Aspen’s relationship with short-term leases: it’s sophisticated | Information

A Saturday afternoon search for two guests to stay in Aspen from Aug. 20-22 on Airbnb netted 13 pages of results — 236 properties.

The first two pages looked like what an average traveler would expect: two-bedroom condos that, when you account for the sleeper sofa, can sleep up to six. After the service fee, totals for such places would cost between about $700 and $900 for the weekend. Considering a room at the Hotel Jerome would run someone $2,174 a night — or $4,939 in total for the trip — Airbnb doesn’t seem like a bad alternative.

But guests of the Hotel Jerome, or any of its contemporaries, are looking for a luxury experience. Other commercial lodges in Aspen charge more than $600 per night, with totals ranging between $1,500 and $1,700 for the weekend, according to a quick Google search.

So it’s tough to blame people who use Airbnb — both those who stay as guests and those who host. In fact, beneath the boxes to fill in dates of travel and number of guests on the Airbnb Aspen search, a tempting message pitches, “Earn up to $2,197/month hosting your place in Denver,” with a linked invitation to “become a host.”

And that’s just in Denver.

Go to Page 13 of the search results for Aspen, and you start to get an idea of how the other half lives. On the high end, there’s a six-bedroom, 5.5-bathroom estate that commands $40,409 per night — $92,228 total for the weekend in question, after the $11,410 service fee. On the low end is a three-bedroom, three-bathroom residence at the St. Regis Aspen for $4,000 a night — $9,129 for the weekend.

To be clear, there’s nothing wrong with either listing. “You can list [a St. Regis residence that you fractionally own] however you want, you just have to make sure you fill out the proper form with member services,” a concierge informs via phone Saturday afternoon.

And again, by comparison with the $5,563 it would cost to stay in a one-king-bed arrangement (that sleeps four) in the hotel side of the St. Regis during the same time period, Airbnb looks pretty reasonable.

But looking at Airbnb listings is just scratching the surface of an iceberg that goes much deeper in Aspen. One that, if you drill down far enough, sends ripple effects through the entire Roaring Fork Valley economy.

Michael Miracle is unabashedly passionate about the subject. And he’s not the only one — in reporting this story, several people expressed a nervousness, if not outright trepidation, about going on the record with their comments about how, in their estimation, the short-term rental market is negatively impacting the broader region. But in Miracle’s case, he maintains that Aspen Skiing Co. hired him to learn the most dire issues facing the community. After all, his title is director of community engagement.

“My job at the company is to deeply understand what’s going on in the community, and I tell people Aspen has a vision of what it wants to be, and then there’s the reality of what it is — and then there’s the path that it is on on what it is sort of becoming,” he said. “And understanding those three things, reconciling them, recognizing how they may be more divergent and inconsistent than people realize is a big part of my job.”

And so he began taking a look under the hood, so to speak.

“Over the past five years, I have sat on multiple working groups: traffic and transportation (RFTA, the Aspen Institute’s upper-valley mobility task force, EOTC meetings and retreats and lots of individual research); mental health; child care; housing (including Pitkin County’s housing stability task force, which is focused on homelessness); airport; zoning and master planning (I was part of Pitkin County’s eight-week look at residential within the context of growth management goals),” he noted via email.

In addition to that, Miracle also worked with graduate-level students at the University of ­Colorado-Boulder on a project regarding short-term rentals that was specifically focused on Aspen.

“And because I sit in Aspen Skiing Co.’s sustainability department, I am involved in climate change conversations nonstop,” Miracle said.

Unfortunately, no one community is going to solve climate change, though it’s imperative everyone be involved, he noted. So barring that topic, the other underlying issue Miracle has concluded has permeated nearly every other conversation locally is the one that’s happening — or not, rather, at least not as robustly as he’d like — around short-term rentals.

“I actually started thinking about this really when I was diving in on traffic and transportation and trying to understand, who’s in the cars coming to town? And I started to realize that skier visits have been largely flat over 20 years. Castle Creek bridge crossings are pretty flat. But then you look at RFTA ridership, it’s dramatically gone up [excluding COVID-19 restrictions],” he said. “So you’ve got many more people coming into town, but what are they coming to do?”

