A consortium of mountain towns will push Colorado state lawmakers this year to pass a bill that would allow local governments to ask voters to tax homes that sit vacant most of the year.

Colorado has no municipalities that impose a vacant home tax, but the growing challenge of providing affordable housing for workers in mountain communities, where real estate prices are soaring and up to 40% of homes are not permanently occupied, is prompting creative thinking about new revenue streams.

“We’re not asking the Legislature to do this. This just clears out some potential minefields for communities that want to do this,” said Jonathan Godes, a Glenwood Springs councilman and president of the Colorado Association of Ski Towns (CAST), which is pushing for the legislation in the upcoming session.

CAST is asking its 28 resort members to support a bold legislative agenda this year. The group also hopes lawmakers will pass a bill allowing local governments to collect fees on every real estate transaction.

(There are 12 communities in the Western Slopes that impose a real estate transfer tax — ranging from 1% to 3% on all real estate transactions — that predates the passage of the 1992 Taxpayer’s Bill of Rights (TABOR), which prevents the imposition of new taxes without voter approval. These communities — Aspen, Avon, Breckenridge, Crested Butte, Frisco, Gypsum, Snowmass Village, Telluride, Vail and Winter Park — have been generating record revenues in recent years while real estate prices are soaring.)

CAST also plans to advocate for legislation that would simplify the process of approving taxes on short-term rentals. In recent years, voters in at least 10 mountain towns have overwhelmingly approved taxes on vacation rentals.

Local governments are preparing for possible ballot initiatives in November that would slow property tax revenues while property values ​​rise. Proposition 50 would cap property tax increases at 4% per year. Initiative 108 would lower assessment rates on residential and commercial properties.

If these measures are passed, “counties will be thinking about how to diversify their revenue so they are not solely dependent on property taxes,” said Summit County Commissioner Tamara Pogue. “The wild swings are hard on our citizens and also hard on those of us who care about good governance and balanced budgets, and both require forecasting skills. That’s becoming increasingly difficult given the annual reduction in the tax rate.”

CAST pushed for the introduction of a property transfer tax last year, but the legislation never moved forward.

CAST deliberately calls the property transfer revenue proposals a “fee” to avoid the legal requirement for voter approval of new taxes under TABOR. While the vacant home tax would require voter approval, a real estate transfer tax could be passed by local elected officials.

“If the land acquisition fees are fees, rather than taxes, used to cover the cost of a specific government service such as affordable housing, then TABOR does not apply,” said an April memo from the association’s attorneys at the law firm Sherman & Howard. That memo cites the Colorado Supreme Court’s 2018 decision that said Aspen’s 2011 ordinance charging 20 cents for paper bags at local stores was a fee to offset the cost of waste reduction, not a tax that would require voter approval under TABOR.

Additional vacancy taxes are also currently being considered outside the state as destinations in areas with large numbers of vacation homes struggle with a housing crisis.

In South Lake Tahoe, voters will vote this fall on a tax on homeowners whose homes are vacant more than 182 days a year. The tax – $3,000 per unit in the first year of vacancy and $6,000 in subsequent years – would support the construction of more housing for working locals. A recent survey found that 44 percent of South Lake Tahoe’s 16,276 homes are vacant, up from 33 percent in 2000. Supporters who want to put the vacancy tax on the fall ballot say it could be the city’s largest single source of revenue.

In Hawaii, lawmakers have been debating a bill for two years that would impose a three percent tax on the assessed value of homes that are vacant for more than 180 days a year. The law is intended to curb real estate speculation in a state where foreign investors now spend up to $5 billion a year on homes – up from $500 million in 2008.

Crested Butte voters in 2021 rejected a proposal for a $2,500 annual tax on vacant homes that were empty half the year.

Most proposals for a vacancy tax point to Vancouver, British Columbia, which introduced a three percent annual tax rate based on the assessed value of vacant homes in 2017. This generated $142 million in revenue for affordable housing in the city while reducing the number of vacant homes by 54 percent.

CAST’s proposal states that vacancy tax legislation would give local governments the power to “prevent these vacancies.”

“Local programs could then use the tax revenue to incentivize renting these vacant homes to the local workforce,” the association said in a statement. (Publicly funded programs in Breckenridge, Eagle County, Summit County and Winter Park offer cash to owners who stop renting their properties to vacationers and sign long-term leases with working locals.)

There are more than 4,000 active short-term rental licenses in Summit County, and federal courts there last month dismissed lawsuits filed by property owners challenging recent local tax plans and limits. Owners of second homes and vacation rentals are increasingly weary of the recent barrage of regulations and proposed legislation, says Toby Babich, who runs a property management firm in Breckenridge and is board chairman of the Summit Alliance of Vacation Rental Managers.

Babich said lodging occupancy is declining and tax revenue from short-term rentals and traditional hotels in Summit County is declining. With the decline, the additional caps, taxes and hurdles threaten the tourism economy, Babich said. Those 4,000 licensed lodgings support local businesses by hosting visitors, he said.

“I don’t know if we’ve reached a breaking point, but if it’s already passed and these local governments are trying to eliminate the short-term rental industry,” Babich said. “There’s definitely a place for taxes and regulations and we understand that housing is needed and it’s difficult to live up here. We want to be part of the solution. But we can’t be the total solution.”

Ski resort association law defines vacant houses as “those that are not used as a residence for most of the year.” It is unclear whether a house full of vacationers – and not necessarily the owner – would be considered vacant.

The U.S. Census Bureau, for example, counts homes rented to short-term visitors as unoccupied because no one lives in them. The U.S. Census’ most recent American Community Survey in 2022 found that a total of 205,621 homes in Colorado were not occupied by owners and 2.38 million homes were occupied. The survey found that 90,728 of those unoccupied homes were for “seasonal, recreational, or occasional use” and 43,819 of those vacant homes were available for rent. Colorado lawmakers have counted about 24,100 homes in Colorado that are available for short-term rentals, many of them near resort towns.

Many of the finer points of the bill — such as how many days a home must be unoccupied to be considered vacant — would be worked out with the individual legislators drafting the bill. And some of those details around a vacancy tax would be addressed on local ballot issues, said Godes, the Glenwood Springs councilman.

“In my opinion, speaking as a city councilor, I don’t think a house that is filled with short-term tenants and sometimes the owner’s family is vacant,” he said. “But that may be different in different communities.”