Frisco Colorado Short Term Rental Information and Meeting

MEMORANDUM

 

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MAYOR AND TOWN COUNCIL

DANELLE COOK, HOUSING PROGRAM MANAGER

SHORT-TERM RENTAL OVERVIEW AND STRATEGIES CONTINUED FROM 6/14

JUNE 28, 2022


Summary and Background: At the June 14th Town Council Work Session, Town staff presented a general overview of short-term rentals and various strategies that could be considered going forward. The Town of Frisco began regulating short-term rentals on May 1, 2019. At the end of 2019, the Town had issued just love r400 STR licenses. Three years later, that number has grown to over 700 licenses, equating to 20% of our entire housing inventory. While short-term rentals undoubtedly have a positive impact on the local economy by adding jobs and increasing revenue, they also have negative impacts such as decreasing the availability and affordability of housing, diminishing residential character, and causing disturbances for the surrounding residents. Overall, Town Council expressed interest in achieving a balance between the needs of the visitors who contribute dollars to our economy, and the needs of the local community who keep our economy running.


Thes strategies that were discussed included inclusionary zoning, an overlay zone district, defining license types, implementing a license cap, and a moratorium. The majority of town council was not in favor of a tourism overlay zone district or a moratorium. Instead, staff was directed to research inclusionary zoning, commercial linkage, license cap, as well as defining license types, and come back to future meetings with more information. The purpose of this work session discussion is to determine the appropriate number of licenses for a cap and to define a license type that would differentiate owner-occupied properties from investment properties. Information about inclusionary zoning and commercial linkage will be presented at a future meeting.


Analysis: When considering a license cap, there are several different methods that could be utilized for calculating the maximum number of STR licenses. For example, the cap could be a specific number, a percentage of the entire housing inventory, or a ratio. Three potential options are explored in detail below.


LicenseCap:

 

Option 1-Currently, the Town of Frisco has 724 STR licenses, an amount equal to 20% of the entire Frisco housing inventory.At the  June 24th town council meeting, Council Member Andrew Aerenson suggested setting a license cap at 22% of the total housing inventory, or 792STR licenses. Since there are only 724 issued STR licenses, this option would allow 68 additional licenses. Using a percentage,rather than a specific number would also allow the


quantity of STR licenses to increase as new units are constructed. As Town staff works to increase the accuracy of the buildout analysis, these numbers may change. For example, if the buildout analysis indicates that there are more or less than 3,600 residential units then the license cap would increase or decrease accordingly, as shown in the table below.


Housing Units

20%STR

Licenses

22%STR

Licenses

25%STR

Licenses

30%STR

Licenses

3200

640

704

800

960

3300

660

726

825

990

3400

680

748

850

1020

3500

700

770

875

1050

3600

720

792

900

1080

3700

740

814

925

1110

3800

760

836

950

1140

3900

780

858

975

1170

4000

800

880

1000

1200


As mentioned, the buildout analysis is in progress. In the meantime, the Summit County Assessor's data shows 3,200r residential properties, but it does not account for individual units on the parcels that contain multiple units (i.e. the apartments next to the Moosejaw) or for lock-offs. In comparison, the census data indicates there are3,600 residential housing units in Frisco, which appears to be more accurate after estimating the total quantity of residential unitsthatwerenotidentifiedintheAssessor'sdata.Staffwillcontinuetoresearchanddevelop a residential buildout analysis fortheTownto develop a more accurate dataset to assist the decision-making process.

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Option2-While Option1 proposes a license cap equal to a percentage of the entire housing inventory, Option 2 proposes to subtract all deed-restricted homes from the total housing inventory before applying a percentage cap. For example, the existing 156 deed-restricted units would be subtracted from3,600 residential housing units, equaling 3,444. Ifa22%cap were applied, a maximum of 758 STR licenses could be issued using this methodology.


In the event that newly constructed market-rate units are added to the Frisco housing inventory, the STR license cap would increase. However, if newly constructed deed-restricted units are added to the Frisco housing inventory(i.e.22unitsatGranitePark), the STR license cap would not change. And, in the event that existing market-rate units convert to deed-restricted workforce housing units through the Housing Helps program, the STR license cap would decrease.


Option3- DuringtheJune14th WorkSession, Mayor Mortensen suggested that the maximum number of licenses could be determined as a ratio based on the quantity of deed-restricted homes. Currently, Frisco has an approximate ratio of 1 deed-restricted home per every 5 STRs.IftheTownweretoadoptthecurrent1:5ratio,thequantityofSTRlicensescouldreach 1,530 by the time we reach our goal of doubling the amount of deed-restricted units in 2027.