The answer, he said, is that they work in the shadows — that is, in what he calls the “shadow economy.” They’re the commuters heading upvalley for work in the residential construction and service sectors.

“There’s a whole new job sector that is growing more and more each year, this residential service sector,” Miracle said. “If you’re going to rent a residential property as a lodge, you need for it to be cleaned every time someone leaves it. There’s a ­service component to this sector that is significantly more than an empty second home might be.”

The real estate market seems to know no bounds, and the rental market is no exception, especially since COVID-19, when property values skyrocketed (and continue to do so) and ­people from all over the country in what became known as the urban exodus flocked from being cooped up in cities to the open air and open spaces promised in Aspen.

Suddenly, even those in Aspen with among the most enviable net worths — who traditionally were not interested in renting their second or third homes to strangers — were experiencing a change of heart, or at least evaluation of the market.

“Historically, high-priced houses were rarely rented out as owners did not need or want others in their house. The high rental rates have certainly changed that, at least with some high-end buyers,” said Randy Gold, proprietor of Aspen Appraisal Group.

It’s a sentiment echoed by Skippy Mesirow, whose perspective is a bit unique: Mesirow positions himself as a champion of affordable housing in both his role as city council member and chair of the Aspen-Pitkin County Housing Authority board. He also earns his primary income as location manager for SkyRun Vacation Rentals.

“What is often untold is that the more expensive a property becomes, the less likely it is to become a [short-term rental],” he said. “But COVID has complicated that in a big way. A lot of places that weren’t renting before — this isn’t the one-bedroom condo, but the homes that sat empty — a lot of these are being built as spec for STR.”

A “spec” house is described as one built on speculation, of sorts — that is, there isn’t a definite buyer lined up, but the developer hopes one will emerge upon a project’s completion. People who work in and study the short-term rental market use the term often to describe a house built with the intention that it will create a full rental income, though several local builders, when asked, disagreed that the term should be applied to the short-term rental market.

Here emerges a common theme that seems to underlie every point of conversation in the dialogue: namely, it’s complicated.

But one thing is clear — building a residential home, from a zoning and public hearing perspective, is far less cumbersome than building a new commercial lodging property. As evidence, Miracle says one need point no further than the long defunct Boomerang Lodge, which developer Mark Hunt bought for about $10 million in 2018. Zoned residential, the property also allows for free-market, multi-family affordable housing. Such a concept had been pitched for the property, but a group of neighbors opposed the affordable housing pitch in 2011. Now, the property remains vacant, Miracle pointed out, as any future use Hunt or anyone else envisions for it will have to receive approval from Aspen City Council.

Meanwhile, in the same neighborhood, a few homes are being constructed in the literal shadow of Shadow Mountain. Miracle maintains they’ll become part of the larger shadow economy, as the intention for the properties is that they become short-term rentals.

Mesirow confirmed as much, at least for the property at 501 W. Hopkins Ave., a home that according to will command $175,000 a month and came in front of the city during a proposed land swap, in which the developer who owns the property was willing to give the city of Aspen more than 19 acres in exchange for 4,000 square feet of public right-of-way around his property. That same developer wanted to pay cash in lieu for affordable housing mitigation.

“This is a perfect illustration of what our community has ‘chosen,’” Miracle lamented. “Money flows into residential because there’s very little obstacle there; residential converts to lodging whenever it wants. But something that is zoned as a lodge has a very different set of obstacles that it must overcome to come back to life as a lodge.”

When that house is rented, it will require an entire staff to maintain its upkeep. Landscapers, chefs, housekeepers, you name it. That conversation circles back to Miracle’s initial observations about the uptick in traffic and RFTA passengers heading into and out of town each day, despite other more obvious industries having seemingly plateaued.

