed local voters to impose a tax on homes that sit empty for long stretches of the year.
House Bill 1036 faced fierce opposition from real estate brokers, homebuilders, county treasurers and business chambers. Local elected leaders and government groups supported the legislation that would have given communities a taxing tool to support affordable housing.
After more than four hours of testimony from more than 50 people Monday, the 11-member House Finance Committee voted 7-4 against the measure, which was sponsored by Democratic state Reps. Brianna Titone of Arvada and Elizabeth Velasco of Glenwood Springs, who grew up in a working family in a resort community. Three Democrats joined four Republicans on the committee to nix the legislation.
“This bill is about the visitors and the tourists who enjoy our beautiful resort communities to pay their fair share and serve the local workers who serve those communities,” Velasco told the committee before the vote. “I want the ultrawealthy to pay their fair share to support our working families.”
The legislation would have allowed city or county governments or housing authorities to ask voters to create a new excise tax classification for empty homes. The tax, which would be set by local communities and did not apply to licensed short-term rentals already generating fees and lodging taxes, was intended to help ease the housing shortage in mountain communities where as many as 40% of the homes sit empty for most of the year.
Steamboat Springs council members narrowly voted in August to kill a proposed vacancy tax of $3,100 a year on homes left empty for at least half the year. Crested Butte voters in 2021 voted down a $2,500 tax on empty homes.
Vancouver, in British Columbia, has a 3% tax on the value of homes left vacant for six months a year. The empty-home tax, approved in 2017, led to the conversion of many vacant properties into rental housing while raising nearly $200 million for the city’s affordable housing projects.
Parker White, the head of government affairs for the Colorado Competitive Council, said Vancouver is the only community in North America to reveal the impacts of a vacancy tax. White said the Vancouver vacancy tax has increased the supply of homes, but not the affordability of those homes relative to local wages.
“This appears to be more of a funding mechanism for local government than it is a tool for affordability,” White said.
Supporters see housing solutions
Several county commissioners with Counties and Commissioners Acting Together and town council members spoke in support of the vacancy tax legislation.
“This bill trusts local voters and local governments to come up with solutions for their own challenges around housing,” Jefferson County Commissioner Andy Kerr said.
Clear Creek County Commissioner George Marlin said existing sales and property tax collections are not enough to help local governments address housing shortages as well as other major challenges like forest and watershed management.
“We are seeing the current set of tax options we have just don’t get it done,” Marlin said.
Chaffee County Commissioner P.T. Wood said 91% of households in his county cannot afford to purchase a home. Nearly a quarter of homes in the county are occupied seasonally and sit vacant for large swaths of the year. Meanwhile, Wood said, developers are building more homes that are not attainable for local wage earners.
“Without tools like this we continue losing workers and weakening our economy,” Wood said. “House Bill 1036 empowers communities to act responsibly and collaboratively to address one of Colorado’s most pressing issues.”
Elizabeth Haskell, a policy advocate with the Colorado Municipal League, said her group was supporting the legislation as a tool for local governments to fix a housing shortage that is driving away residents and forcing workers into long commutes.
Steamboat Springs City Councilmember Gail Garey said workers in her town need to earn around $338,000 a year to afford a median-priced home. More than 3,500 workers commute into Steamboat Springs every day, said Garey, who is a board member for the Colorado Association of Ski Towns, which supported the legislation.
“This will provide one more tool for communities as we seek to balance resort-based economies while ensuring the workforce that supports those economies is housed locally,” Garey said.
Opponents fear administrative burdens
El Paso County Treasurer Chuck Broerman said there would be “administrative burdens and operational challenges” in creating a separate tax category based on occupancy instead of property values.
Marcy Wheatley, the treasurer for Grand County, also opposed the legislation, saying a new tax category for county collectors would create “operational strain … with county treasurers explaining policies we did not design.”
Midsized rural counties could expect to pay $150,000 to $300,000 a year to implement the vacancy tax, Alamosa County Treasurer Amy McKinley said. She also said the Alamosa County assessor opposed the bill, fearing the challenges of determining if owners were meeting occupancy requirements.
“I see this as an absolute disaster for anyone in the government involved in trying to implement this legislation,” McKinley said.
Several real estate brokers from across the state spoke in opposition to the bill, citing questions around the legality of taxing a home based on how often it was occupied. Several suggested that the legislation could lead to litigation.
“This is inviting lawsuits that will cost taxpayers and municipalities,” said Windy Bailey, a Colorado Springs real estate broker.
A San Francisco Superior Court Judge in November struck down the California city’s “empty homes tax,” ruling it was unconstitutional. San Francisco voters approved the measure in 2022, with supporters arguing the 40,000 homes left vacant for half the year should pay taxes ranging from $2,500 to $20,000 a year. The city is appealing the judge’s decision.
Andrew Hamrick, an attorney for the Colorado Apartment Association, which represents 400,000 units in the state, expressed opposition to the vacancy tax legislation fearing empty apartments could face additional taxes.
Hamrick said the vacancy tax could deter the institutional investors who are building most of the new apartments in the state.
“They get scared of taxes that are this unique and this odd that are not a risk factor in other states,” Hamrick said. “Our ability to not be taxed on not being successful with our business ventures is very important to us.”
Tyrone Adams, the CEO of the Colorado Association of Realtors, said his group opposed the vacancy tax.
“You can’t make housing more affordable by making it more expensive,” said Adams, expressing concerns that the tax could foul real estate sales. He also said the process of determining if a property was vacant “could be an invasion of privacy.”
The Colorado Farm Bureau also expressed opposition to the vacancy tax legislation, fearing increased taxes for farmers and ranchers who occasionally leave houses vacant.
The vacancy tax is a “very untested tax policy,” said Ted Leighty, CEO of the Colorado Association of Homebuilders.
“We don’t know the total ramifications of such a policy but we have a pretty good idea of what the consequences will be,” Leighty said. “You don’t tax things you want more of. You are rearranging deck chairs. You are not building more deck chairs.”