Short-Term Rental Proposal Heading to Denver City Council Vote

A controversial proposal that would legalize short-term rentals  — but for only one primary resident per address — could make its way to Denver City Council for a final reading on June 13 if a council committee votes to approve the measure. The STR business is booming in Denver,  but causing consternation among residents and neighborhood advocates alike, as we reported in our December cover story  "The Inn Crowd." 

The plan to regulate STRs has been in the works since councilmember Mary Beth Susman decided to tackle the issue last year; she held public meetings and accepted comments before finalizing her draft proposal. It calls for allowing STRs in Denver, but only when the owner meets a primary residence requirement and agrees to pay the city's 10.75 percent lodger's tax and an annual $25 business licensing fee. Hosts would also be required to post a registration number on their listing so that the city can better police and enforce STRs, too.

In February the proposed ordinance toured Denver at four town hall meetings held across the city. Hosts, neighborhood advocates, council members, Aribnb and VRBO representatives, and other stakeholders attended. At one town hall held at North High School, Cory-Merrill resident George Mayl, who opposes STRs in his neighborhood, was amazed that so many hosts were admitting their illegal activities in front of councilmembers.

"I think for many people, before I started looking at this, they didn't realize that what they were doing was illegal," says Susman. "I think it also shows that it is a movement that's not going to go away and validates a need to get some kind of regulatory control over it... So it seems unstoppable, and it's better to get out arms around it than not." 

Susman says she was "heartened" that over hundred people attended each town hall; she heard from a lot of people, many of them hosts, who were opposed to the primary residence provision. Nevertheless, she adds, "I'm going to stick by it."

But her proposal could still be amended by the Neighborhoods & Planning Committee, where it will be considered on April 13, and even if the committee approves sending a measure to the full Denver City Council for a June hearing, it could be amended there, too. Susman says that councilmembers have made some comments about allowing multiple licenses, but there's been no move yet to amend the measure.

Susman says that if an amendment to the current proposal is introduced and approved at the final reading, it could delay the process and even send the measure back to Denver's Planning Board; that decision would be up to the city attorney.

At the end of February, a study about STRs by the University of Denver's Fritz Knoebel School of Hospitality Management was released; it focused specifically on VRBO rentals, a popular online platform that mostly advertises entire home STRs that are often secondary properties and could be taken off the market if the proposal passes council.

The study interviewed over 400 renters who'd stayed in a VRBO rental in the past two years. Data was collected on the basis of a 40 percent occupancy rate or a rate of three out of seven days a week. However, the average length of stay among participants was over five days. 

"So we think that 40 percent is really a conservative number," says David Corsun, the DU professor who led the study.  "And at 40 percent, we estimate that the total rent was $13.6 million annually. If you think about it, another ten points adds millions of dollars. And then if you think about the lodger's tax that haven't been applied to those rents, you'd be talking about a big number also in these city coffers."

The study found that spending beyond rent — on food, beverage and attractions — amounted to about $21 million a year, and that's still at the conservative 40 percent occupancy rate. "And we're not talking Airbnb, we're talking just over 400 VRBO units in the city," Corsun points out. Only 17 percent of those interviewed said they had paid a lodger's tax; about 75 percent didn't even know or couldn't remember if there was such a tax. That means that adding the tax most likely wouldn't affect their decision to stay at an STR, Corsun adds.

Pricepoint wasn't the deciding factor when choosing lodging, says Corsun. Instead it was location and a dislike of big hotel chains. The most influential factors that came into play when people chose a hotel over as STR was price, location, and safety and security. "So it's not really a financial decisions, because if you look at the rates that people are paying, they're not out of line with hotel rates. I mean your getting more space, but they're still not out of line," says Corsun.

And Corsun says that were STRs taken out of the market there may be a slight drop in visitors because hotel lodging availability would go down and prices could increase.

Here's the DU study: