Janelle Kenny rents out the first floor of her 1910 bungalow in Denver's Overland neighborhood on VRBO.com. She even recently hosted a wedding in her backyard.

(Courtesy Janelle Kenny)

Update 5/16, 9 p.m. The City Council, by a 10-2 vote on Monday,  gave initial approval to Councilwoman Mary Beth Susman's proposal. It goes up for a final vote on Monday, June 13. 

Twenty years ago, a little Aurora-based startup called Vacation Rentals by Owner revolutionized the hospitality industry, using its website to link folks who want to rent their properties to travelers looking for alternatives to long stays in pricey hotels.

Two years ago, home sharing -- a younger cousin of VRBO-style vacation rentals -- got the attention of the Denver City Council. Some worried the city was missing out on tax revenue, and that the city's neighborhoods were being disrupted. 

Now, the City Council is set to take up proposed rules at Monday's meeting that would regulate all types of short-term rentals.

The twist? The company who's explosive growth in the last few years helped launch the city's regulation effort -- Airbnb -- will largely be allowed by the proposed rules. The more traditional vacation model, pioneered by VRBO, stands to lose the most.

But the industry, which is facing tougher regulations across the country as well, is making a last-minute stand in Denver.

Previously:

Airbnb Caught Early Break In Denver

Airbnb made its first splash in Denver in 2008, when the Democratic National Convention brought thousands of visitors to the city. Hotels were packed, and hundreds of residents signed up with the young San Francisco-based company to list their homes.

"Had it not been for the DNC, it's hard to know what Airbnb would be today," the company's co-founder Brian Chesky told CNN in 2012. From there, the company's presence in Denver grew to about 1,700 listings today. The company, now valued at over $25 billion, now boasts more than 2 million listings worldwide.

That relatively quick spurt of growth brought increased attention to the idea of renting out one's home. 

"How it presented itself is through Airbnb. That's when we realized all the short-term rentals were occurring," said Margie Valdez of the Inter Neighborhood Cooperation, which represents neighborhood groups across the city.

Her group has led the fight against short-term rentals, calling for a flat-out ban. Valdez is concerned about short-term rental guests that throw parties in otherwise quiet neighborhoods, and the overall effect they have on long-term residents. 

Councilwoman Mary Beth Susman first brought attention to the issue back in 2014, penning an op-ed on the "sharing economy" in the Denver Post. She announced a new special city committee to study and recommend "how, when and where we encourage and contend with this phenomenon." The first area she decided to tackle was short-term rentals.

Soon after, the debate centered on the effect short-term rentals are having on the city's limited affordable housing stock. Valdez and other residents say short-term rentals turn homes into defacto hotels, exacerbating the problem. But last fall, CPR News scraped data from Airbnb.com that suggested only 118 listings were whole homes rented often enough to be full-time vacation rentals.

Airbnb presents itself more as a platform to make a few extra dollars and meet travelers from around the world. While our data suggests a relatively small number of professional landlords use the service, it also indicates that -- at least in this market -- the company's claim is probably more or less true.

Councilwoman Susman's proposed rules would require short-term landlords pay lodging tax, meet safety standards, and get a business license. But licenses would only be issued to people who rent out their primary residences.

That means that most Airbnb landlords, who rent out all or part of their home, would be allowed. Landlords who own investment properties, or a second home in Denver -- the VRBO model -- would be out of luck. 

"We saw right away that it would have some impact on one [platform] over the other," Susman said. "But I had to look at what was good for the city, given where we are with our affordable housing issue."

To be sure, some professional landlords use Airbnb. And some homeowners use VRBO. But regulators and industry executives both indicate the opposite is more common.

Vacation Rentals Have Colorado Roots

Given the number of second homes in the state (some 70,000), the concept of renting out an otherwise empty house is a natural fit in Colorado. VRBO got its start in 1995 when David Clouse wanted to rent out his flat at the Gold Camp Condos in Breckenridge.

He declined to comment for this story. But his deputy Marvin Floyd, who was vice president and general manager for the company from 2001 to 2009, said it was the right idea at the right time.

A screenshot of VRBO.com, circa 1998. 

(Courtesy Internet Archive's Wayback Machine)

"It spread like wildfire," Floyd said. "People were starting to travel a lot more."

