The City of Grand Junction proposed two issues in the November ballot to address the affordable housing crisis: a 1% increase in the lodging tax and an 8% short-term rental tax.
If the measures pass, the funds will go to affordable housing projects and initiatives for people earning 80% of the region’s median income or less.
According to the ballot, the short-term rental tax is expected to bring in about $325,000 per year and the lodging tax increase would bring in about $1,030,000.
Mayor Anna Stout said funds from the increases will be allocated using the city’s housing strategy.
This plan includes 12 recommended strategies to improve affordable housing options. These include the allocation of city-owned land to affordable housing projects and the acquisition of strategic land to be used for affordable housing.
The strategy also recommends funding existing programs and resources for affordable housing and supporting initiatives that rehabilitate and preserve existing affordable housing options.
The city previously allocated $1 million for affordable housing in its 2022 budget, but did not spend it. The money is now earmarked for housing in 2023.
Supporters say the taxes meet a serious need in Grand Junction and would not be paid by residents.
“It’s the kind of thing that could be passed on to the consumer and no one would bat an eyelid,” said Western Colorado Alliance housing committee member Arlo Miller.
Miller said a 7% lodging tax, which would be the new rate in the event of a 1% increase, is competitive with similar locations in western Colorado and will not be enough to negatively impact tourism.
Business owners in the accommodation and short-term rental sectors are supportive of affordable housing, they said, but they are not the ones to foot the bill. The Grand Junction area chamber of commerce is also against the measures.
A letter from the Horizon Drive Business Improvement District council to the city council outlines the council’s objection to the lodging tax increase and its support for the short-term rental tax.
According to the letter, the Horizon Drive neighborhood has 73% of the city’s hotels.
“We do not support an effort to increase or change the lodging tax to subsidize affordable housing,” the letter states. “While we recognize the need for more affordable housing in the Grand Valley, we believe the city and county should use a different funding mechanism.”
The letter says the council believes that accommodation tax funds should only be used to bring visitors to the area.
However, according to the letter, the council believes voters would favor taxing short-term rentals at a higher rate.
Tom Levalley, who owns properties on the 400 block of Chipeta Avenue that are used as short-term rentals, spoke out against the short-term rental tax.
“By focusing a harmful tax on a small group of vacation and AirBNB owners in the city, we are already paying accommodation tax the same as hotels. I know you think this tax won’t affect anyone other than the visiting traveler, but it’s quite the opposite. You are asking me and a small number of owners to increase our rates by 9%,” Levalley said.
Short-term rentals are supposed to pay the same lodging taxes as hotels, but they pay residential property taxes on their businesses, which are significantly lower than commercial property taxes. Residential property taxes in Colorado are set by factory levies, but are estimated at 7.96%, according to the Mesa County Assessor’s Office. Commercial property taxes are set by law at 29%.
“It would help level the playing field,” Miller said.
Levalley noted that other businesses that operate out of homes, such as accountants, don’t pay commercial property taxes.
“It’s about supporting affordable housing, which I have nothing against, but I feel like you’re picking a very biased and limited market here to raise these funds,” Levalley said.
Councilman Rick Taggart, who voted against putting both questions on the ballot saying he’d rather the city find a way to support affordable housing projects without raising taxes, was particularly vocal. in his criticism of the short-term rental tax, arguing the language of the ballot seemed to blame the lack of affordable housing on owners of short-term rental units.
Estimates of the number of short-term rentals in Grand Junction vary. According to the AirDNA short-term rental data website, there are 457 active short-term rentals in the Grand Junction area, with most of them within the city limits.
Most of those units, 86%, are “whole house” units and 14% are private rooms, according to AirDNA.
“There’s a wealth of research and evidence that short-term rentals affect affordability in communities, whether they’re resorts or not,” said board member Abe Herman, a former operator of short term rental.
Levalley said his short-term rentals were his only retirement income, and he would miss more with the new tax.
Fewer people staying in short-term rentals, especially those near downtown Grand Junction, will negatively impact the local economy, Levalley said.
“Almost all of my guests walk downtown to eat, drink and shop,” Levalley said.
Kyra Rossier, co-owner of Copeka Coffee and tax advocate, disputes this, saying, “If you want to build a resilient economy, you have to make sure that life is affordable for people, or else they will flee. ”
One of the problems is that the prices of other goods and services are not rising as fast as housing, which means that the companies that provide these goods and services cannot raise the wages of their workers, who are squeezed by housing prices, Rossier said.
“I think we need to focus on building a sustainable, resilient community if we really care about the economy,” Rossier said. “And that’s going to help us do that.”
Levalley also said the tax increases won’t increase the affordable housing stock as owners of short-term rental properties develop their properties with the intention of becoming short-term rentals, meaning they’re nicer than affordable housing.
“They’re not designed to be affordable housing,” Levalley said.
A third measure on the ballot would allow the city of Grand Junction to lease municipal land to use for affordable housing for a period of 99 years. Such leases are currently only allowed for 25 years, which proponents of the initiative say makes the city less competitive in funding.
“Part of the problem is that we have goals that need funding, and that’s what those two metrics would provide for us,” Stout said. “What I think is really critical about that, and why we designed it that way by asking voters to approve those two measures, is because those are taxes that our residents don’t pay.”
Proposition 123, a statewide measure setting aside money in the state budget – without raising taxes – for new affordable housing programs, is also on the ballot of november.
“It’s no coincidence that these issues are on the same ballot, because this is a statewide crisis,” Stout said.
Grand Junction is at a tipping point, but still has a chance to reduce a real crisis if it tackles the affordable housing situation quickly, Miller said. “If we don’t commit to spending that money on affordable housing now, then it’s a struggle every year.
“It’s not something we can do slowly, because every day we don’t take care of that, every day we don’t bring more affordable units to market, every day people can’t not afford houses are days when people sleep in our parks, or crash into people’s couches, or give up medicine or food to be able to afford housing, so that’s something that has real impacts for our residents,” Stout said.
Grand Junction isn’t the only municipality in Mesa County to want to raise its lodging tax. The Town of Palisade puts to the vote a measure increasing its accommodation tax from $2 to $6 to be used for land marketing and emergency services.