However, if the Town adopted a one-to-one ratio, as suggested by Council Member Burley, thequantityofSTRlicenseswouldnotincreaseuntilthequantityofdeedrestrictedproperties exceeds724units. And, in the meantime, the quantity of licenses would decrease everytime an STR owner chose not to renew their license or sell their STR property. The table below


provides calculations for various different ratios, based on our current number of deed-restricted units.


Ratio (Deedrestricted

homesISTR

Licenses)

Deed Restricted Homes

STR

Licenses

PercentageofHousing Inventory

1:1

156

156

4.3%HRC /4.3%STR

1:2

156

312

4.3%HRC/8.6%STR

1:3

156

468

4.3% HRC/13%STR

1:4

156

624

4.3%HRC/17.33%STR

1:5

156

780

4.3%HRC/21.66%STR

1:6

156

936

4.3%HRC/26%STR

1:7

156

1,092

4.3%HRC/30.33%STR


The table assumes the number of deed-restricted units would be less than or equal to the numberofSTRlicenses, based on the current conditions.IfTownCouncildesiresaratiothat requires more deed-restricted units than STRs, then the two categories can be swapped to easily calculate the reverse ratios.


This option suggests that the quantity ofSTRlicenses should be in balance with the quantity of workforce housing units. Determining thenumbers that would support that balance is key to achieving a successful outcome.


TheColoradoShort-TermRentalImpactStudypublishedbyHR&AinMay2022indicatesthat STR visitor spending supported 5,900 jobs in Summit County in 2020. In other words, every two STRs generate one job. While the HR&A report was produced with the intent of highlighting onlythebenefitsofSTRsandcontainsinaccuracies, the study successfully demonstrates that each STR generates jobs, therefore requiring workforce housing units for the employees working those jobs.


Furthermore, theColoradoStateDemographer's datashowsatotalof24,773jobsinSummit County in 2020. The 2020 US Census data indicates there were 31,055 Summit County residents and12,939occupiedhomes, resulting in2.4peopleperhousehold.At this time, we do not have data showing how many jobs each person worked, or which type of jobs were available (i.e. full-time, part-time, seasonal). Town staff recommends allowing more time to conduct further research on these statistics to determine an accurate quantity of workforce housing units needed to sustain our economy. Once the required number of workforce housing units is determined, the appropriate ratio could be selected.


Defining License Types: One of the main objectives of regulating short-term rentals is to mitigate negative impacts on the local community, including the availability and affordability of housing. Thirteen percent(94)ofallFriscoSTRsareownedbySummitCounty localsand41 are assumed to be utilized as a primary residence. The locals who short-term rent their primary residence, either while on vacation or as a shared home situation, do so as a means to support housing affordability. Frisco Town council previously expressed interest in exempting local owners who occupy their STR as a primary residence from the license cap.


In order to accomplish the goal, the Town could create two license types: exempt and non­ exempt. To qualify as exempt, the property owner must occupy the STRunitasa primary


  1. AnySTRlicenseapplicant requesting an exemption must provide their federal tax filing showing the property address as the filing address, to be utilized as proof of primary residence. An exemption could also be granted for a property owner showing that the property was long-term rented to a member of the local workforce for a minimum of 10 months during the preceding year. The STR license cap would only apply to all non-exempt applicants. An exempt license would be requalified as exempt as part of the annual renewal process.

Financial Impact:Toapplyforashort-term rental license,theapplicantmustsubmita$250fee. The same fee is applied annually in order to renew the license. In addition to the license fee, the STR owners must collect and remit taxes in an amount equal to 15.725% of the gross revenue generated by the STTR, which includes the 5% excise tax that went into effect June 1, 2022.


In2021(before the excise tax existed),FriscoSTRsgenerated$1,713,899inrevenue.The funds were used to pay for staff time, STR software, workforce housing, the Information Center, recreation, special events, and marketing, as well as general operating expenses. In effect, limiting the number of STR licenses that can be issued will also limit the amount of revenue generated by STR licenses.

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Alignment with Strategic Plan: The Strategic Plan identifies priorities such as Inclusive Community, Thriving Economy, and Vibrant Culture and Recreation. Additionally, the Strategic Plan seeks to increase the number of residential housing units occupied by Frisco residents to 50%. Balancing the quantities of short-term rentals and workforce housing units is key to achieving these priorities.


environmental sustainability: Ensuring the availability of workforce housing has indirect benefits to the environment.


StaffRecommendation: Considering Because hemaximumallowablequantityofSTRlicensesproposedin this report was selected based on current numbers, Staff recommends gathering more data and conducting stakeholder interviews to further develop our understanding of the anticipated outcome prior to implementing a cap.


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