Crested Butte, CO it the latest to propose a vacancy tax with one major shift, nightly rentals would be covered by the new tax along with second homeowners. Who knew that Colorado ski towns would be taking economic lessons from Portland Oregon,one of the worst performing cities economically in the country.
What is in the new CB Vacancy tax proposal? What is the cost? How will “vacancy” be determined? Will other ski towns follow? Who is covered by the prospective tax?
What is the proposal to tax vacant homes in Crested Butte?
Crested Butte is debating a proposed ballot initiative to tax all “vacant homes” 2500 or 5000 or 7500 per year. The current proposal would cover all houses that are not either occupied full time by the owner or full time by a local employed in the community.
Why is Crested Butte proposing a vacancy tax
“Sales tax is considered a regressive tax since it is more of a burden to those with lower incomes. Property taxes can be regressive to those who have owned a house for a long time and seen increased valuations, and thus taxes, rise,” she said.
She presented numbers showing that based on financial models, year-round town residents pay about $2,000 more per year per household in sales tax than part-time residents. Visitors also make significant contributions to sales tax. There are 826 primary residences in Crested Butte and 465 non-primary residences. Of those, 182 are short-term rental units. Fifty-seven of the non-primary residences also have an accessory dwelling unit on the property.
Fundamental flaw in Crested Butte’s reasoning
Crested Butte is missing a basic economic principle, a vacant home is actually the best thing for a community, especially expensive homes. Roads, sewer, etc… are sunk costs that must be maintained whether people are in the houses or not. People who are leaving their houses vacant and only using them for a month or so are awesome for communities as they provide substantially more in taxes than they use in services as opposed to rental houses. The person who only uses the house for 30 days or so a year is still going out to eat, buying furniture, paying utility bills, in many cases donating to local causes, etc… They are the ideal candidate for what you want in a high end ski town.
Furthermore, for residents to only pay 2k more per year than non residents is amazing. Think of if you have two kids in school, that alone is a huge expense for the community with teachers, buildings, maintenance, etc… so to have only a 2k difference is a great problem to have; it shows that second homeowners are paying more than their share of taxes as they aren’t using the services of full time homeowners.
Increased tourism not paying their fair share
Vacant homes are not the culprit for the budget woes that ski towns like Crested Butte are feeling due to “loss of sales tax”, the increase in tourism is having a much larger budget impact.
Unfortunately, the numbers do not lie, regardless of what fancy “modeling” the city council did the numbers do not add up. If increased tourism leads to increased sale tax revenue and in turn the city budget, then why are we even having the budget discussion. For example, in Crested Butte tourism and in turn sale tax revenue has increased every year the last 5 years (except possibly this year due to the dry winter) and yet we still have a budget crisis.
At the same time, the number of full-time residents is about stable or slightly declining. Based on this information, the increased services (fire, police, public works) for the increase in tourism are not being paid for by the increased sale tax revenue from tourists.
Long and short, the numbers do not add up, increased tourism is already not paying its share and now the proposal is to incentivize more tourism????
Are nightly rentals considered “vacant” and subject to the tax?
This brings up an interesting question; are nightly rentals exempt from the “vacant” tax? One of the proposals is to exempt nightly rentals (currently the tax covers all non-owner or local tenant occupied properties), as long as they are rented more than 183 days a year. This brings up a huge issue, why would local governments encourage even more nightly rentals through this legislation while at the same time they are restricting the number of licenses, locations, etc… This makes no sense from a logical point of view. Furthermore, by incentivizing more nightly rentals, each town would in turn need more service workers that can’t afford to live in the area further perpetuating the housing crisis we are seeing in each ski town. Along with exacerbating the housing crisis, more government workers will also be needed for police, fire, etc… in order to accommodate the influx of visitors.
Note, commercial properties are exempt from the rule so if a hotel is only utilized let’s say 180 days a year, then they would not be subject to a vacancy tax.
Another interesting issue, in many ski towns, hotels around the base have been sold as condos meaning each unit is individually owned. These units would now face a substantially higher tax burden than a hotel as it is a commercial property and exempt from the vacancy tax.
