PRESIDENT'S MESSAGE
PRESIDENT'S MESSAGE
2024 ABOR President
Jason Hodges
Dear Members,
It’s been a remarkable year in real estate, with all the challenges and potential changes that we face. To ensure everyone stays informed, I urge you all to attend two timely and informative upcoming classes hosted by the Association. These sessions will be held on July 31 at the Hoffman Hotel. The NAR Settlement and How it affects Colorado Brokers, by Damian Cox, Esq. 10:00am – 12:00pm and 10 Things Every Realtor Needs to be Thinking About by Scott Peterson, CAR Legal Counsel 1:00 – 3:00pm. Please see further details and the registration QR Code on page 10.
One of ABOR’s significant achievements this year is the publication of the STR Economic Impact Study for Pitkin County. This study, funded by the National Association of Realtors with $90,000 from RPAC (Realtor Political Action Committee) funds, is now available. Please find the summary of the report below and feel free to share it with your clients and associates. ABOR is planning to host a community presentation of the STR Economic Impact Study, featuring the authors of the study, and will invite elected officials from our local cities and counties, chamber representatives, and all interested community stakeholders to attend.
Western Mountain Resort Alliance (WMRA):
Transient Inventory Study Analysis and Observations of Pitkin County
Released - February 2024 Authors: Jack Greacen and Kelli Starrett
For decades, homeowners and investors have rented residential units and homes for profit, but the growth of the sharing economy and the launch of Airbnb in 2007 opened a new possibility for residential property owners: short-term rentals (STRs), or leasing property for merely days or weeks at a time. Since then, STRs have grown in popularity and so have the debates around their impact on various communities. At the same time, these same communities are grappling with their own piece of a national housing crisis, and the overall value that STRs have for a community has come into question.
While numerous studies have been done to highlight the gross economic impacts of STR’s on a given region. A recent study, Economic & Workforce Impacts of Short-Term Rentals (EIS) conducted by the Western Mountain Resort Alliance, and funded by NAR’s Issues Mobilization Grant Program, provides a more detailed analysis of what those benefits are and the disproportionate impacts various regulations will have on the “mom and pop” investors who make up the bulk of the vacation home inventory.
WMRA is a collective of REALTOR® associations in mountain resort communities across the western US. The Alliance is put together to collaborate/share market intel, stats, products and technology for its professional real estate members.
In addition, this research begins to help delineate the features that would define a “resort” community as well as allow for certain “generalizations” to be made about the economic impacts STRs have on similarly situated communities. Generally, these features would include:
- Geographically remote locations with anchor communities supporting those commuting to and from these areas,
- Access to these regions was previously limited to those with the financial means to regularly commute to these locations,
- Average home prices in these areas are near or exceed $1M, or 2 to 3 times the national home price average ($382,600),
- Most are geographically constrained with limited developable land and saw development booms prior to 2005,
- The housing stock within these communities is largely comprised of vacation homes (40%+); and,
- Despite their remote locations, have served as pilgrimage points for those prior generations seeking “wanderlust.”
While the EIS focuses on three counties in the Western Rockies (e.g., Summit County (CO), Pitkin County (CO), and Teton County (WY)), this report will discuss the findings of Pitkin County. By reviewing the prior reports looking at Summit County (Airbnb, VRBO), we’re able to define and understand how the economics around STRs has evolved and the net benefit and revenue generator they are for the local municipalities within Pitkin County.
NATIONAL HOUSING CRISIS
Over the last 15 years, housing development across the country slowed to pre 1997 levels while the cost of various inputs for a home’s construction rose (e.g., material costs, interest rates, labor shortages, regulatory burdens on construction loans, etc.). As a result, NAR estimates the underinvestment in housing since 2009 to exceed 5.5 million homes or $4.4 trillion dollars. While the recent impacts of this underinvestment have been more acutely felt by larger urban and suburban communities, resort communities have long struggled with underdevelopment due to the disproportionately inflated cost of building in these remote regions, along with a lack of prioritization of developing “affordable housing” until recently.
