Vacation and short-term rentals have taken a new and lucrative shape over the last decade through services such as Vrbo and Airbnb. But a balance between vacation locations and long-term residences is needed to keep housing inventory at sustainable levels, according to city and county officials.
The city of Durango planned ahead for maintaining this sort of balance, but La Plata County is still working it out, said Ted Holteen, spokesman for the county.
Dan Armentano, a planner with the city, said vacation rentals account for about 1.5% of all housing stock within Durango.
Mike Segrest, deputy county manager, said about 2% of housing in unincorporated areas of the county are vacation rentals.
There were 28,581 residential units in all of La Plata County in 2020, according to census data, of which about 915 were vacation rentals.
The vacation rental company Airbnb has exploded in popularity since its founding in 2008. Airbnb and services like it are convenient services for travelers, but their presence can intrude into the availability of housing, they are taxed at residential rates as opposed to commercial rates, and guests unfamiliar with the places they are visiting can be bothersome to neighbors.
The biggest problem for local governments is commercial versus residential tax rates. Hotels pay a commercial tax, which is a higher rate than a residential tax, said Durango Mayor Kim Baxter. Segrest said residential tax rates are about 7% while commercial rates are 29%.
“So they’re in direct competition with hotels but the playing field isn’t level,” Baxter said. “That’s an issue that the state Legislature has to deal with. It can’t be dealt with at a local level.”
She said that isn’t a critique of the vacation rental business model but a critique of how property taxes are structured.
The issue was compounded by an increase in “short-term” bookings during the COVID-19 pandemic. A short-term rental contract is considered 30 days or less in Durango, Baxter said. But people have been signing for two to four “30-day” periods.
She said “short-term” rentals extending up to four months defeats the whole purpose of short-term rentals and breaks the law.
“We have to make sure the impact on our broader community doesn’t have a negative impact on our quality of life,” Baxter said. “And our quality of life means people can afford to live here and there are good-paying jobs.”
Short-term rental opportunities remove potential housing units for others who don’t live within the community, sometimes for up to a quarter of the year at a time, she said.
La Plata County is working to track vacation rentals, although the only data it has so far uncovered is from a company that surveys areas across the country to find properties advertised as vacation rentals, Segrest said.
The problem is that it isn’t 100% accurate or verifiable, and therefore, can’t be used to take action.
Holteen said some second-homeowners may not be aware of tax or housing inventory issues, or haven’t considered them.
Segrest said the power to impose reporting requirements for vacation rentals would need to come from the state Legislature, as he understands it. La Plata County commissioners have asked staff to make vacation rentals an agenda item for discussion, likely in the third or fourth quarter of the year, to find viable alternatives to reporting requirements.
In Durango, caps on how many vacation rentals are permitted in different zones around the city were put in place to prevent the rentals from becoming “de facto hotels,” Armentano said.
City code was updated near the end of 2020 to address the problem of mixed business and residential use properties being overtaken by vacation rental owners, he said.
“One of the things we noticed was that there were a few properties out there that became really dominated by the number of vacation rental uses, the number of permits issued versus the total number of residential units,” Armentano said.
The city decided to place a cap on the number of vacation rentals that can be permitted to operate out of those locations.
Armentano offered the Jarvis building near 10th Street and Main Avenue as an example. It has 22 residential units, 16 of which are permitted vacation rentals, he said. But that isn’t necessarily what the city of Durango is trying to encourage.
“We wanted to see mixed use buildings with residential use units in them to be nearly entirely used for residential purposes as opposed to being de facto hotels,” he said.
After seeing how prolific vacation rentals could become, the city tightened its zoning caps on the industry in 2014, and then again in 2020.
A total of 22 vacation rentals are allowed in the Established Neighborhood 1 (EN1) zone while 17 total vacation rentals are allowed in the EN2 zone, Armentano said. EN1 is up and down north Main Avenue and EN2 includes the residential grid downtown.
Thirty-nine vacation rental units exist downtown in the Central Business District, Armentano said.
Chris Bettin founded the Durango-based Vacation Rental Collective, which operates in 15 different states and is among the top 50 vacation rental companies in the world, he said. Bettin, who previously served on Durango City Council, said the city was at the forefront of understanding the need to restrict vacation rentals.
At the same time, Bettin said he advocated for slightly looser restrictions.
“It’s a highly limited use in Durango,” he said. “... It’s limited to 3% total density in those two neighborhoods (EN1 and EN2).”
He said keeping a balance between vacation spots and residential housing is important in maintaining a balanced community – the city relies on tourism dollars, but simultaneously, if every house in a community becomes a lodging operation, then it’s not really a community anymore.
Bettin would like to see the city allow vacation rentals in more neighborhoods while keeping density restrictions in place. He noted the vacation rentals in Durango are located in wealthier neighborhoods and it would be fair to allow more “modest” neighborhoods the opportunity to host vacation rentals.
Baxter said vacation rentals are working “reasonably well” in Durango with the exception of property tax inconsistencies, which are her only concern.
Senate Bill 20-109, which would have classified short-term properties as “nonresidential” for tax purposes, was introduced on Jan. 15, 2020, but rejected by the Legislature.