Short-Term Rentals Have Become a Big Business in Denver — But Neighbors Think They're a Big Pain

Short-Term Rentals Have Become a Big Business in Denver — But Neighbors Think They're a Big Pain

No room at the inn on Christmas Eve? No problem: You can still snag a “luxury loft in the heart of downtown,” as well as a “Curtis Park charmer” and a “cozy Capitol Hill apartment.” These are last-minute holiday miracles you wouldn’t have dreamed of finding a decade ago — but that was before Airbnb and other short-term rentals moved in on Denver. But now some residents are wondering if a lack of rules governing such rentals are turning this town into a motel hell.

In the spring of 2008, George Mayl discovered that the owners of the house next door to his in the quiet Cory-Merrill neighborhood of southeast Denver were renting the property out to guests for short-term stays of under thirty days — which is illegal under Denver’s current zoning codes.

Those guests did not make good neighbors. Mayl remembers the stink of pot that hung in the air the morning after short-term renters had stayed up late smoking and talking in the back yard. Then there was the time that eighteen members of a baseball team rented the house and took over the block, cutting it off to traffic for an impromptu ballgame in the street. Mayl recalls only one group of guests he enjoyed: a family in town for their daughter’s graduation. But that was short-lived.

George Mayl fought to make the STRs in his neighborhood behave.
George Mayl fought to make the STRs in his neighborhood behave.
Jim Narcy

“It was absolutely devastating,” Mayl says of living next to a short-term rental. “A lot of issues with pot, noise, alcohol, etc. Worse than a bad neighbor, because they came here not to rest, but to party…. I called the police, but how many times do you want to call the police? You’re taking them off their patrols. You call 311, you might as well just forget about it.”

On many several occasions, Mayl attempted to contact the property owners, who lived only a half-mile away on South Harrison Lane, in a house they also used as a short-term rental; he even dropped by when they were getting the neighboring house ready for the next round of guests, but they were “surly,” he remembers.

So instead, every time a new occupant moved in next door, Mayl called Neighborhood Inspection Services, a division of Denver Development Services, but an inspector could rarely come right away. And if the inspector did find people in the house, Mayl says, they’d been cued to say they were staying for more than thirty days — which is legal in Denver. To combat that, he would place a newspaper next to a car’s license plate and snap a picture, to show the high turnover of visitors on his block. Still, it took over a year for Mayl and the Cory-Merrill inspection representative to build a solid case.

When they’d finally gathered enough evidence, they took it to a hearing of Denver’s Board of Adjustment for Zoning Appeals in October 2010. The room was packed with opponents of the rental, including Mayl and two other neighbors, as well as a representative from Inter-Neighborhood Cooperation, the umbrella group for more than a hundred neighborhood associations in Denver; they were armed with six letters of opposition (including one from INC and another from the Cory-Merrill Neighborhood Association) and 35 petitions against the property. No one spoke in favor of the property owners, who were issued a cease-and-desist order by the city. They soon sold the house next to Mayl and moved out of town.

“They ceased being neighbors and became entrepreneurs, with no regard for their neighbors’ concerns,” remembers Mayl. And while the retired vet won that battle, he’s still involved in the fight against short-term rentals in Denver.

Mary Beth Susman is leading Denver City Council’s work on STRs.
Mary Beth Susman is leading Denver City Council’s work on STRs.
Jim Narcy

Although Denver’s zoning code prohibits residents from renting an apartment, home, room in their home or secondary property for fewer than thirty days, thousands break that law by offering their properties as short-term rentals (STR). The practice has become so common — and the complaints about it so loud — that Denver City Council will soon consider an ordinance to regulate the city’s sharing economy, with a focus on STRs. Councilwoman Mary Beth Susman has been leading the charge, researching the issue and holding town halls to collect input from disgruntled neighbors and fans of STRs alike.

And STRs definitely have fans. Companies such as Airbnb, VRBO.com and TravelTHC provide property owners and renters with a platform through which they can post a room or property that travelers can rent for a short-term stay; travelers appreciate the ease and value of the rentals. The platforms give hosts a page where they can offer a profile of their properties, describing the location, amenities, ambience and whatever else they might want to share. (Travelers coming to Colorado are often interested in whether a place is pot-friendly.) The property owners can set their own price and offer daily, weekly or monthly rates.

