Colorado Short Term rental legislation could impact local markets

This year, the State of Colorado implemented new rental rules affecting long-term tenant issues, such as eviction proceedings and price gouging. But the Colorado legislature also continues to hear ideas that could negatively impact short-term rentals in places like Aspen/Snowmass.

A short-term rental (STR) is defined as the use or occupancy of a residential property or dwelling unit, in whole or in part, by the public for a fee, primarily for tourist accommodations, and for a period of less than 30 days. 

As of now in Colorado, STRs are regulated by the city, not the state. Take Aspen for example, where a new permitting process was implemented in 2022. According to the City of Aspen’s website, "Due to the potential for adverse impacts, STRs are regulated by the City of Aspen to protect the health, safety, and welfare of owners, neighbors, and visitors and balance conflicting community needs and interests." 

Aspen offers three rental permit types: one type for hotels, another for owner-occupied residences with STRs limited to 120 days per year, and a finite number of unrestricted STR permits provided annually, which cost just under $400 per year. One must apply for these permits on an annual basis, and since there are only so many non-restricted STR permits distributed each year, many owners are waitlisted or forced to seek long-term tenants only. This certainly is not an ideal situation for a buyer seeking to maximize their rental income.

In Snowmass, the rental rules are much more digestible. For one, there is no limit on permits. For all four permit types there is an $85 Business License Fee and $300 STR permit fee. This system was implemented without much fanfare in 2023. The process seems rather painless, especially for condo owners whose parent company can obtain just one business license on behalf of the entire complex. This comes as a huge relief to the many condo buyers in the new Snowmass Base Village development. 

But alongside Colorado’s ever-evolving rental regulations is a serious discussion regarding statewide restrictions that would affect condo investors. Last year, a Lodging Property Tax Treatment bill (SB24-033) would have classified rental condos with more than 90 STR nights per year as a “lodging property” (versus “residential real property”) and thus taxed as such—28 percent versus 6.7 percent. This seemingly targets multi-unit owners that perhaps should be considered a hotel or lodging company, but also punishes individual condo owners who rely on rental income to cover the condo’s carry costs. 

The goal of the SB24-033 may have been to create more housing opportunities for long-term residents in resort towns. It also could have resulted in serious unintended consequences for places like Snowmass, where rental rates vary significantly based on the time of year. In essence, the majority of owners would put their place up for rent during the most lucrative 90 days of winter, then refrain from STRs in the summer. One view is that this could severely damage the complex’s revenue flow, thereby threatening the year-round employment of condo management staff.

SB24-033 did not pass, partially in thanks to the lobbying efforts of the Colorado Lodging and Resort Alliance (CLARA), which estimated that the bill “threatens $1.36 billion in STR visitor spending per year and associated 8,148 tourism-related jobs.” This and similar legislation was also vehemently opposed by the Colorado Association of Realtors (CAR). The lobbying efforts paid off. 

But the discussions are not over. Word on the street is that 2025 could be another year of fending off policies that would discourage STRs, statewide. Legislators continue to float ideas like vacancy tax, excise tax on STRs, or additional transfer taxes on real estate transactions. Thankfully, groups like CLARA and CAR continuously scrutinize proposed state legislation that affects the tourism, lodging, and real estate industries in Colorado. And our local governing bodies are doing what they can to regulate STRs in their own, Aspen-Snowmass, way.