Many Colorado Resort Homes Sit Empty. So Why Not Tax ‘Em For Affordable Housing?
It was a trip to a conference in Lake Tahoe that got Jake Wolf thinking.
Like Wolf’s own Vail Valley, where he’s an Avon town councilor, Tahoe is a ski and summer recreation destination for second homeowners.
Those empty, luxury homes are a contributing factor to Tahoe’s tight housing market for year-round residents — especially renters. Wolf saw a utility closet in an aging hotel turned into a bedroom, and extension cords snaking through apartment windows. That pushed Avon’s own housing issues to the front of his mind.
“It was so eye-opening to me. Because it was like squalor,” said Wolf, an East Coast native who came to Colorado two decades ago to play in a Grateful Dead cover band. “And I came back here and I was like, ‘Oh my God. We're not there — but we could be.’”
Wolf returned to Avon determined to do something to address affordable housing. He brought with him an idea he picked up at the conference. In 2017, Vancouver, Canada enacted a 1-percent tax on vacant homes meant to incentivize second homeowners to rent out their houses.
“That to me was an eye-opener,” Wolf said. “I was like, ‘Whoa, well if they could do it up there, there's gotta be some merit to it.' Vancouver's still a functioning city from what I understand; it didn't go up in flames. Maybe we can learn from them.”
Avon’s housing needs are especially acute. According to a city housing plan, the median price for a single-family home, including duplexes and townhomes, was over $850,000 in 2017. Rent for one of the modest market-level two-bedroom apartments on the valley floor can run over $2,000 a month.
As you drive along the roads up out of the valley, three-story apartment buildings give way to gated homes made of stone and timbers. And something else stood out about them on a grey afternoon in mid-December: They seemed empty.
“I would say that house sits empty 10 months a year,” Wolf said, gesturing toward a home he estimated at 15,000 square feet.
The most recent U.S. Census data available estimates about 45 percent of Avon’s homes are vacant. That figure in other ski towns is even higher, topping out at nearly 90 percent in Winter Park — compared to about 10 percent in the state as a whole.
Wolf said owners often live out of state and only visit a few times a year. If second homeowners didn’t want to rent out their homes, Wolf thought, the city could still use revenue from a vacancy tax to boost its own affordable housing fund.
“It was totally off the hip,” Wolf said. “It was just for discussion purposes.”
Wolf brought up the idea at a council meeting last fall, which made it into the Vail Daily. And that’s where Avon resident Mark Kogan heard about it. Kogan, a retired Goldman Sachs partner and who said he spends about six months a year in Avon, said it’s a terrible idea.
“This was a ready fire, aim approach,” Kogan said, adding that it sends residents like him an unwelcoming message. “It would say you're second-class citizens because you've decided that you don't want to live here full time. We're going to take advantage of you.”
Wealthy residents, Kogan said, would choose to live elsewhere if Avon imposed a vacancy tax or fee (a tax would require voter approval under the state Taxpayer’s Bill of Rights). He said there are better solutions to the housing problem, like higher wages. Luxury homes that are only visited seasonally are just a basic reality in a ski town like Avon, he said.
"I pay a lot of property taxes. I'm philanthropic. I don't use the roads much. I don't use the schools,” Kogan said. “And now you want to start telling me I've got to solve the housing problem by either having my house occupied the other four months a year or taxing me?"
Kogan said he has no desire to rent his 7,500-square-foot home.
"It has a lot of expensive furnishings. It's got expensive art. It is my sanctuary. No one will ever take care of it the way I want to,” he said, adding: "The kind of people that need to have this housing, are not the kind of people, honestly, that are going to live in my house.”
Kogan doesn’t feel like he’s responsible for the housing crisis in any way. But research suggests wealthy residents do play a role in overall affordability. Western resort towns with affordability issues tend to have many residents who make money from investments and not the local economy, said Megan Lawson, an economist with Headwaters Economics.
“We'll see a real mismatch when people are earning this income from outside of the community,” Lawson said. “They're able to afford more expensive homes and higher rents, and so that will distort the local housing market.”
Further complicating the housing picture in towns like Avon is the limited space suitable for housing: They’re hemmed in by mountains.
“When that land is used up for more expensive housing, there isn't as much left over for more affordable homes,” Lawson said.
A fee or tax on empty homes could be effective, Lawson said, because it specifically targets one of the root causes of the affordable housing problem.
“When economists are trying to think about the most efficient tax policy, you only want to influence and affect the factors that are contributing most of the problem,” she said.
In practice, though, such a targeted approach can make implementation politically unpopular. Mayor Sarah Smith Hynes understands the criticisms second homeowners have had toward the idea and said they’re responsible for most of the philanthropic efforts in the area. She also noted Avon has a significant real-estate transfer tax — 2 percent.
“My personal opinion, though we haven't studied it yet, is that they're kind of already paying,” she said.
The town will study the idea at some point, she said, though she wants to be careful about sending staff on a “wild goose chase for something that will never actually come to fruition.”
For his part, town councilor Jake Wolf said he got a lot of criticism for bringing up this idea. He said his initial enthusiasm for the idea has worn off, though he still would like to talk about it.
“I don't want to vilify the people that have money. It's not the intention at all,” he said. “It's about having a shared vision of how our community wants to be in 20 years from now. Because if there's nobody to work these resorts, or the shops and the restaurants — the second owners, what are they gonna come here for?”
You want to know what is really going on these days, especially in Colorado. We can help you keep up. The Lookout is a free, daily email newsletter with news and happenings from all over Colorado. Sign up here and we will see you in the morning!