Western Slope voters last week overwhelmingly approved new and additional taxes on short-term rentals to generate money for affordable housing.
Voters in Aspen, Carbondale, Dillon, Durango, Glenwood Springs, Salida, Snowmass Village and Steamboat Springs approved new or additional taxes on vacation rentals. So did voters in Chaffee, Eagle, Gunnison and Summit counties. Together the new taxes from vacation rentals could direct about $40 million a year toward affordable housing in those communities.
Voters in Grand Junction and Park County bucked the higher-taxes-for-housing trend.
Short-term rentals have been the target of local politicians and voters since 2019, when stories of new homebuyers bumping out locals to rent to vacationers became the dominant narrative in the high country housing crisis.
Could two years of increased regulation and limitations, coupled with higher fees and taxes – plus extraordinarily high costs for cleaning by overworked crews charging upward of $50 an hour – put the brakes on a short-term rental market that has steamrollered through Colorado’s high country housing landscape?
“It’s too early to tell as the great STR revenue grab just began,” said Toby Babich, the president of Breckenridge Resort Managers and a longtime advocate for the vacation rental industry in Summit County.
Here’s a list of communities that approved short-term rentals taxes last week:
- Aspen voters approved an additional 5% to 10% tax on short-term rentals that will deliver about $9.1 million a year for affordable housing.
- Carbondale voters approved a 6% excise tax on short-term rentals to generate $400,000 a year for affordable housing.
- Chaffee County voters approved the reallocation of lodging taxes from purely tourism promotion to include workforce housing and child care. But Chaffee County voters also rejected a property tax increase that would raise about $2.2 million a year for new homes built by the Chaffee County Housing Authority.
- Dillon voters approved two measures: a 5% excise tax on short-term rentals and a 6% excise tax on all lodging that will raise about $4.5 million a year for affordable housing. Dillon voters also approved $20 million in debt to buy, plan, develop and maintain workforce housing.
- Durango voters approved the city’s request to retain revenues from a 2021 lodging tax increase for affordable housing. Vail voters did the same with 2021 sales tax revenues.
- Eagle County voters approved a new 2% lodging excise tax on short-term rentals in unincorporated areas and Gypsum, with 10% of the $3 million in new revenue going toward tourism promotion and 90% to fund housing and child care.
- Glenwood Springs voters approved an additional 2.5% lodging tax to generate $2.5 million a year for workforce housing.
- Gunnison County voters approved the reallocation of a 4% local marketing district lodging tax, with 40% for “tourism-supporting” projects like housing, child care and recreational infrastructure and 60% for tourism marketing and promotion.
- Salida voters passed two measures increasing annual and nightly taxes on STRs to create a funding source that could support the construction of 29 new affordable housing units per year.
- Snowmass Village voters approved the reallocation of a 2.4% lodging tax from tourism to workforce housing.
- Steamboat Springs voters approved a 9% tax on about 3,000 short-term rentals to raise $14.3 million for the first phase of development of a planned 2,300 units on 536 acres given to the city by an anonymous donor.
- Summit County voters approved an additional 2% excise tax on short-term rentals to raise $5.4 million a year for affordable housing and child care with 10% of the new revenue supporting “social, cultural and environmental uses related to local tourism.”
- Voters in Grand Junction rejected tax increases on short-term rentals and all commercial lodging to generate about $1.4 million a year for affordable housing.
- Park County voters rejected a new 2% lodging tax to fund housing and child care, recreational infrastructure and tourism promotion.
The past two years of contention between local governments and property owners who rent their homes to vacationers instead of working locals is an issue of land use, said Tamara Pogue, a commissioner in Summit County where more than one-third of all homes are vacation rentals. Hotel developers went through a rigorous local approval process before they opened properties for visitors.
“With a short-term rental, that process doesn’t exist,” Pogue said. “But the needs still exist: roads, sewer, water, emergency response, all that. As a result, there’s a need to generate revenue to meet the infrastructure needs that the business generates, and in this case, because there is no traditional development process, taxation is really the only option.”
Earlier this year, Airbnb issued a report showing that 54% off all visitors to Summit County in 2020 stayed in short-term rentals. Spending by those visitors generated $16.5 million in local taxes and $10.3 million in state taxes, the report says. That study concluded long-term housing was not being converted to short-term rentals and the contributions of the vacation rental industry – more than $1 billion in spending in 2020 in five resort-anchored Colorado counties – outweighed impacts to workforce housing.
Pogue was among 15 commissioners from seven Western Slope counties who blasted Airbnb’s report for “selecting data that fits (the company’s) narrative” and pointed to their own county housing needs assessments that “directly contradict the claims of Airbnb regarding workforce housing.”
Champions of short-term rentals have grown defensive in recent years, arguing they are important contributors to tourism economies. Drive off vacationing renters and eliminate the financial viability of short-term renting and resort communities “will eventually become either villages of foreclosures or second-home ghost towns,” said Babich, who also serves as the mayor of Summit County’s Blue River.
“Neither are what I would look at as a good ‘community character’ for a ski resort town,” Babich said. “Nobody staying in rental homes means nobody shopping, dining and doing activities.”
Babich said the increasing taxes and fees “are essentially tariffs on services” with local leaders hoping they reduce the number of short-term rentals.
“As a local elected official, I find it very troubling,” he said. “I cannot recall local government acting in a manner contrary to their economy with the express purpose of depressing it to achieve goals. It is very counterintuitive.”
Pogue says it’s important to think about how increased regulation and taxation may impact the short-term rental industry. As the economy contracts and visitors begin watching their spending, the pressures of supply and demand may force some property owners to adjust rates. Some of those owners might see value in renting their properties year-round to working locals.
“I think that would likely happen long before we see ‘a village of foreclosures and second-home ghost towns,’” said Pogue, noting that early bookings for the 2022-23 winter in Summit County are strong and she sees “no sign of a wave of foreclosures or a doomsday scenario of homes sitting empty due to regulation.”
If increased regulation and taxes begin to slow the short-term rental industry in Summit County, Pogue said, that could support capping the total number of vacation rental units in the county.
“We may in fact just have too many short-term rental units available to sustain if the sheer magnitude of the industry can’t generate the margin individual owners would like to see,” Pogue said.