In the state of Colorado, there are two different assessment ratios utilized when appraising real estate. For residential properties, the assessment rate is 7.15% of assessed value. This means that if a property is assessed at $1,000,000, only 7.15% of it would be multiplied by the property tax rate, creating a total taxable value of $71,500. The commercial property assessment rate, however, is more than quadrupled, standing at 29%. A similar valued commercial property would then be multiplied by 29% leaving a total taxable value of $290,000. As you can see, the category in which the property is appraised matters tremendously to the overall Colorado property tax liability.
The El Paso County Assessor (Colorado Springs) plans to tax short-term rentals such as Airbnb’s as commercial property and not residential like they historically have been classified. After the City Councilor asked the County Assessor Steve Schleiker how these types of rentals would be assessed, he responded with an email. The Independent, a local Colorado newspaper detailed the exchange between the two with Schleiker saying “Short term rentals and Airbnb’s have been a topic of discussion over the past several years at the State Capital and throughout all 64 county assessor’s offices on the challenges of discovering and valuing these types of properties, and the voices from hotel/motel/and bed & breakfast properties throughout the State have been loud requesting fair and equal valuation and taxation.”
Nothing has yet been done officially but it sounds as if Mr. Schleiker is moving in that direction. This would be big to property owners as these properties would be subject to numerous problems.
- Mortgage issues – Lenders require owner occupancy and the house to be utilized as a single-family home. With this change, a bank could “call a note” meaning the loan would be due immediately.
- Higher utility bills – Commercial rates for utilities are typically higher than residential rates and some companies could choose to charge commercial rates
- Home Insurance – The Home insurance necessary could change if the property is re-classified
- HOA Problems – some HOA’s require residents to be the primary owner and occupy the home, not allowing short term rentals in a single-family residential neighborhood
The next steps Mr. Schleiker says is that a series of community meetings to explain the process and the reason for the change are being scheduled. Nothing official yet, but it looks like the county is heading in this direction and more counties in the state of Colorado could seek to follow.