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

Jason Peasley, who runs the Yampa Valley Housing Authority, stands on a parcel of land the city...
Jason Peasley, who runs the Yampa Valley Housing Authority, stands on a parcel of land the city hopes to turn into affordable housing. To do so, voters will have to approve a new 9 percent lodging tax on short-term rentals like Airbnbs.(Colorado Public Radio)
Published: Jul. 26, 2022 at 12:37 PM MDT
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(Colorado Public Radio) - Jason Peasley walks through knee-high grass to the top of a hill overlooking Brown Ranch – a vast expanse of rolling hills and alpine meadow just outside of the Steamboat Springs city limits.

“We’re looking over what will ultimately be our first phase of development,” Peasley said, gesturing out over the abandoned ranch.

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

The widespread worker shortages being felt throughout the U.S. economy are particularly acute in the state’s mountain communities because the workers that keep the tourism industry humming can’t afford to live there. Resort towns across Colorado are looking for creative solutions for the housing scarcity that has reached crisis levels during the past two years.

Steamboat’s plan might be the most ambitious. The blueprint for Brown Ranch includes both single-family homes and apartments, as well as all the other amenities for a self-contained community. That means stores, medical offices, parks and possibly even a school someday.

“It’s an enormous undertaking,” Peasley said. “I don’t know how many miles of road we’re gonna be building. It’s …20 or so miles of road and hundreds of acres of parks and open space and thousands of units. I don’t think there’s any other community in Colorado that has had this type of an opportunity to build a neighborhood specifically for its local workforce, for its local housing needs.”

Construction could start at Brown Ranch as soon as next year, although it’s likely to be pushed out to 2024 given the complexity of the project.

A plan, but how do you pay for it?

Not surprisingly, one of the trickiest issues is figuring out how to pay for it all. While the land was free, building on it won’t be. Peasley estimates the final price tag will be about $400 million. That’s a lot of money for a city with a population of roughly 13,000. The cash will come from a mix of sources including state and federal aid and other grants, according to Peasley. But that won’t be nearly enough to finance the entire project.

To make up the difference, voters will decide in November whether to levy an additional 9 percent tax on stays at short-term rentals, such as Airbnbs. The proceeds would be earmarked for affordable housing. The money wouldn’t necessarily all go towards 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 rental operators spoke out against the tax during a recent city council meeting, saying it would turn off tourists and end up hurting Steamboat’s bottom line in the long run. But the measure is widely expected to pass.

“I think that’s the general consensus, that this tax will pass,” said Kim Weber, Steamboat’s finance director. “It doesn’t directly affect most of the people who will be voting on it, meaning that they won’t be actually paying the tax, so [it’s] different from a sales tax on merchandise where they would be paying it.”

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

Steamboat wouldn’t be the first place in Colorado to pass such a measure. 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 saw an influx of visitors during the pandemic as people flocked to the great outdoors, leading to a surprise windfall for city coffers – and skyhigh prices at vacation rentals.

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

But the plan isn’t without drawbacks. Mountain towns are starting to see the pace of such short-term rental bookings slow down as travelers pull back in response to inflation and a looming economic downturn. That could eat into funding for these initiatives – especially one as sprawling as Brown Ranch.

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

Peasley is confident he will have the community’s support regardless of what happens with the economy in the short-term.

“We’ve involved the community over the last nine months to figure out what it is the community wants to do out here — not what makes the most money,” Peasley said. “Obviously practical economics matter, but we’ve worked out with the community, what’s the vision, and now it’s our job to figure out how we deliver it,” Peasley said.

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