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Policies targeting short-term rentals and vacation homes were among the most high-profile and contentious bills of Colorado’s 2024 legislative session. Heading into next year, advocates on both sides of the issue are preparing for a possible repeat. 

With the 2025 session set to kick off in January, ideas for bills that could impact vacation rental and investment properties are swirling. Those include allowing voters to approve vacancy taxes on homes that aren’t occupied year-round, increasing county lodging tax rates and finding more ways for local governments to levy taxes on industries. 

“It feels like the perfect storm,” said Julie Koster, executive director for the Colorado Lodging and Resort Alliance. “It shows there is an appetite … to create a hefty structure of taxes or fees or other types of regulation that would affect the vacation rental industry directly.”

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The proposals represent an ongoing attempt by lawmakers to address a lack of affordable, long-term housing for working residents, particularly in mountain resort areas. 

Local governments, too, are looking for ways to diversify revenue streams and generate funding that can be put toward a host of community efforts, like workforce housing. 

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“As has been mentioned many times since the pandemic, we feel like we’re having a housing crisis in our mountain towns, and we need all the tools we can get to achieve our housing solution goals,” said Margaret Bowes, executive director for the Colorado Association of ߣÏÈÉú Towns, which is spearheading the vacancy tax effort.

Advocacy groups and property owners continue to balk at such proposals, which they say will harm an industry that is vital to the economic health of mountain resort areas. 

Last session, Koster’s group was instrumental in defeating a controversial measure that would have quadrupled short-term rental owners’ property taxes. Other efforts, like cutting out second homes from property tax relief, also failed.Ìý

“My concern is that our lawmakers are not going to stop until they get something to pass,” Koster said.

Allowing local communities to enact a vacancy tax 

If introduced next session, the ski association’s vacancy tax proposal would allow Colorado municipalities to, for the first time, ask voters to approve a tax on unoccupied homes. 

In some ski resort areas, over 40% of homes sit vacant throughout the year, according to Census data, and as many as 1-in-3 homes are used as short-term rentals. 

“The hope is that a vacancy tax might motivate some homeowners to rent to a member of the community rather than leave their home vacant for most of the year,” Bowes said.

If those homeowners instead choose to pay the tax, local governments could use the funds for affordable housing initiatives, she added. 

How a community defines that would be up to the local officials drafting the proposal. 

Would it be limited to just homes that sit empty for most of the year and are used as investment properties or could it include people’s vacation homes and short-term rentals? If a short-term rental is occupied seasonally by visitors, would that exempt it from vacancy status? 

Bowes said those questions would be left to each community to decide, adding any statewide legislation must not include a definition of vacant. 

What a vacancy tax looks like in practice could also vary from community to community. It could be a flat annual tax, a tax that is based on a home’s value or a tax based on the number of bedrooms a property has. Property owners could be asked to describe how they use their home in order to avoid a tax, with compliance checks and potential penalties for those who violate the rules. 

Administration and enforcement would be left up to local governments, Bowes said. 

The idea has the backing of the Colorado Municipal League, which represents over 270 cities and towns across the state. 

Executive Director Kevin Bommer said a vacancy tax, while not a silver bullet, gives local leaders more options for how to deal with mounting affordability challenges in a way that avoids top-down approaches from the state. 

“It’s more about trying to find tools for the toolbox and letting local voters decide whether they need to approve new revenue and determine what’s best for their communities,” he said. “That’s the ultimate form of local control.”

Municipalities are currently able to adopt voter-approved property tax increases to fund special projects and programs, which impact all homeowners within a jurisdiction’s boundary. A vacancy tax, however, would only impact specific homeowners, which is why local officials need that authority to be expressly given to them under state law, Bommer said. 

Koster took aim at the vacancy tax proposal, saying it would likely be unpopular and face a mountain of legal battles if it ever were to become law. 

She points to examples like San Francisco, where a judge recently , deeming it unconstitutional. Also in South Lake Tahoe, voters this November second homes that sit vacant most of the year. 

The ski town association and municipal league are currently in talks with state lawmakers to see if someone will sponsor a vacancy tax bill next session. Bowes said no one has “put their name on the dotted line yet,” but feels good about its prospects of being introduced. 

The association had also initially proposed allowing all municipalities in the state to impose a fee on real estate transfers to further fund community needs. Unlike a tax, a fee could be enacted by local officials without the need for voter approval and several examples already exist in local communities. 

But Bowes said the association will not be pursuing the idea as a bill next session amid opposition from Gov. Jared Polis.

