Steamboat asks voters to tax Airbnbs to pay for affordable housing. Will it work?

(Colorado Public Radio) – Jason Peasley walks through knee-deep grass to the top of a hill overlooking Brown Ranch – a vast expanse of hills and alpine meadows just outside the city limits of Steamboat Springs.

“We’re looking at what will ultimately be our first phase of development,” Peasley said, pointing to the abandoned ranch.

Peasley heads the Yampa Valley Housing Authority, an organization that provides subsidized housing to low- and middle-income Routt County residents. An anonymous donor donated the 530-acre site to the housing authority last year. The plan is to build 2,300 homes over the next 20 years in an effort to alleviate the chronic lack of affordable housing that plagues Steamboat — and every mountain town in Colorado — these days.

The widespread labor shortages felt across the U.S. economy are particularly acute in the state’s mountain communities, as the workers who power the tourism industry cannot afford to work there. live. Colorado’s resort towns are looking for creative solutions to the housing shortage that has reached crisis levels over the past two years.

Steamboat’s plan might be the most ambitious. Brown Ranch’s plan includes both single-family homes and apartments, along with all the other amenities for a self-contained community. That means stores, doctors’ surgeries, parks and maybe even a school one day.

“It’s a huge undertaking,” Peasley said. “I don’t know how many kilometers of road we will build. It’s…about 20 miles of road and hundreds of acres of parks and open space and thousands of units. I don’t think there’s another community in Colorado that’s had this type of opportunity to build a neighborhood specifically for their local workforce, for their local housing needs.

Construction could begin at Brown Ranch as early as next year, though it’s likely to be pushed back to 2024 given the complexity of the project.

A plan, but how do you pay for it?

Unsurprisingly, one of the trickiest issues is how to pay for it all. As long as the land was free, building on it will not be. Peasley estimates the final price will be around $400 million. That’s a lot of money for a town of about 13,000 people. The money will come from a mix of sources, including state and federal aid and other grants, according to Peasley. But this will not be enough to finance the whole project.

To make up the difference, voters will decide in November whether to levy an additional 9% tax on stays at short-term rentals, like Airbnbs. The proceeds would be earmarked for affordable housing. The money wouldn’t necessarily go all to Brown Ranch, but the idea is that most of it would. Peasley estimates the tax could cover about half of the total cost.

Some short-term charter operators spoke out against the tax at a recent city council meeting, saying it would discourage tourists and ultimately hurt Steamboat’s long-term bottom line. But the measure should largely pass.

“I think it’s the general consensus that this tax will pass,” said Kim Weber, chief financial officer of Steamboat. “It doesn’t directly affect most people who will vote on it, which means they won’t actually pay the tax, so [it’s] different from a sales tax on goods where they would pay it.

She expects the tax to generate about $11 million a year over a 20-year period.

Steamboat wouldn’t be the first place in Colorado to take such a step. Several other mountain towns passed similar taxes on short-term rentals last November, including Ouray, Crested Butte and Telluride.

Officials say the move makes a lot of sense right now. Resort communities have seen an influx of visitors during the pandemic as people flock to the great outdoors, leading to a surprise windfall for city coffers — and exorbitant prices for vacation rentals.

Many locals blame the proliferation of short-term rentals for driving up housing costs in their communities, and taxing them during good times is appealing. On top of that, Colorado short-term rental owners don’t pay the commercial property taxes that hotels and other traditional lodging businesses pay, Peasly noted, and it’s a good way to make sure everything the world pays its fair share.

But the plan is not without drawbacks. Mountain towns are starting to see the pace of these short-term rental bookings slow as travelers pull back in response to inflation and an impending economic downturn. This could reduce funding for such initiatives, especially one as large as Brown Ranch.

Steamboat’s Weber says the city can incorporate the inherent volatility of that particular revenue stream into its projections. It would only be used for one-time expenses, she said, as opposed to funding ongoing operations.

Peasley is confident he will have community support no matter what happens with the short-term economy.

“We’ve been engaging the community for the past nine months to figure out what the community wants to do here — not what makes the most money,” Peasley said. “Obviously the practical economy is important, but we’ve worked with the community, what the vision is, and now it’s up to us to figure out how we deliver on it,” Peasley said.

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