With fewer STRs on the waitlist Town Board revisits license issues

It has been more than three years since the waitlist for a vacation home rental license in residential Estes Park neighborhoods has accepted new applications.

When the Town placed a moratorium on applications in October 2021, there were 60 applications in the queue with a projected five to seven-year wait.

As of the end of March, with only eight applications on the waitlist, the Town Board discussed the next steps at its April 8 study session.

Town Clerk Jackie Williamson presented three options for administering residential vacation home licenses. The first option is to do nothing and let the waitlist run out. The second option is to hold an annual lottery for a place on the waitlist. The third option is to reestablish the waitlist with a reasonable cap.

According to 5.02.020 of the Town’s municipal code, a vacation home rental is a residential dwelling unit that is rented, leased, or occupied for accommodation purposes for compensation for terms of less than thirty days and includes any timeshare or fractional ownership without regard to occupancy length.

Short-term rentals in residential areas have been licensed by the Town since 2012. In December 2016, the Town capped vacation rental licenses at 588. In 2020, the Town modified the cap, permitting 322 residential zoned vacation homes within its boundaries and 266 permits for areas of unincorporated Larimer County in the Estes Valley for a total of 588 STRs.

With only eight applications on the current waitlist, Williamson asked the Town Board what direction they wanted to take with STR licensure.

Williamson also presented information on hosted short-term rentals, where residents can rent out a portion of their home on a nightly basis.

Hosted short-term rentals differ from a bed and breakfast license, where the host is required to provide breakfast to their nightly visitors, reported Williamson. However, hosted short-term rentals could be included under the residential vacation home regulations by removing language that prohibits the owner or representative from staying on-site during the vacation visits.

Williamson told the Board that a lot of staff time is devoted to maintaining a waitlist, and she outlined various workarounds applicants have utilized to comply with their individual licenses.

She said that several of the residential vacation home licenses had gone inactive due to several factors, including the Workforce Housing Regulatory Linkage Fee, currently at $1,460 annually.

To license a residential home in Estes Park, there’s an annual fee of $200, plus $50 per bedroom, plus the $1,460 linkage fee.

In addition, there’s a nightly tax on each visit of 14.2%, which includes 5.5% for Visit Estes Park, the local marketing district, 3.5% of which is designated for workforce housing and childcare in Estes Park. The rest of the nightly tax is comprised of a 5% Town of Estes Park sales tax, 0.8% Larimer County sales tax, and 2.9% State of Colorado sales tax.

Trustee Bill Brown suggested it was time to sunset the linkage fee, first established with Ordinance 02-22, since 6E funds are also being collected on a nightly basis.

“The whole problem with the linkage fee is it applies at some places and not others,” Brown said. Lodges and hotels don’t have the linkage fee, but they have the 6E bed tax, and that’s the commonality between all of them, which is why I believe we shouldn’t have the linkage fee. We’ve taken care of it another way.”

Bed and breakfast licenses also do not have to pay the annual linkage fee.

Brown also said that before any decision is made on short-term rental licenses, realtors in town should be consulted because STR licenses in residential areas issued before 2021 are transferable with the sale of the property and can raise its value. Brown predicts that realtors would prefer Option 3, maintaining a wait list again, “because of the certainty they can give to their customers that would be lacking in option two.”

But Option 3 “could create a rush to get in,” said Williamson.

There have been instances where property owners have applied multiple times for a license for the same property in the hope that with multiple applications, the property has a better chance of getting the license.

Williamson also explained the challenges the Town’s compliance officer has in enforcing the administrative rules governing short-term rentals.

The Town currently licenses 11 bed and breakfast properties. Williamson predicts that if the prohibition about someone being onsite is removed, eight of these licenses would be converted to the new vacation home licenses.

“I truly believe that some of those people that went into the B & B end of it were doing so because of the cap,” said Trustee Cindy Younglund. “I’m not saying all, but I do believe there were some, and I don’t want to award somebody for going around the back way to get their business going when it was illegal.”

“The commercial number of vacation home licenses keeps going up,” said Williamson, showing that there is still increasing interest in renting a vacation home in Estes Park.

After much discussion, the majority of the Town Board favored a combination of Options 2 and 3, even though that would put additional administrative burden on the Town Clerk’s office without additional resources.

Code enforcement may be a problem, too, said Dan Kramer, the Town’s attorney, because of staffing issues. The board also favored combining hosted short-term rentals with the residential home vacation license and temporarily increasing the cap on the waitlist so that those who have a B&B license can convert if they choose to.

An ordinance to open up the waitlist and set new procedures for the applicants is expected to be presented to the Town Board soon.