“Our trajectory is troubling” Breckenridge caps short term rentals, Guide to STR regulations in CO mountain towns

Breckenridge currently has about 4k short term rentals.  At a council meeting last week, legislation was proposed to cap this number at 2200.  What has caused the huge shift in Breckenridge and other mountain towns regarding short term rentals.  What does this mean for real estate values? Guide to Short term rental regulations in: Breckenridge, Steamboat Springs, Frisco, Vail, Crested Butte, and Winter Park

 

What caused the short-term rental discussion in Breckenridge and other Colorado resort communities?

“My fear is the Breckenridge product is diminished,” council member Jeffrey Bergeron said. “I just don’t think we’re as good of a host as we could be, often because our work staff is overworked, businesses are understaffed, and the sense of being vested in the community is not what it used to be.”

Council members said housing units are clearly out of balance when comparing Breckenridge to other communities. The town council agenda packet noted that there are only 200 short-term rental units in Salida. Town Manager Rick Holman pointed out that Breckenridge has more short-term rental licenses than any other municipality in Colorado.

“We absolutely need short-term rentals, but the issue is our balance is lost,” council member Carol Saade said. “Our trajectory is troubling.”

“Is the town of Breckenridge the next Vail Village of vacationers only, or has it already become that?” Breckenridge business owner James Vecchio asked to open the public comment period. “When are enough visitors enough? When is enough revenue enough? This is the question important to answer to get back to our community feel and have a fair balance.”

Above is from the Breckenridge town council meeting where it was decided to cap the number of short term rentals.

1. Covid surge in visitors: Covid has no doubt led to a huge surge in visitors from Breckenridge to basically every mountain town visitation numbers are up double digits compared to pre pandemic.
2. Nightly rentals in traditionally “locals” neighborhoods: As demand for lodging increases and nightly rental rates increase, many traditional “local” neighborhoods have become desirable areas for nightly rentals. This has in turn led to the larger discussions on where nightly rentals should be allowed.
3. Degradation of community “feeling”: As more properties are rented on a nightly basis, there is a feeling that locals are being pushed out and that neighborhoods are now operating like hotels. If you read through any of the articles below, this is a common message in every discussion regarding regulation of Short Term rentals.

 

How would a cap on short term rentals in Breckenridge work?

There are currently around 4k nightly rentals in Breckenridge.  The new cap would be set at around 2200 (this is the current proposal that could change).  Along with the cap a couple of other notable items:

• No new licenses: There would be no new licenses issued (once the cap is implemented) until the number of short-term rentals falls below the cap.  The legislation did not specify how new licenses would be distributed once they become available
• Licenses would not transfer on sale: short- term rental licenses would not transfer on the sale of the property.
• Existing licenses “grandfathered” in: From the initial read of the legislation it does not look like the city will revoke short term licenses but let them “burn off” as properties are sold/transferred.

Guide to Short Term Rental Regulations/Proposals  Colorado ski towns

The tide for nightly rentals is rapidly changing in resort communities throughout Colorado.  Below is a sampling of five other resort communities that are grappling with the huge surge in short term rentals.  From below it is obvious that the only certainty for nightly rentals is more regulations/restrictions as towns seek to balance revenue from visitors with impacts on residents.

 

1. Frisco
   1. Ballot initiative to ban short term rentals: The proposal would  prohibit short-term rentals for single-family homes, except when the home rented is a person’s primary residence
2. Crested Butte
   1. 12 month moratorium on any new rental licenses
   2. Placeholder for November ballot to tax non primary residences
3. Vail
   1. 2% on tax on nightly rentals: Council approved a measure that will be sent to voters to tax any properties listed less than 30 days a special 2% tax on each rental (basically an increased lodging tax that renters pay when staying).
4. Winter Park
   1. Proposed moratorium for new licenses (not passed yet)
   2. Prospective zoning changes to only allow nightly rentals in certain areas
5. Steamboat:
   1. Short term moratorium for new licenses
   2. Licensing and better enforcement via a third party monitoring company
   3. Prospective zoning changes to prohibit short term rentals in certain areas

 

What does further regulation of nightly rentals mean for real estate values?

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 Breckenridge over the next twelve months.  Here are a few scenarios to consider.

1. 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.  Most of the 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. Many of these buyers are cash buyers that do not need to short term rent their property. Furthermore, inventory is not increasing meaningfully.   As a result, the impact should be muted as there is considerable demand and virtually no meaningful increase in inventory.
2. 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 Breckenridge over other communities as they can be confident that they will not end up with a house next to a nightly rental and a town overrun with tourists?  Essentially capping visitation/short term rentals will bring a further air of exclusivity.  I think that it is greater than 50% probability that prices could accelerate as demand accelerates.

 

Summary:

The tide has substantially turned in mountain towns throughout Colorado regarding short term rentals.  Every major resort community is working to address the balance of full-time residents with short term property owners.  For now, the tide has shifted substantially in favor of residents.  I’ve been saying this for years that only full time residents get to vote.  Locals are driving the huge changes in short term rental regulations and this trend looks to only accelerate.

Additional Reading/Resources

 

1. https://www.summitdaily.com/news/local/our-trajectory-is-troubling-breckenridge-to-set-cap-on-short-term-rental-licenses/
2. https://www.skyhinews.com/news/no-str-moratorium-yet/
3. https://www.steamboatpilot.com/news/steamboat-discusses-prohibited-zones-for-short-term-rentals/
4. https://crestedbuttenews.com/2021/07/crested-butte-council-unanimously-approves-str-moratorium/

 

5. https://www.summitdaily.com/news/frisco-resident-starts-petition-to-restrict-short-term-rentals/

 

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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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