Hundreds of Denver property owners are shutting the door on short-term rental investments as Denver cracks down on rule-breakers in a way no other American city is doing.
As of Thursday, 154 people have surrendered their licenses and another 126 have withdrawn applications this year as four people faced felony criminal charges for falsifying documents related to their rental properties, according to data obtained by The Denver Post from the city’s Department of Excise and Licenses. In 2018, 93 surrendered licenses and no one withdrew an application.
The surge in surrenders and withdrawals has come as the city began asking property owners to sign affidavits, swearing they were in compliance with a rule that their short-term rental locations were also their primary residences. This summer, the Denver District Attorney’s Office, in cooperation with the excise and licenses department, began filing criminal charges against people who investigators say lied on their paperwork.
“This was a unique tactic that would really put people in a position where they really have to come clean and it’s working,” said Eric Escudero, excise and licenses department spokesman. “(Hosts) are realizing the seriousness of this and it’s been an effective tactic that helps us better regulate an industry that’s very difficult to regulate.”
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The rules for short-term rentals such as Airbnb and VRBO were established by the Denver City Council in 2016 after residents began complaining that people coming and going from houses were disrupting residential neighborhoods. Denver is the only city in the country that asks license holders suspected of cheating to sign affidavits.
Those who support the city’s rules say they protect residents and neighborhoods while critics accuse the city of going overboard with unwarranted enforcement.
“This tactic was conceived in an overall effort to improve our short-term rental compliance with existing laws,” Escudero said. “Short-term rental rules are in place to protect the integrity of Denver’s neighborhoods and curtail short-term rentals that could negatively impact affordability in Denver, which is a huge point of emphasis.”
But Daniel Recht, a lawyer representing a property owner charged with a felony in connection with an Airbnb listing, called the city’s rules “disturbingly atypical and unusual.”
The debate will continue, but the numbers show Denver officials are serious about enforcement.
The city received 648 complaints about short-term rentals between Jan. 1, 2018 and Aug. 13, according to data from excise and licenses. Of those complaints, 491 involved primary residence violations. The rest were related to licensing and impacts on neighborhood such as noise or safety issues.
“It’s not an effort to get people in trouble, but we take this very seriously,” Escudero said. “We get an average of three complaints per week, so we have to listen to those complaints. We have to take action.”
Under Denver ordinance, anyone listing a house for a short-term rental must register with the city and pay for a license. If the city has reason to believe the rental property is not an owner’s main residence, then investigations and enforcement steps begin. That’s when investigators can ask property owners to sign the affidavits. The enforcement action can range from warnings to fines to felony charges.
Between March 1 and Aug. 27, the city held 46 investigative hearings, which resulted in either a surrendered license or a primary residence affidavit sent, data from excise and licenses show. Of 186 instances where the city has attempted to deny licenses, 83 property owners withdrew their applications, 15 cases were closed because owners dropped out of the process and six licenses were denied. Another 34 received affidavits they needed to sign to verify the properties were primary residences; 30 received licenses. The remaining cases are pending.
Denver has one of the highest compliance rates in the nation for short-term rental licenses, Escudero said. That’s, in part, due to the enforcement although other theories also exist when it comes to Denver property owners following the rules, he said. As of Thursday, 75% of the homes listed online were registered with the city, excise and licenses data showed.
The compliance rate has been on the rise as word has spread about the rules and as excise and license investigators respond to complaints. Investigators start with warnings and gradually become more aggressive.
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The first criminal charges came in June when Alexander and Stacy Neir were charged with attempting to influence a public servant in connection with their rental property. The couple lived in Stapleton but were listing a house in the Berkeley neighborhood and another near Jefferson Park on Airbnb, according to their arrest affidavits. They had signed documents saying those homes were their full-time residences.
However, Recht, the attorney representing Alexander Neir, said the affidavits were vague and ambiguous. The forms were emailed without any explanation but with a request the couple sign them and send them back.
No one interviewed the Neirs or asked them about signing the affidavits, Recht said. The excise and licenses office, however, says its employees contact short-term rental owners before sending the forms.
“This all raises the question of whether disagreements regarding the interpretation of the bureaucratic regulation should be resolved via felony prosecutions,” Recht said. “We would suggest not.”
The affidavits are often used as a last resort after investigations reveal problems, Escudero said. Licensees who don’t want to sign the documents can take the issue to an investigative hearing, Escudero said.
In April, the Denver Office of Economic Development and Opportunity determined short-term rentals in Denver don’t appear to be negatively affecting the housing market or affordability mainly because of the primary residence requirement.
“This prevents investors from purchasing housing that would otherwise be used for normal, long term residential purposes, thereby decreasing the housing supply and inflating prices,” the report stated. “The enforcement of these regulations is critical to ensuring that short term rentals do not inflate housing prices in Denver.”
The move has elicited mixed reactions, even from those who are running legal short-term rentals.
Pat Romero, who rents out the second story of her historic 1885 house, sees both sides. As a traveler who uses Airbnb, she has stayed in primary residences and full-time rentals, and sometimes, she enjoys having a whole place to herself.
Years after retirement, the 80-year-old Romero decided to use the house as a short-term rental for additional income. Barely a day goes by when the room isn’t rented out.
“Airbnb gave me some structure,” Romero said.
Airbnb company spokeswoman Laura Rillos declined an interview with The Denver Post, but sent a statement saying, “Airbnb is an economic lifeline for Denver families and an important part of the local economy, and we remain committed to working with the city to ensure short-term rentals continue to strengthen the community.”
VRBO officials did not return multiple requests for comment.
Adam Hevenor, a Denver Airbnb host since 2015, said he opposed the city’s regulations when they were created because he thought it was an attempt to push out short-term rentals. Airbnb also was against the rules and organized a meeting for its clients to encourage opposition, he said.
“But over time, I’ve come to realize that Denver’s rules are very sensible,” Hevenor said. “They’re able to balance (running) Airbnbs like we do but also keep the housing market under control.”
Residents, particularly real estate agents, who are running afoul of the rules, frustrate Hevenor. Requiring rentals to be primary residences keeps competition down, making it more difficult for investors to buy up properties to rent, he said.
And despite the regulations, Hevenor said he found the license easy to obtain.
“We’ve had good experience in general,” Hevenor said. “It generates a fair amount of income and we have pretty steady demand.”
Story updated at 2:11 p.m., Sept. 4, 2019 to provide updated information on the number of complaints against Denver short-term rental operators and how many of those involved primary residency complaints.