Adding to this crisis have been the dramatic valuation swings across nearly every community in the last decade, and more acutely since 2019. As increases in mean income, record low unemployment, and historically low interest rates have helped fuel the recovery of the U.S. economy post Great Recession. They have also increased the demand for housing with home prices have grown on average by 30.4% since 2009 and rental prices increasing by 34.6% during that same time.
In resort communities like Aspen, this change has been felt more dramatically with reports showing a peak in average price increase of 165% year over year in 2022. However, that price difference has now dropped significantly from an average high of $6.96M (’22) to $3M today.
Aspen Housing Market Trends (RedFin)
SHORT TERM RENTALS
While economies and the stock market recovered and grew to unprecedented levels after 2009, the “sharing economy” grew along with it. In an era where revenues were up and capitol was cheap, new industries, tools and technologies helped the world become more interconnected. And, by removing the financial and information barriers that once made resort communities destinations for a select few, communities like Aspen and Snowmass were now known and target destinations for larger audiences.
With Airbnb and Vrbo leading the way in the home sharing space, they offered vacation homeowners the opportunity to offset costs by opening what was once a cottage industry to anyone with a computer and internet access. With over 5.6 million active listings worldwide today, many once unknown and quiet communities now see year over year increases in annual visitors.
For communities like Pitkin County, where 34.1% of existing housing are used exclusively for seasonal and recreational use, the option for owners to short term rent helps offset the rising costs of home ownership. With that offset, the EIS shows Pitkin County now hosts more than 1.5 million visitors annually that bring with them a series of economic benefits, questions, and challenges for elected leaders and residents working to balance the needs of their communities against the economic engines that drive them.
ECONOMIC & WORKFORCE IMPACTS OF SHORT-TERM RENTALS
Following previous studies by Airbnb and VRMA, WMRA’s EIS helps to defines the growing economic benefits that STRs provide resort communities. While the prior names studies have not focused on Pitkin County, the trends of Summit County can help estimate the impacts of STR’s in Pitkin and its associated communities.
Economics of Short-Term Rental: Summit County (* Missing Data)
Economics of Short-Term Rental: Pitkin County
Comparing the lodging inventory and overall sales of short-term rentals to hotel or non-str lodging revenues, we see that STRs contribute 50% of the total revenues collected within the county.
The majority of that revenue comes from the Aspen market with Snowmass making up roughly 30% of the total revenue in any given year.
And, despite STRs only accounting for 34.5% of the regions annual occupancy rate, they provide a competitive benefit to the community compared to traditional lodging options.
Given these findings, concerns arise as a result of the current policies and restrictions in place around STRs by Aspen and Pitkin County to address their affordable housing challenges. As a result, the impacts these policies will likely have will be far reaching economic consequences beyond the numbers presented here.
SUMMIT COUNTY HOUSING SUPPLY
Throughout resort communities, the argument is made that “STRs reduce the affordable housing supply for local workers”. While there were likely some number of homes that “true investors” may have owned to rent long term within local resort markets, a 2019 report from the Northwest Colorado Council of Governments shows that 34.1% (4,632) homes in Pitkin County are homes intended for “Seasonal / Recreational Use” today. In short, these are homes that are never intended for use by long term renters. Comparing these numbers to the average numbers of STR listings (2,066) in Pitkin County, there are an estimated 2,566 housing units not being used as either a short term or year-round rental at this time.
NOTE: The EIS Appendix does note comments from property owners who opted to remove their homes from the long-term rental pool siting long term wear and tear, and tenants who did not hold up their end of the rental agreement.
Comparing the numbers the Northwest Colorado Council of Governments of homes intended for “Seasonal / Recreational Use” to to the average numbers of STR listings (9,276) in Summit County, there are an estimated 11,370 housing units not being used as either a short-term or year-round rental.
This is an important distinction considering that the latest efforts by cities and counties across most resort communities, are focused on limiting or restricting the use of someone’s private property with the expectation that it would have to become a long-term rental option. This point can be further emphasized by reviewing the assessed values for homes in Pitkin County.
