A bill that would have quadrupled the property taxes on many homes offered as short-term rentals in Colorado was rejected late Tuesday in a Colorado Senate committee, marking at least the third time in recent years that such a proposal has failed at the Capitol.
Senate Bill 33 was voted down 6-1 by the Senate Finance Committee during the bill’s first hearing, an outcome that came after months of loud opposition from vacation rental owners and companies like Airbnb and Vrbo.
The only “yes” vote on the measure came from its main sponsor, Sen. Chris Hansen, a Denver Democrat.
The measure proposed taxing short-term rental properties at the state’s commercial rate if they are rented to vacationers for more than 90 days a year — regardless of whether they are someone’s primary or secondary home. In 2023, the property tax assessment rate for lodging properties was 27.9% compared with the 6.7% residential property tax assessment rate.
Hansen offered an amendment that would have rewritten the measure to block hotels and motels from being converted into short-term rentals and to study the broader issue. That, too, was rejected by the committee.
Senate Bill 33 seemed to have a better shot at passing than its predecessors because it was drafted by the Legislative Oversight Committee Concerning Tax Policy and Task Force, an interim panel. Measures drafted by interim committees typically pass because of the extra scrutiny they receive.
Senate Bill 33 was first introduced in the legislature in January. It’s first committee hearing was continuously delayed as Hansen tried to find a path forward for the measure.
But, ultimately, the opposition proved too great.
Short-term rental property owners, who showed up in force at the Capitol to oppose the bill, said that if the legislation passed they would be forced to sell their homes or reduce their rental nights to avoid the legislation’s 90-day threshold.
“This new bill … unfairly and discriminately singles out STR owners,” Kristine Lee, who owns a short-term rental in Summit County, testified Tuesday night. “You see us as a cash cow.”
Lee said in reality she’s not making much money on her rental property as nightly rates decrease as demand wanes. She recently had to give up her property manager because she couldn’t afford it.
Proponents of the measure saw it as a way to level the playing field between hotels and vacation home rentals, which are taxed at much lower rates than commercial properties. It would also generate more money for schools and local districts, which are funded by property tax revenue. Some high-country hotels have converted into privately owned short-term rentals in recent years, which proponents contend has reduced local government property tax revenues.
Moreover, some see short-term rentals as a key driver of housing costs and availability in resort towns, which are increasingly unaffordable to Colorado residents.
The state estimates there are 24,100 short-term rentals in all of Colorado that rent more than 90 days a year.
“To the extent that we allowed businesses to be taxed at the lower residential level, we lose out on potential funding to support K-12 education,” Meghan Raynes Matthews, director of government affairs for the Colorado Education Association, the state’s largest teachers union, testified Tuesday night. “Senate Bill 33 closes a loophole.”
Even Gov. Jared Polis has expressed support for taxing residential properties used as short-term rentals at the same rate as hotels, though he didn’t specifically endorse Senate Bill 33 as the way to do that.
The short-term rental taxation conversation isn’t over at the Capitol this year.
House Bill 1299, introduced by Rep. Shannon Bird, D-Westminster, as a gentler alternative to Senate Bill 33, is still pending. It would impose the commercial property tax rate on properties offered as short-term rentals but only when they belong to a person or business that owns at least two other homes.
House Bill 1299 is awaiting its first committee hearing in the House, scheduled next week. It’s unclear if that measure will move forward given that Senate Bill 33 has failed.
The legislature in the coming weeks is expected to debate broader changes to the state’s property tax code. That may include a provision or provisions charging higher taxes on people’s second or subsequent homes.
This is a developing story that will be updated.
