DENVER — Owners of short-term rentals — like properties listed on Airbnb or Vrbo — could have to pay increased property taxes if a bill moving through Colorado's state legislature becomes law.
SB24-033 would require short-term rentals that are leased for 90 days or more be classified as lodging properties.
“Colorado has had a huge increase in the number of short term rentals that are being offered, we're at about 80,000 units right now. And it's a big part of the tourist economy in the state," State Sen. Chris Hansen, D-Denver, who is sponsoring the bill said. “You're getting a big difference now between hotels, motels, and short term rentals as far as the the taxation approach when it comes to property tax... If a piece of property is essentially being offered as a lodging property for most of the year, then it should be treated the same as a bed and breakfast or the same as the hotel.”
Hansen said the lodging tax rate is approximately twice as much as a normal residential rate. He also intends to increase the threshold for a lodging property from 90 to 200 days, but he said there is not a clear consensus on that piece of the bill.
“98% of those 80,000 units that are short term rented in Colorado would not have been affected by this bill. Because they rent for 100 nights a year or 110 nights a year — that's the vast majority of properties," Hansen said about the qualifications related to the potential amendment.
The goal of the bill was properly categorizing lodging properties while creating a sustainable school funding system, according to Hansen.
"Short-term rental units, typically, if they're used a lot, are causing a higher cost for things like fire, ambulance, sheriff calls. Because they have such high use, they require more services," Hansen said. “If we are properly categorizing lodging properties across the state, it means that we are sending less of the general fund to backfill those jurisdictions on the school finance side... Our kids in Denver are basically having to reduce the amount of money in their public school classrooms to send more backfill because these properties are being misclassified. And that's the part that I was really trying to fix.”
However, Hansen is planning on introducing an amendment to the bill this week, which would significantly change its course. The amendment would instead require a study be conducted to examine the economic and service impact of short-term rentals across the state.
“There is a mismatch that these properties are requiring high services, and that there's not the right property tax treatment to cover those costs, and it's having a negative impact on school finance. I think that's what the study is likely to show, but we're going to let the data really lead us in the right direction," Hansen said.
Rich and Beth Mason, who own a short term rental in Summit County, scoffed at the idea that the cost of services would equal a lodging property tax rate.
“He's speaking to the amendments that he's bringing, but we haven't seen them. So, we don't know," Rich said. “I just feel like things are shifting in the sand with all of this. I can't nail things down.”
Rich said the concept of the bill keeps him up at night. He said it does not matter if the threshold is changed from 90 to 200 days because the premise does not make sense.
“To me, it's just how do we get more tax money. Unfortunately," Rich said. “It's a huge waste of time, and nobody's done the homework on the bill.”
The Masons said the way the bill is written, it would quadruple their property taxes. Hansen denied that claim.
“It's our private property. We're not rich, we work really hard to make a living, and we're just a mom and pop business," Beth said. “Without short term rentals, there would be very limited places for guests to stay.”
No matter the amendments expected this week, the Masons said they could never support this measure.
“We're already paying equivalent to what the hotels are paying. So, I really don't see where anything would change my mind on that," Rich said. “Things are going too far, especially at the state level.”
SB24-033 is scheduled to be heard in the Senate Finance Committee on Tuesday afternoon. If the anticipated amendment explained by Hansen progresses, it would aim to produce preliminary results of the study before next session.
