On Tuesday, June 7, the Steamboat Springs City Council voted 6-0 to pass an ordinance that bans vacation rentals in the majority of the ski resort town located in Northwest Colorado.
The ordinance divides Steamboat Springs into three overlay zones: green, yellow, and red.
Effective June 15, short-term rentals (STRs) are banned in the red zone, which covers more than half of the city; capped in the yellow zone, and allowed without restriction in the green zone.
“It looks like heavy-handed policy driven by emotion and not facts, and opens the city up to questions of arbitrary and capricious decision making that could form the basis of legal action,” said Robin Craigen, co-founder and CEO of Moving Mountains, a Colorado-based property management firm, and board member for the Steamboat Springs Community Preservation Alliance (SSCPA).
However, the City Council has created an avenue for existing STRs to continue operating in all three zones, said Planning Director Rebecca Bessey. This could be an important lifeline for the 4,300 STRs in the city.
STRs in the yellow and red zones that were operating before June 15 may apply for “legal nonconforming status,” which would allow them to continue hosting guests.
To prove that the STR was operating prior to June 15, the owner or manager must submit documentation of STR activity such as booking confirmations, verified stays, and remittance of sales tax. STRs with registered legal nonconforming status may continue to operate in the yellow and red zones, Bessey said.
Council members also have requested an amendment that would allow primary residents to short-term rent rooms in their homes a maximum of two times, or 30 cumulative days, per year, whichever is more restrictive, Bessey said.
The overlay map is intended to minimize “potential negative impacts of short-term rentals” on the community’s housing supply, the character of residential neighborhoods, and worker shortages, according to a city staff report.
However, data suggests that few of the short-term rentals affected by the ordinance would, in fact, become long-term rentals, said Paul Forehand, a homeowner in Steamboat Springs who addressed the council on June 7.
About 3,900 out of the 4,300 properties are rented for less than six months of the year, with two-thirds of those, or 2,600, rented for less than three months, according to AirDNA.
“In other words, the people who keep telling you they won’t change to a long-term rental because they use their property themselves while renting it to supplement costs are telling you the truth,” Forehand said.
“You are not going to solve the problem of the price and quantity of long-term rentals by picking on the short-term rentals.”
The council also approved two other ordinances that set new short-term rental licensing and operating rules, including maximum occupancy, parking requirements, vehicle limits, and a responsible party to respond to complaints 24 hours a day.
Short-term rentals must display a license in a visible location inside the premises, and occupancy is limited to one person per 150 square feet, or a maximum of 16 per home.
All three ordinances take effect on June 15 but provide a six-month grace period to give owners time to register their properties.
Airbnb recently released a report by HR&A Advisors that quantifies short-term rentals’ important role in Colorado’s economy and demonstrates what is at stake specifically in Routt County, where Steamboat Springs is located.
The study found that in Routt County, STRs generated $179.2 million in economic output in 2020, including $65.3 million in visitor spending, 1,100 local jobs, $41.6 million in worker earnings, and $4.5 million in state and local taxes. The study also found that just 178 out of 6,800 STRs in Routt County would be affordable for workers if converted into long-term rentals.
Some homeowners affected by the ban said they were rethinking their investment in the community.
“It took my wife and I 25 years to be able to afford to buy a condo in Steamboat,” homeowner Chris Drohosky wrote in a letter to council on June 8. “… After purchasing the condo, we had to do long-term rentals in order to afford the mortgage. The ultimate goal was to go to short-term rentals within a year so that we could also enjoy it with our friends and family. This dream was shattered last night.
“We are currently renting the condo to a lovely family at an affordable rate and were about to renew their lease for another year. After [the decision by council], we have decided to sell the unit because the value will only go down and we will never be able to use it for ourselves.
“Your actions have not only affected us and other owners, but we now have to tell a great tenant that we had for three years that they need to go elsewhere to find a rental.”
The council is also considering sending a ballot measure to voters in November that would levy a special tax on STRs to generate revenue for affordable housing. The tax rate has not yet been determined, but council members have discussed a rate of between 7% and 10%. They are scheduled to hold a meeting on June 20 to discuss the proposed tax.
Craigen said the SSCPA’s focus will now shift to opposing that tax.
“If this passes, it will have a further devastating effect on local lodging companies who are fighting inflationary pressures and dipping demand as the world opens up after COVID,” Craigen said.