To: Board of County Commissioners
Through: Bryan Weimer, Director, Public Works and Development
Prepared By:
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Roy Rimer, Zoning Inspector, Public Works and Development
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presenter
Presenter: Roy Rimer, Zoning Inspector, Public Works and Development
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Subject:
title
3:15 PM *Implementation Options for Regulation of Short-Term Rentals
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Purpose and Request:
recommended action
Staff is requesting additional direction from the Board regarding the method the proposed short-term rental program should be managed in terms of the relationship between levels of service, enforcement, and budgeting.
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Background and Discussion: Since the previous study session at the end of January 2024, Public Works and Development has drafted Land Development Code language for the regulation of short-term rentals (STRs) and performed research into avenues of implementation. The County Attorney’s Office provided support in converting portions of the language into an ordinance to work alongside the Land Development Code and meet statutory requirements.
Draft Regulations
The prepared draft regulations provided to the Board, if adopted, would require that any operating STR obtain a license from the County, and renew the license annually to continue operating. A license may be granted depending on compliance with the requirements in the text of the regulations as well as a “good neighbor” agreement. Examples include requiring the owner or their agent be available to promptly respond to issues that may arise, a list of safety standards, off-street parking being provided, proper trash management, occupancy limits, prohibiting noise/disturbance, and limiting the minimum distance that two STR properties may operate from one another. Potential penalties for non-compliance include fines and revocation of the license for two years.
Inspection Requirements
Staff recommends that the regulations require self-certification or third-party certification by the applicant’s chosen contractor, potentially a member of the National Association of Certified Home Inspectors (NACHI). A compromise between these two options would be to require inspection by a certified home inspector at an owner’s first STR application and a self-certification for renewal applications. A change in ownership would restart the process.
Approach to Implementation
In developing these regulations, our goal is to both encourage and require licensing for all STRs in Arapahoe County. By this metric, maximum effectiveness will require a proactive approach to enforcement of the regulations. This will depend on the County’s capacity to identify operating STRs. Definitive identification of a property as an STR can be difficult, as ads on host websites such as AirBnB or VRBO are typically vague about the location of the STR on offer and do not always include exterior photographs of the dwelling. This makes identification a time-intensive process requiring internet research comparing information from multiple sources, and potential site visits, easily taking staff thirty minutes to multiple hours to confirm STR locations. It should be noted that each STR must be identified over time because the postings change. This approach would be a high level of service in support of the program but is not possible with Zoning’s current resources and staffing levels.
Alternatively, a targeted approach at a lower level of service could be used. This would entail less consistent periodic research, notification to operators by mail, and potential enforcement action. The number of confirmed STRs would very likely be fewer, and the number of operators brought into compliance proportional to those operating (known and unknown) would be fewer still. The result would not be a comprehensive solution.
Staff investigated potential solutions for this deficit, including services that specialize in identifying and supporting local governments in tracking and regulating STRs. Host Compliance, a subsidiary of a vendor the County already partners with, uses automation as well as their own analyst staff to locate and confirm operating STRs. One of the services they offer to their clients is the ability to map and track operating STRs in close to real-time. They maintain a historical record of each operator’s licensure or compliance status, their listings and bookings, as well as complaints received. This data can be used to inform decisions, adjust the approach to certain situations, and to improve efficiency. Additionally, they provide automatic communication and automated notice-mailing for non-compliant properties. Perhaps most importantly, they provide a complaint-handling service that includes the ability to take complaints and communicate with an STR owner or their agent 24 hours a day. Complainants have the option of using an internet form or a telephone number to contact the service and have the option of a response to the complaint if they choose. The automation of these services replaces the use of great amounts of staff time and other resources that would otherwise be required to achieve a high level of service.
Costs and Fees
The approach to implementation, costs, and fees associated with STR licensure are interrelated. A more proactive approach should result in more licenses and compliance. More licenses and compliance will result in more fees collected which would support the more proactive approach. Host Compliance estimated 288 STRs operate in the County, but Staff estimates would be more conservative to account for certain condo properties that are in districts where Hotel uses are permitted. Based on experience with other jurisdictions, Host Compliance estimates first year compliance around 60%. Factoring for STRs that would not voluntarily comply and those that cannot comply (are not eligible for a license), 100 licenses are a reasonable target projected for the first year. This target can be used for a basis of determining a fee structure sufficient to cover the costs of administering STR licenses and enforcement, including the use of Host Compliance’s product.
The one-time startup costs for this program are estimated at $38,180. That includes one-time costs $31,680 for configuration of our current Accela system to be used as the licensing system for this program. The one-time costs also include $1,000 for the initial Host Compliance setup and $5,500 in staff time for integration, testing, training (the staff workhours are already accounted for in the budget but will require that time be diverted from other duties). Projected ongoing costs for the program are estimated at $29,310 in year one, which includes $24,310 for the Host Compliance software and $5,000 in staff time costs (approximately 4 hours per month in staff time using existing staffing resources).
To cover these costs, the recommendation is for an initial application fee of $200 and an annual licensing fee of $300. Everyone who applies would pay the $200 application fee. If the application is approved, the customer would then pay $300 for the initial annual licensing fee (so $500 total in the first year) and $300 to renew the license every year thereafter. For comparison, staff found the total licensing fees for most jurisdictions ranged from $250 to $500 annually or the community imposed lower fees while also collecting a lodger’s tax. The target 100 licenses in the first year would produce $50,000 in revenue. In subsequent years, revenues accounting for new licenses (including an estimated 10% annual attrition and replacement) and renewals would be $34,500. Based on this fee recommendation and the projected program costs, the revenue generated from this program is estimated to cover the ongoing costs every year of the program starting in year one. The one-time startup costs will require an initial investment that will be covered by program fees over the first five years of the program.
Based on this fee recommendation and the projected program costs, the revenue generated from this program is estimated to cover the ongoing costs every year of the program starting in year one. The one-time startup costs will require an initial investment that will be covered by program fees over the first five years of the program.
Continued Alignment with the Board’s Stated Objectives
Implementation of the draft regulations requiring licensing with a proactive approach to management and enforcement is expected to be optimal in protecting public safety, quality of life, and pursuing sustainable housing objectives.
Fiscal Impact: Colorado Statutes empower counties to regulate short-term rentals, which includes the authority to require licensing and registration fees. Adoption of new regulations will potentially lead to additional enforcement. Adoption of a licensing system and use of a supporting third-party service will have initial startup costs. However, even with continuing administration costs, the program is expected to cover costs within 5 years. A detailed overview of the projected fiscal is discussed in the above section.
Alignment with Strategic Plan:
☒Be fiscally sustainable
☐Provide essential and mandated service
☒Be community focused
Alternatives: The BOCC has the following alternatives:
1. No change to current regulation.
2. Adoption of regulations with complete in-house management of short-term rentals and a reduction in service levels in other areas or adding a new FTE.
3. A ban of short-term rentals.
Staff Recommendation: Staff believes that the best approach to achieve the Board’s stated objectives is implementation of these proposed regulations with proactive licensing and enforcement. Staff recommends the use of the Host Compliance service, and resolution adopting the licensing fee structure proposed. This combination will use automation to identify operating STRs for licensure or enforcement, while also generating a net revenue and preserving staff time for service levels in other areas.
Concurrence: N/A