You could actually be waiting for 4-18 years depending on the location of your property.
Background
If you are a subscriber to my newsletter or YouTube channel, then you know about the current state of short term rental regulations in unincorporated Summit County. A quick summary for those just catching up – in May 2022, the Board of County Commissioners, which consists of three elected officials, put a moratorium on the issuance of any more Short Term Rental licenses in unincorporated Summit County “neighborhood zones.” They excluded Copper Mountain and Keystone (since they are resorts), and a couple condo projects in Breck which happen to fall under their jurisdiction, and the rest of the properties in their jurisdiction are neighborhood zones. This equates to 9,928 properties. (See SDN article with chart from SC Staff presentation.)
Summit County has 32,655 residential properties according to the Assessor’s office build out study. This means that Unincorporated Summit County neighborhood zones make up 30% of Summit County’s residential properties. Other jurisdictions governing STR licensing for which Summit County BOCC does not have jurisdiction are the Town of Breckenridge, Dillon, Blue River, Frisco, and Silverthorne. So, it’s important to note that these regulations do not cover all properties in Summit County. (I have had many clients get confused by this.)
Since May, the BOCC has been meeting with stakeholders, taking public input, and getting feedback from the different county basin commissions with the goal of coming up with regulations by February 2023. There is a lot of reporting on this through the SDN and you can read about it on my blog. On November 15, 2022, the BOCC committed to some percentage caps of STR licenses in their meeting. Different basins will have different percentage caps on STR licenses. You can see these suggestions on the accompanying spreadsheet, but here is a screenshot.
I ran a property sales analysis to determine how the BOCC’s proposed caps will affect the future issuance of STR licenses in unincorporated Summit County. A detailed explanation of my analysis, along with a spreadsheet is below. Here is the wait time for a STR license (not calculating a wait list) in each Basin using sales numbers from the past 365 days:
Lower Blue Basin (Wildernest and Silverthorne) – 5.75 years
Snake River Basin (Dillon Valley and Summit Cove) – 11.8 years
Ten Mile Basin (Frisco) – 18.1 years
Upper Blue Basin – (Breckenridge Area) – 4.4 years
The BOCC claim that their numbers aren’t “arbitrary,” but these results sure look arbitrary to me. I would suggest that they carefully consider how these caps not only affect different neighborhoods with up to 14 years of difference in wait time, along with taking a long hard look whether they actually WANT STR licenses to be this hard to obtain. As a resident of the Ten Mile Basin, I’m not too happy that my neighbors in the unincorporated Summit County Frisco area are looking at an 18 year wait time for a license. Their caps create percentage differences ranging from a 22% to 48% decrease in the amount of STRs in each basin showing different treatment for each basin. The effect on the real estate market is going to be dramatic once people understand what these caps actually mean.
Here again is my spreadsheet. I am sharing the link with everyone. If you want an editable version, please email me and I will send it to you.
Methodology
I started with the spreadsheet shared in the October 22, 2022 SDN article which discussed the Basin Planning Commissions suggested for STR caps. The BOCC met on November 15 and the SDN wrote this article about their suggestion for caps in the different basins. I took the numbers from the county’s presentation, and plugged in their new proposed caps and then calculated the surplus of STR licenses above their proposed caps. The surplus can be found under the heading “Difference” and are negative numbers in red.
I then researched through the Multiple Listing Service (since I am a real estate professional), the number of sales in each Basin in unincorporated areas in the last year. I excluded deed restricted properties and I did my best to exclude any properties in other jurisdictions (I will explain more below). I did this analysis on November 21, 2022 so the one year time frame of sales is November 22, 2021 to November 21, 2022. For each basin there was a number of sales, such as 146 for Lower Blue. The Summit County chart says that 19% of properties in this basin are STRs so I multiplied the total number of sales by that percentage to show the number of STR licenses that would presumably become available due to sales. With 27.74 sales per year of STR properties, it will take 5.75 years to absorb the surplus of licenses and get down to the recommended cap. Then, with the next STR sale, the first person on the waitlist gets a license.
Caveat: Sales Numbers are Close, But May not be Exact
While the MLS search is the best way I could calculate the number of sales, there are a few issues so the sales numbers may not be perfect, but they are close. I will explain my methodology in detail and if anyone can come up with a better way, let me know and we can update the spreadsheet.
I used the mapping feature of MLS to isolate the Summit County unincorporated neighborhood zones and to not include towns. I think I did a good job, but it’s probably not perfect. If I’m off on sales, I think it’s going to be by less than 20 properties and those are only for Lower Blue and Snake River basins. I used a different methodology for Ten Mile and Upper Blue basins. In those jurisdictions, I could eliminate the properties in the Towns of Breck and Frisco by sorting with and without the transfer tax. I will also note that the Upper Blue sales numbers are higher than they actually are because that sales number will include properties in Blue River which are not governed by the BOCC. (Blue River doesn’t have a 1% transfer tax so those properties are still included in the Upper Blue Basin sales.) I just couldn’t find an efficient way to eliminate the Blue River properties.
Additionally, the MLS does not include any private sales. While private sales are only a small portion of our sales, there could be a +10-20 property sales in each basin (my estimate).
I then went to the Land Title annual statistics. These numbers break out sales by neighborhoods and also include private sales. Unfortunately, these statistics group areas together that include both in town jurisdictions and unincorporated Summit County so it’s impossible to parse out the real numbers. (I bailed on using this data for sales).
I decided to rely on the MLS search as the best methodology. I used the above methodologies and ran a search for the last 365 days. I then ran full year searches from 2018-2021. You can see those results here along with wait times for STR licenses assuming the sales from that particular year:
Wow – is all I can say. The best case scenario is using the record setting sales numbers from 2020 where an Upper Blue license may become available in almost 3 years.
