Colorado Cities Compete for Worst Airbnb Regulations

Arbitrary restrictions include limiting Airbnb to one unit per block face in one city and forbidding second homes from being rented out.

"There is no one-size-fits-all answer for municipalities in regulating short-term rentals." This conclusion, which comes from the Colorado Municipal League's recent report on short-term rental regulations, may be true. But Colorado cities' policies show that there are countless misguided approaches to regulating the growing home-sharing industry.

On January 1, the city of Denver celebrated the new year with regulations meant to limit home sharing. These restrictions, pushed by the hotel industry, represent unnecessary impediments to residents renting out their homes for some extra money. Unfortunately, limiting property owners' rights is part of a growing trend across the state of Colorado.

Denver's new rules require a $25 license fee, a 10.75 percent business tax on all income gained, and compliance with certain safety and liability insurance requirements. Some of these requirements are common across the United States, but the major problem with Denver's rules is that homeowners are only allowed to rent out their primary residence. Even though most Airbnb hosts rent out their primary residences, second homes are nonetheless an important part of the home sharing industry. Second homes can comprise everything from vacation homes to long-time family homes that owners do not want to sell when work opportunities lead them to another city for a few years. A ban on renting them out is unnecessary and arbitrary.

If Denver follows through on its misguided regulations, the next few months will be expensive for local hosts. The vast majority of Denver Airbnb hosts remained unregistered in the weeks leading up to the January 1 deadline, even when they now face fines of up to $999 per incident.

The second most active city in Colorado for Airbnb is Boulder and Boulder County at large has certainly seen an explosion in growth from Airbnb. Six of seven communities in Boulder County nearly doubled their number of annual of Airbnb guests from 2015 to 2016. Even Boulder, the last city (and largest), increased its visits by over 50 percent. This is great news for Boulder County. Airbnb guests stay more than twice as long and spend almost twice as much money in the community as other visitors. Airbnb's wide footprint in diverse neighborhoods also spreads this travel income around outside of traditional hotel districts.

One would think cities would embrace this direct infusion of tourists' dollars into the local economy, but Boulder has instituted similar regulations as Denver. The city requires hosts to rent out only one property as well as pay a hefty license fee and business taxes. For example, residents can rent out a room in their home, but they cannot rent out any type of alternative dwelling unit (such as a garage apartment or casita). Short-term rentals in alternative dwelling units are capped at 120 days a year. Boulder also sets an occupancy limit of either three or four "unrelated persons."

Regulators are often at their worst when they get creative and Durango's short-term rental restrictions are an example of this. Durango's self-described "innovative policy solution" that "seek[s] to maintain neighborhood character, vitality, and vibrancy" accomplishes only winning the award for the worst home sharing regulations in the state.

Durango imposes strict—and arbitrary—restrictions on who can participate in this sector of the sharing economy. The city only allows short-term rentals in limited areas and then caps the number of short-term rentals available per block face at one. Yes, you read that right. Durango does not allow people to rent out their homes if a few of their neighbors have permits to do so.

All in all, Durango offers only 60 permits for short-term rentals for a town with 8,000 housing units. This nonsensical cap effectively shuts Airbnb and short-term rentals in general out of Durango.

Telluride gives Durango a run for its title of worst short-term rental regulations in the state. The town limits short-term rentals for properties in residential zones to a max of three occurrences of renting in a calendar year and these three or fewer stays cannot be for more than a total of 29 days.

Failing to follow these rules can lead to heavy criminal penalties. As the city states, "Violations constitute a misdemeanor and upon conviction are punishable by a fine of up to one thousand dollars ($1,000), or imprisonment for a period of up to ninety (90) days, or both such fine and imprisonment per offense. Each day that a violation occurs or continues to exist is considered a separate criminal offense." Yes, people can go to jail in Telluride for renting out a room in their homes.

Even cities that are "better" in terms of their home sharing regulations have issues as well. Breckenridge, for example, does away with the "primary residence" requirement, does not have an occupancy limit, and imposes no zoning restrictions. Breckenridge does, however, assess a special annual license fee of between $75 and $175 on short-term rentals, along with requiring short-term rental owners to pay a similar tax to what hotels pay.

The city also has additional rules on noise, parking, and trash that only apply to short-term rentals. Compared to the nonsensical policies of other Colorado cities, Breckenridge has reasonable short-term rental regulations. But the city's high taxes and license fees, along with its additional regulations, can still discourage residents from exercising their right to rent out their own home.

For a state with such a vibrant and important tourism industry, Colorado's cities are constantly thinking of new "innovative" ways to partner with special industries to shoot themselves in the foot. Instead of competing to see which city has the worst short-term rental policy, Colorado cities should welcome an industry that provides extra income to homeowners, reduces prices for consumers, and boosts the economy of the region.