As of June 30, 2022, the EIS shows that of the 9,866 active STRs with only 4.7% having a valuation below $500K. Given that Pitkin County’s Average Median Income is $80,100 (100% AMI), less than 4.7% of STR listings (49 units) would be options for a single person buyer allocating 30% of their income to housing costs. Only those making at or above 200% of AMI ($160,200) can consider purchase options for 160 homes assuming their housing costs do not exceed 30% of their total income.
The preceding data infers those homes in Pitkin County, like Summit County, were built and/or purchased with the intent of their use being for seasonal or recreational purposes, and despite the proposed changes in licensing and regulation around STRs they will likely remain that way. Thus, not increasing the housing options for local workers and only reducing the economic benefits and taxable revenues that have become a meaningful economic driver for Pitkin County.
REGULATORY IMPACTS
As previously stated, the growth in STRs has been assumed to be the cause of the affordable housing crisis most resort communities are facing. The growth in STRs has only shown that most resort communities have not, and likely could not predict their housing demands in our modern sharing economy. In their efforts to combat these challenges, resort communities across the country are using a wide variety of local policies that they believe will aid in freeing up housing for local workers. These policies include but are not limited to:
- Short Term Licensing Requirements
- Increased Taxes and Insurance
- Caps on the total number of STRs within
- The county.
- The city, or portions of the city.
- Or a given neighborhood.
- Caps on total bookings
- Outright bans on STRs.
- And other burdensome regulations often used in regulating large hotels and resorts.
In June of 2022, Aspen imposed stringent limits on the total number of STR permits and imposed an additional 10% STR tax. Pitkin County imposed strict caps on the total number of nights a unit may be rented at 120, as well as a tiered fee structure based on the number of nights a unit is rented.
While there is little empirical evidence to say what the impacts of these policies will be long term, an STR study from 2017 of the resort community of Anna Marie Island in FL showed that similar limitations could have broad implications for overall property values. Based on the home demographics surrounding a parcel, in areas where one property has the full use of their property under the law, that property will maintain its market value while those who have their rights restricted will likely see decreases in overall valuation. This is concerning for STR property owners in Pitkin County considering the EIS shows that 27% of STR owners are also residents of Colorado.
Additionally, anecdotal feedback from some of those who participated in the EIS showed that 26% of STR owners are worried about their ability to continue to afford their homes given the new limitations and financial burdens being placed on them by city, county and state regulators and are likely to sell if STRs were outright banned.
NIMBYISM
While not a topic of the EIS, some comments from participants did reflect views strongly against STRs in Pitkin County. Due to the impact local constituents have with local elected leaders, they will continue to carry an influential voice in current conversations.
To combat this, further research is needed to fully understand the broad economic impacts the various STR policies will have in the long term. This research should be combined with communication strategies that target local businesses and elected leaders to help define the benefits STRs have within the community while defending against arguments that STRs are a burden that detract from the local community.
There is currently no publicly available data regarding the complaints filed against STRs to show any trend to support some claims around STRs being a source of problems defined by nuisance, safety and security.
CONCLUSION
WMRA’s Economic & Workforce Impacts of Short-Term Rentals helps continue to show how reliant many resort communities and regions, like Pitkin County, have become on the economic stimulus provided to them through Short-Term Rentals. While the challenges these communities face in addressing their affordable housing problems are shared by cities and towns across the country, resort communities are also unique in their options to solve these same challenges.
Looking ahead, it will be necessary for Pitkin County REALTORS and WMRA members to become more familiar with the markets and regulatory landscape of their respective Alliance partners as they each have varying scenarios and problems to solve. However, much can also be learned as there are examples of success and acknowledgement of the dependence many of these communities have on the STR industry.
While the debate on around how to appropriately tax STRs continues, in Telluride, an independent research report by Greg Craig on Telluride’s STR market helped turn the opinions of the city council. Beginning in 2024, there will be no limitations on the number of nights an STR license holder may rent for, but will now be subject to an $857 per bedroom tax; at least two city council members are in favor of reducing that tax.