Denver’s short-term rentals collection nears $2 million

Denver is doing a poor job of tracking and enforcing its new short-term rental regulations, the city auditor says, with some applicants receiving licenses they shouldn’t have, putting the city at risk for a lawsuit.

The findings, released Thursday, come a year after the Denver City Council passed regulations for short-term rentals. The rules allow rental of a primary residence for 30 days or less and require hosts to collect the 10.75 percent lodger’s tax.

The tax has generated nearly $2 million since January — a figure that’s expected to rise, city officials say.

The rules were intended to level the playing field for traditional hotel operators who were required to collect the lodger’s tax, and also to ensure the safety of renters and mitigate the impacts on neighborhoods and housing affordability.

Ashley Kilroy, executive director of the Denver Department of Excise and Licenses, said the city’s rollout has been cited as an example of best practices for other communities across the U.S. and internationally.

But the Denver auditor’s office found “flaws in the city’s systematic evaluation

of licensing activities as well as inconsistent data validation processes.”

For instance, there were about 2,000 short-term rental business licenses issued between Jan. 1 and Aug. 31, accounting for only about 68 percent of the rentals offered through online services such as VRBO and Airbnb.

“These discrepancies between the law and enforcement could lead to public confusion on how to stay in compliance, as well as the risk of perceived inequity,” auditor Timothy O’Brien said in a written statement. “This could put Denver at risk of legal action.”

The auditor’s office says it also found that the majority of lodger’s tax license and identification numbers used on rental licenses were invalid because people were confused by the process and using the wrong digits. (City officials say they have already begun to address this issue.)

The audit also discovered that multiple people were sharing the same number, multiple licenses were issued to the same applicant, and in some cases, applicants violated the primary residence requirement by registering more than one address under the same license.

The rules passed in 2016 allow short-term rentals only at primary residences. Second homes or investment properties were prohibited in an effort keep more rental units available to permanent residents of the city.

“For example, we identified 45 instances out of 1,642 applicants who received more than one shortterm rental license, 20 of them had a license registered to more than one address,” the auditor’s office said in a news release.

O’Brien’s staff said Denver’s Department of Excise and Licenses disagreed with the auditor’s recommendations that they review all short-term rental enforcement regulations.

But Kilroy, who leads the department, said her agency is constantly looking at ways to improve, including working through an advisory committee. She boasted that Denver now has a short-term rental registration rate above 70 percent while its peer cities are at or below 50 percent.

Kilroy added that her department’s initial focus was in getting people licensed and signed up under the city’s 2016 regulations, and then to begin really addressing issues in need of enforcement.

“Policy implementation overall is a phased-in approach,” she said, noting that the auditor’s office began its review just months after the regulations went into effect. “We feel like we are collecting the data we need to collect.”