To: Honorable Mayor and Members of Town Council
From: Kristin Read, Assistant Town Manager
Title
Discussion/Direction: Short-Term Rentals
Body
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Executive Summary
Council in December directed staff look into the issue of short-term rentals within the community. Among the topics requested to be researched were the prevalence in Town of such rentals - generally defined by stays of 30 days or less - as well as tax, regulatory and business-related issues. Staff has completed initial research in these areas and presents this report for Council’s discussion and any further direction.
Discussion
Short-term rentals have been more prevalent across the Country since online listing service Airbnb surged in popularity over the last decade. An attached article indicates Airbnb has about half of the market share, with longtime service VRBO having the second-largest share. Numerous smaller services are in the market, too. There are three basic varieties of rentals: 1) shared accommodations, where the resident remains on site with the guests; 2) unhosted sharing, where the resident vacates the unit so it can be used by short-term guests; and 3) dedicated rentals, where there is no primary resident.
Without a reservation, the listing services generally do not release a property’s exact address. Using map searches in early February, staff found approximately 120 listings in the Castle Rock area on Airbnb and about 25 on VRBO. These numbers are not exact - especially given the unincorporated pockets that exist throughout and around Castle Rock - but they provide a ballpark figure for listings in the area. Council should keep in mind that property owners may choose to list on more than one service, so there could be some overlap between the two sites. Listings exist in most neighborhoods within Castle Rock, which has roughly 21,000 total housing units, to provide context as to the prevalence of listings.
Examining a listing on either site, one will notice listed among the applicable charges taxes including “occupancy taxes and fees” on Airbnb and “lodging tax” on VRBO. However, neither Airbnb nor VRBO are presently remitting taxes to the Town of Castle Rock. Airbnb executes with municipalities “Voluntary Collection Agreements” prior to remitting taxes, and the Town does not presently have one in place. Cities with the agreements in place have experienced challenges collecting tax revenues from Airbnb; see the “Wired” article in Attachment A.
Still, the Town is receiving limited sales tax revenue from a handful of property “hosts” who have obtained Town business licenses as required to operate a business within Castle Rock. The Town’s 4% general sales tax is applicable to short-term rentals. The Town does not have a lodging tax, but any future lodging tax would be applicable to the rentals, as well.
Numerous Colorado municipalities have chosen to restrict or regulate short-term rentals. See Attachment B for a summary compiled by the Colorado Municipal League last year. Within Douglas County, the City of Castle Pines, Highlands Ranch Community Association and the Town of Parker prohibit short-term rentals, while Lone Tree does not regulate nor require licenses for them.
Town Code at present is silent on the issue, so the presumption is they are allowed where not restricted by homeowners association rules. Checking in with the larger HOAs in Town, staff found rentals shorter than one month are not allowed in Founders Village nor The Meadows, and rentals shorter than six months are not allowed in Terrain. (Staff also checked with the Crystal Valley HOA but had not received a response as of the writing of this memo.)
There are numerous considerations when evaluating whether to regulate short-term rentals, one of the chief of which is enforcement. Companies including Harmari, Host Compliance and LODGINGRevs contract with cities to monitor listings, verify compliance and collect complaints. Airbnb itself has launched a “Neighborhood Support” webpage where concerns can be submitted. Concerns about short-term rentals generally relate to noise, parking, trash and transient occupants. Positive aspects of the rentals include that they provide supplementary income to community members and can increase tourism spending and tax dollars within the local economy. Regulations are generally seen as a way to balance these various interests, as well as to provide for life-safety inspections and to level the playing field between these rentals and other commercial lodging businesses. Though, the rentals have been found to provide low direct competition for hotels, including by the American Planning Association and within a paper by a Harvard Business School professor.
Staff offers this information in response to Council’s direction and requests any further direction arising out of this briefing.
Attachment
Attachment A: Inside Airbnb’s ‘Guerilla War’ Against Local Governments, Wired
Attachment B: Short-Term Rental Property Ordinance Matrix-March 2019, CML