Short-Term Rental Reform: Housing First, Hotels Second

The Problem

Denver already has a short-term rental ordinance. It has not worked.

The current rules require STR hosts to obtain a license, collect lodgers’ tax, and - in theory - operate only in primary residences. In practice: enforcement is minimal, investor-owned STRs operate openly, and the licensing portal has been chronically backlogged. As of 2024, over 3,500 Denver units are listed on Airbnb and VRBO (Inside Airbnb, 2024). Thousands of them are full apartments and houses - not spare bedrooms - removed entirely from the long-term rental market.

This is not a minor inconvenience. It is a measurable drain on Denver’s housing supply at a moment when the city needs every unit it can get.

How STRs Drive Up Rents

The economics are straightforward. A landlord choosing between a long-term tenant at $1,500/month and Airbnb guests at $150/night needs to fill the unit only 10 nights per month to match long-term rental income - and can often do far better. The rational choice for a profit-maximizing property owner is to pull the unit from the long-term market.

When enough owners make this choice, the supply of long-term rentals shrinks, vacancy rates fall, and rents rise. Academic research confirms the effect: a 2021 study in the Review of Financial Studies (Barron, Kung & Proserpio) found that a 1% increase in Airbnb listings in a neighborhood is associated with a 0.7-1.3% increase in rents. In Denver neighborhoods with high STR concentration - Capitol Hill, Five Points, RiNo, Baker - the cumulative rent premium is estimated at 7-13%.

Denver’s Current Rules Are Not Enforced

Denver requires STR hosts to hold a primary-residence-based license. But:

• No systematic cross-checking of STR listings against property records to identify non-primary-residence operators.
• Complaint-driven enforcement only - neighbors must file complaints for the city to investigate.
• Penalty structure is too weak to deter commercial operators, who can absorb fines as a cost of doing business.
• Licensing backlog has historically meant operating without a license for months without consequence.

The result: a system that looks like regulation but functions as permissiveness. Commercial STR operators exploit the gap between the written rule and its enforcement.

Who Benefits, Who Pays

The beneficiaries of the current STR market are a small number of property investors who own multiple units and extract tourism income from them. The losers are the much larger number of Denver residents who compete for the long-term rental units those properties would otherwise provide.

This is a transfer from renters to investors - dressed up as “sharing economy” language that obscures the commercial nature of most STR activity.

Our Solution

1. Primary Residence Only - Strictly Enforced

Reaffirm and actually enforce the primary-residence requirement:

• STR licenses tied to the host’s verified primary residence (determined by voter registration, driver’s license, or homestead exemption).
• Annual re-verification of primary residence status for all license holders.
• Automatic license revocation if the property is sold, or if the owner stops living there.
• A host may rent their primary residence as a whole unit only while they are physically away (e.g., during travel), with a cap of 90 nights per year for whole-unit rentals.
• A host may rent a room within their primary residence without a nightly cap - this is genuine home-sharing and does not remove a unit from the long-term market.

2. Proactive Enforcement - End the Complaint-Only Model

Shift from complaint-driven to proactive enforcement:

• Monthly data sharing from platforms. Require Airbnb, VRBO, and any other STR platform operating in Denver to provide the city with a complete monthly listing data export: address, host identity, nights booked, revenue. This is already required by many cities including New York, San Francisco, and Amsterdam.
• Automated cross-referencing against property records, licensing database, and voter rolls to identify unlicensed and non-primary-residence operators.
• Fines with teeth. First violation: $1,000/day. Second violation: $5,000/day and permanent license ineligibility. Fines accrue from the first day of unlicensed operation, not from the date of citation.
• Platform liability. Platforms that knowingly list unlicensed properties are jointly liable for fines. This is the provision that changed STR enforcement in New York City (Local Law 18, 2023): when Airbnb itself faced fines, listings of illegal units collapsed.

3. Dedicated STR Enforcement Office

Create a dedicated STR Enforcement Office within Denver’s Department of Excise and Licenses:

• Staffed to actually enforce - 5-8 FTE investigators funded entirely by licensing fees and fine revenue.
• Public compliance dashboard showing licensed vs. unlicensed listings by neighborhood, updated monthly.
• Whistleblower hotline with a finder’s fee for tips that result in confirmed violations.

