Breckenridge incorporates $400 per bedroom STR fee, 2,200 cap

Editor’s note: Highlands is not the only town struggling with an influx of people due to COVID-19, lack of affordable housing and a short-term rental issue on its hands.

Resort towns across the United States are scrambling to find ways to house employees and appease both sides of the isle when it comes to short-term rentals.

In “Short-Term Rentals Causing ‘Peak’ Problems,” The Highlander is taking an in-depth look at different resort mountain towns to see how different local governments across the nation are dealing with these crises.

This is the second in the series.

Known for its ski resorts, alpine activities and Gold Rush history, Breckenridge, Colorado, has a permanent population of 4,763 people. Annually, the former gold mine town sees 1,600,750 visitors.

History of STRs in Breckenridge

Historically, the town has always had short-term rentals, but when things took a turn in 2019 with the COVID-19 pandemic and people started moving to the mountains, Breckenridge saw a massive influx of short-term rentals.

“Breckenridge has always had short-term rentals,” Breckenridge planning manager Laurie Best said. “We are about an hour and a half from Denver and we don’t have very many hotels. So, we have always been a town where you could find a unit and you could rent it. It provides a lot of the tourist bed base, just because we don’t have traditional hotels.”

Best said in 2019, the housing inventory in the town started to get out of balance.

“We have a goal that about 35 percent of the housing inventory should be locally occupied and 65 percent can be vacation homes,” Best said. “So, we do have a lot of vacation homes. Most of these vacation homes are located at the base of the ski area, and had that continued to be the case, we probably wouldn’t have started to see the issues that we saw. With COVID, the demographic of the area shifting and technology allowing remote work, it caused an increased demand for resort communities.”

With the influx of people, Best said they saw a tremendous loss of traditional neighborhoods.

“We started seeing the impact short-term rentals were having on these small traditional neighborhoods,” Best said. “All of thesudden, you have small hotels in neighborhoods where homes used to be. People are having issues with noise, cars, trash and all of that sort of stuff. They really are little businesses operating in residential neighborhoods. The Town of Veil did a study and it showed that for every 10 houses that were selling, nine of them were being turned into a vacation home. The loss is tremendous.”

Now that most of the workforce housing has disappeared, Best said the businesses in town are starting to feel the effect.

“The loss of the housing that used to provide a place for our workforce is making it where we can’t house our workforce,” Best said. “It is starting to impact the businesses who can’t find employees. The loss of housing for locals was a big deal for us. We started seeing that loss of existing local housing about 10 years ago, but it started booming within the last five years.”

Breckenridge Community Development Director Mark Truckey said the town started seeing an overwhelming amount of people visit the city, causing an overcrowding situation.

“Many people in town said that it was just an unacceptable level of people,” Truckey said. “You hear the story again and again in different places. There are certain weekends where the town is completely overwhelmed.”

Most of the people that complain the most about the overcrowding situation, according to Truckey, are the locals.

“A lot of the visitors are coming from big cities and are used to it,” Truckey said. “But for the locals, it erodes their quality of life. All of the sudden, you have gridlock on Park Avenue, which is one of the main thoroughfares through town. There’s a really big emphasis on this issue of overcrowding and a concern about that. Short term rentals were playing a part in contributing to that.”

Another issue with STRs that Truckey mentioned is the conversion of long-term rentals to short-term rentals.

“It seemed like each week, we had half a dozen new license proposals for short-term rentals from houses that were historically rented out as long-term rentals,” Truckey said. “What’s happening is it is eroding our ability to provide workforce housing. Pretty much everybody in town that had a business had a shortage of employees last year. That used to be somewhat the case, but even the large employers can’t fill their vacancies, and housing is probably the number one issue.”

Cracking down on STRs

Starting in September 2021, the Breckenridge Town Council voted unanimously to pass an ordinance capping nonexempt short-term rental licenses at 2,200. In November 2021, the town voted to pass a new regulatory fee of $400 per bedroom.

The storm of lack of affordable housing, influx of people and conversions of long term rentals to short-term rentals prompted the town council to take action, according to Truckey.

“The town council had to do something,” Truckey said. “So, they held several work sessions and public hearings and ended up putting a ban on new short-term rentals.”

While the town council started making these decisions about short-term rentals, they also set up a task force to study the STR problem and the Tourist Overlay areas, which Truckey was the lead on.

“We formed this task force in October of last year, and it is comprised of citizens at large, as well as realtors, property managers and town staff,” Truckey said. “We had a number of meetings and came to the conclusion that there are three zones in town.”

According to Truckey, the three zones are zone one, where they would allow some additional short term rental licensing; zone two, which is primarily a small area in the historic district, where they wouldn’t allow much more licensing; and zone three, which is the rest of the town and the goal is to reduce licensing significantly.

