In this editorial series, we’re basically focused on Archuleta County STR regulations, but today we’ll be discussing the Town of Pagosa Springs and its recent attempts at regulation.
Last night, March 7, the Town Council engaged in a generally friendly debate about greatly increasing their fees on in-town Short Term Rentals, and voted unanimously to direct staff to work with the Town’s newly appointed attorney, Bob Cole, to create an ordinance to that effect.
The ordinance, which may come back to the Council at their next meeting on March 23, would allow the Town to collect an impact fee based on the ‘nexus study’ delivered last November from consultants Root Policy Research.
The Council did not pick an exact amount for the new fee, although it appeared that at least a couple of Council members were in favor of the maximum fee calculated by Root Policy — $2,687 per year. In other words, the actual amount of the fee is still open to discussion and will be established by ‘resolution’ separately from the proposed ordinance.
This new impact fee might apply equally to ‘owner-occupied’ STRs as well as ‘investor-owned’ STRs. It might also be in addition to the Town’s existing $500 per year administrative fee. These details remain to be worked out.
During the discussion, the Council’s newest member, Brooks Lindner, expressed his support for an impact fee, with the revenues to be used to support workforce housing… but also made a somewhat impassioned plea for repealing some — or all — of the limiting STR regulations that the Council established two years ago, such as the requirement that an investor must own the property for two years before they can apply for an STR license.
Mr. Lindner, referring to notes on his laptop:
“I would like to — if you guys will indulge me, it won’t take too long — but I did prepare some comments, because I’ve thought about this issue a lot. I know you guys put a lot of work into [the existing regulations], and I was not part of it. I’m not trying to undermine the work that you did… but if you’ll bear with me…
“So, current regulations have effectively cut off any new licenses for STRs. At the same time, revenues are down for existing STRs in town. So this brings into focus how, really, the market is self-correcting after the anomaly of the prolific COVID visitors that we had.
“Speaking to a property manager that manages both STRs and long-term rentals, she shared that she’s encouraging her investors to switch to long-term rentals, because the revenue is currently better. Is there a possibility that the market is self-correcting?”
Before we let Mr. Lindner continue, we can consider some of his comments. Mr. Lindner may have more insight than I have into the real estate market, considering that his wife is the managing broker for one of the more successful real estate companies in Pagosa.
First of all, the Town’s current regulations have not entirely cut off new licenses for STRs. The limiting regulations apply only to ‘investor-owned’ properties, within three particular zoning districts within the town limits. All of the mixed use zoning districts are unregulated.
Also, some of the Town’s current regulations do not apply to ‘owner-occupied’ properties.
Additionally, 85% of the community’s real estate is located outside the town limits, and the Archuleta Board of County Commissioners have not yet established any definite limits on the number of new STRs that might be permitted. To suggest that “current regulations have cut off any new licenses for STRs” is not a terribly accurate statement, taken by itself.
Is it possible that the market is ‘self-correcting’? This is an argument we often hear from the real estate industry. “We don’t need STRs to be regulated, because the market is self-correcting.”
The three charts below, taken from the AirDNA.co website this morning, suggest that the STR industry has its ‘ups and downs’ but doesn’t seem to be struggling terribly, at the moment.
I began writing about development issues and politics for the Daily Post in 2004, and the Town and County leadership were then concerned enough about the lack of workforce housing to hire Denver consultants Economic and Planning Systems to create a well-researched housing needs study, which you can download here.
The Pagosa real estate market did indeed undergo a ‘self-correction’ between 2008 and 2012, during the Great Recession, and at one point, Archuleta County had one of the highest foreclosure rates in Colorado.
Since 2012, the number of STRs in Pagosa appears to have tripled. And the cost of a single-family home has also tripled, and the supply of homes in the ‘middle-class’ price range in Archuleta County has essentially dried up. What amount of ‘self-correction’ might take place in 2023 and 2024, we still don’t know. What foreclosure rate Pagosa might experience, we also don’t know. Yet.
Investors might be switching to long-term rentals, but that trend is not yet evident on the AirDNA.com website. In the two charts below, you can get a feeling of the growth of the Pagosa STR industry over the past three years. AirDNA found 856 active rentals in 2020 (Q3) and 1,393 active rentals in 2022 (Q4).
Mr. Lindner continued:
“The rest are just questions, guys, for our spirited discussion in the future.
“How do we ensure that any regulations we implement are serving our residents, and not harming them, taking away the tourism dollars we rely on as a community?
“How do we create policies that are fair for our homeowners and doesn’t favor one homeowner over another, while ensuring individual property rights?
“How do we make it fair to our commercial lodgers — our hotels — that pay property taxes at commercial rates for their property, if we charge a residential tax rate for STRs?
“And finally, how do we streamline enforcement of regulations, so we’re not making it extremely difficult to enforce, and taxing our Town staff?
“So in conclusion, I would propose that we initiate a simple solution — a single fee, based on the [Root Policy] nexus study, and that we get rid of all the other regulations, and that we dedicate the revenue that we get from the nexus study fee to potentially subsidize our other housing projects…”
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.