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Colorado Airbnb hosts: Proposed tax will put us out of business

Lawmaker committee looks at tripling tax rate
Posted: 6:32 PM, Sep 28, 2018
Updated: 2018-09-29 00:38:45Z

DENVER -- Everything is perfect inside the Denver Airbnb that Gretchen Blaz is preparing for its next guest.

“We provide hosting services to owners,” said Blaz, who co-founded Hospitality Denver, part of the growing economy around short-term rentals that provide cleaning, booking and hosting. 

However, a proposed tax change could change everything for her and her hosts.

"It will put them out of business," said Blaz. 

The state of Colorado is under a looming financial crisis because of conflicting tax laws voters passed in the 80s and 90s, that have resulted in reduced funds for schools and the State.

Those laws are the 1982 Gallagher Amendment, which has lowered property taxes as home values have gone up; and TABOR, the Taxpayer Bill of Rights, which requires all tax increases get voter approval.

"Not everything is exactly the way it used to be in 1982," said Rep. Daneya Esgar, D-Pueblo, who said rural communities have been disproportionately impacted and are struggling to find fire districts, water districts and school districts.

She chairs a committee looking to find solutions to the impasse. One proposal is to change short-term rentals from a residential tax rate of about 8 percent to a commercial rate of 29 percent, after hearing that, especially in the mountains, many short-term rental owners don’t even live in Colorado.

"The idea is some of these communities aren't necessarily getting all of the property tax dollars that they should be getting if this was an actual commercial property and it's impacting fire districts, it's impacting water districts, school districts," said Esgar, who said the bill is in the very early stages. “So this is just an idea that was brought forward to kind of help figure out how we can get more funding in these communities.”

But an Airbnb spokeswoman says 58 percent of hosts in Colorado use Airbnb to help afford staying in their home.

"The majority of Colorado Airbnb hosts are sharing the homes in which they live and many do so in order to help make ends meet,” said Airbnb spokeswoman Molly Weedn. “This proposed change could mean much of this important supplemental income would go to state coffers, rather than helping a host pay their bills.”

The committee has since been inundated with calls from short-term rental hosts like Michael Socha, who hosts guests in his Denver basement and said the commercial tax rate would force him out of his home.

"We'd have to completely re-look at whether we want to do this, and we may have to sell our house because we bought our house and have a mortgage with a specific amount thinking we would be able to make that amount to be able to live,” said Socha. “It's just so expensive to live in the City of Denver."

The fiscal note that would detail the economic impact has not yet been completed. The committee is scheduled to vote Wednesday on whether to move the proposal forward.

“I would mostly say 'stay tuned,'” said Esgar. “I get why they would be on alert on this but nothing has been decided and this may not be something we pursue yet.”