Carbondale voters are due to be asked this November whether they should levy a 6% excise tax on home rentals to bolster the city’s Affordable Housing Fund.
However, city trustees on Tuesday decided to “put the brakes on” in a separate ballot question to increase the existing tax on hotels and other types of lodging.
The City Council voted 7-0 at its regular meeting to prepare a ballot targeting Carbondale’s newly regulated short-term vacation rental inventory.
Homeowners who rent all or part of their homes for vacation rentals are now required to obtain a city license to do so. Monday is the deadline for applying for rental housing this year. Owners who use their homes as their primary residence and only rent one room or attached unit, or who have property in the city’s historic commercial area can apply at any time under the city’s new rules.
The potential for an additional tax on short term rentals (STRs) and/or an increase to Carbondale’s existing 2% occupancy tax has been discussed in recent months to meet demand for more affordable housing.
“Everyone is doing something about this,” Trustee Colin Laird said, referring to a new state law that allows taxpayer money to be used for housing to help meet housing needs.
The law only applies to county governments and special tourism marketing districts, but it sparked community-level talks across Colorado to examine various tourism-oriented taxpayer dollars to meet the growing need for affordable housing for workers.
Laird noted that given the relatively small number of STRs in Carbondale, the new tax is likely to bring in only about $150,000 to $180,000 per year.
“That won’t solve our affordable housing problem,” he said. “But we’ve talked about small steps that build up into bigger steps, and this is one of those first steps.”
The city has also discussed a possible occupancy tax increase for hotels, motels and bed and breakfasts, but trustees have decided to let it sit for now.
Trustee Marty Silverstein said he was concerned about the potential that two new taxes would charge too much at once and that they could end up competing.
Local lodge owners have also expressed concerns about raising the tax too much and would like to see a more detailed plan of how that extra money would be used.
In addition to using some of the proceeds from a higher lodging tax for housing needs, the city’s Tourism Council has recommended using funds to address some of tourism’s impacts, such as footprint.
The Trustees agreed that it would be better to iron out those details and look at another election issue related to the Lodging Tax next year.
“I think it’s worth spending a year really working with the housing groups to develop a plan,” Mayor Ben Bohmfalk said.
The STR tax, on the other hand, doesn’t directly impact local taxpayers as it’s paid for by the holidaymakers renting the properties, he and the six trustees agreed.
Since hotels pay a higher business tax rate and vacation rental owners pay the lower residential property tax rate, “this also levels the playing field,” Silverstein said.
However, the excise tax on STRs would be in addition to the city’s occupancy and regular sales taxes, which are also levied on vacation rentals.
Trustee Erica Sparhawk said it’s possible the city may also want to consider a separate tax proposal more specifically related to housing, possibly linked to a bond issue, rather than raising the lodging tax.
Senior Reporter/Managing Editor John Stroud can be reached at 970-384-9160 or [email protected]