Following Mona Cayard’s Tuesday morning testimony to the Archuleta Board of County Commissioners (BOCC) work session — quoted yesterday in Part Five — another motel manager stepped forward to share a similar perspective on the dangers posed to our community by unchecked vacation rental growth.
Tom Inman, General Manager of the popular Springs Resort, thanked the two commissioners present — Warren Brown and Ronnie Maez — for inviting public testimony on the controversial topic.
Mr. Inman said he was representing “business groups, and the lodging industry.”
“As a business group, we’re not against short-term vacation rentals. The challenge is trying to find a balance with the impact of short-term rentals on our community. And I’m sure that’s exactly what everybody is trying to figure out right now.
“That balancing act is certainly an issue in [residential] neighborhoods, and the negative impact of short-term rentals on neighborhoods. There’s certainly a need for balance when it comes to tax laws.”
Speaking of tax laws, vacation rentals and motels and bed & breakfast inns are all required to collect and remit ‘Lodgers Tax’ from their guests — a tax that adds 4.9% to the customer’s bill within town limits, and 1.9% in the unincorporated county. (Whether the numerous ‘unregistered’ vacation rentals in Archuleta County are actually remitting those taxes is currently an open question.)
A somewhat larger tax issue rears its ugly head when we talk about property taxes.
I own an older house in downtown Pagosa, and I have the right to allow friends and relatives, or even strangers, stay in my house. But if I were to convert my house into a ‘bed & breakfast’ and begin charging people to stay, my property — under Colorado law — is transformed from a residential property into a commercial property, and my property tax rate changes from 7.15% to 29%.
Those rates are set by the State of Colorado.
But the State of Colorado provides an enormous loophole for vacation rentals. If I rent out all or part of my house — but do not serve breakfast — the State considers my house to be a “short-term rental” and continues taxing it at the residential rate: 7.3%
What a difference breakfast makes!
Of course, the Springs Resort is a motel, and as such, pays the commercial property tax rate of 29%. Motels are obviously commercial operations. If you ask me, vacation rentals are also obviously commercial operations, but the State of Colorado hasn’t yet come to that realization.
Mr. Inman continued his testimony:
“It’s clear there is a community need for a stronger balance when it comes to long-term housing options and affordability, for service workers, hospital staff, teachers — I think you’ve all heard the stories.
“So in 2019, the Economic Policy Institute, a non-profit, non-partisan American think tank, found that the economic costs of short-term rentals outweigh the benefits.
“In summary, short-term rentals continue to outpace long-term rental supply, resulting in increases in long-term rents…”
From that 2019 study:
Because housing demand is relatively inelastic (people’s demand for somewhere to live doesn’t decline when prices increase), even small changes in housing supply (like those caused by converting long-term rental properties to Airbnb units) can cause significant price increases. High-quality studies indicate that Airbnb introduction and expansion in New York City, for example, may have raised average rents by nearly $400 annually for city residents.
The rising cost of housing is a key problem for American families. Housing costs have risen significantly faster than overall prices… since 2000, and housing accounts for a significant share… of overall household consumption expenditures.
We don’t have firm, high quality data for Archuleta County, but anecdotally, rents have been skyrocketing in our community over the past several years. Those increases would certainly be expected, due to “supply and demand”, if — as High Country Lodge owner Mona Cayard told the BOCC Tuesday — the number of vacation rentals operating in Archuleta County has increased from ‘620’ in 2017, to ‘1,119’ in the last quarter of 2020.
Mr. Inman continued:
“Additionally, short-term rentals have only a small [positive] economic impact on our community. It’s frequently overstated, as far as the impact, because it doesn’t take into consideration that travelers now staying in short-term rentals previously would have stayed in hotels and motels, so the overall growth is not nearly as significant…
“Short-term rentals has a negative impact on neighborhoods; it’s a commercial use in residential zoning. Commercial zoning, on the other hand, tends to avoid a lot of those negative impacts.
“The County is proposing increased permitting fees, and we feel that is a start. However, in the end, that doesn’t achieve the balance that I think we all desire. What I think business groups would like to see is, for one thing, the formulation of some kind of cap on the number of short-term rentals in the community. That formulation could be based on the availability of [rental] housing, in a mathematical percentage of how many short-term rentals are in the market.
“We also believe that affordable housing is a crisis right now, in Pagosa. I want to mention that many lodgers are actually housing staff at this point, or building housing. We’d like to see a 2.5% Affordable Housing Tax added to short-term rentals; those taxes would be paid by the individuals who are coming here and enjoying those properties. And that tax could in turn be earmarked for affordable housing…”
A 2.5% Affordable Housing Tax? That seems rather timid. Why not dream big?
I believe the City of Oakland, California is considering a 14% percent ‘Transient Occupancy Tax’. That sounds closer to the right number.
I suspect the majority of the voters in Archuleta County would happily approve a 14% TOT tax on vacation rentals… but even that amount would cause barely a ripple in our current (and worsening) housing crisis.