As fight over how to tax short-term rentals heats up, bill incentivizing renting to locals moves closer to Colorado governor’s desk

Senate Bill 2 would also let cities and counties give tax breaks to properties used for things like child care, mental health and other services

A bill that would allow local governments to give tax cuts to certain property owners — including those who offer long-term rentals as opposed to short-term — is one step closer to the governor’s desk. 

Senate Bill 2 would also let cities and counties give tax breaks to properties used for things like child care, mental health and other services they deem as “areas of local concern.”

After already receiving approval from the Senate, the House approved the bill on second reading Friday. If it is approved in the final third reading, it will go back to the Senate for approval of the amendment made by the House and will then proceed to the governor’s desk for his signature.

The bill defines “areas of local concern” as properties used for a service that is diminishing in the community based on data. The county’s board of commissioners also must deem the service as necessary for the “health, safety or welfare” of their community. 

The bipartisan legislation is sponsored by Sen. Dylan Roberts, D-Frisco, House Speaker Julie McCluskie, D-Dillon, and Rep. Lisa Frizell, R-Castle Rock.

When presenting the bill to the House floor Friday, McCluskie spoke about the enormous spike in housing costs and inflation in Colorado in recent years and its impact on necessary services. 

“Add to that increased property taxes across the state and we know the burden that many hardworking families and people in this state are facing,” McCluskie said. “Senate Bill 2 will provide yet one more tool in the toolkit.”

The programs, which could be tax rebates or credits, would have to be evaluated by each county for effectiveness and could be renewed for one more year if they’re found to be helping the area of concern. Those evaluations would be made public under an amendment made by McCluskie and Frizell on Friday.

“This is a bill that will provide additional flexibility to counties and municipalities to help them shape their communities in ways that are beneficial to the communities and their citizens,” Frizell said.

The bill comes as arguments over how to tax short-term rentals have heated up at the Capitol. Two bills with alternate approaches on the matter have been introduced and await their first committee hearings. 

“Short-term rentals are a big part of our lives up in the mountains and some of the long-term housing stock has switched over to short-term rentals,” Roberts said in a committee hearing on the bill in January. “We’re trying to pull some of that back to have more availability for local workforce.”

Roberts said the idea began as a focus on housing when Summit County, using relief money from the COVID-19 pandemic, provided cash payments to landlords renting to locals rather than short-term rentals.

Summit County Commissioner Tamara Pogue spoke in support of the bill in that committee hearing in January. 

“In Summit County we have entire neighborhoods that used to be rented long-term to locals that are now rented short-term,” she said. “The margins in the short-term rental market are just so large that we have to find ways as a community to equalize that.” 

In an emailed statement, a spokesperson for Gov. Jared Polis said the governor is “looking forward” to the bill coming to his desk.

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