A spokesperson for Polis’s office said in a statement, “The governor is generally skeptical of transfer fees or other fees or taxes that would increase the cost of housing and will review any legislation that comes to his desk.”

Duel tax increase measures may also be introduced 

Along with the ski town association’s proposals, Colorado Counties Inc., a nonprofit representing all 64 of the state’s county governments, has also unveiled two legislative priorities that could raise taxes on short-term rentals. 

The first is a proposal to raise the cap on lodging taxes in unincorporated county areas that are outside municipal boundaries. While cities and towns are currently able to ask voters for as much as a 6% lodging tax rate, counties can only ask for up to 2%. 

In an , La Plata County Commissioner Matt Salka said the lodging tax increase allows counties to be “comparable to their municipal partners” and lists several areas where the revenues could be allocated such as advertising and marketing for local tourism, housing and childcare services. 

Another idea would allow counties to impose an excise tax, which is a tax on specific goods and services, in unincorporated areas. If given voter approval, counties could use it to tax industries such as ski resorts, lodging properties and other businesses to further fund community priorities. The same authority would also be granted to statutory towns that currently lack the ability under state statutes. 

Home-rule cities and towns, which are less bound by statute, already wield this ability, and some currently have short-term rental taxes in place. 

State Sen. Dylan Roberts, who represents several Western Slope counties, plans to introduce the excise tax legislation alongside House Speaker Julie McCluskie next year. While a community could decide to place an excise tax on short-term rentals, Roberts said that language won’t appear in the bill’s text. 

“It’s completely agnostic to the topic,” Roberts said. “But we have commissioners and town council members who see it as a potential for that type of use.”

Koster said the lodging and excise tax proposals would have compounding impacts on an industry that is currently in bookings and seeing shorter lengths of stay from vacationers. 

“We already have a lot of taxes and fees, like sales tax, that compound on what our guests have to pay,” Koster said. “What that ends up impacting is the ability for us as an industry to maintain competitive rental rates, because we’d have to offset the pain.”

Koster added, “We talk a lot locally about catering to the missing middle, well the missing middle is going to also disappear from tourism if we continue to raise rates and we continue to tax them.”

Roberts did not say how he might vote on a vacancy tax but signaled it could be difficult for local governments to accurately track those homes. 

“I’m empathetic and supportive of local efforts to increase the availability of funding for affordable housing and other community needs, and I think that’s where these ideas come from,” he said. “But I think getting the details right is really important.”

McCluskie, in a previous interview, said she would need to review legislation before deciding how she would vote. 

Lobbying efforts expected to ramp up next year 

Bowes anticipates any bills affecting lodging properties will receive pushback in the legislature. 

She’s preparing to have conversations with industry groups and property owners who, last year, mounted an organized lobbying campaign to defeat what they saw as their greatest threat, . 

The legislation would have reclassified short-term rentals that have more than 90 nightly stays a year from a residential property tax rate to the much higher lodging tax rate — effectively quadrupling property taxes for short-term rental owners.

As the bill came forward, industry advocates like Koster were busy working the phones, speaking with lawmakers about how the bill would impact the lodging industry. The opposition culminated in an hours-long public testimony from property owners before the Senate Finance Committee, which ultimately voted 6-1 to kill the legislation.Ìý

“This (next) year, we’re going to take that same playbook and we are going to copy and paste it onto this next legislative session,” Koster said. 

Rep. Mike Weissman, a Democrat representing parts of Aurora and a prime sponsor of Senate Bill 33, said he has no intention of bringing the proposal back next session. But Weissman, who won election to the state Senate this year, also doesn’t believe discussions on how to deal with short-term rentals are over. 

“I think that enough legislators have heard repeatedly of the burdens that short-term rental activity is putting on some communities around our state,” Weissman said. “And I think that there is an ongoing appetite to be part of the solution and not strictly to say that local governments are all on their own.” 

Lawmakers representing parts of the High Country have said they are largely in support of the various tax ideas that may come forward next session. Those same lawmakers, however, also opposed some of the more sweeping measures at the state Capitol last year, such as reclassifying the taxes short-term rental and second-home owners pay.Ìý

On those issues, Roberts said he remains in favor of bills that will empower local decision-making, adding, “It does seem like the big, broad statewide proposals about short-term rentals are not possible at the Capitol right now.”

Koster said she’s optimistic that lawmakers will be open-minded to hearing the lodging industry’s perspective, as they were with S.B. 33. 

But facing the possibility of three new tax-related bills, short-term rental owners are also prepared to show up in force again, just like last time. 

“We are going to show up, and if all three of these bills go at once, I hope they are ready,” Koster said. “We are going to bring as many people as we can to share their story.”