AIRBNB, VRBO HOSTS COULD SOON FACE FINES OVER TAXES

Den­ver is gear­ing up to en­force rules for short­term va­ca­tion rentals.

The Denver Post - - FRONT PAGE - By Jon Murray

The new year will bring the first threat of fines un­der Den­ver’s new va­ca­tion rental rules, and there ap­pear to be plenty of po­ten­tial tar­gets.

Six months into the city’s roll-out of short-term rental li­cens­ing, most peo­ple who rent rooms or homes on on­line ser­vices such as Airbnb and VRBO still have not got­ten on board.

That’s not a sur­prise. San Fran­cisco, Port­land, Ore., and other cities sim­i­larly have strug­gled to get most hosts to start col­lect­ing lodg­ing taxes and ob­tain a li­cense or per­mit. Such lags of­ten per­sist for years.

But next week, Den­ver li­cens­ing of­fi­cials will be­gin hold­ing out the threat of fines — top­ping out at $999 for re­peated vi­o­la­tions — though they say vi­o­la­tions still will be met first with a warn­ing.

The short-term rental reg­u­la­tions, ap­proved by the City Coun­cil 9-2 in June, le­gal­ized the grow­ing prac­tice over some ob­jec­tions from neigh­bor­hood ad­vo­cates who wor­ried they could dis­rupt quiet blocks. The rules al­low the rental of a pri­mary res­i­dence for 30 days or less and re­quire col­lec­tion of the 10.75 per­cent lodger’s tax from guests.

The Den­ver Depart­ment of Ex­cise and Li­censes said it had is­sued 420 ac­tive li­censes as of Thurs­day, with an­other 200 or so ap­pli­ca­tions un­der­way in the on­line ap­pli­ca­tion sys­tem. This month has brought a surge.

It’s un­clear just how many short-term rental prop­er­ties ex­ist in Den­ver, but ob­servers pre­vi­ously es­ti­mated the city was home to 2,000 or more list­ings on va­ca­tion rental web­sites.

That would mean about 20 per­cent have ob­tained li­censes — not bad, con­sid­er­ing that Port­land reached that com­pli­ance rate about two years af­ter it passed its rules. But it’s still far short.

“What’s more im­por­tant to us is fig­ur­ing whether or not this is work­ing,” said Dan Row­land, a Den­ver li­cens­ing spokesman. “That’s part of why we have an ad­vi­sory com­mit­tee to sort of gauge that feed­back as that comes in over the next cou­ple months,” with both hosts and more skep­ti­cal neigh­bor­hood ad­vo­cates rep­re­sented. “Ob­vi­ously, we want to get any­one out there who’s host­ing to get li­censed.” Here are key things to know: •Den­ver al­lows short-term rentals only for pri­mary res­i­dences — no se­cond homes or in­vest­ment prop­er­ties. (A separate dwelling unit on the pri­mary prop­erty, such as a car­riage house, still can be rented out full time.) The rules heav­ily fa­vor Airbnb’s model of more oc­ca­sional rent­ing while cut­ting out, in the­ory, en­tre­pre­neur­ial own­ers who have listed mul­ti­ple prop­er­ties as va­ca­tion rentals.

•Hosts, in­clud­ing home­own­ers and renters who have their land­lord’s per­mis­sion, can get li­censed en­tirely on­line, avoid­ing a trip down­town. Den­ver re­quires that they post their li­cense num-

ber in each on­line list­ing.

•The city’s web­site, at www.den­ver­gov.org/str, guides hosts through the step-by-step process, start­ing by get­ting a lodger’s tax ID (cost­ing $50 every two years) and an oc­cu­pa­tional priv­i­lege tax ID ($48/year). They then ap­ply for the short-term rental li­cense, which costs $25 a year.

•En­force­ment by a new short-term rental co­or­di­na­tor and li­cens­ing in­spec­tors will in­clude re­spond­ing to com­plaints about un­li­censed rentals — or those that are le­gal but a nui­sance — as well as proac­tive searches. The li­cens­ing depart­ment has bud­geted $70,400 in 2017 for a dig­i­tal data-min­ing ser­vice that will comb va­ca­tion rental web­sites and pro­vide re­ports and maps to the city.

