edUncertainty is a difficult thing to deal with, especially in investing. I have a high tolerance for it, since in my former existence as a trader, uncertainty equaled opportunity. By having a stance in an uncertain situation, one can profit while those who are hesitant sit on the sidelines. This brings me to a current situation in Crested Butte: the limited number of short term rental licenses in town. Currently the number of unlimited rental licenses is capped at 212, this will be a slightly fluctuating number as more homes are built in approved areas. The town council, in setting the restrictions in number of licenses created a subset of an unlimited number of licenses limited to 60 rental days per year. The problem arises from the estimated number of people getting those limited licenses and the real number. Town estimated that dozens of locals would opt for the limited license, since it is quite a bit less expensive than the unlimited. This would then allow some room in the number of unlimited licenses and we would remain below the cap. In reality, only 5 people opted for the limited license, and it's a toss up whether or not the cap on unlimited licenses will be reached in the first half of 2018.
If the cap is reached, either through people already grandfathered in (around 201) or from the waiting list (currently 21) it doesn't matter. Once that cap is reached, any new buyer in town will have to get a license that has been turned in in order to short term rent their house for more than 60 days per year. There is one loophole in that short term rentals are defined by being 29 days or fewer. One could rent in 30 days increments without those days being counted against the 60 day cap for the limited license. The other great benefit about 30 day plus rentals is that the short term rental tax need not be paid. Since that tax in town has recently risen to 18.4 %, that could be a significant money savings.
There will be 1 more chance for people to get licenses, and that will be once the town does the mandatory inspection of rental units. I can imagine there are some properties which won't pass inspection, for whatever reason, and that license would then be put back into the pool.
I think that the cap on unlimited licenses is a bad idea. Town is rewarding people who already have licenses (even those who were on town council and had illegal licenses) and arbitrarily effecting market value of property. For those currently trying to sell their property, there is a great uncertainty about whether the new owner will get a license. This in turn is slowing down sales of houses in town, and could create a situation in which valuations decrease due to this uncertainty. Since the council mistakenly believed that many more than 5 individuals would choose the limited license, I think they should raise the cap on unlimited licenses. Another solution would be to allow licenses to transfer over with the sale of property. Then at least buyers would know that they could rent their property right away, instead of waiting the current 4 months, and likely longer in the future.
Town collects a 3% real estate transfer tax on all sales in town. Uncertainty is causing sales in town to slow, and that situation could continue indefinitely with the license cap. That has slowed tax revenues already, and could have a larger impact in the future as investors forego town properties. Maybe town should already reconsider the short term rental license cap, silly rules have big consequences and we are already seeing some of the fall out.
If the cap is reached, either through people already grandfathered in (around 201) or from the waiting list (currently 21) it doesn't matter. Once that cap is reached, any new buyer in town will have to get a license that has been turned in in order to short term rent their house for more than 60 days per year. There is one loophole in that short term rentals are defined by being 29 days or fewer. One could rent in 30 days increments without those days being counted against the 60 day cap for the limited license. The other great benefit about 30 day plus rentals is that the short term rental tax need not be paid. Since that tax in town has recently risen to 18.4 %, that could be a significant money savings.
There will be 1 more chance for people to get licenses, and that will be once the town does the mandatory inspection of rental units. I can imagine there are some properties which won't pass inspection, for whatever reason, and that license would then be put back into the pool.
I think that the cap on unlimited licenses is a bad idea. Town is rewarding people who already have licenses (even those who were on town council and had illegal licenses) and arbitrarily effecting market value of property. For those currently trying to sell their property, there is a great uncertainty about whether the new owner will get a license. This in turn is slowing down sales of houses in town, and could create a situation in which valuations decrease due to this uncertainty. Since the council mistakenly believed that many more than 5 individuals would choose the limited license, I think they should raise the cap on unlimited licenses. Another solution would be to allow licenses to transfer over with the sale of property. Then at least buyers would know that they could rent their property right away, instead of waiting the current 4 months, and likely longer in the future.
Town collects a 3% real estate transfer tax on all sales in town. Uncertainty is causing sales in town to slow, and that situation could continue indefinitely with the license cap. That has slowed tax revenues already, and could have a larger impact in the future as investors forego town properties. Maybe town should already reconsider the short term rental license cap, silly rules have big consequences and we are already seeing some of the fall out.
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