Prop HH Hurts Second Home Investors
Colorado residents and property owners across the state are gearing up for a fierce debate over the potential negative impact of a proposed ballot measure that aims to change property tax laws for those average Coloradans with second homes, investment properties or rentals that they hope will be that retirement nest egg for the future.
Proposition HH, if passed, would subject owners of investment properties to a different tax rate, potentially leaving many with a hefty financial burden. This could have far-reaching consequences, not only for those who depend on rental income from their second homes, but for the entire state's economy. With tensions rising and opinions divided, the future of Colorado's property tax landscape hangs in the balance.
Colorado's Governor Jared Polis, economist Arthur Laffer, Representative Rose Pugliese and Michael Fields
The truth is -- the legislature could have easily fixed the state’s property tax mess but chose not to. Democrats made the choice to go through a ballot measure process because they had to go to voters to ask for their TABOR refunds. Watch the full debate HERE.
The controversial measure, which is set to be decided by voters this November, would create a new state-level distinction for those who own homes in Colorado but do not live in them. This could have serious financial implications for those who have invested in a second home in the state.
Supporters of the proposition, including Lakewood Democrat Rep. Chris deGruy Kennedy, argue that there is an "equity problem" with how second homes are currently treated when it comes to property taxes. They believe that these homeowners should be subject to a different tax rate than primary homeowners.
If passed, Proposition HH would not only change the tax rate for second homeowners, but also decrease overall property taxes for all Coloradans. However, it would also reduce the amount of money available for annual refunds through the Taxpayer's Bill of Rights, which could have a negative impact on local services, such as schools.
“This is something that could potentially penalize Coloradans who do have a second home somewhere else in the state,” said Brian Tanner, the vice president of public policy for the Colorado Association of Realtors. “We don’t believe it’s good for real estate. We don’t believe it’s good for property owners.”
The controversial proposal has faced opposition from groups such as the Colorado Association of Realtors, who believe it could penalize Coloradans who own second homes in the state. They also point out that it could lead to a new residential class for second homeowners, potentially creating more tax burden for these individuals.
Additionally, there are concerns about the lack of accurate data on second homeownership in certain counties, making it difficult to properly track and enforce these potential changes.
Despite these concerns, the idea of different tax rates for primary and second homeowners is not unique to Colorado. Other states, such as Utah and Florida, already have similar exemptions in place.
Supporters of Proposition HH see it as a starting point for addressing the issue of non-owner occupied housing in the state. Rachel Richards, a longtime elected official in Pitkin County and Aspen, believes that the current system disproportionately benefits those who own second homes and use them as an income property.
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While there are some who argue for a statewide approach to addressing the impacts of second homeownership, others, like Colorado House Speaker Julie McCluskie, believe that short-term rentals should be treated as a business rather than a residence when it comes to property taxes.
As voting on Proposition HH enters its final stretch, it is unclear whether it will pass. However, the issue of second homeownership and property taxes is likely to remain a topic of conversation in the state legislature in the future.