EDITORIAL: The Calculus of STRs, and the Third Law of Motion

I enjoy hearing from Daily Post readers, who typically have a slightly (or dramatically) different perspective from my own. This morning, I received the following comments from a reader, referencing recent recommendations by the Town Planning Commission. That commission unanimously recommended that the Town Council establish significantly higher fees for short-term rental (STR) licenses… up to $6,000 a year… and that the revenues be dedicated exclusively to solving the worsening housing crisis.

These increased fees, if adopted by the Town government, would apply only to STRs located within the Town boundaries. By my estimate, only about 20% of the STRs in our community are located within the Town boundaries.

My friend wrote:

Hi Bill;

I just wanted you to plug this into your calculus, since people may not be looking at things through the same lens.

Just to be clear, I don’t have a STR, not a huge fan of them, but understand why they exist.

So, if we ignore the whiny rich folk you cited in your article and look at more pragmatic middle/upper class second-home owners, they would have two choices if they were to jack up the annual fee: pull out/sell their second home, or – and I believe this is more likely – actually get more serious about filling their house to cover the new fixed costs. In other words, doesn’t forcing people to run it like a business force them to… well… run it like a business? This means more turnover/traffic, and people next to these STRs seeing even more come-and-go traffic.

Am I missing something, or isn’t that the opposite of what everyone wanted?

I think you know too that Telluride has a rule of something like 30 max STR days a year. Now THAT sounds like pushing the needle towards less use, not more.

Of course, if the purpose of the recommendations is to generate more tax revenue, then those suggestions are right on the mark. Maybe you ought to re-assess the motivations of the recommenders?

Hope that helps…

I responded to my friend, with my reaction:

Thanks for the thoughtful comments.

I think you make a good point. Our local leadership has, in my opinion, gone in the wrong direction, if they want a ‘diverse’ community where working families can afford to live here. (Which I have been saying, and writing, for the past five years. Make that, the past 15 years.)

You mention the word “calculus” so my thoughts naturally drift in the direction of Sir Isaac Newton, who did groundbreaking work on that branch of mathematics. He also published his Third Law of Motion in 1687.

“For every action there is an equal and opposite reaction.”

That same rule seems to apply to politics, and economics.

One part of the Pagosa economic/political puzzle is the financial divide between, on the one hand, the Baby Boomers (like myself) who — having lived through the most affluent period in US history — are blessed with comfortable pension/retirement plans and lots of free time, and on the other hand, the generations that are still trying to work for a living, and who are paying a chunk of their income into the pension/retirement plans that are supporting us Baby Boomers.

I grew up during a time when the US was an international powerhouse of manufacturing industries, and also a major bread basket… a time when the divide between the rich and the poor had been reduced and a huge middle class developed, between 1945 and 1980.

Since then, the trend has been in the opposite direction. The rich have become relatively richer and the poor relatively poorer, and the middle class has been hollowed out. The Baby Boomers are, basically, a remnant of that once-large middle class.

The Baby Boomers are now retiring, or have retired, and have bought up most of the property in Pagosa Springs, apparently. According to a 2016 study by Region 9 Economic Development District, 60% of the residential property in Pagosa was owned by people who don’t live here. I’m pretty sure the percentage is even greater in 2021.

But generally speaking, we Baby Boomers don’t want to contribute our labor to keep the community operating, because… well, we’re retired. We just want to enjoy the community. Look out the window at the view. Eat at the Alley House. Go to the theatre. Play pickleball.

AirB&B and VRBO made it very easy, even for middle-income Baby Boomers (and business-savvy younger investors) to buy up even more of Pagosa’s housing and pay the mortgage by operating vacation rentals that they can use, themselves, a few weeks of the year….

That’s one part of the puzzle.

Several years ago, the leadership in places like Salida, Denver and Boulder put strict limits on the number of STRs that could operate in their communities. Only 3% of the residential homes in tourism-driven Salida, for example, have been converted into STRs. That’s a government-defined limit.

Here in Pagosa, the conversion of housing into mini-motels appears to be approaching 20%. Pagosa Springs/Archuleta County dropped the ball, thinking that “any tourism is good tourism.”

As you point out, there will be a reaction to the policies proposed by the Planning Commission, if the Town Council adopts them. Some STR owners will double down and work harder to run their STRs like a real business. Some will sell, and possibly make a profit. Some will merely leave the homes vacant, when they’re not using them.

According to the Law of Motion, a $6000/year fee charged to STRs within the municipal limits will drive the STR development out into the unincorporated county. The same would happen with any restrictions/fees placed on STRs within the town, unless there is coordinated action between the Town and County governments.

The chance of seeing coordinated action?

We’re probably better off betting on the lottery.

Bill Hudson

Bill Hudson

Bill Hudson began sharing his opinions in the Pagosa Daily Post in 2004 and can’t seem to break the habit. He claims that, in Pagosa Springs, opinions are like pickup trucks: everybody has one.