As the discussion about short-term rentals (STRs) kicked off at the July 23 joint Town-County meeting, Town Manager Andrea Phillips reminded the meeting participants that the Town Council will be discussing STR regulations at their August 27 work session, where data from a consultant will be presented. (Perhaps we will find out how bad the problem really is?) . She also noted that a particular local citizen (I didn’t catch his name) might be presenting some alternative data.
County commissioner Ronnie Maez: “I think we have something similar scheduled for our work session.”
County Attorney Todd Weaver: “There’s some movement to classify short-term rental property as ‘commercial’ for property tax purposes.” Currently — for who knows what reason? — hotels and motels and bed-and-breakfasts pay property taxes at a 29 percent assessment rate, but STRs, even full-time STRs, are currently classified in Colorado as a ‘residential use’ and pay a 7.2 percent rate.
Although towns and counties have extensive powers to enact land use regulations, and to establish zoning districts to protect residential neighborhoods from harmful commercial uses and from ‘overdevelopment’, property tax classifications and assessment rates are set by the state government. Assessed values, meanwhile, are determined by recent real estate sales and numerous other factors.
Local communities have some control over the mill levy that gets applied to the assessed values.
County Attorney Todd Weaver: “There’s movement to classify short-term rental property as ‘commercial’ for property tax purposes. The [Colorado Assessors Association] is kind of pushing that. There was a bill proposed during the [2019] General Assembly that didn’t make it too far, but according to our Assessor, that’s a subject the [CAA] will take up at their conference this summer, and they might vote to push for commercial classification. So if the property tax rate were to jump to 29 percent, that might be its own solution.”
Attorney Weaver didn’t clarify which problem, exactly, this might be a solution to, but we could assume he meant: an increasing number of STRs in a little town with no affordable housing to speak of.
Attorney Weaver admitted that he didn’t fully understand how assessment rates and values are determined.
Town Council member Tracy Bunning suggested that neither the Town nor the County truly understand the magnitude of the situation.
Commissioner Maez: “I had a conversation with [County Planning Manager] John Shepard a little earlier today, threw a couple of ideas at him, about establishing a cap on the number allowed. And he said, right now, it would be too early to make that kind of decision. That was his opinion. What he suggested to me was some kind of moratorium, because we’re just inundated [with STR applications] and we’re trying to catch up on all the inspections on the properties that have already filed for a permit from the County. And we’re behind on that.
“He said maybe a six- or eight-month moratorium, so we can get caught up.
“But there’s a lot to be discussed, because we have a housing problem, and a lot of the workforce people who live in Archuleta County can’t find a place to live, because all these other people who’ve chosen to have a second or third home here, they’ve bought the homes and turned them into short-term-rentals. It takes housing away from the people who live here year-round.”
Commissioner Steve Wadley noted that the biggest increase in assessed values, in 2019, was in the lowest priced segment of the housing market. “The more affordable properties, the ones that weren’t moving in the past, the trailers, things like that, they jumped up in value because it’s pretty much the only thing anyone can afford right now. That’s a sign of the times.”
Council member Nicole DeMarco: “I think we all agree that this is something that… it’s grown exponentially. Anecdotally, I think we have no idea how big it’s becoming.” She turned to Council member Tracy Bunning, who owns a title insurance company. “I know, in your position, Tracy, you see how many people, it’s their sole purpose…”
Council member Bunning: “Second home purchases have gone up 60%, 70% in the last two years, and I would say 90% percent of it, is people buying strictly as vacation rentals. They have the idea of owning property in the mountains, and they like to have their two or three weeks guaranteed, but they’re buying them just as investment properties.”
Council member DeMarco: “Nobody that I’ve talked to privately has said, ‘Yeah, I think I know what the solution is.’ I think we all come with all kinds of ideas. Property taxes. ADUs. I think we need to engage the different interest groups. We need to talk to the Pagosa Springs Area Association of Realtors… Pagosa Housing Partners… all sit down at the table together.
“A really ‘big picture’ brainstorming exercise.”
Communities all across the American West are facing the same problems. Neighborhoods that have turned into motels. Declining school enrollment. Employees unable to find housing. Commissioner Wadley mentioned the problem of rising crime, when neighborhoods lose their full-time residents. “We saw that problem in Albuquerque, when the military downsized. All these vacant apartments… no one cared about the neighborhoods, and we had a huge spike in crime. It took years to deal with.”
Mayor Don Volger got to thinking about our disappearing neighborhoods:
“Is this something we may be able to address with zoning? It’s like establishing certain districts that allow hotels and motels. Because residential should be residential. Maybe there’s something we can do with zoning.”
Tracy Bunning:
“The first thing we have to do is to understand our problem, or if we even have a problem. These are solutions, if we do have a problem. Until we know the numbers that we’re dealing with, and the percentage of the housing inventory… we’re all going to have to buckle down and look for that information.”
Can this really be the case? That we don’t know if we even have a problem?
