Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
It seems to me like the push to quadruple Colorado STR property taxes is softening quite a bit.
Still a long way to go, but reading between the lines of this Colorado Sun article today, the opposition efforts seem to be working. There are a couple notes from the article that make me think this, but the biggie is this passage halfway down:
"The sponsor of the bill said he plans to offer amendments to narrow the bill with less of a focus on people renting second homes and more attention paid to hotels that convert to privately owned units that are taxed as residential but still operate like a hotel.
These giant corporate properties that are being misclassified as residential but are being rented out as a hotel. That’s what we will focus on,” Hansen said. “But for the average owner doing 60, 90, 100 days a year, the final bill will have little to no impact on that.
Now that last sentence leaves wide open the possibility of changing tax rates for full-time short-term rentals and vacation rentals in Colorado. So I'm not sure what distinction he's making. But the trend I've seen in recent news articles is the sponsor pulling back from the scariest parts of his own bill.
Typical politician....he's lying as usual. He knows darn well that the average STR owner does more days than that. So he can 'look' like he's softening up the law while having it accomplish the same thing.......
Well, that's kinda good news.....The 60/90/100 days a year mention would still leave out most STR owners. I usually went about 200 days per year which I suspect would be an average?
It sounds like he wants to protect people in places like Summit county who bought a second home and need to STR to afford it which is great. But there are a lot of us who are single people (not corporations) who bought property and poured hundreds of thousands into it - (yes my husband and I spent a ton creating a triplex out of a single family on an R4 lot before he died of COVID) to make a great property specifically to short term rent. This was and is a huge part of my retirement plan. I hope they consider that all STR owners are not huge corporations!
Well, that's kinda good news.....The 60/90/100 days a year mention would still leave out most STR owners. I usually went about 200 days per year which I suspect would be an average?
But good that he's getting some pushback.
Yeah, I see my clients getting 60-70% occupancy for STRs in Colorado, so like you said, his quote about 60, 90, 100 days as a vacation rental would leave nearly everyone out in the cold.
It sounds like he wants to protect people in places like Summit county who bought a second home and need to STR to afford it which is great. But there are a lot of us who are single people (not corporations) who bought property and poured hundreds of thousands into it - (yes my husband and I spent a ton creating a triplex out of a single family on an R4 lot before he died of COVID) to make a great property specifically to short term rent. This was and is a huge part of my retirement plan. I hope they consider that all STR owners are not huge corporations!
Interesting, what do you read in that that leads you to think it's a Summit County specific thing? I do think the pushback is greatest in the Breckenridge/Summit County area, which has the highest concentrations of vacation rentals in Colorado.
I think you were the one that thought they would create some middle-tier taxation rate for STRs. Did you hear that somewhere?
I know you've done well with your triplex. You're in such a good position being grandfathered in under the old rules and having three units. I hope for your sake -- and the sake of a lot of my clients -- that this gets amended well.
If you heard/saw what happened recently in the Palm Springs area (3-4 cities ganging up) with anti-STR laws crushing resale values. Does Colorado avoid that by being a bigger market with a lower concentration of STR?
@James Carlson the reason I think he's speaking about second home owners in summit primarily is because what STR owner who doesn't use their property as a second/vacation home would rent less than 100 days a year?
If you heard/saw what happened recently in the Palm Springs area (3-4 cities ganging up) with anti-STR laws crushing resale values. Does Colorado avoid that by being a bigger market with a lower concentration of STR?
I know Palm Springs passed a cap on the number of STRs per neighborhood. I've followed that a little and know there are reports of people not being able to sell their home because they're in a zone that's well past the cap, and so the pool of potential buyers -- which would otherwise include potential vacation rental buyers -- is reduced.
I think that's slightly different that the repercussions that could be felt by this Colorado law. This doesn't cap the number of STRs, but would eat in to the potential cash flow a buyer could get from a short-term rental.
Now, there are a lot of cities and counties in Colorado that have gone the route Palm Springs, most notably in Breckenridge and Summit County. Both municipalities are facing lawsuits from STR homeowners.
@James Carlson the reason I think he's speaking about second home owners in summit primarily is because what STR owner who doesn't use their property as a second/vacation home would rent less than 100 days a year?
