By Stacey McDole
Short-term rentals (STRs)—rentals for less than 30 days—are increasingly popular in tourist-heavy Denver. VRBO.com started here in 1995 as a solution to rent vacation mountain condos. Today, the website currently lists 2,600 owner-managed rentals in Breckenridge alone. According to Dan Rowland, Citywide Communications Advisor for the City and County of Denver, that number is closer to 3,000 in the metro area.
Instead of the number of miles to the Convention Center, travelers should look for this: 2016-BFN-0001234, a business license number issued by the City acknowledging the host complies with local regulations and taxes.
On Jan. 1, the City began imposing fines on unlicensed STR hosts. Hosts must register for a $25 business license, an excise license and a State of Colorado tax identification number. Those who fail to comply, but continue to operate, are at risk. First offenders are issued a $99 fine; second, $499; third, $999, and then $999 every day after, for being non-compliant. Those issued a Notice of Violation have 14 days to comply, but no fines have been issued yet.
As of mid-January, only 744 of approximately 3,000 STRs have registered with the City.
“We are following up with complaints daily, and have sent hundreds of notices to comply,” said Rowland. “Now, we are sending Notices of Violations.”
To get the word out, the City launched a digital marketing campaign microtargeting hosts. The campaign touts the slogan "Stay Legit Denver."
Per denvercov.org/str, “staying legit” is an easy, three-step process: obtain a Lodger’s Tax ID number, a short-term rental business license and post the number to platform ads.
“Some hosts I’ve spoken to have found the process a little bumpy,” said James Carlson, a Denver real estate agent specializing in STR-legal residences and who teaches a course on STRs at Colorado Free University. “Many of the hosts I know [are rethinking the STR business model] and will offer their spaces to traveling nurses and business people.”
Those who host guests for 30 days or more are exempt from the regulations and taxation.
According to a Survey Monkey study of 46 applicants, the City website was rated a 6.6 on a difficulty scale of 0-10. A downloadable PDF was added for hosts as they traverse the application process. And, according City representatives say earlier glitches have been repaired.
Also beginning Jan. 1, hosts must now charge a 10.75 percent lodger’s fee and an additional 4 percent State of Colorado sales tax. An Occupational Privilege tax, or head tax, is charged to those hosts exceeding $500 in revenue, per month.
Taxes are collected by hosts and paid online to the City. Buffy Gilfoil—an Airbnb host since 2012—sits on the Short-Term Rental Advisory Committee (STRAC) and said the City and Airbnb have agreed how taxes are remitted. As of Feb. 1, Airbnb will collect and remit Colorado State Sales and Use Tax, Colorado-collected Local Sales Tax, Local Marketing District Tax and County Lodging Tax on the host’s behalf.
“The agreement between Airbnb and the City of Denver regarding taxes has made it easier for me in terms of how those taxes are remitted,” said Gilfoil. “I’ll adjust my booking rate to accommodate the taxes,” she added. According to a University of Denver (DU) study conducted in early 2016 by the Fritz Knoebel School of Hospitality Management, only 21 percent of guests surveyed said the imposition of taxes would influence their decision to stay at an STR.
Gilfoil’s nearly 20-year career with FEMA has kept her frequently out of town. To make better use of her investment, Gilfoil considered the short-term rental idea. When City Council added STR regulations to their agenda, Gilfoil attended the meetings. Airbnb held forums with STR hosts and encouraged them to sit on the STRAC. Gilfoil agreed.
“[The City] worked hard to work with everyone involved,” said Gilfoil on her experience on the Committee. “It was important to make acceptable regulations to a broad range of constituents."
Marisa Moret, a representative from Airbnb, sits on STRAC, as do Amie Mayhew of the Colorado Hotel and Lodging Association and Sabrina Zunker from the Denver Metro Association of Realtors.
Secondary residences and investment properties are prohibited from being licensed as short-term rentals.
“It was at the recommendation of the neighborhoods that STRs be limited to primary residences,” District 5 Councilwoman, Mary Beth Susman, said. She agreed.
Two years ago, City Council moved forward with a plan to protect the shrinking inventory of affordable housing and to regulate STRs.
“If hosts can't offer them [on VRBO], then they'll offer them as fully-furnished units to corporate clients or traveling nurses. That doesn't address the issue the city hoped it would,” said Carlson.
Some of Carlson’s clients are attracted to hosting short-term renters to offset mortgage payments. However, instead of a separate residence as a full-time STR, they are looking at homes with full basements, or accessory dwelling units (ADUs), like carriage houses or garages to convert into rental units.
According to Rowland, the City has not seen a decline in Denver STRs advertising on any platforms.
However, Carlson thinks this could change in the future. “I think hosts understand the city's desire to maintain affordable housing, but most hosts think this isn't the answer.”