Telluride council among first to consider easing short-term rental restrictions

This story first appeared in The Outsider, the premium outdoor newsletter by Jason Blevins.

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The dust has settled in Telluride. After two years of bitter fighting over short-term rentals, the town council appears ready to end a voter-approved cap and moratorium on short-term rental licenses.

Telluride councilwoman Adrienne Christy vehemently supported a cap on short-term rentals in 2021. At a council meeting this month she began to cry as she described her decision to support the expiration of the town’s license cap and an increase in taxes on short-term rentals.  

“The only way we are going to solve this problem is to build affordable housing and in order to do that we need to make money,” she said at the Sept. 12 council meeting, making clear that she sees short-term rentals contributing to the town’s housing crisis alongside previous councils’ investment in open space and preservation of historic buildings. “I don’t feel I need to soapbox anymore. I am not in favor of a cap. I’m ready to make some money — more money — and put it in our affordable housing fund from licenses and fees.”

After two years of intense regulation on short-term rentals in Colorado’s Western Slope mountain communities, Telluride is among the first to ease caps and limits imposed at the height of the pandemic. Property owners also are fighting back on taxes and regulations as tourism economies and real estate markets settle down after community-shocking growth during the pandemic. 

Two years ago, pandemic-fleeing newcomers were flooding mountain towns, paying exorbitant amounts for houses and spiking home prices to record highs. The sudden surge in prices pinched the housing supply for locals and a labor shortage followed as heavily trafficked businesses struggled to find workers.

Local leaders across Colorado began targeting short-term rentals, hoping a crackdown on the largely unfettered industry could ease the housing crunch. By the end of 2021, very few mountain towns were not fiddling with short-term rental rules, suspending permits, capping numbers and raising taxes and fees. In November 2022, voters in 11 towns and six counties overwhelmingly approved new or expanded taxes on vacation rentals. 

All those ballot issues were crafted by local elected leaders. Telluride voters in 2021 balked at a ballot question that would have capped the number of short-term rentals at 400, which would have cut more than 300 from the existing roster of vacation homes in the box canyon resort town. The town’s voters did approve a second ballot question that doubled the fee for short-term rental licenses and suspended all new permits. 

Jon Stavney, the head of the Northwest Colorado Council of Governments called the various short-term rental management strategies in the high country “a regional laboratory” in 2021. 

“Let’s find out in a year or two after data tracking,” Stavney told The Sun in October 2021. “This is experimentation with policy that addresses something we know is impacting us.”

It’s been two years. Property owners are fighting back on taxes and regulations as tourism economies and real estate markets settle down after community-shocking growth during the pandemic. Communities are seeing record revenues flowing from new taxes and fees on short-term rentals. And tourist traffic is ebbing from its pandemic crescendo. 

A lawsuit is underway in Summit County and another is simmering in Breckenridge. Salida property owners are preparing for a ballot question in November that could lower fees and taxes on vacation rental properties. Steamboat Springs is hauling in more than $1 million a month on its new 9% tax on vacation rentals.

Stavney says the lawsuits may be getting attention, but residents are not being swayed. 

“I still think most citizens see the impacts and are behind the elected officials who seek to tax that for public benefit and protect the workforce,” he said. “There will be some adjustments made where regulations seem to impact the casual STR operators, that is it.  As for tax revenues, once these start getting translated directly to affordable housing projects they will be difficult to argue against.”

There are about 760 active short-term rental licenses in Telluride and about 55 applicants are on a waitlist. That lock on new permits is set to expire in November. Instead of renewing the cap, it appears the council is opting for increased fees and excise taxes. Telluride hired an outside research firm to compile a report that analyzed how other communities are regulating homes that owners rent to vacationers. That study revealed most local governments tapping short-term rental owners and visitors with fees and taxes that fund affordable housing.   

Three communities have short-term rental “housing regulatory fees” that range from $1,800 a year for a two-bedroom in Pagosa Springs, $756 per bedroom in Breckenridge and $1,390 in Estes Park. At least a dozen other communities have increased annual license fees in the past two years, ranging from $1,000 in Salida and $800 in Crested Butte to $125 in Breckenridge. 

The study by Economic and Planning Systems, Inc. showed short-term rental tax rates — which include city, county, state, lodging, short-term rental and other taxes — ranging from a high of 27.95% in Ouray to 12.275% in Breckenridge. Voters in many communities have passed excise taxes on short-term rentals in the past couple years, ranging from 15% in Ouray and 10% in Aspen to 2% in Avon. Ouray has the highest tax rates for short-term rentals and also has a cap of 120 licenses. 

The voter-approved policy on short-term rentals in Telluride directed half of license revenue from an annual fee of $330 plus $44 per bedroom to the town’s housing fund. So far this year those license revenues raised $168,724 and a 2.5% excise tax raised $1.3 million in 2022 for the town’s affordable housing fund. By comparison, a voter approved 9% tax on more than four times the number of short-term rentals in Steamboat Springs generated more than $1.3 million a month in the first three months of a year. 

Telluride Councilman Dan Enright remained unwavering in his support for a cap on short-term rentals. He noted that Telluride — like most Colorado mountain towns — is collecting more tax revenue than ever before. He said it was “unconscionable” to remove the cap, which he said would increase housing pressure on the town’s businesses, local government, hospital and law enforcement.

“I don’t think money is the answer to everything,” Enright said. “As a person who is still struggling to make it in this town it feels harder than ever to actually be established. And I’m a town councilperson and I feel further away than ever than making this place my permanent home.”

Telluride resident Greg Craig has spent two years analyzing his town’s short-term rental industry and tourism economy. Earlier this month he sent each member of the council a copy of his in-depth, 134-page report. With vacation homes accounting for almost 90% of the overnight lodging base in Telluride and the annual lodging occupancy averaging around 40% a year, Craig counted 19 days a year where occupancy climbed to 74% or higher. Only on those 19 days a year would a cap on short-term rentals have any impact, said Craig, who has had a vacation rental license in Telluride for the past decade. 

“STRs are not eating Telluride or affordable housing,” said Craig, whose study suggests a strict cap on vacation rentals could be contributing to a decline in Telluride visitation and tax revenue this year, while nearby  Mountain Village — one of very few Colorado resort communities that has not imposed any new restrictions, caps or taxes on short-term rentals and, it should be noted, allows second-homeowners to vote — is seeing robust growth.