Colorado Lawmakers Face Backlash to Attacks on Short-Term Rentals
Colorado lawmakers were met with fierce opposition on Tuesday as they discussed a proposal to impose a significantly higher tax rate on short-term rentals.
The proposed legislation, which would classify these homes as commercial properties, has drawn criticism from over 80 speakers who testified at the hearing of the Legislative Oversight Committee Concerning Tax Policy.
Under the proposed measure, homes rented for more than 90 days a year on a short-term basis would be subject to a commercial lodging tax rate of 27.9%, rather than the 6.765% rate currently used for residential properties.
Supporters of the bill argue that this change would create a level playing field and generate much-needed revenue for schools and local districts. However, many short-term rental owners, who expressed their opposition at the hearing, see this as an unfair burden that could force them to sell their properties.
The backlash against the bill is a clear indication of the political hurdles it faces. Just this year, Colorado voters are also facing Proposition HH, a property tax relief plan that places higher taxes on second homes, many of which are used as short-term rentals. This proposition is seen as a precursor to the proposed change in property tax rates for short-term rentals and with the recent endorsement of Governor Jared Polis, there is a real chance of the bill passing in 2024.
During the hearing, over 75 speakers, from various counties and cities across the state, expressed their concerns with the proposed legislation. Many argued that the increased taxes, coupled with local restrictions and fees, would make it impossible for them to continue renting out their properties. Some even worried that the bill could lead to a flood of homes on the market, causing property values to plummet.
Among those who spoke were homeowners who rely on the income from short-term rentals to afford their homes in Colorado. One homeowner, Eric Richards, introduced his young children to the committee, stressing the importance of being able to pass on their family home. Others, like Hillary Skye who runs a property management company, warned that these additional taxes could devastate the short-term rental economy in Colorado.
The proposed legislation also has consequences for local governments, particularly those who rely on tourism tax revenue from short-term rentals to support affordable housing in their communities. The president of a property management company in Denver, CJ Willey, estimated that the change in taxes could cost the state's tourism economy $500 million in direct visitor spending, as properties are forced to stop being offered as rentals.
Amidst the passionate opposition from short-term rental owners, some counties and commissioners expressed their support for the bill, arguing that these properties should not be treated as residential homes but as commercial lodging facilities.
The bill also faces challenges from county assessors who would be responsible for administering the new legislation. They expressed concern about the increased workload and difficulties in enforcing the proposed changes. Despite these concerns, the bill was advanced by the Legislative Oversight Committee Concerning Tax Policy with a vote of 4-2. However, an amendment was proposed by State Senator Chris Hansen to address the concerns of assessors by creating a statewide database to monitor short-term rental properties and allow owners to appeal the change in tax rates.
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Despite this amendment, the bill still faces opposition from some members of the committee who believe that the 90-day limit for short-term rentals is too restrictive and arbitrary.
In the end, the proposed legislation has sparked intense controversy and has even received more feedback than bills on topics like gun control and wolf reintroduction. With such strong opposition, it remains to be seen whether the bill will ultimately pass.