By Jason Blevins
The Denver Post
02/22/2015 12:01:00 AM MST
Kate Barney fielded a call from a local property manager a few years ago: Would she rent her family’s home in downtown Crested Butte to vacationers for the summer?
The offer was huge — almost eight months of mortgage payments.
“These people are paying top dollar,” said Barney, who manages properties with her general contractor husband, allowing them to move their family to different houses.
Now, their home is typically booked for the entire summer by mid-March, as are many of the more than 250 vacation rental homes available in the Crested Butte area listed on websites such as VRBO.com, HomeAway.com, Airbnb.com and flipkey.com.
Crested Butte is one of the 10 fastest-growing markets in the nation for short-term rentals, according to HomeAway, the online Goliath in the vacation rental market.
But nearly every other high-country town in the West is contending for that title, as a surge of property owners convert their homes into vacation destinations for the growing number of tourists seeking something more than a hotel room.
That deluge of property conversions is challenging municipal leaders as they wrestle with the impacts of vacation rentals, which account for a rapidly growing share of lodging bookings. The taxes paid by vacation rentals has grown from trickle to torrent, and municipalities are mulling increased regulations that would, ideally, keep that revenue high but dampen the side effects that come when owners wring more value from homes on the hot short-term market.
The widespread repercussions of vacation rentals are rippling through urban and resort communities. On the upside, there are more options for visitors who are looking for experiences beyond a hotel. More options equal more visitors, which equals more spending and tax revenue.
But there’s more than cash in the wake of a vacation-home renter.
“It seems to have increased in magnitude just in the last year or so. And now things are coming to a head, and communities are looking more comprehensively at what the issues are. And they are seeing there are a lot of issues,” said Melanie Rees, a resort community housing consultant who is piloting a study of the impacts of vacation rentals for the 25-community Colorado Association of Ski Towns.
“A real crisis”
Longtime residential neighborhoods are seeing homes turned into mini-hotels, with parking, noise and trash problems that follow a steady stream of visitors. And locals are finding themselves shut out of the long-term rental housing market as owners pursue more lucrative short-term tenants.
The supply of rental housing for workers is already critically low in many resort communities and municipal leaders wonder how the vacation-rentals boom is further pinching supply, Rees said.
Maybe it’s the growing economy creating more jobs. Maybe it’s more short-term rentals. Maybe it’s both.
Regardless, she said, “a real crisis for workforce housing” has emerged in the past year.
Six years ago, as vacation rentals in mountain towns grew from a few to dozens, municipalities began scouring the Internet for vacation rental listings and collecting local lodging and sales taxes from owners. Texas-based HomeAway in 2011 sent cease-and-desist letters to a few Colorado towns, calling the pursuit illegal data mining.
Towns that began chasing lodging and sales taxes in 2009 and 2010 say they’re doing well, with resort destinations such as Breckenridge now gathering nearly $100,000 a year from short-term rentals.
And in Crested Butte, where a vigilant program keeps landlords in compliance with local tax laws, short-term rentals now account for 60 percent of the town’s lodging tax revenue , Mayor Aaron Huckstep said.
Even with the taxes, vacation-rental use is skyrocketing in Colorado, largely because of changing consumer demands and a limited supply of new lodging. Large-scale hotel or condo development in the mountains has been slow to recover from the economic downturn in the high country, yet visitation is reaching record levels, especially in the summer.
“There is rising demand and no more supply,” said Ralf Garrison, who studies lodging trends for his DestiMetrics group, which surveys mountain resort property managers across the West to measure lodging occupancies and rates.
Garrison said there also is “a huge shift” in what vacationers want from their lodging. Surveys of ski-town visitors show that more than half want to feel like a local, not a visitor in a hotel, he said.
“They said, ‘I want to immerse myself in the community and get the real experience, not a synthetic, packaged experience,’ ” Garrison said. “Communities that were skeptical about vacation rentals are finding an economic reason to accommodate them.”
Not a passing trend
Recognizing that vacation rentals are not a passing trend, nearly every high-country town council is grappling with regulations to help mitigate their impacts. These mountain communities share the problem with urban cities seeking to rein in the suddenly everywhere vacation-rental market with regulations and even outright bans — including New York; San Francisco; Austin, Texas; Portland, Ore.; Nashville, Tenn.; and Boulder.
Many Colorado mountain communities require permits for vacation rentals, including Grand Lake, Estes Park, Durango, Winter Park, Breckenridge, Granby, Aspen, Manitou Springs and Steamboat Springs.