VRBO.com was the first company to formalize this part of the sharing economy. Founded by a husband-and-wife team in 1996, it was bought by Homeaway (an online vacation-rental marketplace based in Austin, Texas) in 2005. Hosts on VRBO.com are exposed to 77 million travelers each month; the top 5 percent make an average of $65,000 a year, according to VRBO.com. The company offers hosts different levels of subscriptions, starting at $399 and rising to $1299 a year, depending on services; it also charges a fee of up to 10 percent of each night’s rental. Most VRBO rentals are full houses or apartments.

Airbnb got its start in 2008, when Brian Chesky and roommate Joe Gebbia, both broke college students, began renting out three air mattresses in their apartment in San Francisco, where the company is now based. Today Airbnb is valued at $24 billion, according to the New York Times, and manages some two million listings in 34,000 cities in 190 countries. (By comparison, if the Marriott International and Starwood Hotels and Resorts merger goes through, it will create the world’s largest hotel company, with 1.1 million rooms in over 5,500 hotels in 100 countries.) Airbnb charges hosts a simple 3 percent of every night’s rental rate in exchange for verifying the property, listing it and providing insurance. According to a data scrape done by Colorado Public Radio in August, there are about 1,700 regular Denver listings on Airbnb; last week, an Airbnb Facebook ad featured hundreds of open spots in Denver for Christmas Eve.

On the Denver Airbnb page, visitors can choose anything from single basement rooms to whole apartments or carriage houses. Some top hits for this holiday week include an “International Microhostel” for $17 a night (also seen for $23 a night) in Glendale; it’s a luxury apartment with a shared room and a stocked fridge — and it’s 420-friendly. For $70 a night, two guests can have their own entrance to a cozy basement room described as “Bohemian chic in the Highlands.” There is no access to a kitchen, but the place does have a coffee maker, a microwave and a full-size refrigerator. Guests can smoke pot outside, but the host asks that they make sure to keep quiet after 10 p.m.

A “Bohemian chic” Airbnb listing in Denver.
A “Bohemian chic” Airbnb listing in Denver.
airbnb.com

The prices go up from there, to close to a thousand bucks a night for a three-floor condo or a 7,000-square-foot home in Cherry Creek. You can have the entire Castle Marne Bed & Breakfast for $2,380 a night. And in Centennial, a seven-bedroom, five-bathroom, 420-friendly mansion is available for $5,000 a night; with a $1,200 “service fee,” a four-day holiday excursion there will run you $21,200.

In Denver, 83 percent of the hosts have just one listing, and 93 percent of those are rented out for fewer than 180 days a year, with the average unit renting for fewer than 55 nights, according to Airbnb. Alison Schumer, Airbnb’s public-affairs manager, says that many people who rent places on Airbnb are middle-class families who use the platform “to pay the bills.” In turn, she adds, guests make significant contributions to the local economy and support small businesses in the area where they are staying.

Airbnb liaisons work closely with local municipalities to craft rules that fit the needs of both Airbnb and the area, Schumer continues. “Our role is to engage our community of hosts to help policymakers develop the right rules for Denver,” she explains in an e-mail. “Effective home-sharing regulations are simple, clear and allow people to share their homes and contribute to the community.”

But some STR neighbors don’t consider those short-term-rentals much of a contribution to residential neighborhoods.

As she began to hear more and more about the sharing economy, Susman wrote an op-ed for the Denver Post in April 2014. In it, she cited many options that allow people to trade or pay for almost anything, from rides and tasks to meals and houses, and speculated about what role government should play. After that, her phone started ringing off the hook with calls from people asking the councilwoman what she was going to do about short-term rentals. An increasing number of residents were worried that their neighborhoods were turning into cheap, untaxed motel districts.