Tricia McIntyre, proprietor of Aspen Luxury Rentals, takes a different approach than Airbnb and VRBO, but also a different one than those in the real estate market, whose brokers have become “rental experts,” though she shared some skepticism toward that term. Her company employs 10 full-time staffers just to maintain the property-management component of the business. Far from caring about the net worth of her clients, she cares more about the ages of their ­children, she said.

“I want to know how old their kids are so they have rental bikes and if they have snacks when they arrive,” she said.

But there’s a barrier to entry in this market, she continued — even though McIntyre’s been in this market for more than 15 years. Namely, it’s become difficult to get properties listed under her property management umbrella with such a saturation of real estate brokers. And, for the most part, that doesn’t serve the guests, she maintains. Or Aspen’s larger reputation.

“Realtors should have no business doing rentals,” she said. “They have no hospitality background; they have no idea about how to do a hospital corner on a bed, what a daily housekeeping check is … but they’re doing them and they’re making a fortune,” she said. “But they’re doing it at the expense of the guest. I’m just waiting for a shoe to drop — you wouldn’t believe what’s going on in this town.”

For instance, say someone books a short-term rental for $15,000, and they put down a security deposit. But because it’s a short-term rental, the lease isn’t treated the same as it would be for a long-term rental: there may never be before-and-after photographs taken of the property, but there’s a security deposit required, nonetheless. And if an owner claims that damage occurred during a stay, a client may have little opportunity for rebuttal.

“There’s nobody slapping them on the wrist and saying, ‘Stop it, you can’t gouge people like this,’” McIntyre said.

Andrew Ernemann, owner of his namesake consulting firm Ernemann Real Estate Advisors, didn’t argue against that point — but he underscored that he wouldn’t characterize the entire, or even majority, of the industry as bad actors.

“It absolutely happens — I personally don’t handle any rentals because I look at rentals as the wild, wild West, especially in Aspen,” he said. “Part of the reason I have people on my team who handle rentals is there’s the whole gamut of brokers who may or may not be licensed who don’t take the care or aren’t trained or don’t have the expertise to handle [that level of clientele]. And then there are many who are incredible at it and do full before-and-after photos … and beautiful leases.”

A big reason for the discrepancy, everyone seems to agree? Regulation, or lack thereof.

“There’s definitely, in my opinion, there’s less oversight and scrutiny from a state regulation level and a local real estate company level on brokers doing rentals, and every singe lease — because the volume is so much that I think it’s just become something where it’s hard to keep up with all of it, and people look at it as, ‘It’s not a $1 million transaction, it’s just a lease,’” Ernemann said. “But there are people in Aspen who are doing it really well.”

Indeed, Frias Properties boasts more than 150 condos and homes in downtown Aspen for rental options, according to the lodging page on its “Aspen Vacation Blog.” It offers concierge services, which can arrange “groceries, wine and liquor and even meals from local restaurants to be delivered to your rental,” the page points out.

It also points out another incentive: “We have reduced our rates by 15-25% this summer, and, when you book a rental of 30 days or more, you are exempt from paying the 11.3% lodging tax!”

That’s another fact Mesirow and McIntyre both bemoaned — without enforcing the current law, which as of October last year requires each property owner who rents property on a short-term basis to acquire a business license and vacation rental permit, there isn’t an accurate way of gauging how many dollars the city has potentially lost to uncollected taxes.

But for both of them, the issue is complicated, although for different reasons. In Mesirow’s case, he cares deeply about the issue but acknowledges that given his current professional role, it may mean having to recuse himself from future votes that he otherwise would have fought to have gotten to the agenda in the first place.

“It’s possible that I may have to, I don’t know. I’m in it so I can live — I was running a nonprofit trying to support entrepreneurs in the valley,” he said of his professional chapter before finding himself in the short-term rental industry. “This opportunity literally walked into my door. It’s hard to work … for $17,000,” he said in reference to his role as city council member. “So finding another job that has enough income to pay rent and the flexibility of time is almost impossible.”

