#Summit County #Colorado
The Colorado Association of Realtors alerted local real estate organizations Jan. 16 that a bill has been introduced in the state Senate that would change the designation of short-term rental units from residential to commercial, resulting in an increase in property taxes from 7% to 29% across the state, according to the industry trade group.
“We’re very disappointed … ,” Summit Association of Realtors former president Thomas Coolidge said. “We’re going to reach out to our legislators on all levels and try to come up with some compromise that we feel is reasonable given that short-term rentals are such an important part of the economy.”
Current Summit Association of Realtors President Dana Cottrell said the association met previously with state Rep. Julie McCluskie, D-Dillon, to discuss a similar bill, which was later dropped. Senate Bill 20-109 now has been picked up by Sen. Bob Gardner, R-Colorado Springs.
“It would negatively impact investors in the community if all of a sudden you have to take on this very increased property tax,” Cottrell said.
Cottrell said that when she met with McCluskie, the motivation McCluskie had behind sporing the bill was that she felt if a property was used as a type of commercial investment, it should be taxed as such.
“People want to offset their costs,” Cottrell said. “I want to protect the people that want to have a second home up here and want to offset those costs. I want them to use their properties as they see fit.”
The bill defines a short-term rental property as a building that is used “predominantly as a place of residency by a person, a family, or families,” but is leased for short-term stays. For the purposes of this proposed tax law, a property qualifies as a short-term rental unit only if it is occupied by the owner for less than 30 days per year.
For example, if a family on the Front Range has a second home in Summit County and stays for a month over the course of a year, they can still rent their home out on Airbnb or through a property management company for the rest of the year without being subject to commercial property taxes.
Breckenridge Town Council member Gary Gallagher said the council generally supports a bill like this that applies to short-term rental properties that are being run like a business rather than families who just want to rent out their property a few times per year.
“From many of our perspectives, I think what it really comes down to is if you want to run a business, then I am very comfortable with them being treated as commercial property and being taxed as such,” Gallagher said.
Gallagher said a short-term rental that is being operated as a business should not get special tax benefits compared to restaurants, hotels or other commercial properties in town.
“Let’s call it what it is: It’s a business,” Gallagher said. “We tax other businesses as commercial properties.”
Mark and Mary Waldman, owners of Summit Mountain Rentals, disagree that the 30-day caveat would protect second-home owners.
“The average owner stays 14 to 20 days. It’s just a gimmick to make it more palatable,” Mark Waldman said about the 30-day exception.
If the bill were to be enacted, the Waldmans think it would affect more than just real estate.
“For those of us who live in the mountain community, it will be a collapse in real estate prices because the people who own here … are heavily dependent on tourism for our sales tax dollars. If these homeowners are taxed 3.14 times more … they simply won’t rent, and then they’ll choose to sell,” Mary Waldman said.
The Waldmans added that this would have immediate impacts on real estate professionals in the area. Summit Mountain Rentals has a staff of 43 people, but the Waldmans said this would have to be reduced if the bill passes.
“If this tax hits, a large portion of that staff goes away to accommodate that reduction in economic needs,” Mary Waldman said.
Mark Waldman said they are forecasting a 20% to 50% reduction in rental units.
“We feel it’s a very short-sighted effort to try to collect some more taxes,” Mary Waldman said, adding that as a representative from Colorado Springs, Gardner sees a very different economy. “Big cities, they don’t rely on 90% of their income from the tourism industry. I feel that he doesn’t understand the mountain community.”
Breckenridge Mayor Eric Mamula explained that as the town of Breckenridge doesn’t rely heavily on property taxes, he doesn’t anticipate a major economic impact should the bill pass.
“There has been some discussion that, look, these things are commercial enterprises, and that’s how they should be taxed,” Mamula said. “Some of these homes that are rented all year long, they have impacts on the community, and they have impacts to the county at large.”
Mamula pointed out that the town of Breckenridge mainly exists on sales tax and while the bill could decrease homes in the short-term rental pool, it could then free up homes for the long-term rental market. He said that when Airbnb and VRBO came onto the scene, many of these long-term rental units that were used by local employees were eaten up by the more profitable short-term rental market.
“Maybe this just balances things back out the way that it was beforehand,” Mamula said. “It is hard to gauge the long-term effects of a decrease in short-term rentals, but an increase in long-term rentals? That we sorely need.”
Courtesy of the Summit Daily News.
