New Mexico Politicians may tax STR properties as commercial

[Randy Dubiskas]

I was on a zoom call with Carl Vidal, an Albuquerque realtor and STR management firm owner about this idea that has been floated. The idea is that counties will identify a residential property as a short term rental and change the status to commercial and remove any residential caps on property tax. As told by Carl, it seems to be an idea by a group of county assessors, but not necessarily state-wide. It seems that no legislation is needed to implement this? The largest county (population) is Bernalillo - this is where Albuquerque is located. Have others seen changes like this in different areas?

[Russell Brazil]

The property is being used for commercial purposes, so I guess that makes sense.

[Randy Dubiskas]

Maybe, and I don’t have a lot of experience with property taxes on commercial but the basis is different. Homeowners are taxed based on market value and recent sales. Commercial same?

[Randy Dubiskas]

Quote from @Russell Brazil:

The property is being used for commercial purposes, so I guess that makes sense.

Also, what about the retiree that books an ADU or casita out to make some extra coin, then loses property tax benefits afforded to seniors?

[John Clark]

Quote from @Randy Dubiskas:

Maybe, and I don’t have a lot of experience with property taxes on commercial but the basis is different. Homeowners are taxed based on market value and recent sales. Commercial same?

In most every state/locale, yes. The tax rate is usually higher for commercial, but determining the base value is usually the same as/similar to determining the value of residential properties. 

If owner occupied, I would assume that either some sort of blended method would be used, or if lucky, the owner gets a pass. 

[John Clark]

Quote from @Randy Dubiskas:

Quote from @Russell Brazil:

The property is being used for commercial purposes, so I guess that makes sense.

Also, what about the retiree that books an ADU or casita out to make some extra coin, then loses property tax benefits afforded to seniors?

What about it? We want to help widowed Aunt Tilly, living in genteel poverty, not Donald Trump or Uncle Fester, whose extra “coin” means the difference between two months a year in Cancun and three. 

[Bill B.]

This is already true for almost all long term rentals. Most property tax caps are only for owner occupied properties. Some states like Nevada also have a tax cap for “affordable rentals” based on rent/divided by bedrooms. (3% vs 8%)

Unless you're talking about STR of rooms while the owner still lives there (as required in Vegas and other locales.) obviously they should be treated as rentals. There shouldn't be a different property tax 7 day, 30 day, or 365 day rentals.

My MN property tax has more than doubled in 7 years because it’s a rental versus owner occupant, just the way it’s always been. 

[Michael Baum]

Sounds like par for the course. Some states do have laws that limit property tax increases so that would mean they would need to go through the legislature to get it modified.

[Sarah Kensinger]

This doesn't surprise me in the least...I wonder if they think it'll deter more STR.

[Randy Dubiskas]

Quote from @Bill B.:

This is already true for almost all long term rentals. Most property tax caps are only for owner occupied properties. Some states like Nevada also have a tax cap for “affordable rentals” based on rent/divided by bedrooms. (3% vs 8%)

Unless you’re talking about STR of rooms while the owner still lives there (as required in Vegas and other locales.) obviously they should be treated as rentals. There shouldn’t be a different property tax 7 day, 30 day, or 365 day rentals. 

My MN property tax has more than doubled in 7 years because it’s a rental versus owner occupant, just the way it’s always been. 

For an ADU where the owner resides in the main house and the detached unit is listed, you might lose your favorable property tax treatment such as for Veterans or Seniors. 

[Richard Elvin]

Quote from @Sarah Kensinger:

This doesn't surprise me in the least...I wonder if they think it'll deter more STR.

I think they plan for it to increase their coffers, not deter STR. If they were only concerned about detering STR they would probably use zoning vs taxing.

[James Carlson]

@Randy Dubiskas

This idea of taxing STR properties on a commercial basis is floated almost every year here in Colorado. And ever year it dies a very quick death. Most city governments in the state (Denver and Colorado Springs being the biggest but far from the only ones), and even the more conservative unincorporated county governments (like around ski resorts), are restricting Airbnb, so it's not like there's a big sympathy toward short-term rentals. And yet the state never gets that far in this pursuit of classifying Airbnb-STRs as commercial properties.

I think there are two headwinds. 1. There are a lot of people who do vacation rentals and they are vocal. 2. And maybe more importantly, this could add some logistical headaches to city/county governments to identify all STRs and switch them to commercial and then what happens if an STR is sold to someone who's going to stop doing Airbnb?

Philosophically, like @Russell BrazilI can see why people would want this, but I guess I'm saying if New Mexico is anything like Colorado, then I suspect that any such proposal would die. 

[Sarah Kensinger]

Quote from @Richard Elvin:

Quote from @Sarah Kensinger:

This doesn't surprise me in the least...I wonder if they think it'll deter more STR.

I think they plan for it to increase their coffers, not deter STR. If they were only concerned about detering STR they would probably use zoning vs taxing.

Yes, there is that too! Seems like pretty much everything is about money.

[Robin Searle]

@Randy Dubiskas currently in Colorado there is a bill in committee to make a new category of “lodging” for any home rented out more than 90 days per year short term (under 30 days). This would really increase the property tax on STRs. I spoke with our assessor in Colorado Springs a couple of years ago and this is exactly what he told me he was recommending to politicians at the state level.

https://leg.colorado.gov/sites/default/files/images/committees/bill_6_24-0388.pdf?fbclid=IwAR3_82R2GbrrTQ0diMMKj9pyy3fOplEJTO6ny4dKRKYf89nFVbV0dYtnVNg_aem_AfhYQ4ypdCSKYTIC8FQXm2QLf-N_7ErU7jiArZZpfOk5qnUp981jEGtYZk1tNl7h454

[Ruth Lyons]

Thanks for this discussion. It makes me so angry that these legislators sit in their offices and try to figure out more ways to tax us. What are the unintended/intended consequences of this? Why do they want to tax this? Let's see -- force the small investors out by making it unaffordable. Another example of big government over-reach through unneeded regulation and taxation. 

[Ryan Moyer]

Quote from @Ruth Lyons:

Thanks for this discussion. It makes me so angry that these legislators sit in their offices and try to figure out more ways to tax us. What are the unintended/intended consequences of this? Why do they want to tax this? Let's see -- force the small investors out by making it unaffordable. Another example of big government over-reach through unneeded regulation and taxation. 

This isn't really a new tax though.  It's properly classifying a commercial business as a commercial business.  Just closing a loophole where people were operating commercial businesses without the squeeze.  Fun while it lasted, where we've gotten to have our cake and eat it too, but we'll see this everywhere eventually.

[Randy Dubiskas]

Quote from @Robin Searle:

@Randy Dubiskas currently in Colorado there is a bill in committee to make a new category of “lodging” for any home rented out more than 90 days per year short term (under 30 days). This would really increase the property tax on STRs. I spoke with our assessor in Colorado Springs a couple of years ago and this is exactly what he told me he was recommending to politicians at the state level.

https://leg.colorado.gov/sites/default/files/images/committees/bill_6_24-0388.pdf?fbclid=IwAR3_82R2GbrrTQ0diMMKj9pyy3fOplEJTO6ny4dKRKYf89nFVbV0dYtnVNg_aem_AfhYQ4ypdCSKYTIC8FQXm2QLf-N_7ErU7jiArZZpfOk5qnUp981jEGtYZk1tNl7h454

 Thanks for your update.  I bet New Mexico lawmakers will be watching and try something similar.