Airbnb Owners Have Big Reservations About Proposed Property Tax Increase

Hundreds of short-term rental owners are preparing to descend on the Colorado Capitol today, outraged by a proposed property tax increase — but the bill's sponsor says the change would ultimately impact only a tiny minority of rental properties.

The Colorado Lodging and Resort Alliance is holding an advocacy day on Tuesday, February 6, in response to Senate Bill 33, an effort to tax some short-term rentals as commercial lodging properties instead of residential properties. Over a hundred property owners who rent their homes out through apps like Airbnb and Vrbo are expected to flood the halls of the Capitol to express their opposition to the bill they say could decimate their industry.

"Senate Bill 33 has the potential to significantly raise property taxes for short-term rentals, which could harm homeowners and have broader implications for Colorado's hospitality and tourism sector," says Dana Lubner, a boardmember of the alliance. "This event serves as a platform for our voices to be heard."

As introduced, the bill would quadruple the tax rate of homes that are rented for more than ninety nights a year, going from the 6.7 percent residential property tax rate to the 27.9 percent commercial rate. However, Senator Chris Hansen, who sponsored the bill, says that amendments introduced later this month will significantly limit the bill's reach.

With those changes, the bill would only reclassify properties that federally qualify as commercial, Hansen says, and would only apply to homes rented for more than 200 nights a year. As a result, the tax increase would not apply to 95 percent of short-term rental owners, he points out, including people ranging from those who occasionally rent out spare rooms to those who sometimes rent out second homes. Since short-term rentals in Denver already must be the host's primary residence, few — if any — rentals in the city would qualify for the increased tax rate.

But the alliance is still coming today. "They're rallying everybody around a bill that functionally doesn't exist anymore," Hansen says. "That's disappointing."

The amendments will be introduced during the bill's first committee hearing on February 20. Hansen says he's been planning the changes based on stakeholder concerns, but the alliance has refused to discuss the amendments with him.

"I've talked to them several times. They, in each of those interactions, have been very aggressive and negative with me," he adds. "I've offered to talk through the amendments that I'm considering and basically got this response, which is: 'We're coming down to the Capitol and we're going to show you.' That's their First Amendment right if that's how they want to pursue a bill negotiation. But that is not how I prefer to work on bills."

But Lubner denies that the alliance turned down information and a chance to talk about the amendments, saying they didn't receive any outreach from the bill's sponsors.

"We would be more than willing to engage in a discussion," she says. "If these amendments do reflect the changes mentioned, it would signify a significant departure from Senate Bill 33. We would have to see actual language to state our position, and we have received no language, even in draft form."

Short-term rental advocates have successfully shut down previous legislative efforts seeking to tax the homes as commercial properties, the same way hotels and motels are taxed.

This latest effort comes as hotels are converting to residential properties and renting out their rooms as short-term rentals in such places as Steamboat and Crested Butte. Though they continue functioning as hotels, they enjoy the lower property rates of residences, keeping millions of dollars in tax revenue that would otherwise be used to fund local schools, fire districts, hospital districts and more. These are the operations the bill is meant to target, Hansen says.

"People like to keep their tax breaks. I get that. But I also am a firm believer that we need to have tax equity and tax fairness in the state," Hansen says. "My constituents in Denver who do not own second, third or ninth homes are having to pay extra because commercial activity is not being taxed properly."

Colorado has a love-hate relationship with short-term rentals. Critics condemn them for contributing to the state's housing shortage and increasing unaffordability; consumers enjoy them for cost and convenience. In recent years, Airbnbs throughout the state have also been criticized for attracting violent crime, scamming renters and disrupting surrounding communities.

Advocates say short-term rentals are an important part of the state's economy and tourism industry. A survey commissioned by the alliance estimates that the original version of Senate Bill 33 could cost the state $1.36 billion in annual tourist spending if short-term rental owners reduced their rental nights to meet the bill's ninety-day threshold.

Another current piece of legislation, Senate Bill 2, aims to let local governments create tax incentives for converting short-term rentals into long-term rentals or workforce housing. That bill passed the Senate on Monday, February 5, and will next go to the House of Representatives for consideration.