Proposed regulations for Denver’s sharing economy will force some short-term-rental hosts out of business — or they'll face strict fines if they continue to operate outside the law. While the proposed ordinance would legalize STRs, a primary-residence provision would require that owners live on site — a suggestion that is under fire from STR hosts across the city.
As we reported in our December cover story, "The Inn Crowd," STRs have become a big business in Denver.
Under the city's current zoning, it's illegal for owners to rent out their property for fewer than thirty days. But online platforms such as Airbnb, VRBO, TravelTHC and Flipkey make it possible for anyone to rent out a spare room or property as a short-term rental, and nearly 2,000 people in Denver do just that — generally without concern of being caught and punished by the city.
For Denver City Councilwoman Mary Beth Susman, who sparked the regulatory push in early 2014 with an op-ed in the Denver Post, one reason to change the city's approach involves affordable housing. Many people running STRs are doing it to meet a mortgage or help with paying bills, which Susman sees as a contribution to affordable housing. But those renting out secondary properties don’t help — and, in fact, could be taking affordable housing off the market.
“When you’re renting out a place you don’t live in or buying up places in order to do STRs, you’re reducing our housing inventory of what might be possibly more affordable living conditions,” says Susman, who chaired the Sharing Economy Task Force she created in July 2014; it was later folded into the city council’s Neighborhoods and Planning Committee.
Many hosts who rent out a secondary property go through VRBO, a platform that advertises full-size houses, some that could easily sell for half a million dollars in Denver's hot real-estate market — which would hardly qualify as affordable housing.
“I see that point,” Susman says. “But if we open up that door, we have a situation, which has happened, in Denver where people buy up multi-unit apartment houses in Capitol Hill that would be renting maybe for $1,000 a month and they start renting them for $200 a night — and then that $1,000 apartment is gone.”
The proposed ordinance would also require hosts to pay the city's standard 10.75 percent lodger's tax on every night a place is rented, as well as a $25 licensing fee. Hosts would each get license numbers that would have to be displayed on their Airbnb/VRBO/etc. profiles, so that the city can better track and enforce STRs by scrolling through listings — a job that would fall to the Denver Department of Excise and Licenses. Anyone found advertising or operating an STR without a license number could face fines of up to $999 per incident.
Right now, the only way the city can take action against illegal STRs is if a neighbor complains to the city and a neighborhood inspector is sent out.
The ordinance is expected to go before city council for a final vote in June. This month, it's being presented at four town hall meetings, one per week.
The first took place last Wednesday night at South High School, and about 100 people showed up from all over the city. Many were hosts who rent out secondary properties, and they provided anecdotes about the relationships created by hosting travelers, the investments they’ve made in their rental properties, the lack of problems they’ve had with guests and the financial benefits that come with STRs.
But neighbors of STRs complained about noise, rowdy behavior, decreased parking, and having their residentially zoned neighborhoods house what are essentially hotels with a “revolving door” of strangers.
“Where it is happening is neighborhoods where people have been long-term residents and made long-term commitments to the quality of life in their community, and others are making a lot of money off of it,” said neighborhood activist Sarah McCarthy, who added that she's put thousands of hours into preserving quality of life in the city and doesn’t think STRs are contributing to that.
Also at the meeting were Jacob Lill and Taylor Hills, co-founders of Effortless Rental Group, a company that provides turn-key services for twenty STR hosts in Denver, including showing the property, housekeeping, key turnover and resupplying. Neighbors of rental properties have their numbers in case any problems arise, they said, and they even make sure the person who made the reservation is the same one picking up the key.
“We’re not against regulation,” Hills said. “We think that smart regulation is key in having a company like ours.” Out of 2,000 guests they have worked with, the partners noted, there have been only a handful of problems — none of which required police intervention, and all of which inspired new processes to avoid similar issues in the future.
But many of their clients rent out secondary properties, including one woman who spends most of the year in Florida. While she’s away, Effortless Rental Group manages her guests and property.
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The primary-residency rule is "one of the areas that I really hope the city is going to re-examine and re-evaluate, because I don’t think that makes sense,” Lill continued. “It will force our business to evolve and to grow and to figure out how to operate within the confines of the law.”
After the town hall meetings, the Denver Planning Board will hold a public hearing at 3 p.m. March 16 to discuss proposed changes in the zoning code. After that, Denver City Council's Neighborhoods and Planning Committee will consider those changes, then send the final proposal to the full council.
If and when the regulations are passed, the city will set up a Short-Term Rental Advisory Committee to make sure the new rules are working well and actually helping with enforcement, according to Susman, who adds, "The data will show us what we need to know, I hope, but I don’t see the primary-residence thing going away.”
The next town hall meeting on STRs will start at 6:30 p.m. Thursday, February 11, at East High School. Find more information at denvergov.org/str.