Section 11.12.2 of Denver’s zoning code details “Primary Residential Uses,” and defines household living as “residential occupancy of a ‘dwelling unit’ by a ‘single household.’” In the code, tenancy is defined on a month-to-month basis or longer — but never shorter. It recognizes a dwelling unit as a place with one or more habitable rooms used for permanent occupancy. A household is a “dwelling unit occupied by persons...living as a single non-profit housekeeping unit, including any permitted domestic employees.” Relatives are allowed, too — but not short-term renters.

In July 2014, Susman formed the Sharing Economy Task Force to tackle issues involved with Denver’s sharing economy, starting with house sharing. The task force was later folded into the city council’s Neighborhood and Planning Committee, which Susman chairs. Councilman Rafael Espinoza of District 1 in Highland is the vice-chair, and Albus Brooks of District 9, which covers downtown, RiNo and Five Points, is also on the committee. They both represent areas experiencing radical housing changes that are home to many short-term rentals. Lowry and northeast Denver also have a high number of STRs.

Currently, the only way the city knows if a house in one of those areas — or any of the 300,000 residences in Denver, for that matter — is being used for an unauthorized short-term rental is when a neighbor complains, as Mayl found out. After that, a city inspector needs to find the renters, confirm that they are not related to the property owner, and then ascertain if they are renting the dwelling for fewer than thirty days. But the city has only eighteen neighborhood inspectors, and even if one has time to visit the subject of a complaint, that inspector usually ends up leaving a note because no one is home.

That’s why Susman is working on a proposed ordinance that will make it easier for the city not only to find short-term rentals, but to make sure they adhere to certain standards. “I think it will make our residents feels safer if there is more regulation to it,” she says. “If we can identify and legitimate it, we can make sure they have things like fire extinguishers, CO2 detectors, ensure that the guests can get a hold of the host business.”

Under the proposed ordinance, Denver could require hosts to register and get a license that would come with a number that would need to be included in their online profile. That way, Denver listings could be policed. “It would be an easier enforcement process, actually,” says Susman.

Shahla Hebets, an STR host, founded the Denver Short Term Alliance.
Shahla Hebets, an STR host, founded the Denver Short Term Alliance.
Jim Narcy

A major component of the proposal — and one that may force many short-term rentals out of business, specifically those on VRBO.com — is a primary-residency requirement. This provision would allow Denver residents to rent a space for fewer than thirty days as long as they live on the property. Ideally, this would deter any business from buying up houses or even apartment complexes solely to profit off short-term rentals — a situation that has plagued larger cities like New York.

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“If you’re buying up properties in order to do this, you’re kind of in the hotel business,” says Susman. “And if you’re buying up apartment units, you are actually diminishing what might be the affordable-house inventory in the city. That’s not popular with places like VRBO.”

City council is also looking specifically at Accessory Dwelling Units, also known as mother-in-law apartments, or smaller buildings separate from the primary home but on the same site. But a host wouldn’t be able to rent a room in an ADU as well as a room in the primary residence.

Unlike in some municipalities, Denver City Council is not interested in limiting the number of days an eligible property can be rented in a year. That would be too difficult to track, Susman says. But the city definitely wants to require hosts to charge a tax, most likely the standard lodging tax of 10.75 percent — the same rate that hotels collect from their guests — and then remit it to the city. That lodging tax will become increasingly important in Denver, since voters in November approved assigning the revenue stream to the new National Western Center...indefinitely.

While short-term rentals are a big business in this state, hotels don’t see them as the threat that some residents do. According to Amie Mayhew, president and CEO of the Colorado Hotel and Lodging Association, which represents hotels, resorts and dude ranches all over the state, Denver’s hotel industry has not noticed any negative effects from short-term rentals. In fact, the latest lodging report shows that in October, the 9,000 hotel rooms available in the downtown area had an 85.7 percent occupancy rate at around $202 a night, which is much better than the national vacancy rate of 64.4%.

“This is a part of the new world we live in. That’s why Uber and Lyft are here to stay in the world of transportation,” adds Mayhew. But Denver’s hotels would definitely like to see short-term rentals charged a lodging tax, she notes: “I think what we’re doing is trying to make sure that as we move forward in this world, we know what the playing field is for all the parties involved.”

