Mt. CB considers STR licensing adjustments in future

Possible incentives to help with valley’s affordable housing woes

[ By Kendra Walker ]

Now that the town of Mt. Crested Butte is more than a year into its Short Term Rental (STR) licensing program, the town staff and town council have been looking at its regulations and considering potential adjustments moving forward.

During a June 15 work session, town staff and the council looked at several possible updates, including putting restrictions on STRs and incentivizing homeowners to rent out to local workers.

Earlier that day, the town had notified all STR owners of the discussion and nearly 100 people tuned into the Zoom work session.

There are currently 557 individual STR units in Mt. Crested Butte, for a total of 1,668 including hotel rooms. Fifty percent of the town’s total sales tax revenues is estimated to come from short term rentals, and 50 percent of the town’s lodging revenues are estimated to come from individual STRs. The town does not currently have a capacity limit on the number of STR licenses it gives out.

Hotels
“Does the council want to consider removing STR restrictions on the Elevation and Grand Lodge?” asked town manager Isa Reeb. She explained that the Elevation has been renting 32 hotel rooms to their employees and is currently in violation of their short-term restrictive covenants, but asked if the council was amenable to allowing the hotels to long-term rent to local employees.

“I would encourage them to allow that versus restrict it,” said council member Dwayne Lehnertz.

“I am absolutely in support of doing what we need to do to allow them to legally house their employees,” said council member Lauren Koelliker.

“This one is easy for me, these businesses are unusually qualified to sort of solve their own problem on site,” said council member Nicholas Kempin. “I think we should absolutely support that.”

“I see this as an emergency stop gap that sits for a year or two until we get some housing built and then maybe we retract that,” said mayor Janet Farmer.

Incentives
The town council also considered possible incentives to encourage people to long-term rent their properties to local employees.

Reeb explained that currently, owners don’t have to pay sales tax if the rental is more than 30 days. “So there’s already an embedded incentive for long-term rentals that exists today.”

Reeb also said she spoke with Jennifer Kermode of the Gunnison Valley Regional Housing Authority for ideas, one of which would be to implement a housing program that matches landlords who previously rented STRs with working families who need long-term housing. Kermode saw such a program succeed in Summit County, which had 15 units join in the first year and it now has 50 units.

“It’s not a very expensive program, there are some management fees to it,” said Reeb, explaining that the Summit program received a $50,000 donation to get started. The program would screen tenants, offer free property management services to the owner, as well as guarantee rent payment if the tenant skips out.

“It’s not guaranteed that people will be enticed by the program but it is something that has worked in Summit County,” said Reeb.

“I’m a huge advocate of this and I would definitely support pursuing it or having the Housing Authority pursue,” said Koelliker. “Perhaps there are people who have grown wary of STRs but are concerned about packing 14 ski bums in their house. This might at least help a little bit.”

“If we get a handful, 10, a dozen – great, every little bit helps,” said council member Michael Bacani. “I think this is exactly what we could use our affordable housing fund for…It’s a lot cheaper to put someone in an existing unit rather than build a unit.”

“It makes sense to me to spend the money in this way,” agreed Lehnertz, noting that it shouldn’t just be a town program; it should be a county-wide program.

Reeb said she would connect with the Housing Authority and see if others are interested in contributing.

Reeb also explained that giving landowners a break on property taxes by long-term renting is not allowed. “It’s subject to the county and TABOR laws, it has to be a ballot initiative,” she said. She also said that putting a price cap on STRs is illegal and that providing a stipend to STR owners to house local employees is not recommended by staff or the Housing Authority.
Bacani asked if they could cover the difference in rent that a property owner would lose by long-term renting vs. short-term renting.

“It’s extremely difficult to manage. I don’t think we can take that on,” said Reeb. “Maybe we incentivize them through property management, I think that might be the better way to go.”

STR restrictions?
As a topic that came up during the Community Housing Forum earlier this month, the council discussed the potential of placing a hold on any new STR licenses for a specific time frame, to help with the current local housing crisis.

