STRs Licensing in Denver - Primary Residence Rule

[Sid Payne]

I am looking to help out with an STR in Denver proper. In reading about the licensing, the first thing I saw was this:

"Property owners and long-term renters are allowed to apply for an STR license for their primary residence."

If this is the case, are most of the houses on VRBO not licensed? I have a hard time believing these are all folks who rent out their primary residence.

Has anyone figured out how to manage this without it being a primary residence? I did see that one thing you can do is turn it into a commercial property/license but that seems cost prohibitive due to most likely having to install sprinkler systems and become ADA accessible.

It seem unfortunate that Denver is missing out on all the tax revenue that could be generated by a strong STR market.

Any ideas you folks have would be greatly appreciated,
Sid

[James Carlson]

@Michael Greenberg Thanks for the mention

@Sid Payne Here's more info than you ever wanted to know about enforcement of Airbnb/VRBO/short-term rental laws in Denver

Currently, there are roughly 4,500 STRs in the city limits of Denver. The enforcement guy with Excise & License tells me the majority of those are operating illegally. But while the city contracts with a data-scraping company to ensure all listings are licensed, without the manpower, the city can't enforce the primary residence rule. To do so, it relies solely on neighbor complaints. So as I always tell people, if your neighbors don't care, you're fine.

Some people ask how to get around the primary residence rule? If the question is, how to get around it legally, there's only one small sliver of a loophole. It's this:

• Find properties with basement apartments or carriage houses out back.
• Get a long-term renter in the smaller of the spaces.
• Because tenants are allowed to Airbnb their "primary residence" (which is considered the entirety of that property) with landlord permission, the tenant gets the license and makes you a co-host. 
• Operate an STR in the main unit.
• However you split the STR income is up to you and your tenant.

Now, yes, you could just get someone to sign a dummy lease, but that doesn't get you around the neighbor issue. Whether you have the proper "paperwork" or not, if your neighbor complains, the city is going to investigate. And then your tenant story better hold up. 

There is about to be a test case going to court over this. An owner in Cherry Creek says he lives in the place and is legally allowed to rent it out. On the side, a handful of neighbors are going to testify that they never see this guy. The question is whether the judge will side with the neighbors without concrete evidence. I'll be watching that closely.

Something else kind of interesting is that the city is considering filing felony fraud charges against a few people who apply for a license, check the box that says I testify this is my primary residence and then submit knowingly false information in the form of documents. 

This all to say, Denver is getting more diligent about its enforcement efforts. 

Oh, yes, you can find a property zoned for commercial (or a SFH and then apply for a variance in zoning), so that you can run a lodging facility, but that's not an insignificant task to get the proper licenses, install sprinklers, exit signs, etc.