Airbnb-style rentals are booming, but some say they aren't playing fair 

click to enlarge Karen Cullen's vacation rental on Ruxton Avenue in Manitou. - COURTESY KAREN CULLEN
  • Courtesy Karen Cullen
  • Karen Cullen's vacation rental on Ruxton Avenue in Manitou.

On April 14, Manitou Springs' one-year moratorium on new short-term rentals will expire, opening the door to more Airbnb-style businesses in the historic tourist destination.

Don't expect a free-for-all. The town's City Council plans to consider an ordinance days later that would cap the number of the popular rentals at 2 percent of the housing stock, or 56 rentals. Twenty-five of those slots are already taken.

It's hardly an unusual move. Laws restricting short-term rentals (fewer than 30 days) have been popping up nationally — and in Colorado's mountain towns — even as Internet sites like Airbnb and VRBO have become hugely popular.

Denver, for instance, currently bans short-term rentals but is estimated to have around 2,000 of them operating. Denver's City Council is considering a proposal to allow short-term rentals in a homeowner's primary residence only. That's caused a big stink, The Denver Post reports, because many investors have bought homes specifically as short-term rentals.

For many, renting out a home, or even a room, is a great money-maker and a service to travelers who prefer not to stay in a hotel or motel, due to personal tastes or because they want a bigger space for more people. Short-term rentals are often also economical.

In Colorado Springs, for instance, Airbnb lists more than 300 short-term rentals at an average price of $129 per night. But a private room that costs $25 per night and a "writer's cabin" that costs $75 per night immediately pop up.

The problem for cities like Manitou Springs and Colorado Springs, however, is that short-term rental owners may not be properly licensed, or collect sales tax or Lodgers and Automobile Rental Tax (LART). That means they're cutting into tax revenues while upsetting the traditional hospitality industry, which collects those taxes and follows a host of other regulations.

Colorado Springs Councilor Jill Gaebler says she's concerned about that issue of fairness, though she has no interest in banning or limiting short-term rentals — a move that Colorado Springs has yet to consider.

"I cannot see our city forcing its will on private ownership of homes and how they should be used," Gaebler says.

County Commissioner Sallie Clark, who owns the Holden House 1902 Bed & Breakfast Inn in Old Colorado City with her husband Welling, says it's frustrating to see many short-term local rentals that don't pay taxes.

When she set up her business, she says, she had to jump through hoops. The owner of even a one-room bed-and-breakfast, she notes, must get a variance to operate in a residential area, have enough parking and meet safety requirements. They must pay insurance, commercial property taxes, sales taxes and LART.

"I don't think the average person realizes how many restrictions B&Bs have to adhere to," Clark says, adding she's heard outside investors are coming here (as is common in other cities) and buying properties specifically as short-term rentals. It's a significant business, she says, yet they may not be following any rules.

"Those of us who want to run things legitimately, want to be good stewards of the community, you kind of feel like you're being punished," Clark says.

Randy Hodges, a Manitou City Councilor who owns the Avenue Hotel B&B with his wife, has other worries.

"[O]ur concerns are that an unregulated plethora of [Airbnbs] springing up would certainly take guests away from the existing lodging businesses who struggle as it is to survive in the seasonal tourism industry," he writes by email. "What happens down the road if the longtime operating lodging operations have to close and then these [Airbnb] outfits lose their fad appeal and drop out[?] The entire economy of the area could be impacted."

While the Colorado Springs Convention and Visitors Bureau and Manitou Springs Chamber of Commerce represent motel and hotel owners, they aren't against short-term rentals.

Chelsy Offutt, Springs CVB spokesperson, says as long as short-term rental owners pay the appropriate taxes, the CVB supports them for bringing more people to the city.

"It's a trend and we don't see it going away anytime soon," she says.

Likewise, Leslie Lewis, Manitou's Chamber director, says as long as they play by the rules, she has no problem with short-term rentals — in fact, some of those owners are Chamber members.

"I think the people who are looking for a cabin, who are looking for an Airbnb-type situation, 99 percent of the time wouldn't stay in a hotel," Lewis says.

Nobody knows what tax collections would be if all rentals followed the rules, but the impact hasn't been enough to drag down LART collections in Colorado Springs, according to a snapshot of regional properties (which does not include larger hotels).

LART collections in 2013 were a little over $4 million, 2014 collections nearly $4.5 million and 2015 collections over $5 million.

Lewis says she's heard anecdotally from Manitou hotel and motel owners that 2015 was better than previous years, though hardly an all-time high. The town's planning director, Wade Burkholder, says over the past year, Manitou found 32 illegally operating, short-term rentals and put them on notice.

But Lewis notes many factors can influence hotel profits, from weather to the economy, and it's tough to single out the impact of short-term rentals.

Meanwhile, after Gaebler expressed concern, Colorado Springs' Sales Tax Manager Karen Garcia and her staff checked Airbnb and found 137 potential short-term rentals. Of them, 52 had a sales tax license and were collecting taxes. The others were notified, and all 85 came into compliance.

Via email, Garcia says the city also informs short-term rental owners to meet state licensing requirements, contact the City Planning Department and Regional Building Department to determine zoning and occupancy requirements, and collect and remit the 2 percent LART.

Not all short-term rental owners are in the dark.

Michael Clark has owned a 4-bedroom, 3-bath Victorian in Manitou Springs for about a decade. He's always rented it out, though four years ago, he decided to make it a short-term rental instead of long-term. He contacted the city, followed the process to switch and has paid his taxes.

Clark says he was surprised when Manitou issued a moratorium on short-term rentals. He had never heard of big problems.

"But," he says, "I do get the point about playing by the same rules."

Karen Cullen, running for county commissioner, is another Manitou short-term rental owner who has followed the law. Cullen ran a bed-and-breakfast, 1892 Victoria's Keep, out of her home from 2004 to 2012. She and her husband moved to Hong Kong for over a year, but Cullen already owned a cottage that was a short-term rental, so she switched the B&B too.

She's never looked back. While she now lives in her Manitou home again, she rents an attached apartment and the cottage short-term. She says it's easier, and guests enjoy the privacy and the amenities of a home away from home.

But Cullen understands why some in the hospitality business might be upset.

"The problems arise," she says, "because there are people who are avoiding the process."

This is the first in a two-part series on short-term rentals. Next week, we'll explore other issues that can come up with the rentals, like the disruption of neighborhoods and the impact on affordable housing.

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