Reeb explained that town staff had concerns with this, because of the gray area of when to place the hold, giving people sufficient notice, and those caught in the middle of a real estate transaction that was specifically planned for an STR.

“No we should not place a hold issuing new permits,” said Lehnertz. “We should not place restrictions on people’s property rights. My situation is I could not afford to live here if I did not short-term rent my place. There are people in the same boat as I am. Without being able to short-term rent their property, they don’t live here, they don’t come here, don’t spend their dollars here.”

Koelliker agreed that the town shouldn’t restrict existing STR licenses or real estate transactions currently in the works, but “for future real estate transactions I don’t think it’s unreasonable to put a temporary hold while we figure out the best path forward.”

Bacani was in favor of not putting a hold on STR licenses, but noted complaints they’d received about STR guests disturbing neighborhoods. He suggested the license could require that owners have to make sure their guests abide by the town’s ordinances, such as light, noise and dog etiquette, or the license could get suspended or removed. “I live in a complex with multiple STR units and if I ever have an issue I call the owner and the owner is on it the very next day. We need to make sure those folks are good stewards and tenants for the other people around them,” he said.

If neighbors have complaints about STR tenants, they are encouraged to contact the town.

Kempin addressed the topic of second homeowners. “They short-term rent to make extra money but they still stay at their home at different times during the year so I wonder what effect it would have on those. Would those people choose not to rent to anyone and that house sits vacant?”

“There’s evidence that it might actually, in terms of people who reached out to us, cause them not to short-term rent at all,” said Reeb.

“If we restrict STRs and those people choose not to short-term rent at all, it seems that we’re going in the other direction…and then it increases demand for existing STRs,” said Kempin.

“Approaching this from an incentive perspective instead of restrictive perspective is going to leave the most amount of people content with the efforts being put forward,” said council member Steve Morris.

“Just to remind the council, it’s not about limiting STRs, it’s just about if we should place a temporary hold on licenses,” said Koelliker. “The people who received an email and link to register [to tonight’s Zoom meeting] were all people who own STRs and operate them. It was not sent out to every member of the Mt. Crested Butte community. We don’t necessarily have the input of other people.”

Farmer suggested reaching out to everyone on the town’s email list, “so we can get a more balanced response and find out from people who don’t short-term rent how they feel about their neighbors.”

Reeb proposed to put this on the back burner and focus on the other items.

During public comment, several STR homeowners spoke. Craig McManus manages STR units and said, “The ones I deal with will never be employee housing and that’s the five-bedroom, $2 million dollar houses, and restricting those will simply restrict the number of guests up here in our restaurants and everything else.”

“I will be coming back into the STR market and any hold you put on, I would be one of those people caught in the middle,” said Karen Redden. “The fact that short-term tenants can be somewhat disruptive in neighborhoods…long-term tenants are also disruptive if their units are in buildings that are originally designed for short-term.”

“We’re not all millionaires sitting there making a ton of money,” said Ben Smith. “The people that are renting it are paying me and the city good dollars to be there and they’re also funding the businesses. I can’t lock in a six-month term of not being able to use my own home that we worked hard for,” he said.

Eric Sanderson explained that the current sales tax exemption for renting longer than 30 days is not an incentive. “Not having to pay a tax that I don’t have to pay anyway is not an incentive. An incentive would be helping to mitigate the cash flow. To put it on a long-term market for an employee, I would take substantially less than I’m getting paid now. It would not break even based on the HOA dues. Let’s make up for that cash flow.”

Kempin asked for staff to look at other towns that have put capacity limits on STRs and if they’ve seen any change to the local housing issues. “Perhaps it would be worth reaching out and seeing other examples,” he said.

Morris also requested that the town increase its messaging on the STR topic to the community. As the town will be holding its meetings only in-person and no longer via Zoom starting on July 6, “Maybe this has to move to a larger facility to handle some of these work sessions,” he said.

Koelliker agreed, “We might have set a record for most people to attend a Mt. Crested Butte work session.”
Staff and town council plan to resume the discussion at their next work session on July 6.