Is taxing vacant homes in CB and following Portland a good idea?
First, as a side note, any economic policy that Portland Oregon is championing should be a warning sign for everyone else like Portland. Last June, City Councilor Sameer Kanal added a note to the 2026 city budget requesting a study to provide projections for a possible tax or fee on vacant residential and commercial spaces. He was joined in support by Council President Jamie Dunphy and Councilor Candace Avalos.
Why would anyone think following in the footsteps of Portland is a good idea. It is one of the worst performing cities economically in the country, so clearly their policies are not working!
Is a vacancy tax in Crested Butte a good idea economically?
When you think of Colorado’s ski towns, I’m going to differentiate between second homeowners that solely use their properties for personal use as opposed to nightly rentals. Assume there is a second homeowner who has a 4m dollar home in Crested Butte. That owner currently pays the same amount as a primary resident yet uses very few services. For example, they don’t use the schools for their kids yet still pay taxes for them. They only drive on the roads maybe 90 days a year yet pay the same as a resident who uses them daily. They spend tons of money when they are in town on restaurants and other services as they are high net worth spenders. So, I’m not sure from a “fairness” standpoint second homeowners should pay more.
On the flip side the argument is that someone who has a 4 million second home can afford to pay more taxes. Regardless of which camp you are in, segregating property types based on occupancy creates some thorny questions of fairness, etc… and it defies the basics of economics! Ironically, Crested Butte should be doing just the opposite and try to attract more people with 5-10 million dollar homes that only visit seldomly as they give the biggest boost to the cities revenue with the least amount of expenditures.
Vacancy tax will budget worse for Crested Butte and other ski towns
The root cause of the affordable housing crisis in every Colorado resort town is that lower paid workers are required to run the resort economy from servers to lift operators, etc… Very few, if any, of these employees are making enough to buy property in the towns they work. With median home prices in many Colorado resort towns averaging 2 million and up it is not feasible to afford a market rate property.
Unfortunately, the solution continues to be to tax property owners more, which incentivizes even more short-term rentals for property owners to make ends meet with the increase in expenses. This in turn requires even more workers that still can’t afford to live in the town thereby making the crisis even worse than we are in today.
Crested Butte Vacancy tax is a terrible idea
The vacancy tax is not just theoretical. Crested Butte is running full force to use vacant homes as the scapegoat for their budget woes. Ironically the reason for the budget shortfalls is huge overspending coupled with unfettered growth of tourism that is not paying its way for the services required. Instead of actually addressing the root causes of budget issues (see my prior article on this topic), the city council is merely grabbing more money to sweep away the problem.
A vacancy tax is a bad idea for Colorado ski towns as it will have the opposite impact by requiring even more workers and housing due to increased nightly rentals. The vacancy tax will do nothing to “incentive” owners to rent long term as the numbers just do not work. It is not possible for workers to make enough money in order to pay for the rent on a multi million dollar home.
By implementing a vacancy tax, Crested Butte and Colorado ski towns will make matters considerably worse for current workers and demand will merely increase for housing. Furthermore, a second home provides substantial value to a community, they pay the same taxes as a full time resident and yet use very little of the same services (schools, etc..). Ski towns should be taking the exact opposite approach and encourage more people to keep their houses vacant if they cannot rent to a local worker. This would substantially help the community as tax revenue remains high and the impacts of tourism are mitigated.
Finally, I would highly suggest all the city councilors take a basic economics class and understand the unintended consequences of their actions.
Additional reading/resources
- https://crestedbuttenews.com/2026/05/cb-council-begins-talks-on-possible-vacant-home-tax-details/
- Steamboat City Council moves forward with draft ballot language for potential vacancy tax | SteamboatToday.com
- https://coloradosun.com/2024/08/07/colorado-ski-towns-vacancy-tax/
- https://coloradohardmoney.com/second-homeowners-charged-higher-property-taxes-in-colorado/
- https://www.summitdaily.com/news/colorado-mountain-towns-home-short-term-rental-tax/
- https://coloradohardmoney.com/every-colorado-ski-town-has-made-one-huge-mistake/
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