This is a guest post by Councilmember Mary Beth Susman, Denver, Colo. This post is the first installment of a new blog series that examines how the sharing economy is developing in different cities.
Statistics show about 2000 dwellings in Denver listed on various short-term rental websites – a sign that the sharing economy in Denver is booming. (Juli Scalzi/Getty Images)
Exciting things are happening in Denver these days! Our city is growing. Our economy is humming. Millennials are flocking to the region in overwhelming numbers. Denver is constantly appearing on or near the top of some great lists that extol the quality of life in the Mile High City. And have you heard about our little experiment with recreational marijuana?
Denver is also at the forefront of the on-demand economy, commonly known as the sharing economy. Colorado was the first state to legislatively re-regulate ridesharing, thus making their operations legal. Now we are immersed in considering whether to re-regulate homesharing and the short-term rental (STR) market. I say “re-regulate,” because it is currently illegal in Denver to rent a home or apartment in a residential zone for less than 30 days. But the business is booming. Our best statistics show about 2000 dwellings in the city listed on various STR websites.
Early last year, I formed a Sharing Economy Task Force of the Denver City Council charged with studying these innovations and what they might mean to our city. “Sharing” economy can be considered a misnomer, as the industry entrepreneurs rarely “share” in the strictest sense of the word. They charge for the goods or services. It’s also been referred to as Peer to Peer, On-Demand, Collaborative Consumption, The Mesh Economy and other terms, but “sharing economy” has stuck as the most widely understood term.
We started out with many questions. How would ride-sharing and car-sharing affect our established taxi industry? (Dramatically, it turns out.) Should municipal governments step in to place regulations on meal-sharing? (Probably not. How would we enforce?) With much of Denver’s general fund revenues coming from sales tax, how do these untaxed on-demand models that prize access over ownership affect our sales tax revenues? (The jury is still out on this one.) There is a lot to tackle.
The task force has spent the bulk of its time discussing STR’s. Each meeting features presentations from citizens, hosts, guests, city agencies and representatives of the industry (i.e. Airbnb, VRBO, corporate rental companies), in addition to a review of the literature and other cities’ ordinances. Generally, it leads us to more questions. How can Denver promote innovation and creativity without sacrificing the quality of life of our neighborhoods? How can we preserve affordable housing and prevent the gobbling up of diverse housing stock? Are short term rentals helpful to home affordability by giving homeowners extra income to meet a mortgage, or do they diminish the supply when multi-units are converted to short-term rentals instead of long term? What safety measures do we need and how do we verify that hosts are complying? If we regulate STR’s with lessened requirements for inspections, etc. does it have implications for modernizing regulations on the existing hotel and lodging establishment? We’ve even seen the emergence of cannabis-friendly home-sharing. That discussion was a trip!
As we’ve watched other cities pass laws on home-sharing, we’re cognizant of going too far: creating regulations so onerous that home-share hosts simply don’t register, something Portland and San Francisco are experiencing. Meanwhile, it is difficult to enforce our present ordinances against STR’s. A city inspector has to receive a complaint, visit the site, find the renter, ascertain that he/she is a renter and not a nephew or cousin, and then prove they are renting for less than 30 days. It takes weeks/months to do this. How could we ever have a workforce to handle 2000 dwellings? Anyway, we have no way of locating them without specific complaints. To put more perspective on this, we’ve only had nine complaints of an STR ever as of this writing.
We considered adding STR’s to the list of allowable home occupations, but with a requirement to get a permit. We discarded that tack because a) it would be the only home occupation requiring such; and b) since we intended to license for taxing purposes, it would mean several extra steps for the host. We are now proposing to add it as a use-by-right for all residential zones, but still require a business license, thus one step instead of two or three. We also are suggesting that it be limited to hosts’ primary residences to thwart the conversion of affordable units. This last component stymies some providers’ business models, i.e. VRBO (HomeAway) and corporate rental companies, who have objected.
We have taken the proposed regulations to neighborhood groups at each iteration to get their feedback. Their input has provided valuable suggestions which continue to inform our work. The discussions have led to our preliminary framework for regulating short-term rentals in Denver. We hope we have elegant solutions that will preserve our residential neighborhoods; promote innovation; ensure the safety of hosts, guests and neighbors alike; prevent the loss of affordable housing, and encourage registration and compliance by hosts.
We are next exploring the licensing process that would apply lodger’s tax to the home-share enterprise. This is a significant step to level the playing field somewhat for our traditional hotel and lodging industry. The task force heard from our Hotel and Lodging Association who opined that they don’t think the home-share enterprises are a serious threat to their business because it appears to draw a different customer, but their biggest request was that we at least apply the same taxes.
Ironically, traditional hotels themselves are now listing unsold rooms on Airbnb and the like.
We will be going back to the community with the licensing and taxation pieces of the regulations for their consideration. I have particularly liked this back and forth process that gives us both time and multiple viewpoints to consider carefully what we are doing.
About the Author: Mary Beth Susman is a Denver City councilmember who chairs the council committee charged with investigating the sharing economy. She also sits on the sharing economy advisory panel of the National League of Cities.