It was pretty obvious to most of us, ordinary Colorado citizens, that the vacation rental industry was converting residential homes into commercial mini-motel operations… that probably ought to be paying commercial property taxes.
Not only were the investors helping to worsen a housing crisis; they were, at the same time, benefiting from a property tax loophole.
No doubt the same thing was obvious to our elected officials. But it’s taken a while for those elected officials to react to the problems caused by this invasive species.
Certain Colorado communities have taken dramatic steps to control the industry’s growth. That has not been the case in Archuleta County.
The Colorado General Assembly has likewise been reluctant to put any controls in place, to slow the growth of the vacation rental industry. That might change in 2024.
Here in Pagosa Springs, the Town government has put a ‘cap’ on the number of STRs (Short-Term Rentals) that are allowed in residential zoning districts. This cap essentially stopped the ongoing conversion of homes into motels, within the town limits. Several other controls were put in place, including a limit on the number of STRs within a given commercial zone, by requiring a certain distance between STRs.
Additionally, in 2022, the Town voters approved a sizable fee on STRs, with the revenues to be used to address the housing crisis. A small group of STR owners challenged the law in District Court and got the fee invalidated. The Town Council later imposed a much smaller fee on STR operators.
The vast majority of the 1,000 (estimated) vacation rentals in our community, however, are located outside the town limits, in the unincorporated county. In July, 2022, the Archuleta County Planning Department and the County Planning Commission provided the Board of County Commissioners with a range of new policies that could address the various problems being caused by the STR industry’s growth. As far as I know, none of the recommended steps have been adopted by the BOCC, and the growth of the STR industry within the county has been essentially uncontrolled, except by certain homeowners associations.
The Colorado General Assembly — like the Archuleta BOCC — has been unwilling to place controls on the growth of the STR industry. But that might be changing. Finally.
You can click the link above to download the proposed law.
The bill indicates that the property owners will submit paperwork, to be used by the County Assessor for classifying the home as “residential” or “commercial”.
On or before January 15, 2026, and January 15 of each year thereafter, an owner of a short-term rental unit shall submit to the Assessor of the county in which the property is located an affidavit signed by the owner, under the penalty of perjury in the second degree, identifying the total number of days during the previous property tax year that the short-term rental unit was leased for short-term stays. In the absence of contrary information, the Assessor shall use the information in the affidavit for purposes of applying subsection (10.8)(a) of this section…
A preliminary analysis of the financial impacts, by the Legislative Council staff, indicates that the property tax change would provide about $78 million for public schools, and about $371 million to local government districts.
In a news article by Jason Blevins published on the Colorado Sun website on November 1, we were able to hear a few comments from both sides of the issue. A parade of STR owners from across Colorado provided three hours of comments opposing the bill:
“We need to have this home available to short-term rental guests to pass this legacy onto our kids,” said Eric Richards, who introduced his two kids, ages 10 and 12, to the committee.
“We cannot live with all these types of restrictions… this will, in my humble opinion, kill the short-term rental economy in Colorado,” said Hillary Skye, who runs a property management company with homes in Arvada, Boulder and Breckenridge.
The comments in support of the bill reportedly came from people who do not own or manage STRs, including a 21-county group called Counties and Commissioners Acting Together, and representatives from Arapahoe, Chaffee, Grand, Ouray and Summit counties.
“These are commercial lodging facilities… they have deep impacts in each of our communities,” said Chaffee County Commissioner PT Wood.
Speaking to the Colorado Sun in late September, Governor Jared Polis indicated his support for the bill, referring to the current residential tax rate for commercial STRs as a “loophole”.
“The tax treatment should be uniform… We shouldn’t be subsidizing (short-term rentals) vis-à-vis other legitimate business…”
Some Colorado communities have been dealing with the impacts of the vacation rental industry by increasing specific fees, locally, and using the funds expressly to address workforce housing — the type of arrangement that was approved by Town of Pagosa Springs voters in 2022, and then invalidated by District Court Judge Jeffrey Wilson.
The property tax approach proposed by the Legislative Committee would not specifically address the shortage of workforce housing in Archuleta County, but instead would go towards schools and local government districts to use on whatever priorities those districts may have. Housing could possibly be one of those priorities, although — as of 2023 — relatively little progress has been made in that direction by our local community, outside of a few Habitat for Humanity homes, the Rose Mountain LIHTC (Low Income Housing Tax Credit) project, and the conversion of the former Pagosa Springs Inn & Suites motel into small apartments.
I know how I would vote on allowing vacation rentals to pay a commercial property tax rate. I have no idea how our legislators will view this proposed law.