4. STR Housing Return Fund

Fines and license fees collected under the new enforcement regime are dedicated to a STR Housing Return Fund used to:

• Acquire formerly-STR units as permanently affordable rental housing (in partnership with the Denver Social Housing Authority).
• Provide relocation assistance for tenants displaced from units that transition away from STR use.
• Fund the ADU financing program (see: Zoning Reform policy) to help homeowners build legal, owner-occupied ADUs as an alternative income source.

5. Transition Period

Existing license holders who currently operate non-primary-residence STRs are given a 12-month transition period to either:

• Convert their unit to long-term rental (with a $5,000 landlord incentive from the Housing Return Fund for signing a 2-year lease at or below market rate), or
• Sell the unit (with a right-of-first-refusal for the Denver Social Housing Authority to purchase at appraised value).

After 12 months, full enforcement begins.

Evidence

Cities That Have Acted - And What Happened

The common thread: platform liability is the enforcement mechanism that works. When Airbnb and VRBO face fines for listing non-compliant properties, they comply. When only hosts face fines, non-compliant listings persist because individual hosts are hard to find and prosecute.

Denver-Specific Evidence

Denver’s own data supports action. Neighborhoods with the highest STR concentrations - Capitol Hill (4.2% of housing stock), Five Points (3.1%), RiNo (2.8%) - are the same neighborhoods with the lowest vacancy rates and the fastest-rising rents (Denver Office of Economic Development, 2023). The correlation is not coincidental.

Local Context

Denver’s tourism economy is real and valuable. Hotels, restaurants, and attractions employ tens of thousands of workers. This policy does not target hotels, bed-and-breakfasts, or even genuine home-sharing where a resident rents a spare room. It targets the commercial extraction of long-term housing units by absentee investors who have found a more profitable use for their properties than housing Denver’s residents.

There are approximately 3,500 STR listings in Denver. If even half of the whole-unit listings that are not primary residences converted to long-term rentals, that would add 700-1,000 units to the long-term rental supply - more than Denver’s entire annual affordable housing production through subsidized programs.

Denverites who work in hospitality - cooks, housekeepers, front desk staff - are disproportionately the ones who cannot afford to live near where they work, because STRs have converted the affordable units in walkable neighborhoods into tourist accommodations. This is the housing crisis made visible.

Frequently Asked Questions

“Won’t this hurt Airbnb hosts who depend on STR income?” The policy specifically protects genuine home-sharers: people renting a room in their primary residence. It also allows whole-home rentals for up to 90 nights/year. A homeowner who occasionally travels and rents out their home is not affected. The policy targets investor-owned STR operations - people who bought properties specifically to run as de facto hotels. Those are a business, and they should be regulated as businesses.

“What about people who bought investment properties relying on STR income?” Real estate investment always involves regulatory risk. Investors who bet on the continuation of a permissive enforcement environment took that risk knowingly. The 12-month transition period provides time to adjust. The city’s housing needs take precedence over the investment strategies of property speculators.

“Won’t tourists just stay in hotels instead?” Yes - and that is appropriate. Hotels employ unionized workers, pay full occupancy taxes, comply with health and safety inspections, and do not remove housing from the long-term market. A thriving hotel industry is entirely compatible with a healthy housing market. Denver’s tourism sector was functioning before Airbnb existed and will continue after investor-owned STRs are restricted.

“Will this actually be enforceable?” New York’s Local Law 18 demonstrates it is. The key is platform liability - requiring Airbnb and VRBO to delist non-compliant properties rather than leaving enforcement to individual prosecutions. Once platforms are required to verify compliance or face daily fines, compliance follows. San Francisco’s experience before and after platform liability confirms the same pattern.

How We Pay For It

This policy is substantially self-funding:

Operating costs for the STR Enforcement Office: ~$1.5M/year. Net surplus dedicated to the STR Housing Return Fund: ~$3-7M/year.

References

• Barron, K., Kung, E. & Proserpio, D. The Effect of Home-Sharing on House Prices and Rents: Evidence from Airbnb. Review of Financial Studies, 2021.
• City and County of Denver. Short-Term Rental Licensing. Department of Excise and Licenses, 2024.
• Denver Office of Economic Development. Denver Housing Market Analysis. 2023.
• Inside Airbnb. Denver, Colorado dataset. 2024. http://insideairbnb.com
• McGeehan, P. New York’s Airbnb Crackdown: A Year Later. New York Times, 2024.
• New York City Council. Local Law 18 of 2022. Short-Term Rental Registration Law.
• Santa Monica City Planning Division. Home-Sharing Ordinance Annual Report. 2020.