Denver City Councilwoman Mary Beth Susman saw the writing on the wall several years ago with short-term rentals. Defined as stays fewer than 30 days, these rentals were becoming increasingly common thanks to online services such as Airbnb and HomeAway. The issue, though, was that short-term rentals were illegal in Denver, so Susman began pushing city council to legalize and regulate the up-and-coming industry. Last summer, she got her way: City council agreed to legalize short-term rentals starting in January 2017. We spoke to Denver residents and professionals who have begun experiencing the potential Susman saw in short-term rentals—sometimes to the tune of tens of thousands of dollars.
The biggest change the law brings is a licensing process, which includes a primary residence clause. This forbids people from renting out second homes or investment properties, and caused the number of short-term rentals in Denver to drop. As of August 22, data from the Denver Short-Term Rental Advisory Committee shows Denver’s short-term rentals have decreased by 652 listings (about 17 percent). But demand has still been high: So far in 2017, more than 200,000 guests have found lodging in Denver through Airbnb—that’s 87 percent of last year’s total—according to Airbnb spokeswoman Jasmine Mora.
Josh Berman, a Denver resident of 14 years, decided to renovate the mother-in-law suite in his Capitol Hill home and transform it into an Airbnb apartment. Renovations took three months, and they remodeled the bathroom, took out a few walls, and replaced doors, paint, appliances, and furniture—all of which cost Berman just under $20,000. Berman now rents out the space for $125 per night. During the summer months, he says the apartment is occupied 90 percent of the time. In the winter that drops down to about 50 percent. If he keeps this pace, he’ll be turning a profit in less than two years.
For those, like Berman, who have unused space in their primary residence—such as an empty room, carriage house, or basement apartment—there’s certainly an opportunity to make some extra cash. “I’m hearing stories all over about people renting out their basement apartment and either paying off their mortgage or at least putting money toward that,” says Libby Levinson, the Denver Metro Association of Realtor’s secretary of the board. “I don’t think this is going to stop anytime soon.”
Local real estate broker James Carlson says his clients have noticed this opportunity, too. He looked through Denver’s database of home listings (known as MLS, or Multiple Listing Service) to see whether more homeowners have begun advertising a “carriage house” or “basement apartment” when listing their homes. He found that in the first seven months of 2017, the amount of people that included those terms in their listing had nearly doubled compared to the entire previous two years combined.
“This says, to me, that the real estate industry is recognizing a demand for homes with basement apartments or carriage houses,” writes Carlson in an email to 5280, “And [it is] trying to advertise for that.”
Denver is among the early cities to make an attempt at regulate the short-term rental market. In other cities, such as Portland and San Francisco, getting hosts to comply with new regulations has been very difficult. In the Mile High City, 65 percent of hosts are properly licensed—which Susman says puts Denver among the nation’s highest compliance rate. Although more municipalities, such as Boulder and Fort Collins, are including regulations similar to Denver’s primary residence clause, the best anyone can do—including city council members—is speculate how the future market will look.
“For a lot of us, it’s kind of like: Let’s sit back and see what happens in Denver,” Levinson says.