Airbnb investment in Colorado Springs: Now or never?

Question

Hey any Colorado Springs BPers! (And those simply interested in Denver's little sister.)

A new proposed Airbnb ordinance in the Springs has me wondering whether it's now or never to buy an STR investment in some of the most popular areas of that city.

Just last year, the city council passed an ordinance allowing short-term rentals in any kind of investment property. Now things might change. Earlier this month, the city proposed two changes, but the one that's interesting to me is this:

• A 500' density limit prohibiting any new non-owner occupied Airbnb within 500' of an existing non-owner occupied STR.

The density restriction, which councilman Knight said would be voted on next month, could essentially blot out huge swaths of Colorado Springs to future Airbnb investments.

Here's the thing. According to the draft language, any existing or new STRs approved prior to the implementation date of the density restriction will be grandfathered in. The draft appears to say implementation date is 90 days after passage of the law. This could create a huge rush in the next few months to get in before the door closes.

I've nabbed the current permit data from the Colorado Springs Short-Term Rental Alliance (shout out to COSSTRA!) and then mapped the current STRs. There are certainly pockets of the city that A) aren't blotted out by the overlapping 500' circles and that B) are also good areas for Airbnbs. But still, if this passes, many areas -- including most of Old Colorado City and broader downtown -- could be off limits to STR investment in a few months

I see this as a double edge sword. If you don't get in, then you could be out forever. But if you do get in (or are already in) in certain areas, then the city will essentially block all future competition.

Let the bull rush begin!

Thadeous Larkin · Answer

@Michael O'Brien - for the sake of comparison, it took me less than a week to get my application approved and the folks who work in the permitting office are super friendly and helpful.

Robin Searle · Answer

@Ryan Riches That's not on the table at this point (owner occupancy) - they are considering density restrictions and were supposed to take that up this month but it's been indefinitely delayed after the last town hall.  Not saying they won't change the rules on all of us at some point but for now we are allowed to continue exercising our private property rights!

Thadeous Larkin · Answer

Six of the nine seats of city council are up for election in 2021.  Just sayin'.

Robin Searle · Answer

@Ken Latchers So true - always have an exit strategy and back up plan! We just got permits for all three units of our CS Triplex. I’ve been shocked at the fast about-face of our council members due to a very small minority opposition! But I’ve always had a back up plan for this particular property.

Ken Latchers · Answer

Don't think that jumping in now because of regulatory changes will prevent further regulatory changes in the future.

James Carlson · Answer

@Ken Latchers

Totally. I think you always need a Plan B. For us, it's to turn our two smaller units into furnished medium-term rentals. And I think making a rushed decision to try to get under a new proposal could lead to problems if you haven't already thought it through.

I also think you can't not take a step because a city could change the law in the future, especially when the city has been explicit that they won't. In this instance, I mean that Colorado Springs council has been explicit every time they talk about the density restriction that existing STR permits will be honored.

Again, though, always have a back-up plan

James Carlson · Answer

Hey @Michael O'Brien

You know a month or so ago I would have said there's no way the city of Colorado Springs -- long a right-leaning, property rights driven council -- would have passed something so restrictive for short-term rentals and Airbnb. But something seems to have shifted, so now I guess I'd say there's an equal to greater-than-equal shot that they pass the density restriction.

As far as timing goes ... You've got time to find a place -- a month if you're diligent -- then another 30 days to close. You're at 60 days now. I was worried about how long the application process would take as well. BUT! The below note was attached to the signature of a recent email a friend received from the Colorado Springs planning department. (Pertinent part in bold.)

If this email is in regards to a STR permit, please be aware this applicaiton submittal is the first step to establishing your STR permits(s). The submittal date will be what Staff considers for grandfathering in the event any permit density regulations change during the review of your application.

That seems to say that if you get your application in before the regulations change, you're good to go.

Michael O'Brien · Answer

Wow. Thanks for the info James!

Is there any idea on how the vote will go?  What’s the timeline for Colorado Springs to approve a short term rental permit application?

I’m surprised this wouldn’t get rejected immediately for anti-business practices and anti- free market.

I can see a month to close, then however long it takes for the permit eating up a lot of the 90 day period to get everything done.

Sucks as I’ve been trying to see what is out there in old Colorado city and the west side of COS.

Would you mind sending the list with the blot map of everyone with current permits?

Just bought a lot in my local area for a new construction build  (st louis) so bad timing hah.

Ryan Riches · Answer

One thing to keep in mind on top of the density rule: They are also voting on a regulation that would not allow you to rent your property out as an STR unless you occupy that property - Same rule that Denver has enforced. I thought they were supposed to vote on this one back on 10/22 but haven't seen anything new on it. Just like @Robin Searle and @James Carlson have said, have a backup plan for your properties. I would even say to make sure they will break even or cashflow if you had to transition them over to LTRs.

James Carlson · Answer

@Michael O'Brien

No, unfortunately, the original STR ordinance states that the permit is with the owner, not the property. The pertinent section is 7.5.1702(B):

"The short term rental unit permit does not run with the property, but is issued to thespecific owner of the property. The permit shall expire upon sale or transfer of theproperty. The permit shall not be transferred or assigned to another individual, person,entity, or address but may be managed by a third party on behalf of the owner."

Airbnb investment in Colorado Springs: Now or never?

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