COLORADO SPRINGS — Local elected leaders are taking a closer look at property taxes and how they apply to short-term and vacation rentals. El Paso County Assessor Steve Schleiker wrote an email to City Councilman Wayne Williams this week explaining that hotels and motels are not considered residential properties due to the fact that rooms are rented for less than 30 days. He went on to say that short terms rentals listed on websites like Airbnb should be considered non-residential property based on that legal description.
Businesses pay property taxes at a rate roughly four times higher than homeowners. Property taxes are calculated based on the assessed value, or a percentage of the fair market value. The assessment rate for commercial property is 29 percent of that value, for residential property it's 7.15 percent.
At the moment, El Paso County does not assess short term rentals at non-residential rates. Schleiker explained that its difficult to identify a residential home that may be listed on Airbnb.
"The difference between (businesses) and Airbnbs is they've got signage," he explained. "They're out there like a business we all are so used to seeing. Airbnbs you don't know if they're privately owned or an Airbnb."
He's also concerned that a sudden switch in classification could cause unintended consequences. Residential utility customers pay lower utility rates that commercial customers. Property insurance is also lower.
"This could have ramifications on a lender where a lender is going, we lent on the property as a single family primary use property but now it's commercial, are they going to call the note," Schleiker wondered. Calling the note means demanding the mortgage be paid in full. It's a worst case scenario, but Schleiker said it shouldn't be overlooked.
A spokesperson for Airbnb said in a statement that reclassifying their members properties would be damaging to their ability to earn extra income.
"The vast majority of Colorado Airbnb listings are rented for less than half the year and any change to property tax rules would undercut the thousands of Coloradans who rely on the supplemental income they earn to pay the bills," the statement reads.
Yet, maintaining the status quo damages other businesses in the hospitality industry. Traditional bed and breakfasts, hotels and motels are all competing against the short term rentals while paying higher taxes, utilities and insurance costs due to the regulatory environment. Hoteliers and innkeepers must also charge their customers Lodgers and Auto Rental Taxes (LART).
"When you have a business that is competing with other businesses, you have to sit there and look at, is it fair if one business gets the residential assessment rate and the other does not," he said.
Schleiker thinks the tax structure must be fair and equitable for everyone in the state. While El Paso County may not list short term rentals as commercial properties, other counties already do. So, Schleiker is speaking with state lawmakers in the community to encourage them to introduce a bill in the next session to create a fair an uniform policy statewide.
"Right now, we have assessors throughout the State of Colorado that probably look at this differently. And they could sit there and in one county, the assessor will be picking those up as non-residential properties where in another county they would be leaving them as residential property."
In the meantime, he is working with the County's Public Information Office to schedule of series of public meeting to answer questions about property tax law and any potential changes.
