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Cracking down on rental homes

Reid Armstrong
Sky-Hi Daily News

An ever-increasing number of second-home owners in Colorado’s mountain towns are renting out their homes as vacation properties. Using online resources like vrbo.com and craigslist.org, many of these property owners are able to handle bookings at a minimal cost without hiring property management firms.

But, the majority of these vacation rentals by owner are flying under the radar, not registering with the local government, not applying for business licenses and not paying sales or lodging taxes, according to a study conducted by the Town of Breckenridge last year.

Nobody has a solid estimate on how much revenue in Colorado is being lost each year in off-the-books vacation rentals, but in ski towns like Breckenridge, Steamboat and Winter Park, it could add up to tens of thousands of dollars every year.

The Colorado Association of Ski Towns (CAST), an organization of more than 25 municipalities, is looking to pool its resources to crack down on the short-term vacation rental industry. Alone, few towns have the resources to address the problem, which requires tracking down violators who are advertising online and elsewhere and cross-referencing them with licensed business owners and tax filings in each town.

The Town of Breckenridge ran a pilot study last year to identify homes in its jurisdiction that were advertised and rented online illegally. Breckenridge town manager Tim Gagen, who serves on the board of CAST, estimates Breckenridge has some 600 vacation rental properties out-of-compliance, whether by lack of knowledge or deliberately.

But the upshot, he said, is that all of the property owners that Breckenridge contacted last year regarding noncompliant vacation rentals filled out their paperwork and sent in their checks. Through that effort, the town collected more than $10,000 in revenue it wouldn’t have seen otherwise .

“And that was just going forward,” Gagen said. “We didn’t even try to collect for taxes they should have paid in the past.”

Steamboat conducted a similar program and collected tens of thousands of dollars, Gagen said.

With ski towns losing hundred of thousands of dollars in revenue in the sluggish economy, Breckenridge proposed that CAST members go after this missing revenue using a collective approach.

Last week in Mt. Crested Butte, CAST board members charged executive director Joyce Burford with exploring the options for a joint regulatory operation. Burford, who also serves on the Fraser Board of Trustees, said she will be appointing a committee made up of lawyers, finance directors, property managers and vacation rental owners to oversee the hiring of a person or firm to run the program. The committee will discuss how to structure the job and payment.

CAST members will have the option to participate in the program, Burford said.

Another benefit likely to evolve out of this process, Gagen said, is the streamlining of regulations between municipalities regarding short-term vacation rentals. Ordinances and taxes vary widely among towns. Some require special licenses, some don’t regulate vacation rentals at all; some require vacation rental properties to carry business licenses, and all charge some sort of sales and lodging taxes, ranging from 7 percent to 16 percent.

Counties have even more to lose by not collecting additional property taxes associated with homes that are being run as a business.

“There’s a definite advantage to everyone having standardized forms, taxes and regulations,” Gagen said. “Any time we can have uniformity it’s a good thing.”

With the down economy compromising homeowners’ ability to afford their mortgage payments in mountain towns, the industry is destined to continue growing.

“We want to stay in front of that,” Gagen said.

CAST has given this issue high priority this year, and Burford said she hopes to have the details of the program knocked out in the next six months.


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