The ultimate goal of the ordinance, Susman says, would be to regulate and tax the STR industry in such a way that it’s easy for hosts to register their rentals — and for the city to keep an eye on them. “You’ve got to sit there and noodle a lot: what about this, what about that?And nothing in our ordinances say anything about it, because who knew?” says Susman. “We believe strongly that a simple process for a host is more likely to get compliance than a complicated one.”

Cozy in Colorado.
Cozy in Colorado.
airbnb.com

George Mayl has followed every step of the discussion of STRs in Denver. He’s involved with the INC Zoning and Planning STR subcommittee created in September 2014. And although Cory-Merrill is quiet these days, other neighborhoods are not.

At one early meeting of Susman’s task force, Mayl says, three people gave glowing reviews of their experiences as hosts, speaking for a total of fifteen minutes. Mayl was given two. One of the hosts told councilmembers he’d collected over $100,000 that year, but when Mayl asked if he’d paid taxes on it, the man kept quiet.

At the end of 2014, Mayl was at another Board of Adjustments hearing where Cannabliss, an STR on St. Paul Street owned by Florida resident Dale Koppel, was discussed. The house has five bedrooms and is decorated for the stoner, complete with original artwork from Amsterdam, vintage ashtrays, a fridge full of munchies and ice cube trays in the shape of pot leafs, according to its listing. Although that listing also says that Cannabliss is only available for rentals of thirty days or more, neighbors said there had been a revolving door of strangers going in and out, with some people knocking on neighboring doors late at night, looking for keys to the rental.

In the Airbnb listing, Koppel says she was frustrated when she couldn’t find 420-friendly vacation rentals in Denver where she could toke — so she took matters into her own hands and bought a property where she could do just that. (Koppel could not be reached for comment, but she was allowed to continue renting her property — as long as the rental period was over thirty days.) air

Last February, Mayl attended a meeting on STRs held by INC’s Zoning and Planning Committee; Denver Water, Susman, Airbnb and other city players were invited. Again, Mayl asked the many STR hosts in attendance how many had reported their income to the IRS; none raised their hands. Hosts “don’t want anyone to know what they are doing,” he claims. “Denver says, ‘Maybe we’re making the laws too strict for them.’ It makes no difference. They don’t want declared income [and] they could care less about the structure of the neighborhood. That’s a commercial operation in a residential neighborhood; it doesn’t belong.”

Airbnb does provide hosts with 1099 tax forms, those used for independent contractors, so taxes are mostly the hosts’ responsibility.

Mayl has no sympathy for the argument that STRs are helping some middle-class families pay their mortgages. He recognizes that there may be isolated cases of that, but he thinks for the most part the business is all about the money — big money. “I would like to go on vacation and make an extra $10,000 or $100,000 a year, but I’ve got neighbors,” he says. “I moved here because I wanted the solitude and protection of a residential neighborhood, and Airbnb and those platforms do not lend to that.”

One resident of the Whittier neighborhood says she’s had problems with the STR next door to her rowhouse (and she asks to remain anonymous because those problems could affect her business). After April 20 last year, five guys left six trash bags outside the STR for days; the neighbor finally had to call the city to pick up the garbage. In another instance, she and her spouse woke in the middle of the night to pounding on the walls; they feared they were the victims of some sort of home invasion. Instead, it turned out the STR guests were in the middle of some raging, wild sex. Her spouse threatened to call the cops on them, which is what the couple does now with any troublesome guests.

The neighbor says she’s tried to contact the owner of the rowhouse, but nothing changes. “I do not respect the intention to profit and play entrepreneur without regulation or paying taxes, especially at the expense of your neighbor’s safety and quality of life,” she says. “The issue can, has and will continue to hit all-new lows if parameters and enforced regulation are not set by municipalities. [City Council] needs to put their people before profit on this issue.”

“There is impact to neighborhoods of people who are coming in and out,” says Councilman Brooks, who’s investigating the issue. “Now, that’s more anecdotal. We’re digging into that, as well. But we’re hearing some fear from neighborhoods that it breaks up neighborhood stability.”

