Buying a second home in the mountains? Consider these new taxes on short-term rentals first

by | Dec 20, 2021 | Blog, Denver Real Estate Market | 0 comments

City dwellers buying mountain property as second homes and renting them out when they aren’t in town is nothing new. But the recent influx of non-local buyers snapping up mountain homes, combined with housing crunches in mountain communities, has brought a backlash in the form of new tax initiatives passed last November.

The new funds, raised from new taxes on short-term rental properties, will be used to help address affordable housing issues.

Summit County Commissioner Tamara Pogue explained the problem to The Colorado Sun: “We have entire neighborhoods in Summit that have gone from being owned primarily by locals to being owned by people who do not designate their primary residence as Summit County.”

As a result, her county is struggling to house workers. It has been forced to build new workforce housing, lease hotels for local workers and offer up to $24,000 to owners of short-term rental homes who ink year-long leases with locals.

“As a county we simply do not have the tools to mitigate the financial impacts. We can’t keep up with building at the pace that it would take to mitigate the impact on our workforce housing that short-term rentals have created for us.”

A slew of tax initiatives passed in November, including these:

Avon approved a 2% excise tax on short-term rentals to raise $1.5 million or more for affordable housing.

Ouray approved a 15% excise tax on short-term rentals. The money will go toward workforce houses and wastewater treatment facilities.

Leadville approved an increase in lodging taxes on short-term rentals.

Created Butte approved a 2.5% increase in lodging taxes on short-term rentals to help fund more affordable housing.

Owners of second homes in the mountains were no doubt relieved that mountain communities rejected even more stringent measures. For example, Crested Butte voters did not end up supporting a proposal that would have charged a $10,000 annual fee on unoccupied homes.

Meanwhile, state lawmakers rejected creating a proposed state-wide standard that would have imposed “commercial tax rates on residential homes that owners rent to vacationers.” This would have more than tripled property taxes for short-term rental owners, notes the Sun.

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