By Vincent Carroll
The Denver Post
Posted: 01/24/2015 05:00:00 PM MST

Hundreds and possibly thousands of people in Denver and Boulder are illegally renting out rooms in their homes — or their entire residence — in short-term agreements through online services such as Airbnb. And now, both of these cities are poised to decide what to do about it.

Opinions range all the way from enforcing existing bans against short-term rentals in residential areas (which are rentals of fewer than 30 days) to throwing open the doors and letting them prosper without limit, with a range of options in between.

If these cities are smart, they’ll loosen regulations to legalize short-term rentals, while ensuring they pay taxes. But the regulatory questions involving short-term rentals extend far beyond whether they stay or go.

Denver’s Inter-Neighborhood Cooperation group, known simply as INC, released an analysis last month of the “impact to Denver’s neighborhoods regarding short-term rentals,” and it amounts to page after page of unrelenting alarm. Short-term rentals, the document suggests, could jeopardize the “peaceful and quiet enjoyment of one’s home and property,” “change the nature of a neighborhood,” “decrease … property values,” create burdens on city services and available parking, provide a “Mecca for out-of-state visitors for recreational drug use,” reduce the availability of affordable housing, and boost housing costs.

And those are just the highlights!

Margie Valdez, who helped prepare the gloomy analysis, assured me that “we were just trying to spot the issues for Denver, so we didn’t go into possible remedies.” And as negative as the analysis might be, INC has not taken an official position on short-term rentals, she added, but will discuss them at its February meeting.

Meanwhile, Denver Councilwoman Mary Beth Susman, who has chaired a task force of interested council members to examine the issue, says, “I couldn’t tell you which way we’re going to go at the moment.” Susman estimates 1,000 Airbnb hosts exist in Denver — “not very many out of 300,000 households.” But the number has almost certainly been surging in the past year or two, as home sharing grows in popularity.

And it’s not just Airbnb, she reminded me. “There are five or six of these sites” that coordinate short-term rentals, such as HomeAway and VRBO (the familiar “vacation rentals by owner,” which has been around for years).

Meanwhile, Boulder Mayor Matt Appelbaum estimates the number of VRBOs in his city at 250, most of them in or near downtown. Some are run as businesses, he says, while others are booked infrequently. As for Airbnb, he thinks 500 to 1,000 homes may have signed up, although city staff is still trying to get a handle on the number.

“What are we going to do about it? I don’t know,” he told me. “On the one hand, it’s really hard to imagine us saying, ‘You can’t do this’ — although of course right now it is illegal. But we’ve got old codes and, like Denver, this happened really fast, and nobody can update their code on the spur of the moment.”

Appelbaum notes that Boulder licenses and inspects rental properties, and “we’re really serious about it.”

“So the question is,” he added, “if rental properties have to be licensed and inspected, why is Airbnb different? Should it be different?”

Not long ago, Boulder sent cease-and-desist notices to 20 property owners who were renting space through Airbnb or VRBO, but rescinded them almost immediately when council members got wind of it. The council plans to take up the issue of short-term rentals next month, and didn’t want its efforts pre-empted.

Both Appelbaum in Boulder and Susman in Denver worry about the impact on rents and affordable housing of investors buying up rental property for exclusive use as short-term rentals. “That kind of business, in my opinion, threatens our diversity of homes and also affordable homes,” says Susman. Appelbaum believes this is more of an issue for VRBOs than Airbnb, but that “even if it’s only 300 VRBOs, it’s still 300 units that aren’t being rented out but are being used by visitors.”

Denver Councilwoman Jeanne Faatz takes a harder line. “This really offends me to have people buying up homes in residential areas to use for this purpose.”

“Are we going to try to maintain residential areas or just throw that to the wind?”

When she asked her constituents by questionnaire whether they favored allowing short-term rentals in southwest Denver, she said, 80 percent said no.

But how many homes could ever actually be used exclusively for short-term rentals, with absent owners treating them as investment property? There is a limit to the potential demand for home-sharing, just as there has been a limit to the demand for motels and hotels. And many neighborhoods, mine in southeast Denver included, would hardly be highly sought centers for visiting tourists.

But if officials are worried, they could require a short-term rental property remain the owner’s primary residence. For every would-be investor champing at the bit of short-term rentals, there must be numerous homeowners who simply wish to supplement their income — and have no more wish to undermine their neighborhood than anyone else.

Even that strategy is not without risk. When San Francisco imposed strict residency rules on short-term rentals in October, the city was promptly sued by HomeAway, which operates both HomeAway.com and VRBO.com, for discriminating against its business model.

The concerns of short-term rental critics are not to be dismissed, since most of us move into a community expecting reasonably stable neighbors, not a stream of visitors next door. But why anticipate the worst from the outset, as some critics seem to do? As these services evolve, maybe we’ll discover they have indeed created unintended problems that need addressing. Meanwhile, keep regulations on the light side.

Susman has asked city staff to draft a “straw-man ordinance” that includes licensing of short-term rentals and mandates that hosts pay a lodger’s tax, use the property as their primary residence and limit rentals to a “certain number of times a year.” She expects to have it in hand by the end of the month.

In other cities, Airbnb has agreed (or acquiesced) to regulation involving taxes and primary residence, among other things, but it has hotly contested some proposed restrictions.

And so have its hosts. Portland’s complex regulations may be a lesson for both Denver and Boulder. Six months after Portland legalized short-term rental operations in July, fewer than 10 percent of Airbnb hosts had volunteered for the permitting and inspection mandate.

If Front Range cities aren’t careful, they could end up passing laws their residents simply ignore, too.

E-mail Vincent Carroll at vcarroll@denverpost.com. Follow him on Twitter @vcarrollDP