Susman’s meetings have brought all the stakeholders to the table, but Denver is definitely behind other cities like Austin and San Francisco in handling questions about STRs, Brooks says. Still, the new representatives who joined city council this year need to be brought up to speed. “So we’re going to do a pretty in-depth community perspective and approach so that we can really understand what’s the best policy to go with,” says Brooks.

This palatial place can be yours...for thirty days.
This palatial place can be yours...for thirty days.
Airbnb.com

While Denver City Council studies the situation, STR hosts are strategizing. In August, Shahla Hebets created the Denver Short Term Alliance as a voice for STR hosts, specifically those renting out secondary properties, who would be hit hardest by the proposed ordinance. The group now has close to a hundred members representing 370 secondary properties listed on VRBO.com (many of which are also on Airbnb), says Hebets, who has been running an STR since 2008 and volunteers her time for the alliance.

When she started reaching out to property owners via VRBO.com, many of them had no idea that what they were doing was illegal, says Hebets. So the first job of the alliance was to inform owners of Denver’s zoning regulations, and then let them know how the proposed ordinance might hinder future operations.

A report analyzing the impacts of STRs on Denver released at the end of last year was drafted by INC Zoning and Planning Committee co-chair Margie Valdez, with contributions from the STR subcommittee; Mayl had a hand in it as well. The report discusses safety, loss of affordable housing, drug and crime use, among other issues. After about sixteen pages of bullet points, clip art and a few graphs about Denver’s housing market, it concludes that the short-term rental business “destroys the integrity of the neighborhood and, more importantly, the expectations of the property owners who purchased the property with the intention of a neighborhood remaining a residential neighborhood.” If STRs are officially allowed by the zoning code, the report predicts, the number of units in Denver could go from 1,000 to 10,000 or even 20,000.

When Hebets read that report, she was concerned that there was only one voice in Denver’s conversation of STRs. That’s when she started organizing the Short Term Alliance, and she also commissioned the University of Denver to do a report that involved questioning 500 STR guests to determine the effects that short-term rentals have on Denver’s economy. “I think there’s a perception that you’re just rolling in the dough,” Hebets says. “But the truth of the matter is that you’re constantly reinvesting in that property. So the net, really, isn’t that much different when all is said and done…. Yeah, you’re making a little bit more and you’re investing a lot more, but at the end of the day, your property is pristine and you’re giving a service to someone who’s coming to spend money in the city you love, so I think there’s a lot of positive aspects that make you want to do this…. It’s a lovely little business.”

As a host, Hebets says, she regularly uses such local services as pest control, lawn care, interior and exterior painters, handymen and cleaning services. She and many other members of the alliance have found that their property is maintained much better when it’s used as an STR rather than rented to long-term tenants: Every time a guest leaves, someone has to make sure the house is clean, uncluttered and in good repair — which is better for the neighborhood, she points out.

The alliance is very interested in finding a compromise ordinance that would both benefit STR hosts and protect Denver, Hebets says, adding that her members are fine with imposed safety standards and even the lodging tax. It’s the primary-residency requirement that concerns them. Such a provision discriminates against owners who do not reside on the property and is an infringement on their rights as property owners, she explains. The alliance wants to see that provision dropped altogether.

“At the end of the day, we love Denver,” Hebets says. “We don’t want the neighborhood to go by the wayside because we happen to be hosting travelers in our homes.”

Even Mayl doesn’t expect to see all STRs prohibited; he agrees with Susman that such a provision would be impossible to enforce. Instead, Mayl wants to see quicker and harsher actions taken against troublesome STRs. He’d like to see high fines if complaints are found to be valid, and suspension of the problem host’s ability to rent for a length of time. He also favors imposing limits on the number of STRs allowed within a certain area, especially residential zones — maybe one STR for every four blocks. And he definitely wants to go after owners who fail to sign up for licenses from the STR business altogether.

“As long as there is neighborhood protection,” Mayl says. “If we have a problem with somebody, I want it shut down.”

The proposed STR ordinance is slated to go before the full Denver City Council in April. Until then, though, Airbnb has a great deal on a “hot spot in the heart of the city” for you. Or how about that “420-Friendly Comfy Cap Hill Suite?” It’s only fifty bucks a night.

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