Opinion Piece, by Amy Nakos
There have been some drastic changes in the landscape of Summit County Colorado short term rental regulations. I have written an article with the facts, but here is my opinion.
I get asked a lot about what I think about short term rental regulations, and since I’m an attorney, I also often get asked if these regulations are “legal.” Being a real estate professional and an attorney, I highly value private property rights. In my first year of law school in Real Property class, we learned that real estate ownership comes with a bundle of rights – possession, control, exclusion, derivation of income, and disposition. Limitations on the ability to short term rent take away “derivation of income” and “control” rights. While I don’t agree with the government taking away property rights by restricting short term rentals, I also don’t know that it’s illegal. It’s just annoying, devaluing, and unfair. (You now know my opinion).
Decrease in Property Values
Breckenridge’s attempt to force owners to rent to locals through STR regulation is the wrong approach. By taking away an inherent property right of being able to rent your property short term, there will be a decrease in the value of properties without short term rental licenses. This is a simple economic result of losing a previously owned use right. People bought their properties with that right, but won’t be able to sell them with that right. The losers are current property owners who will see a devaluation of their properties.
An alternate theory proposed by Glen Weinberg of Fairview Commercial Lending, is that by prohibiting short term rentals in certain areas, those areas will become even more exclusive to the uber wealthy and property values could increase.
Less Income Generated Overall in Resort Communities
Properties will be purchased by people who do not care about rental income, and those properties will then likely be used by them and their families exclusively. We have seen many legacy homes in our communities used only for a few weeks a year. Think Aspen. And while this is the ABSOLUTE right and prerogative of the owners, by creating empty homes in our neighborhoods, that can’t be short term rented (no license available) and certainly won’t be long term rented (owners want to use it + don’t want to rent to locals), there will be less income generated in our resort community and no additional housing for local workers. This equals more people losing.
Many say this is the result of bad planning. If there were more apartments, then people would have a place to live without being kicked out since their rental is selling. If we had hundreds of apartment units, we could serve the demographic who wants a safe, reliable place to live that is managed by professionals whose business it is to rent apartments. Now, without enough of that property type, we are placing the burden of housing locals on the backs of individual private property owners. Individual private property owners who bought their properties thinking they could short term rent them, but now may not be able to. And more likely, not be able to sell their property with the right to short term rent in the future.
Affordable Housing Impacts
Why is this happening? Well, affordable housing in resort communities has been a problem as long as there have been resort communities. The pandemic fueled the housing market in the entire country, but resort markets saw huge increases in value and property sales. The pandemic also closed down much of our service industry forcing service workers to move away, live on unemployment, and perhaps move to different careers. Properties that were owned for many years by people and rented out to locals (because of the low cost basis, the owners could still make money on long term rent instead of the more lucrative short term rental option), were now trading hands at record prices. Long time owners couldn’t resist the price tag being offered to sell their resort property and did just that – sold it for a giant profit. Again, ABSOLUTELY their right to do so. But ownership shifted, employees shifted, business shifted, and we are left in imbalance. There aren’t enough rentals to accommodate the demand of local workers and seasonal renters. Most recent sales prices of properties would make long term rental prices unaffordable. Oh, and as I mentioned earlier, there aren’t enough apartments either.
The first solution being offered by governments is to crack down on short term rentals. By taking away a property right, the now very efficient marketplace will have a stick in the wheel spokes. Each new Breckenridge buyer will have to decide if they want to purchase a property without short term rentability and then perhaps wait for a license to become available. This could be years where they can’t generate income on the property unless they long term rent it or rent it monthly for instance. This will necessarily knock out a huge segment of buyers, and those buyers will go elsewhere – probably to all the other locations in Summit County where there aren’t any regulations. Maybe the Breckenridge Town Council doesn’t care about property values. But current owners of properties in Breckenridge should care a lot.
Long Term Rental Incentives
Summit County is talking about offering incentives to long term rent properties, but we haven’t seen those details yet. The glitch for most second home owners is that they bought their property to use it when they want and to rent it out when they aren’t using it. Giving up the ability to use their property in exchange for some monetary incentives isn’t likely to work for most people. Incentives are certainly preferred over regulatory mandates, and I’m hopeful that this produces some additional housing relief. But I’m skeptical.
Overreach of Government
Obviously, this is a multifaceted problem without a single solution. A long term plan should have happened, but it didn’t, and now our community is in crisis. The takeaway from me is that whenever property rights are taken away (haha – takeaway), it’s never a collaborative solution. It’s essentially a government “taking” without compensation. Using incentives and available financial resources to create rental properties and deed restricted housing is the best solution.