Property Values – Potentially Billions at Stake
I haven’t even addressed property values yet. While we haven’t seen values dramatically decline yet, that process takes time. We have seen days on market in Summit County increase by over 30 days since May of 2022 from 16 days to 48 days. Rolling 12 month sold listings are down 36% are are below 2017 levels. So, the inevitable is that pricing is going to soften, and we are seeing prices drop in Wildernest and Dillon Valley in particular. The combo platter of interest rate increases, national economic uncertainty, inflation, and STR restrictions have slowed the real estate market dramatically. By taking away the ability for a property to be short term rented for many years, let’s assume the value decreases by 10% for that reason alone. (I think a conservative estimate as most neighborhoods that restrict STRs sell for about 15% less than other properties that allow STRs.)
There are 9,928 Properties in Unincorporated Summit County Neighborhood Zones. Median sales price $900,000 as of October 2022 for all of Summit County. That equates to $8.9 billion dollars of real estate values. ($8,935,200,000). A 10% reduction in values is $893 million in lost property values. When we factor in the actions of Breckenridge’s Town Council and other jurisdictions limiting property rights, there are billions of dollars of lost real estate values happening in Summit County.
My Humble Message to the BOCC
- Please reconsider the caps and make them above the existing license numbers.
- Please consider the “fairness” of the caps you are choosing.
- Please let me and the real estate community show you how changing market conditions are already affecting our community’s real estate industry and how your regulations further hinder the free marketplace.
The biggest problem I see is that the BOCC is deciding to institute caps BELOW existing STR issuance. I wrote an article about this cautioning against setting the caps below existing numbers. In every single basin, there needs to be attrition of licenses to get to the BOCC’s recommended caps. In looking at our sales analysis using sales from the last 365 days as described above, each basin’s property owners will have to wait at least 4 years and up to 18 years to get a STR license. Is this what was intended? Did the BOCC wish to make the Ten Mile Basin an 18 year wait and the Upper Blue Basin a 4 year wait? Wouldn’t caps just above existing STR issuance make for a more seamless and easier process without having such drastic effects on values and marketability?
The second biggest problem I see is that the BOCC has not accepted a single STR license since May 2022. All of my numbers above DO NOT include any of the back log of people waiting to submit their applications once this moratorium is over. While I have no idea how many people are waiting from May 2022 to February 2023, you have to assume that the back log of applications will increase the wait time for any future property buyers who don’t get their STR application in on the day applications open. So maybe Lower Blue owners aren’t waiting 5.75 years, but more like 8 years. Who knows! (See my personal story below about a friend and her STR license denial.)
Other Factors Making STR Wait Time Longer Than My Spreadsheet
I also need to point out a few other very important details of this analysis. The past 365 days of real estate sales have SLOWED DRAMATICALLY! We know that sales volume is down at least 35% in Summit County since May 2022, and you can definitely see this when comparing the number of sales from the past 365 days and looking back at 2021 and earlier. This means that the time to get a STR license will actually get longer as sales slow. Looking at previous years shows lesser wait times with higher numbers of sales, but I predict that the last 365 days data is even more sales than we will experience in the next couple of years making wait times even longer.
Note also, that as STR licenses are absorbed, the amount of time for a new one to sell actually becomes longer. This is a statistical analysis that is too complicated for this report, but imagine that in the Lower Blue Basin, 80 STRs sell over the next three years, the percentage of available STRs to sell is now cut in half. So it will take, presumably, twice as long to reach the desired attrition as the saleable pool of STRs diminish.
Personal Story – How Many People Are Like My Friend?
Slight digression of an unfair STR story: I have a friend who was in the process of applying for a STR license in May of 2022, and the county wouldn’t accept her application because she needed to get her septic pumped and was waiting for weeks to get that done. The septic pump was the ONLY item needed to complete her application. (It takes a long time to get a septic pump appointment). During the time she was waiting, the BOCC made the decision to institute the moratorium. She went back to the county’s offices with proof of her pumped septic, and the person there told her that he “couldn’t even touch her application” due to the moratorium. As I mentioned back in May, the moratorium was a sweeping decision that completely surprised the real estate community. So, my friend didn’t get a license, still doesn’t have a license, and will have to get on the Upper Blue wait list when applications open up again. She will wait, according to my calculations, for 4.4 years, assuming she’s first on the wait list, because she couldn’t get her septic pumped. That is just one story of a blocked application. How many other people are in this situation? I don’t know.
Final Parting Thoughts
I know the BOCC is trying to solve for a housing crisis in our community, and I’m sympathetic to that. I work in real estate and understand the problem. I also don’t think they have been presented with this data to understand how their decisions (which they don’t want to be “arbitrary” and want to use the right “methodologies,”) are going to actually play out.
I want to offer my time and my expertise to help with this decision. It’s one that is important and that affects thousands of people and potentially billions of dollars in real estate values.
I also want to note that I did this analysis on my own. I was not prompted to do it by our Realtor association or by anyone. My efforts are for truth and transparency to be known. And if anyone in the community can assist with better data inputs, I would be more than happy to meet and make this analysis as accurate as possible.
Subscript
I sent this email to the BOCC on Wednesday, November 23, 2022. I expected to receive a response and maybe even a thank you! I wanted to give them the opportunity to respond and maybe change course before I put this out to the world. Today, it’s a week later, November 30, 2022 and I have not received any response, so I’m publishing this and sharing it with the real estate community and the press.
Sincerely,
Thanks for your efforts Amy