Fraser Valley vacation rentals challenge regulators
February 13, 2015
When John Connelly of Arvada was put in charge of his college buddy's 40th birthday ski vacation, he booked a five-night stay at a condo in Winter Park. His first instinct was to search VRBO, or the "Vacation Rentals by Owner" website that lists condos and other lodging options available for short term rentals.
"I've used VRBO in the past and it's mostly just because of the name," he said. "It's everywhere, right? I've used it for Michigan and Florida. For me it was probably the easiest."
Connelly is not alone. According to a Business Wire report, vacation rentals (77 percent) outpaced hotel bookings (70 percent) starting in the summer of 2013.
A quick search of short-term rental sites resulted in over a thousand results in the Winter Park area, with hundreds more throughout the county.
“When you look at the properties on VRBO you can’t tell who the owner of record is, or even most of the time, which property it is.”Kristy MeyerOwner and General Manager of Destinations West at Beaver Village Condominiums
Ease of booking for vacationers like Connelly creates a market fraught with regulation issues from noise to parking to uncollected taxes. Cities from San Diego to Boulder are grappling with how to handle the online vacation rental boom.
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Business license and taxes
Owners using their homes as short-term rentals (for periods of less than 30 days) are supposed to register as a business, obtaining a license and paying the related lodging and sales taxes on revenues from renting the property.
"It's the same as a business that may open up in Main Street Station," said Bill Wengert, finance director for the Town of Winter Park. "But they have to identify themselves and let us know they are doing this."
Homeowners who don't register as a business or pay taxes have a 4.7 to 8.9 percent advantage, depending on their rental's location in Grand County. That advantage comes at the expense of lodging companies and hotels.
"From a property management standpoint, sure, everyone wants a 9 percent advantage," said Wengert. "But we want to create a level playing field for those who are complying."
Kristy Meyer, owner and general manager of Destinations West at Beaver Village Condominiums, recently did an informal study of the Beaver Village condominium complex. They identified 25 of their 201 properties that were renting on short-term vacation rental sites. In addition to taxes, the HOA requires a 2 percent contribution toward clubhouse and pool because all renters increase the wear-and-tear on common spaces.
"Unfortunately, and I can feel relatively confident in saying, the majority of owners who are advertising on VRBO are not collecting the appropriate taxes. It's difficult to regulate because there's just no way to know. When you look at the properties on VRBO you can't tell who the owner of record is, or even most of the time, which property it is," said Meyer.
Wengert agreed that there is a need to inform and educate the owners of their responsibilities.
"We have a service that identifies those properties for us. Then we follow up by sending them a letter. We try and make sure they understand," he said.
Vacationers booking online may perceive the lack of fees as a benefit. Connelly was attracted by the "set price" model he found for his VRBO condo.
"I didn't see any taxes or fees. It was just added in the price, I guess. That was nice — usually you end up paying another 200 bucks in taxes and fees per night," he said.
Neither the Town of Winter Park nor the Grand County Planning and Zoning Department could put an exact price tag on taxes lost due to non-compliance. Other mountain towns have quantified results following enforcement efforts.
The Colorado Association of Ski Towns (CAST) created a taskforce in 2009 to identify short-term rentals and bring them into compliance. Following the effort, the town of Breckenridge reported collecting $10,000 in taxes that were previously negligent.
"I think most of the owners were non-compliant because they were not aware of their town's sales tax and/or business license requirements. I am sure there were some that purposely avoided compliance, but I think the majority just didn't have enough knowledge," said CAST's Executive Director Joyce Burford in an email.
HomeAway, now the owner of VRBO and the largest online company of its kind, has been joined by competitors. Growing in popularity is Airbnb, which was originally touted as a room-share site, where a homeowner could rent out a spare bedroom or couch.
One Winter Park homeowner who asked that his name not be used for this story uses Airbnb to book his spare bedroom with a king bed and private bath for around $85 per night. His motivation is not really monetary, though.
"VRBO is more revenue-driven, more for people just into making as much money as they can from their place," he said.
This homeowner says he likes meeting new people and learning about different cultures.
"I want to provide a place with personality and meet people with personality," he said, although a few guests have booked his room without understanding what they were signing up for.
"I've had people arrive and realize it wasn't their sterilized, immaculate living space. Then it's up to them. They can get a hotel room for $200 and I'll refund their money," he said.
Airbnb is morphing into more listings for full condos and homes. Evergreen resident Doug Kettelsen uses Airbnb to list his second home in Fraser because he can interview potential guests to determine if they are a good fit.
"With Airbnb I get to ask the guest questions about the group and get a feel for their personality before accepting them. Management companies just want to fill slots," Kettlesen said.
Evergreen is within driving distance, but some of the homeowners using these sites do not live close enough to quickly address problems that may arise with their rental property.
Difficulties contacting owners prompted Grand County to create a short-term rental registration program and related zoning regulations in 2011.
"Grand County would receive complaints about a nightly or weekly rental in a residential neighborhood, but the owner lives in Denver or even New York City," said Ed Moyer, Grand County Director of Community Development. "And in some cases there would be 20 people packed in a rental, parking up and down the street, creating excessive noise and leaving the trash out for the bears to get into and for the neighbors to clean up after the renters left. In the end, it's about being a good neighbor and having the ability to contact someone when there's an issue."
Burford reported that CAST has also switched its focus from revenue to helping communities address regulatory issues.
"CAST's focus has shifted more towards the impacts that VRBO and Airbnb are having on our communities in terms of regulations, zoning, safety, parking, noise, etc," she said.
Local property management companies can curtail complaints by being close-by and on-call 24-hours a day. Their proximity is a benefit for guests as well; staff can provide immediate emergency assistance that a distant homeowner cannot.
"Managing properties isn't as easy as some homeowners think when they start. Weird things happen in the middle of the night," Meyer said.
If You Can't Beat Them
Meyer reported that HomeAway, the parent company of VRBO, recently changed its policies to make it easier for property management companies to list their properties alongside homeowners.
Previously, the company charged $400 to $1,200 per listing per year, which is expensive for multiple units. Now a 10 percent commission — relatively small for industry standards — makes it a more attractive option. Indeed, numerous properties listed on these sites are managed by established Grand County property managers and hotels.
"They've made it very easy and inexpensive for us to list alongside owners who are renting on their own. So that's probably diluted the ability of owners to rent on their own. But they are still doing it," Meyer said.
The big picture of short-term rental sites may be that the more lodging options tourists have, the more attractive Grand County is as a destination.
"Overall there are more and better options for places to stay," Wengert said. "It's just another way of doing it."