Study links vacation rentals to housing crisis
July 27, 2015
Short-term vacation home rentals are big business.
From Breckenridge to Park City, mountain towns cracked down — starting in 2009 — on property owners who were renting to vacationers without required permits and licenses and skipping out on taxes.
Now, according to a Colorado Association of Ski Towns (CAST) report released in June, the growth of vacation home rentals on online hosting sites has led to more challenges beyond noncompliance and lost revenue.
Community concerns have shifted to long-term rental housing loss, neighborhood character changes, zoning regulations and problems with parking and noise.
The (housing) shortage could be caused more by landlords raising rent as the economy has improved and increased property values. Brian Waldes, Breckenridge financial services manager
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Workforce housing worries towns the most, moving tax collections issues to second-place.
"The workforce housing issue is just going to get tighter and tighter in our CAST towns," said Joyce Burford, CAST executive director. "How each town solves that problem is going to vary."
The CAST report details how 10 towns — Breckenridge, Crested Butte, Durango, Estes Park, Frisco, Jackson, Mt. Crested Butte, Ouray, Park City and Steamboat Springs — are dealing with the challenges, and it suggests communities learn from each other.
In 2014, more than 2.1 million rentals were listed on the top-three hosting sites — AirBnb, Homeaway and FlipKey — and more hosting sites pop up all the time.
"It's a little bit like a game of whack-a-mole," said Breckenridge Mayor John Warner. "I don't think it's inherently a bad thing; it's just a different way of doing business."
Breckenridge and Frisco officials said they recognize the positive economic contributions vacation rentals make and don't see any new rules coming soon.
LONG-TERM RENTAL CRISIS
Of the 10 towns, Breckenridge had the second-highest portion of housing used as vacation rentals, with 41 percent of 7,187 estimated units in 2014, behind Mt. Crested Butte's 52 percent.
Breckenridge financial services manager Brian Waldes said the portion hasn't jumped in recent years.
Frisco has a much smaller portion of vacation rentals, with just 6 percent of total housing units estimated as being used for short-term rentals. However, vacation rental sales-tax collections form 31 percent of all lodging sales-tax collections in 2014, up 3 percent from 2010.
The CAST report notes that concerns have increased in the last year over the impacts of vacation rentals on the availability and cost of workforce housing. Most towns have done little to quantify impacts but are more interested in pursuing affordable housing options, with several towns talking about a housing crisis.
"This was the first year in my eight years as mayor I've really run into the word 'crisis' when we describe the lack of affordable properties for our workforce," Warner said.
Breckenridge's largest employers came to officials at the start of last ski season and urged action.
"Certainly short-term online rentals can't be helping the situation," Waldes said, but the shortage could be caused more by landlords raising rent as the economy has improved and increased property values.
According to the report, the town's long-term rental units have held steady at about 9 percent of all residential units.
WHERE GOES THE NEIGHBORHOOD?
Breckenridge and Frisco were in the minority of towns studied that don't restrict vacation rental locations. Short-term rentals are prohibited only in deed-restricting housing.
Mindy Brewer, who has lived in the Wellington neighborhood with her family for the last 10 years, said the proliferation of websites like AirBnB has affected Wellington dramatically in the last year or so.
"Now we've got strangers that are renting out rooms and taking our parking," she said.
She said Wellington's HOA dues have risen, and neighbors might be breaking the rules because they're struggling financially.
"People are just getting off track with affordable housing and what that was supposed to create," she said. "Everybody's just forgetting."
As a property manager, Brewer said she gets 100 inquiries in an hour after posting a long-term rental listing, and sometimes people will offer to pay $50 more a month because they've gotten so desperate for housing.
Warner said the Breckenridge Town Council recently celebrated the groundbreaking of a workforce housing project on Airport Road and is working on others.
Outside of deed restrictions, the CAST report found outraged neighbors in many towns fighting against the proliferation of vacation rentals while trying to preserve visitor-driven economies.
The vacation-rental industry has grown beyond its sharing economy status and no longer uses only spare bedrooms, homes empty while owners are on vacation and second homes that owners visit a few times a year. Familiar faces in some neighborhoods are being replaced by transient populations.
Overall concern is higher for impacts on community character than on specific nuisances, the report said, of which parking violations are the biggest complaint followed by noise.
"Basically, it's about being a good neighbor while you're using your home as a business," Waldes said. "You're responsible for letting people know the rules."
Warner said he lived in a Breckenridge neighborhood near the Stephen C. West Ice Arena where illegally-parked wedding guests became a problem. After 19 years there, he moved to the Highland Greens neighborhood off Tiger Road where vacation renters are kept in check by property management.
"It can work if it's regulated well," he said.
REGULATION AND EDUCATION
Unlike traditional lodging, online hosting sites don't ensure quality or safety standards, generally don't collect taxes and aren't limited to zones where vacation use is more compatible or expected.
In Frisco, revenue specialist Chad Most said he generally hasn't seen issues with vacation rentals not paying taxes or following town laws.
The town receives few complaints about parking, noise or trash, he said, and he finds between 10 and 20 units out of compliance with taxing in his annual check. As the town's one-person tax department, though, he said he wished online hosting sites made it easier to track vacation rentals.
"If we can't get the information off of these websites in an efficient manner, then it's really difficult for us to enforce these rules equitably," he said. "My big hope in the future is that there is some action not only on a statewide level, but perhaps even on a federal level."
Durango limits the number of vacation rentals in a given area within the zones where they are allowed. It also provides an online map of all permitted vacation rentals that anyone can use to submit complaints directly to the community development department, which helps with tracking.
Breckenridge has strengthened sections of its nuisance law to address vacation rental concerns, and the town requires the designated contact person for the property to be available 24/7 and live or work in town. All units must also visibly post a brochure on noise, parking, occupant, visitor and trash regulations.
The CAST report suggests other towns could model themselves after Breckenridge, which sends all new property owners a letter and a vacation rental application form that explains licensing. Then the town sends a reminder letter on requirements every four years.
"Breck has always been kind of ahead of everybody," Burford said, starting with town manager Tim Gagen spearheading revenue collection efforts six years ago.
The town has an estimated 99 percent licensing compliance rate, and, for the last couple years, the town reported addressing roughly five noncompliant units annually.
"People understand that it's the cost of doing business," Waldes said, and business licensing fees go into the town's marketing fund and benefit property owners and managers through advertising.
At the county level, officials are still trying to understand the growth of vacation rentals.
"I don't know that we have even digested what this all means enough to know what our public policy should be," said County Commissioner Thomas Davidson, adding that the county attorney's office is working on what rules the county could enforce.
Community leaders have said they want to continue supporting those doing business legally, like Tammy Ramsay, who manages five vacation rental properties in Keystone and said a panel discussion on vacation rental management tips in Summit could help.
"The short-term rentals create lots of work for the people in our county," she said, from housekeeping, maintenance and landscaping teams to massage therapists and home chefs. "Short-term brings so much more than rental income to the owner."
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