City Policy Reducing Aspen’s Short-Term Rentals
A recent city of Aspen policy is significantly steepening an existing decline in short-term rentals in Aspen.
Recently enacted caps on certain short-term rentals in residential areas have created a backlog of applicants seeking to open new STRs on their properties. The number of waitlisted applicants unable to immediately acquire permits is roughly equal to the decline in Aspen’s STR units between 2023 and 2024.
While the policy cannot account for longer-term trends in declining STR numbers, it accounts for a significant portion of this year’s drop.
According to city data produced in a memo this week, the number of Aspen’s short-term rentals — housing units rented for periods of under 30 days, often through services like AirBnB or Vrbo — dropped by 53 units between 2023 and 2024. The number represents active business licenses granted for individual units operating as STRs within city limits. Meanwhile, the number of applicants waiting to receive capped STR permits is 48. Each capped STR permit, like each business license, corresponds to one unit. By keeping those 48 applicants on the waitlist, the city has kept new STRs from replacing old ones as they drop off.
This dynamic reflects the stated goals of the city’s cap policy, which explicitly aims to reduce non-owner-occupied STRs in residential areas by 25% over the coming years. The April 2022 ordinance that created the cap states that STRs limit housing availability for full-time residents and erode neighborhood character. At the time the ordinance was passed, the city was experiencing a spike in STR activity corresponding with the COVID-19 pandemic, with the city stating in a presentation that 16% of Aspen’s existing housing stock was functioning as STRs.
“The reason we’re having all this conversation is that we feel that it’s too much,” City Councilman Ward Hauenstein said at the time. “I would like to see the effect of reductions. … I think we need to make some kind of substantial move here, and just leaving everything as it is I don’t think is acceptable.”
The cap policy specifically limits STRs whose owners live outside their units for most, or all, of the year. The so-called “classic” permits for this kind of unit are capped at different levels throughout 14 residential zones.
Other STRs, such as those operated by hotels or lodges and those in units where the owners are full-time residents, are also not capped.
Before this policy, STR operators acquired “Vacation Rental Permits,” which were grandfathered into the new STR permit program. As the number of grandfathered and new permits exceeds the caps in some zones, the city cannot begin issuing new permits in those zones until the number of existing permits drops down below the cap (this occurs as owners abandon the permits for various reasons). In the meantime, applicants for new permits build up on waitlists.
A city memo distributed on Tuesday states that at their current rate of abandonment, it could be two years before the first applicant on the longest waitlist, which currently sits at 37 people, gets a shot at acquiring a new permit. Applicants now entering the end of the list have heard from city staff that their wait might last 10 years.
While the classic permits have declined by 6% since 2023, uncapped categories have seen smaller drops. STRs operated by lodges and hotels have declined by 2%, and owner-occupied STRs have even increased (72 to 76 units).
Nonetheless, the program cannot explain a longer-term decline in STR sales, which predates the cap system (the system truly went into effect at the beginning of 2023).
According to a financial update presented to city council members on Tuesday, taxable STR sales dropped 11% between 2022 and 2023 ($105 million to $94 million). At the same time, the memo notes that long-term rental arrangements in Aspen appear to be rising, citing an 18% increase in long-term rental deductions on tax filings between 2022 and 2023. The memo, however, points out that this increase could be a result of increased awareness around tax filing practices.
City staff have offered several explanations for the remaining decline in un-capped permit types and in non-residential areas, including the diminishment of pandemic-era demand for STRs and a slight softening of Aspen’s tourism economy (traditional lodging transactions declined by 4% in 2023).
Staff also recognized in the information memo that another new city policy — an STR excise tax imposed in 2023 — could be stifling demand for STRs. The tax runs as high as 10% on nightly stays at STRs with classic permits (5% for owner-occupied and lodge-operated STRs).
Some STR operators are feeling the squeeze.
Texas resident Dustin Nicholas and Illinois resident Scott Sherman lost the STR permit for their E. Hyman Street. condominium because of a missed renewal deadline in January. Sherman’s and Nicholas’s families have a record of operating short-term rentals on the property for over 40 years. Their unit is in the zone with the longest waitlist (known as Zone R-MF), and city staff have told them they could face a wait time of up to 10 years before they can get another permit.
Sherman and Nicholas said they cannot afford to keep the property if they don’t rent it in some way, so they will transition it to long-term leases. That arrangement, however, will limit their ability to use the unit with their own families during holiday seasons.
“My family spends every Thanksgiving there together,” Nicholas said. “Family from all over the country comes in, from California to Texas to the East Coast, to all be there for Thanksgiving. And it's been a tradition of our family since the late ‘90s.”
Nicholas’ father-in-law and Sherman’s father bought the condominium together in 1976. Both men have since passed away, leaving the unit to their wives, who now rely on it as a meaningful source of income. Nicholas and Sherman manage the unit for their mother and mother-in-law.
“We both love Aspen,” Nicholas said. “It's been a part of our lives for forever. And so the short-term renting has allowed us to pay the bills, help support our mother-in-law and mother, respectively, and continue to go out there and enjoy the town that we love.”
Nicholas said he understood that the city wants to maximize housing for local residents, but questioned whether long-term leases, as opposed to STRs, would benefit locals.
“How many locals can afford to live in pay 12,000 a month for a unit at long-term rate?” Nicholas questioned. “Whoever starts renting this unit, could very well not be a local person, even if they're renting it long term.”
By: Austin Corona| Aspen Daily News I March 29, 2024