Western Slope voters tax short-term rentals to fund affordable housing – The Journal | Vette Leader

Homes fill the landscape in front of the ski resort in Steamboat Springs on December 27th. Hill town voters recently approved additional taxes on vacation rentals. (Hugh Carey/The Colorado Sun)

Communities could generate around $40 million in new vacation rental tax revenue to support affordable housing

Western Slope voters last week overwhelmingly approved new and additional short-term rental taxes to generate money for affordable housing.

Voters in Aspen, Carbondale, Dillon, Durango, Glenwood Springs, Salida, Snowmass Village and Steamboat Springs approved new or additional vacation rental taxes. So did voters in Chaffee, Eagle, Gunnison and Summit counties. Taken together, the new vacation rental taxes could divert about $40 million a year into affordable housing in these communities.

Voters in Grand Junction and Park County bucked the trend toward higher housing taxes.

Short-term rents have been the target of local politicians and voters since 2019, when tales of new homebuyers crowding out locals to rent to holidaymakers became the dominant narrative in the Highland housing crisis.

Could two years of heightened regulation and restrictions, coupled with higher fees and taxes — plus extraordinarily high cleaning costs from overworked crews charging upwards of $50 an hour — could slow a short-term rental market muted by Colorado’s highland countryside?

“It’s too early to tell as STR’s big revenue stream is just beginning,” said Toby Babich, president of Breckenridge Resort Managers and a longtime advocate for the vacation rental industry in Summit County.

Here’s a list of the municipalities that approved short-term rental taxes last week:

  • Aspen voters approved an additional 5% to 10% tax on short-term rentals that will bring in 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 in affordable housing.
  • Chaffee County voters approved the redistribution of lodging taxes from purely tourism incentives to include workers’ housing and child care. But Chaffee County voters also rejected a property tax increase that would bring in 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 housing, which will bring in about $4.5 million a year in affordable housing. Dillon voters also approved $20 million in debt to purchase, plan, develop, and maintain workers’ housing.
  • Durango voters approved the city’s motion to withhold proceeds from a 2021 occupancy tax increase on affordable housing. Vail voters did the same with the 2021 sales tax receipts.
  • Eagle County voters approved a new 2% excise tax on short-term rentals in unincorporated areas and plaster, with 10% of the $3 million in new revenue going to promote tourism and 90% to fund housing and child care .
  • Glenwood Springs voters approved an additional 2.5% lodging tax to generate $2.5 million per year for housing workers.
  • Gunnison County voters approved the redistribution of a 4 percent local marketing district lodging tax, with 40 percent going to “tourism-supporting” projects such as housing, child care and recreational infrastructure, and 60 percent to tourism marketing and promotions.
  • Salida voters passed two measures to increase 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 redistribution of a 2.4 percent occupancy tax from tourism to blue-collar housing.
  • Steamboat Springs voters approved a 9% tax on approximately 3,000 short-term rentals to raise $14.3 million for the first phase of development of a proposed 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 childcare, with 10% of the new revenue going to “social, cultural and environmental causes related to local… support tourism.
  • Grand Junction voters rejected tax increases on short-term rentals and all commercial housing to generate about $1.4 million annually in affordable housing.
  • Park County voters rejected a new 2% lodging tax to fund housing and child care, recreational infrastructure and tourism promotion.

The last two years of rows between local governments and real estate owners renting their homes to vacationers instead of working for locals is a land use issue, said Tamara Pogue, a commissioner in Summit County, where more than a third of all homes are vacation rentals. Hotel developers went through a rigorous local approval process before opening properties to visitors.

“With a short-term rental, you don’t have that process,” Pogue said. “But the needs are still there: roads, sewers, water, emergency response, all that. As a result, revenue needs to be generated to meet the company’s infrastructure needs, and in this case taxation is really the only option as there is no traditional development process are.”

Earlier this year, Airbnb released a report showing that 54% of all visitors to Summit County in 2020 stayed on short-term rentals. Expenditures from these visitors generated $16.5 million in local taxes and $10.3 million in state taxes, the report said. This study concluded that long-term homes were not being converted to short-term rentals, and the contributions of the vacation rental industry — more than $1 billion in 2020 spending at five Colorado County resorts — outweighed the impact on workforce housing.

Pogue was among 15 commissioners from seven Western Slope counties who blasted Airbnb’s report for “selecting data that fit the (company’s) narrative” and pointing to their own county’s housing needs assessments being “in directly contradicts Airbnb’s claims regarding worker housing.”

Advocates of short-term rentals have become defensive in recent years, arguing that they make important contributions to the tourism economy. Evict vacation renters and eliminate the financial viability of short-term rentals, and resort communities “will eventually become either foreclosure villages or second-home ghost towns,” said Babich, who also serves as mayor of Blue River in Summit County.

“In my opinion, both are not a good ‘community character’ for a ski resort,” said Babich. “No one living in rented accommodation means no one can shop, eat and do activities.”

Babich said the rising taxes and fees are “essentially tariffs on services,” with local leaders hoping they would reduce short-term rentals.

“As a local elected official, I find this very worrying,” he said. “I don’t recall the local government acting against their economy with the express aim of oppressing them to achieve targets. It’s very counterintuitive.”

Pogue says it’s important to think about how increased regulation and taxation might affect the short-term rental industry. As the economy contracts and visitors begin to watch their spending, supply and demand pressures may force some property owners to adjust prices. Some of these owners may see value in renting out their properties to working locals year-round.

“I think that would probably happen long before we see ‘a village full of foreclosures and second home ghost towns,'” Pogue said, noting that early bookings for winter 2022-23 are strong in Summit County and they’re showing “no signs see a wave of foreclosures or a doomsday scenario of homes sitting vacant by regulation.”

If increasing regulation and taxes begin to slow Summit County’s short-term rental industry, Pogue said it could help limit the total number of vacation rental units in the county.

“We may just have too many short-term rental units available to sustain if the sheer size of the industry can’t generate the margin that individual owners would like to see,” Pogue said.

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