Short-term rental owners from across Colorado sounded off last week over a proposed bill aiming to impose a higher tax rate on many of their homes by reclassifying them as commercial properties during a more than four-hour meeting of the state’s Legislative Oversight Committee Concerning Tax Policy.

If passed, the proposed law would classify homes rented for more than 90 days a year on a short-term basis, defined as being less than 30 days per booking, as a lodging property. In 2023, Colorado taxed lodging properties at a rate of 27.9% compared to 6.85% for residential properties.

“I am a property manager who this year purchased my own property,” Hillary Skye told the six-member committee Tuesday. “I have invested over $80,000 in a remodel as well as staging the home. This year alone, I have created about $34,000 in income. That is not even close; it’s going to take years to pay that off.”

“This bill is going to crush the short-term rental community in Colorado,” Skye added.

Members of the Legislative Oversight Committee voted 4-2 to advance the bill to the January legislative session despite opposition from Skye and several dozen members of the public who spoke against the bill at Tuesday’s meeting.

The proposed tax for short-term rentals included in the bill would create an additional financial burden for many property owners in places like Steamboat Springs, where 62% of voters approved a 2021 ballot measure to collect up to a 9% tax on each short-term rental booking made in the city.

But it is not just property owners who could feel the effect of the proposed legislation. Taylor Hills founded the effortless rental group with his best friend in 2015 and said the bill would likely impact their operations and the local economies they serve.

The firm, which offers a turn-key management solution for property owners who rent their homes on a short-term basis, initially focused on the Denver market before expanding to the Western Slope. Today the company contracts with a property in Steamboat and more than 30 properties in Summit and Eagle counties.

“When you combine the taxes that are already in place in most resort towns or towns around the state of Colorado and then you add this additional property tax, it just doesn’t leave enough revenue for owners,” said Hills.

“Local municipalities are already taking a huge percentage,” Hills said. “So, you have the local municipalities that are squeezing the lemon, and then you have that state that is coming to squeeze the lemon as well, and it just doesn’t pencil out anymore for property owners.”

“The tax is going to be passed on to the guests no matter what,” he added.

According to data collected by the analytics firm, AirDNA, short-term rentals booked in Steamboat between January and March this year surpassed $170,000, up from $112,875 in 2021, and the town estimates it will collect $13 million in short-term rental tax revenue in 2024.

In Telluride, where voters approved taxes on short-term rental bookings at a rate of 8.65% in 2019, wintertime rentals booked between January and March earned the town $63,412 in 2023 compared to $56,063 in 2021.

Gov. Jared Polis supports the bill, telling The Colorado Sun in September that the fact that short-term rentals have lower property tax assessment rates than commercial lodging properties is a “loophole” that he supports closing.

“The tax treatment should be uniform,” Polis said at The Colorado Sun’s annual SunFest event Sept. 29. “We shouldn’t be subsidizing (short-term rentals) vis-à-vis other legitimate business.”

Dana Lubner, who serves on the board of directors for the Colorado Lodging and Resort Alliance and effortless rental group, said the idea that property owners who engage in the short-term rental market are “raking in dough” is a commonly misrepresented narrative.

“Oftentimes they are choosing to rent their home because it is what they have to do in order to lift their dream of eventually being able to buy a mountain home that they can stay at through the year,” she said.

Pointing to a statistic showing 75% of vacation rentals in Colorado are owned by residents of the state, Lubner contended the proposed legislation would ultimately hurt resort economies in Steamboat and in municipalities across Colorado, adding that the idea of using short-term rental taxes to fund affordable housing should be a local decision.

In Steamboat, a ballot question proposed for the Nov. 7 election will ask voters to decide on committing 75% of the city’s 9% short-term rental tax collections to fund the development of more than 2,000 affordable housing units at Brown Ranch, a 523-acre property purchased by the Yampa Valley Housing Authority through an anonymous donation.

Lubner said she spoke with Chair of the Legislative Oversight Committee Concerning Tax Policy Sen. Chris Hansen, who noted the proposed legislation stipulates the property tax collections would be put toward education, but a secondary impact could come in the form of supporting affordable housing projects through a “trickle down” effect.

“A lot of local tax and lodging tax has recently been passed,” she said. “Let’s see how that plays out and see how far that can go at the local level versus doing a tax that is going to be a 400% increase.”

“My solution would be to oppose this bill and leave it up to local governments to figure out how they want to generate money to go towards affordable housing, and stop the narrative of saying the problem and the crux of the affordable housing problems is short-term rentals because the folks that are saying that are just honestly not doing their research,” said Lubner.