City of Aspen officials believe they have found a solution to tracking and tax-compliance issues that have come up since the explosion of the online short-term rental marketplace.
Legislation updating the city’s land-use code, which is set to be introduced at the Nov. 12 regular meeting, would require every individual property engaging in short-term vacation rentals to have a business license. A second reading and public hearing is planned for Nov. 26 and the ordinance would take effect 30 days after approval.
This change goes hand in hand with a new software system the city is implementing that’s intended to streamline the process of applying for a business license and remitting taxes. The software package, known as MuniRevs with its companion piece LodgingRevs, will also scan popular short-term rental websites to cross-check tax and licensing compliance.
The last time the city updated short-term rental regulations, in 2012, it lifted a little-enforced cap on the annual number of vacation rentals a property was allowed, while requiring that all residential short-term rentals pay sales and lodging taxes. The code amendment also required that every short-term rental obtain a permit from the community development department and designate an on-call representative who could be responsible for responding to trash, parking or other neighborhood concerns.
The number of properties that have actually taken that step is unclear, but most are not annually renewing the permit, as required. Currently, there are 61 active permits on the books for 2019, according to community development department planner Mike Kraemer.
Vacation rentals of residential condos have long been a core piece of Aspen’s tourist bed base and numerous local, professional companies manage units on behalf of owners. Compliance with local regulations, including tax remittance, has also been part of the service those companies provide.
But since the popularization of online platforms such as Airbnb and Vacation Rentals by Owner, many believe that a vast gray market has emerged of owners renting their properties without paying taxes.
The actual size of that market, and its growth since the advent of new online tools, has been a matter of speculation.
When asked what percentage of the market he thinks may not be paying taxes, Anthony Lewin, tax auditor with the city’s finance department, replied that the question has been plaguing city halls for the last 10 years.
Aspen’s new regulatory system, which he hopes will be in effect by the new year, will help get closer to the answer, Lewin said.
The framework that will be under council consideration next month has been four years in the making, Lewin said. The city has considered a multitude of strategies over that time, but the “one-stop shop” nature of the new software platform has made this system the city’s preferred solution, he said.
Lewin said he is excited to “finally be able to move forward on this and hopefully get this market under control.”
“It’s going to take a lot of work for us to get everything ready to go, but we are hoping that 2020 is a year of more compliance,” he said.
Currently, one property rental business with multiple units under management accounts for all of its sales activity, and pays all its required taxes, under one business license. The proposed code change, if passed, would require every unit under a property rental company’s management to have an individual business license tied to its physical address. This will allow the city to track what is being rented and where. It will also help ensure the units are in compliance with all health and safety regulations.
Obtaining a business license requires a $150 annual fee.
Lewin added that for fractional ownership units in the short-term rental pool, each fractional owner will not be required to get a business license.
Once all the units are registered, property managers and rental companies will be able to submit one monthly report and remittance for all the properties under management, Lewin said.
He added that the software the city is bringing on board is the same software used by Snowmass Village and Glenwood Springs.
Chuck Frias, managing partner of Frias Properties of Aspen, which is one of the largest local managers of short-term rentals, said he applauds the city’s effort to get control of the shadow short-term rental market and level the playing field.
When Airbnb first grew in popularity, Frias Properties staff would often hear from people who had a negative experience trying to rent on the gray market. It was “bad business for Aspen” for guests to experience a “wild west” aspect in trying to secure accommodations, he said.
The unknown size of that market is also a problem which the city and others in the community are right to try and understand, he said, adding that he supports good regulation and paying the appropriate fees that would be required to support fair rules for everyone.
“I think you need to capture all the people that are doing that kind of business,” Frias said, when asked what he felt good regulation would look like for Aspen.“I am in favor of anything that, first, levels the playing field and, second, collects the taxes that the city should tax with that kind of business activity,” he said. In addition, Aspen policy should protect guests from getting ripped off and ensure that short-term rentals happen in a safe, regulated space, he said.
Frias noted that if his accounting staff would have to remit taxes individually for each unit under management each month, that would be untenable. However, Lewin said that property managers will be able to use a “bulk upload” function when submitting reports on multiple properties.