For McIntyre, too, it’s tough. On the one hand, short-term vacation rentals — as a dedicated, professional property manager offering everything from arranging child care to transportation to Christmas decorations as part of the vacation experience in the Aspen area — has been her professional passion and world for roughly 18 years. On the other hand, she’s exhausted. And she doesn’t feel she can responsibly speak entirely well of what the industry has become. She said like Miracle, she’s sat in on plenty of meetings and served on advisory boards, but she hasn’t seen the meaningful dialogue she’d hoped to by now.

“It’s in awful disarray right now,” she said. “I sit in these BOCC meetings and I’ve talked to the [city of Aspen] finance department about it and talked to them about ways to collect the sales tax and monitor it. I feel like a pain in the ass.”

Mesirow described the city’s licensing requirement so far as “definitely successful.” But, he noted, that term describes just his impression of the notable uptick in the number of property owners who have since obtained licenses and permits. The next step, he underscored, is enforcement for those who have not complied.

As for labeling short-term rentals as good or bad and looking at the role they may play in the future, again, it’s complicated.

“I think the part that’s most difficult to talk about or balance is that the tourists of today is the town of tomorrow,” he said, adding, “95% of us weren’t born here. If we want a crystal ball to see Aspen in 30 years, we just need to look at our tourist base today. Because a lot of our land-use choices … the traditional lodging market has become completely unattainable. I think we just have to be careful about saying all STRs are bad. An STR that displaces a local worker is bad.”

Circling back to Miracle and his CU students with whom he worked, they too felt the impact of the short-term rental market on the larger landscape, recommending five alternative policy approaches, ranging from registering the number of short-term rentals (as is current policy) to capping the number of such properties allowed in certain zones.

That is far from unheard of, Miracle, McIntyre and Mesirow all emphasize: from towns as near as Palisade to Park City, Utah, to Chattanooga, Tennessee to Key West, Florida, plenty of other municipalities of destination locations have found ways to offset the perceived negative impacts of the market.

Gold acknowledged outright that the impact of short-term rentals is being felt throughout the larger real estate market.

“My sense is that the thriving short-term rental market is a bonus for buyers and simply another motivating factor to buy. Stated another way, while some purchases in Aspen and throughout the valley are affected by the rental prospect, I doubt that many purchases and the prices being paid are driven by this metric.

“For most Aspen-area buyers, it would be my view that the ability to rent out their property for an exorbitant short-term amount is likely not resulting in higher prices per se, but is rather a factor considered in paying a higher price,” he continued. “Stated another way, I would be surprised if a buyer willing to pay $10 million for a house would pay $10.5 million for that same house because it can be rented out. Instead, they may have to pay $10.5 million for that house to make the deal and the ability to rent it may make that more acceptable.”

What goes up must come down in the Roaring Fork Valley, as it comes to housing, anyway. The increased value in residential properties — for whatever reason — is being felt downvalley, as well, a fact Gold acknowledged.

“My guess is there, where pricing is more moderate, active short-term rentals could be more of an influence on price,” he said, with the preface that his direct experience is in the Aspen market.

Ernemann, too, said there’s no denying the interrelationships throughout the market in every sector, including real estate. That’s become especially true in the last 15 months or so, since the pandemic.

“Some buyers are attracted by the opportunity to purchase a property and then rent it out when they’re not using it or rent it out full-time, and that’s not new. I think the biggest change in the last 15 months is just the pressure on the market — just the number and intensity of people wanting to be in Aspen. You can’t just say the short-term rental now is pushing people out of long-term — that’s not fair,” he said.

“What you can say is there’s incredible pressure on occupancy all year round now … owners see that and say, ‘I can make more money in short-term rentals than long-term rentals.’ But it will also encourage owners on the sidelines to say, ‘I’m going to rent my property,’” which may help the long-term renter.

And if the current players weren’t on the field, someone else would be, he points out.

“There’s lots of people who love to point at realtors and say, ‘This is ridiculous that you would charge a 20% commission or a 10% commission on a short-term rental,’” he said. “I don’t think it’s fair for people to point at that and say realtors shouldn’t benefit from that. It’s business, it’s capitalism, it’s our country.”

In short, it’s a long conversation. And it’s complicated.