“That reduction would have to occur by selling the property and the license goes away, or that there is a decision made by the owner that they are not going to rent it any longer,” Truckey said. “How successful that strategy is going to be, we have no idea yet until we put this in place.”

Best said the cap passed by the town council is an attempt to get back to a balanced home inventory, but as soon as talks were in the air about a cap, Best said the town had a boom of short-term rental applications sent in.

“I can’t even remember how many hundreds of applications we had turned in when we were talking about a cap,” Best said. “Right before we formally set the cap, we had hundreds of applications for short-term rentals turned in, but we decided not to do an immediate moratorium at that time, and I know a lot of places do, just to stop the bleeding. For us, we moved forward and eventually adopted the cap. That was our first step.”

With the fee being passed in November 2021, all of the money will go back into a fund that will provide housing for the workforce in Breckenridge.

“For years, our short-term rental fee was very, very low,” Best said. “The new fee, which is $400 per bedroom, goes straight into our housing fund, which will help us provide housing because short-term rentals are creating more jobs and bringing more visitors to restaurants and businesses that can’t find employees. Our fee is based on trying to support housing for the local workforce.”

The ordinances weren’t met without criticism, according to Truckey and Best.

“We had a ton of negative reactions,” Truckey said. “Especially with two groups, the property managers and the realtors. If you have an existing license, you are good to go, however, the town council said when a property exchanges hands, the license does not go with it. The realtors got up in arms because they were saying the property wouldn’t be worth as much. With the increase in fees, a lot of people howled about that, but they all got a license.”

Other options for affordable housing

There are several ways Breckenridge is trying to overhaul its lack of affordable housing.

In February the town incorporated a Workforce Housing Five Year Blueprint, accessing the needs for housing in the town.

A goal is set in the blueprint to add 150-200 new units each year through the construction of new inventory, as well as the preservation of existing stock. The town projects that will increase local workforce housing by 974 units over the next five years, which translates to housing for more than 1,700 employees and their families.

The town also expects to invest approximately $50 million in housing programs and projects.

They expect $4 million in projected revenue from the new short-term rental fee.

“The five year plan is a way for us to get in front of the council and say, ‘This is our response to the current circumstances,’” Best said. “We are committing and the Breckenridge Town Council is super committed to providing the resources to try to address this trend and reverse it. We would love for a certain percentage of our jobs in town to be filled with people who live in town, as opposed to commuting in.”

One thing about the plan that Best mentioned is that they are not focusing on the quantity of units, but about building neighborhoods.

“Obviously we want to build as many units as possible,” Best said. “But it is more about building neighborhoods and building places where people want to live and stay.”

Another project in Breckenridge that is helping people find affordable housing and helping with the STR issue is its Lease to Locals program.

Since its inception in October, Lease to Locals has converted 54 bedrooms, offering housing to 57 local workers in Breckenridge and unincorporated Summit County, which means any area in the county outside of town limits.

The program provides monetary incentives to property owners, who convert short-term rentals into longer leases for local workers. Property owners can receive up to $20,000 per property depending on how many rooms they open up and for how long they rent them out.

“Say you’ve got a two bedroom condo that you have been renting out as a short term rental, if you agree to rent it to a local, you might get a $20,000 incentive,” Truckey said. “That was one of the programs put into place to help this affordable housing crisis. I think some of the incentives worked out to be an extra $2,000 a month, which is pretty huge.”

Advice to Highlands Town of Commissioners

Best’s advice to the Highlands Town Board of Commissioners is the first step is to deal with the mass conversion of long-term rentals to short-term rentals.

“For us, we can add as many units and try to buy existing units, but if you don’t stop the mass conversion that is happening, you are losing so many units daily,” Best said. “You can do so many things, but if you are losing so many every day to vacation homes, you’re not making any progress at all. Every community needs to decide what type of community they want to be in the future, then take the necessary actions to move you in that direction. Your workforce will eventually be bussing in from wherevers closer. Every community has to look at their goals and say, ‘Do we want people in our community to live here, work here and raise a family here?’ and if you do, then I think the entity needs to take action.”

Truckey advises the board of commissioners to take a step back, limit STRs and do a long term study.

“I appreciate what our town council did,” Truckey said. “It was a brave decision, honestly, but in my opinion, something needed to be done. Maybe there is a different way to go about it. Maybe you don’t stop everything today, but you say that you’re going to severely back off on the amount of permits you’re going to issue and in the meantime, you have a study where you analyze the long-term approach of it.”

In the next article of “STRs causing ‘peak’ problems,” The Highlander will look at Crested Butte, Colorado and how they are dealing with the short-term rental issue.   

- By Christopher Lugo