Denver coming up short when enforcing regulations around short-term rentals under services like Airbnb, auditor says

Denver is doing a poor job of tracking and enforcing its new short-term rental regulations, the city auditor says, with some applicants receiving licenses they shouldn’t have, putting the city at risk for a lawsuit.

The findings, released Thursday, come a year after Denver City Council passed regulations for short-term rentals allowing the rental of a primary residence for 30 days or less and requiring hosts collect the 10.75 percent lodger’s tax from guests.

The rules were aimed at creating a level playing field for traditional hotel operators who were required to collect the lodger’s tax, and also to ensure the safety of renters and mitigate the impacts on neighborhoods and housing affordability.

But the Denver Auditor’s Office found “flaws in the city’s systematic evaluation of licensing activities as well as inconsistent data validation processes.”

For instance, there were about 2,000 short-term rental business licenses issued between Jan. 1 and Aug. 31, accounting for only about 68 percent of the rentals offered through online services such as VRBO and Airbnb.

A Denver Auditor’s Office map showing short-term rental advertisements in Denver versus where licenses were issued.

“These discrepancies between the law and enforcement could lead to public confusion on how to stay in compliance, as well as the risk of perceived inequity,” auditor Timothy O’Brien said in a written statement. “This could put Denver at risk of legal action.”

The auditor’s office says it also found that the majority of lodger’s tax license and identification numbers used on rental licenses were invalid because people were confused by the process and using the wrong digits.

Also, it discovered that multiple people were sharing the same number, multiple licenses were issued to the same applicant, and in some cases, applicants violated the primary residence requirement by registering more than one address under the same license.

The rules passed in 2016 allow short-term rentals only at primary residences — second homes or investment properties are not allowed in an effort to cut out entrepreneurs listing multiple properties.

“For example, we identified 45 instances out of 1,642 applicants who received more than one short-term rental license, 20 of them had a license registered to more than one address,” the auditor’s office said in a news release.

O’Brien’s staff said Denver’s Department of Excise and Licenses disagreed with auditor’s office recommendations that they review all short-term rental enforcement regulations.

The Denver Post reached out to the city for comment on Thursday but did not immediately hear back.

The auditor’s office encouraged the excise and licenses department to track and analyze its short-term rental data to ensure that the intent of the regulations are being fulfilled. Overall, it said the department needs to “strengthen its implementation of short-term rental regulations to ensure that the regulations are enforced consistently and equitably.”

“If the Department of Excise and Licenses does not track and analyze the data, officials should work with city council to determine who is responsible,” O’Brien’s statement said. “A central goal in the ordinance is to determine the impact on neighborhoods and affordable housing, and some agency needs to be working on it throughout the process.”

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