Battle over short-term rentals heats-up at Colorado's capitol

State lawmakers are drafting dueling bills that will impact tens of thousands of Coloradans with short-term rentals.

Right now, short-term rentals are taxed at the residential rate of 6.8%. However, some lawmakers think they should be taxed at the commercial rate of 29%.

The bill would not only impact thousands of mountain homes but hundreds of short-term rentals like Julie Hill's Airbnb in Arvada. 

"Not only is the location awesome, we love Olde Town Arvada, but my parents moved away and so they needed a place when they come to visit," she said.

When her parents aren't staying at the 3-bedroom ranch, renters are. Hill says she turned the place into a short-term rental to pay the mortgage but it has paid off for local businesses, too.

"They're eating at the Denver Beer Company two blocks away. I think I've sent Scrumptious -- the ice cream shop -- a lot of business," Hill said.

But her short-term rental days may be short-lived. The initial draft of a bill by Democratic state Sen. Chris Hansen would tax short-term rentals as commercial properties if they're rented for more than 90 days.

He says if a home is used like a hotel, it should be taxed like a hotel.

"What we're trying to do is look at the tax equity of the situation," Hansen said.

Hansen says he's working on amendments to his original version of the bill. His goal is to create a level playing field.

"If a private residence is converted into a lodging property, I believe it's fair to the owner of the bed and breakfast that the property right next door, that's a residential condo, has fair treatment."

Dana Lubner with the Colorado Lodging and Resort Alliance says it's not a fair comparison. She says a bed and breakfast -- unlike a short-term rental -- has several rooms and makes money off food and drinks, too. She says the bill would drive up rents and cost Colorado tourism dollars. A study by the Colorado Lodging and Resort Alliance found if the homes are taxed like hotels it would cost the state $1.6 billion in tourism and more than 8,000 jobs.

"While we're looking at maybe creating a tax parity, the reality of this is that we're actually hurting our own economy," said Lubner. "My concern with this bill is ripping a dream away from working-class Coloradans."

She says 75% of the state's short-term rentals are owned by Coloradans.

Democratic state Rep. Shannon Bird says not all short-term rentals are the same.

"I think the biggest mistake we make is to lump everybody into the same bucket," Bird said.

She introduced a competing bill that would allow Coloradans to have one short-term rental, in addition to their primary residence, at the residential rate.

"This is how people build wealth and it's a tremendous goal, it's laudable and we need to protect people's ability to do that," she said.

Hill says a higher tax will mean higher rent at her Arvada home and, if she can't cover her mortgage she says she'll have to sell, which will not only hurt her.

"You're losing all that revenue of these people coming and visiting a place that they might normally not visit," she said. "Not to mention, these people who have visited our place, who have visited, are going to come back."

While short-term rentals contribute to the local economy, Hansen says one study found they use disproportionately more fire, police, and ambulance services. Lubner says local governments can impose their own taxes and fees to cover that, and she says many have.