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Airbnb sent out an urgent request to hosts to: “ We urgently need your involvement NOW,” the email stated as it instructed hosts how to provide public comment. “It is critical to speak up against the proposed moratorium on all new permits.” The town of Crested Butte just won a battle against Airbnb. What happened to Short Term Rentals in Crested Butte? How will this impact real estate.
What happened with Short Term Rentals in Crested Butte, CO?
After several hours of sometimes emotional public discussion Monday night, the Crested Butte town council agreed to move forward with two initiatives to address what is being termed community preservation efforts.
- Approval of a 12-month moratorium on accepting and processing applications and issuing licenses for non-primary residence short-term rentals (STRs).
- New tax on STRs: Council also agreed to put a placeholder on the November ballot to potentially allow Crested Butte citizens to enact a tax on houses not occupied by full-time residents and/or increase the sales tax in Crested Butte to fund community preservation efforts. A special meeting will be held in August to flesh out details of the potential tax proposals
- Cap on number of rentals: Although nothing was formalized in this meeting, there was further discussion to reduce the number of short term rentals allowed from the current cap of 212.
How was Airbnb involved in the Crested Butte Short Term rental discussion?
Many expressed some alarm over the fact Airbnb sent an email to Crested Butte area hosts encouraging them to attend the Crested Butte council meeting and speak against the ordinance.
“We urgently need your involvement NOW,” the email stated as it instructed hosts how to provide public comment. “It is critical to speak up against the proposed moratorium on all new permits. Hosting is a vital economic recovery lifeline and can be a key revenue source for many of our Hosts. It should not be restricted at a time when many residents are still struggling from the impacts of the ongoing pandemic…”
No one at the Monday meeting appeared to take the email’s advice. In what ended up being approximately two hours of intense public comment with up to 122 participating on Zoom and another 75 in person at the council chambers, the overwhelming feeling was to flip off the $83 billion Airbnb company and enact the moratorium.
How will this moratorium impact Crested Butte’s economy and real estate
- Room Rates will rise: As costs increase to operate a nightly rental, these costs will be passed on to renters in the form of higher room rates. Furthermore, if the supply of nightly rentals is further reduced this would also lead to an increase in prices.
- More higher paying visitors: Volume of visitation should decline but more of these visitors will be paying higher rates. I suspect that the impact to sales tax will be nominal as higher paying visitors spend more money.
- More affordable housing: One of the goals of the tax/impact fee is to provide a dedicated funding source for affordable housing. If the fee is passed, this could be a game changer for real estate.
- Will this impact real estate? If you ask someone who owns a short-term rental, their answer will be that these regulations will destroy the real estate market. On the opposite side, if you ask a long time local, the impact will be negligible.
Crested Butte will be a case study in Short Term Rentals for other Colorado ski towns.
There are many passionate voices on both sides of the debate. Fortunately we are going to get to find out what actually happens to real estate in Crested Butte over the next twelve months. Here are a few scenarios to consider.
- Will prices of real estate fall? I hear this time and time again that any action on STRs will cause a real estate collapse. Unfortunately, I don’t see this in the cards. The majority of recent demand for real estate is from high-net-worth buyers looking for a “safe place” outside of an urban center for their personal use. The impact should be muted as there is considerable demand and virtually no meaningful increase in inventory.
- Will this trigger an increase in real estate values? An increase in prices is a plausible outcome. Will Crested Butte become more desirable (in higher demand) because of less visitation. Would someone choose to buy in Crested Butte over other communities as they are assured they will not end up with a house next to a nightly rental and a town overrun with tourists? I think that it is greater than 50% probability that prices could accelerate as demand accelerates.
Although, Crested butte is not alone in their struggles as almost every resort community is coming to terms with the huge influx of visitors, they are the farthest along in regulation. For example, Frisco has a proposal to ban nightly rentals in Single Family homes. With the moratorium and proposed impact fees Crested Butte will be an interesting case study on the true impact on more regulation of nightly rentals. Whatever happens in Crested Butte, if it is successful, will be a model for other towns throughout the state and country. I’ll keep an eye out for the impacts and provide an update after the first of the year.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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