In June of 2016, the Denver City Council voted to allow, regulate, and tax (10.75%) short-term home rentals within city limits starting January 1st of this year. Short-term rentals are defined as a rental term of anything less than 30 days. Few people know that this is actually an amendment to an unenforced zoning ordinance that was in effect for many years prohibiting short-term rentals in the entire city. The new rules only allow the use of someone’s primary residence to be rented short-term. This is not just extended to homeowners; renters can rent out their homes with permission from their landlord.
https://www.airbnb.com/To get approved for a short-term rental license, “hosts” must obtain a Denver Lodger’s Tax ID Number and then a Short-Term Rental Business License. Hosts are then provided with their license number and are required to post their number on their short-term listings. Failing to obtain a short-term license can cost a short-term rental host fines up to $999.
Last week, the Denver Department of Excise and Licenses sent out 1,057 violations, mostly to hosts that have not posted their license numbers on their listings on sites like AirBnB, VRBO, HomeAway, and many others. First time violators face fines of $150, bumping up to $500 for the second violation, and $999 for every violation after that.
The new regulations have caused a stir among real estate investors throughout the city, especially those that have multiple properties used to generate income through short-term rentals via AirBnB and alike. Some believe that investors will divest their properties as a result of the regulations, which will provide much needed inventory to the depleted cache of available homes for sale in the Denver area. It’s hard to imagine there would be much difference between 6 and 7 weeks’ worth of inventory when normal home market conditions call for around 12-16 weeks.
There are other options of course, like renting out long term. In most cases this provides less rental revenue but also less headaches and turnover. Longer term rentals also create a more stable and fixed revenue stream with lower variable costs, such as damaged property.
I personally believe the new licensing will have very little effect on the ability for hosts to promote and rent their properties through conventional channels. Real estate investors tend to be innately savvy and governments tend to be slow to react to holes in the system. Most short-term investors I know already have legal work arounds for the new licensing issues and I’m sure some of the more cavalier investors have more not-so legal avenues to take. In the end, it’s not such a hardship for short-term hosts and the City of Denver gets its 10.75%.
Matt Jackson, Denver Realtor