But some of those towns think permits alone are not enough.
A study released last fall by Estes Park revealed that 54 percent of the town’s rental housing was available short-term, with only four long-term rental units available in the Estes Valley and 398 vacation rentals. The town’s short-term rental regulations limit parking and occupancy and do not allow rentals of deed-restricted housing.
Estes Park has 161 licensed vacation rentals, up from 101 in 2012. The town estimates that 79 percent of the roughly 400 vacation rentals available online are not paying sales and lodging tax, a loss of more than $70,000 a year in revenue for the town.
A proposed tightening of vacation-rental restrictions includes more limits on occupancy numbers, increased permit fees and requiring vacation rentals to pay commercial utility rates.
Durango Steele and her husband, Mark Newman, would be happy to pay some higher fees — but not commercial property taxes — for the 1921 cabin they renovated seven years ago, changing it from a long-term rental to a high-end vacation property, with a gourmet kitchen and all the trimmings of a top hotel. “Rockhedge” — where they hope to retire — is Estes Park’s top-ranked rental on VRBO.com. In the garage is an old sign from the 1930s, back when the cabin’s owners rented bunks to travelers.
“Back then, all the old inns around here were people’s homes, which they opened to visitors,” Newman said. “We aren’t that different.”
Manager and rules
Proposed small-town regulations run the gamut. Jackson, Wyo., bans short-term rentals in its residential neighborhoods. Durango last fall passed regulations that capped the number of permitted vacation-rental homes at 3 percent of the total homes in two downtown neighborhoods — resulting in 63.
Breckenridge requires large short-term rental homes to use a property manager with rules about trash and guest parking.
Local real estate brokers have told Breckenridge leaders they are seeing more new buyers and existing owners entering the short-term market, town manager Tim Gagen said. That has narrowed the supply of homes available for local renters.
“Within a very short time, we have been surprised by how tight the market became on the rental side,” Gagen said, noting that the town recently financed a pair of affordable-housing projects that should be breaking ground soon.
Gagen called vacation rentals “probably a good thing for resorts. We like hot beds, but it’s a balance.”
Breckenridge, like most resort communities, does not allow locals who live in taxpayer-supported, deed-restricted housing to open their homes to short-term rental. But in Aspen, where home prices are among the highest in the country, the city may allow workers in deed-restricted housing to rent short term, opening up more affordable-lodging options for visitors.
And that could help Aspen workers stay afloat.
“It could relieve some of the burden of living in an expensive town,” said Mayor Steve Skadron, who serves as president of the Colorado Association of Ski Towns.
That’s the story behind the story, Crested Butte’s Barney said.
Most for-rent listings, she said, are by locals trying to find a way to make money off their biggest investment so they can stay in a town where vacant residential lots sell for $600,000 and most new homes top $1 million.
Ski town locals renting out bedrooms is nothing new. But traditionally, they rented rooms to other locals. Now, they can rent to vacationers and earn two to three times more.
“We are paying local taxes, we are keeping people employed, and the people who rent our home are spending money in town,” Barney said. “We are just trying to hang on to what we have and make a little money so we can stay here.”
The vacation-rental websites, increasingly in municipal crosshairs, recently banded together to help towns forge regulations that are not too complicated or onerous.
Philip Minardi, the spokesman for the Short Term Rental Advocacy Center, which is supported by Airbnb, HomeAway, Trip Advisor and FlipKey, said regulations first must identify a short-term rental as a property that rents for fewer than 30 consecutive days. The rules should be easy for homeowners to find and follow without a burdensome permitting process that would lead to noncompliance, he said. Another guideline suggests that payment of local taxes should be the responsibility of the owner, not the website that connects owners with renters.
Making the rules too thorny could “have a wide-ranging detrimental effect to communities that rely on tourism,” Minardi said.
A final guideline, according to the advocacy center, is that any regulations should not change that property’s tax assessment from residential to commercial.
“The type of tenant in a property should not change the zoning,” Minardi said.
Chaffee County, which is home to vacation-rental-rich Salida, assesses some short-term homes as commercial, which increases the property tax rate from about 7 percent to 29 percent. If the home is available for short-term rental 365 days a year — with no days blocked off for owner use — the home is taxed as a commercial property, said Chaffee County Assessor Brenda Mosby, who inherited the policy from the previous assessor.
“If an insurance business moved into that house, we would charge them as a commercial business,” she said. “We just want to be as fair as possible.”
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