Right, that inference makes sense. But there's a disconnect in what he's saying. His tone and implication is that he's going to amend the bill to reduce the potential impact on STR owners -- "The sky is not falling," he's said a few times -- but the bill already has a threshold of 90 days, so when he throws out 60,90, 100 days as some sort of comfort to vacation rental owners, that doesn't make sense to me. It's what the bill already says and it's what is scaring most short-term rental owners.
Typical politician....he's lying as usual. He knows darn well that the average STR owner does more days than that. So he can 'look' like he's softening up the law while having it accomplish the same thing.......
Another quick update on Colorado's push to classify STRs as commercial property for tax purposes.
The bill will be amended to only apply to Colorado vacation rentals that are short-term rented for 200 days or more each year. The author of the bill said in a Westword article today that he plans to offer the amendments at the bill's committee hearing on Feb. 20.
(Currently, Airbnb properties would be taxed at the commercial rate if their short-term rental bookings amounted to 90 days or more in a year.)
If the bill passed with a 200-day trigger, you could have a 54% occupancy rate for the year and fall under that threshold. My STR clients in Denver and Colorado Springs and mountains definitely have higher occupancy rates, but it's at least not as draconian as it was before.
@James Carlson so if you do short term (30 days or less) just below the 200 day threshold and then do medium term the rest of the year, you still pay residential rates? I can see a lot of owners switching to that model. Not sure that will accomplish whatever the proponents of this bill are after.
If you heard/saw what happened recently in the Palm Springs area (3-4 cities ganging up) with anti-STR laws crushing resale values. Does Colorado avoid that by being a bigger market with a lower concentration of STR?
Wasn't this exactly what the politicians wanted though? The argument was that STR's are artificially increasing prices beyond what owner occupants can afford. At least that's what I thought. I could be wrong. :) Not arguing for that, just that's what I thought they were saying.
I was going to say exactly what @Bruce Woodruff said. He's (the bill sponsor, not Bruce. lol) trying to make it appear that he's negotiating, just to get the bill passed. It's a distinction that doesn't change the effect on full time STR's. Does anyone know if the "hotels that convert to privately owned units that are taxed as residential but still operate like a hotel." is even a real thing? Are there documented cases of this, or is it just a strawman argument to get the bill passed? It would seem that zoning wouldn't allow that hotels to convert to residential, but IDK.
Yes, at least that's how he presented it to the newspaper. We'll see what the details of the language are when he introduces the amendment in a few weeks at committee.
We have an example of this in Arvada, just outside of Denver. They allow non-owner occupied STRs but limit the nights you can run it as a short-term rental to 240 nights per year. My clients there do STRs from spring through fall and then MTR in what would be the low season anyway.
This seems like a good model, regardless of government-imposed limits. The MTR rates seem about as good as low-season-STR rates.
@James Carlson so if you do short term (30 days or less) just below the 200 day threshold and then do medium term the rest of the year, you still pay residential rates? I can see a lot of owners switching to that model. Not sure that will accomplish whatever the proponents of this bill are after.
I agree. Property owners will adjust whatever they need to make it work. If it works to go 54% occupancy with STR and ~46% occupancy with MTR, why not? Some investors use this model as well with beach properties in Coastal NC because of the seasonality. One of the downsides is it can hurt your rankings with Airbnb if you're blocking off bookings for almost half of the year. Although, at this point, getting a little hurt in the rankings is likely better than the higher tax rates. And many people will be in the same boat, so it may level out the competition for search on BNB sights.
Yep, I agree with everything you said. Interesting point about switching from STR to MTR and taking a hit in the algorithm. I think you can avoid that by booking your midterm rental through Airbnb.
Our medium-term rentals in Denver and Colorado Springs have been booked exclusively through Airbnb the past year and a half. Furnished Finder seems to have messed something up, and it hasn't been great for us in a few years. Zillow got us one or two bookings as well, but again, I think Airbnb is going to be the big dog in the MTR space soon.
@James Carlson That's good to know about Furnished Finder. I haven't had much experience with it. I have done MTR through Airbnb myself and had success with it but I know others who have mostly advertised month-to-month on Fb Marketplace or the MLS for a 4-6 month lease, depending their strategy in the off-season. That's when I think it can hurt your results in the algorithm and I was assuming STR hosts would have to go that route if they need to limit their STR days rented.
If it's still rented through Airbnb for MTR, wouldn't that flag the days rented for gov-proposed limits?