•Ci­ta­tions and vi­o­la­tions will start with a warn­ing and then es­ca­late from $150 to $500 and a max­i­mum $999 for re­peated vi­o­la­tions. Fines could re­sult from some­thing as sim­ple as re­peat­edly fail­ing to note a city li­cense num­ber on a list­ing.

The city has re­designed its ap­pli­ca­tion web­site to make it sim­pler af­ter sur­veys and ad­vi­sory com­mit­tee feed­back in­di­cated that ap­ply­ing was more cum­ber­some than in­tended.

Get­ting more on board

One chal­lenge is that many of those seek­ing the new li­cense don’t think of rent­ing out their home as a busi­ness and aren’t fa­mil­iar with tax regis­tra­tions, Row­land said.

Sev­eral ap­proaches have aimed at get­ting more peo­ple on board. The city sent out 240 com­pli­ance no­tices through early De­cem­ber. And Airbnb sent an e-mail blast to its Den­ver hosts and cre­ated a ref­er­ence page ex­plain­ing Den­ver’s new rules.

Li­cens­ing of­fi­cials now are rolling out a new cam­paign — un­der the ban­ner “Stay Le­git Den­ver” — via use so­cial me­dia and dig­i­tal ad­ver­tis­ing that will con­tinue into 2017.

The long de­bate over how to reg­u­late short-term rentals in­cluded two years of public meet­ings con­vened by Coun­cil­woman Mary Beth Sus­man and zon­ing and li­cens­ing of­fi­cials be­fore the coun­cil’s vote.

The most con­tentious is­sue cen­tered on whether to re­strict rentals to pri­mary res­i­dences or al­low se­cond homes. The coun­cil’s de­ci­sion left plenty of en­ter­pris­ing hosts dis­sat­is­fied.

“In light of that, the city has done well in mov­ing for­ward with what it passed,” said Craig Ellsworth, an ad­vi­sory com­mit­tee mem­ber who ob­tained a short-term rental li­cense for his home in July. He called the for­ma­tion of the com­mit­tee “a very pos­i­tive step. It’s been suc­cess­ful, and in­clud­ing public com­ment at the ad­vi­sory com­mit­tee meet­ings, I think, was very im­por­tant.”

“Throw­ing in the towel”

The first six months of the soft roll­out have forced a reck­on­ing for own­ers of po­ten­tially lu­cra­tive se­cond homes: try to fly un­der the radar, in­clud­ing by por­tray­ing the home as their pri­mary res­i­dence or ad­ver­tis­ing 30-night min­i­mum stays (a com­mon tac­tic in other cities); sell the home; or con­vert it to a longer-term rental that’s likely to be less prof­itable.

“For the most part, long-time hosts that I’m speak­ing with are throw­ing in the towel and are look­ing to com­ply with the law,” said James Carl­son, a Den­ver real es­tate agent who has taught cour­ses on how to be a suc­cess­ful Airbnb host. “And they’re either go­ing to sell off their fur­ni­ture and con­vert to a tra­di­tional long-term rental, or they’re con­sid­er­ing keep­ing their fur­ni­ture and con­vert­ing to a medi­umterm rental model where they’re look­ing to rent to vis­it­ing nurses and re­lo­cat­ing pro­fes­sion­als” who are in search of a place to stay for a few months.

Carl­son has eked out a spe­cialty in find­ing home-buy­ers prop­er­ties that have base­ments, at­tics or mother-in-law units that can be listed on web­sites legally. He calls it “house-hack­ing” for peo­ple seek­ing to earn a steady in­come with­out run­ning afoul of Den­ver’s new rules.

Coun­cil­man Kevin Flynn, who cast one of the two “no” votes on the rules in June, said he re­mains con­cerned about the city’s en­force­ment ca­pac­ity.

“My big­gest ques­tion is: How will neigh­bor­hoods be pro­tected un­der this?” he said. “I have con­cerns that we don’t have enough re­sources to fol­low up on com­plaints,” whether by po­lice of­fi­cers or li­cens­ing in­spec­tors.

But whether those com­plaints will ma­te­ri­al­ize in large num­bers is among the many un­knowns.

For now, the city’s ap­proach is more straight­for­ward.

“Our first step will con­tinue to be get­ting peo­ple into com­pli­ance,” said Row­land, the li­cens­ing spokesman. “We aren’t go­ing to be slap­ping $1,000 fines onto peo­ple on Jan. 3, but we will be step­ping up our en­force­ment then.”

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