Under Floyd's tenure, listings grew from 8,700 to 130,000. VRBO's biggest competitor, Austin-based HomeAway, acquired it in 2006. Then, last fall, travel giant Expedia snatched up HomeAway for $3.9 billion. 

In Colorado, VRBO has always been more popular in mountain ski towns -- many of which have adopted vacation rental regulations already. Breckenridge, for example, has about 1,700 listings now. Denver, by comparison, has only about 350. But its presence has grown in recent years; the company says Denver has 118 listings in January 2011.

But Susman said short-term rentals have never been legal in the city -- regulators just haven't enforced the rules yet.

"They started in town illegally," she said. 

Floyd said the company didn't concern themselves with local regulations until the cities came knocking. In the case of Denver, Floyd said that never happened. 

"This is the first time I've ever heard that it was illegal in Denver," he said. "We would've gladly worked with the city of Denver."

Other landlords, who've invested thousands of dollars into their properties, have also pleaded ignorance. 

"If you've got something that's operating in the city for a long duration [of time]," said Shahla Hebets, founder of the Denver Short Term Rental Alliance, "You had no idea you were doing something wrong."

Denver's zoning code doesn't flat out ban short-term rentals. Rather, the city's neighborhood inspectors interpret a handful of separate sections as collectively amounting to a ban.

The city document, which details their reasoning, says tenancy in residentially zoned area is arranged on "month-to-month or longer basis." That's been interpreted to mean at least a month.

"Historically, the way that residential districts were defined, they didn't include the ability to do things like short-term rentals. It wasn't forseen," said Abe Barge, a senior city planner. "These provisions are perhaps a bit hard for the layman to interpret."

If the city were to drop its current proposal, Barge said, it would likely make the ban more clear. But that's not likely.

Searching For Compromise As Clock Ticks

After two years of work, Susman said she's ready to move forward with the bill's primary residence requirement intact. And Valdez, with the Inter Neighborhood Cooperation, said while she'd prefer a flat-out ban, she can live with the current proposal.

"We gulped, but we accepted that," Valdez said.

There was a brief moment of hope for vacation rental owners when, at an April committee meeting, Councilman Wayne New floated an amendment that would've allowed landlords to either rent out their residence -- or a secondary residence. His office says he pulled the amendment after negative feedback from his constituents.

Still, VRBO and Homeaway, fortified by their new parent company, are not giving up the fight. Top executives came into Denver recently to pitch their case against "onerous" regulations to reporters.  

Their top target: Susman's primary residence requirement, which they say unfairly targets professional landlords. They said the city assured them years ago they were not worried about the traditional vacation rental model. 

So they were "a little bit shocked at the proposal that has come down," said Matt Curtis, the director of governmental relations for HomeAway. "Somehow or another, through this ... new discussion related to home sharing, we've been swept into the conversation."

Curtis said the current proposal will drive landlords underground, or encourage them to find loopholes like signing and voiding 31-day leases with guests. He pointed to a 2012 U.S. Conference of Mayors resolution, which warns that "onerous" regulations discourage compliance.

Curtis said Denver should look to other cities, like Savannah, Georgie, that have passed less strict rules that he says result in more landlords playing by the rules. While complaints are down, the Savannah Morning News reports the city is looking to tighten up rules over concerns the short-term rentals are growing too popular.

Curtis pointed to San Francisco as an example of a city that set up tough rules that it can't enforce. Indeed, a recent city report said most hosts flout regulations, which require multiple permits that must be obtained in person. Councilwoman Susman said Denver will have an easy-to-use, web-based sign-up process.

Curtis also said vacation rentals have proven over the last two decades that there's a demand for temporary housing outside of hotels. Grant Swanson, who rents a home in the Berkeley neighborhood, said he recently hosted new grandparents who wanted to stay near -- but not with -- their relatives. 

"It's a very different product for a very different market," Curtis said.

And Hebets is trying to add more data to a debate that she says is severely lacking it. The Short Term Rental Alliance published a new survey this week, showing that 70 percent of registered voters in Denver believe all such rentals should be legalized, required to register with the city, and pay taxes. 

"Our strategy is to talk to any council member who will look at the data," she said.

But the clock is ticking. Unless something unexpected happens Monday night, Susman's bill will go up for a vote in June.

Editor's Note: An earlier version of this story incorrectly said the proposal would grant permits only to property owners. Long-term renters could also get a license under the proposal.