Denver STRAC Update January 30th, 2018 Excise and Licenses

Current STR License & Enforcement Numbers Licenses/Compliance: Total STR Licenses in Denver: 2,065 Total number of unique STR properties in Denver: 3,866 Current compliance rate of ~53% 488 licenses have been renewed while 417 have expired

STR Compliance/Trends

Treasury Update Lodger’s Taxes: Total number of STR Lodger’s Tax Accounts: 2,473 Total Lodger’s Tax revenue collected from STR operators for 2017 : $2,916,831 This includes 200 monthly filers and 848 quarterly filers An additional 1,425 Lodger’s Tax Licensees are registered to file annually This amount does not include OPT or license fees Using Lodger’s Tax Account numbers, Denver is at 64% compliance rate The Treasury Department and City Attorney’s Office are still evaluating legal concerns with the AirBnB Tax Collection Agreement

STR Enforcement Numbers Notice of Violations (NOVs), Postings, and Admin Citations (ACs): Total NOVs issued: 2,024 (advertising without a license) Total ACs issued: 42 - 8 @ $500, 34 @ $150 for a total of $9,100 in fines issued (continuing to advertise without a license) Total number of properties posted: 44 Host Compliance: Host compliance will begin tracking administrative enforcement actions in mid-February. EXL has approximately 25 open STR investigations based on complaints, etc. Based on the results of the investigations, they could be referred to the City Attorney’s Office for consideration of a Show Cause.

STR Enforcement Numbers Complaints: 232 complaints on 109 licensed premises 53 licenses have just one complaint Show Cause Hearings: 6 orders to Show Cause have been filed 4 have surrendered licenses 2 have settled after neighbor mediation 3 investigations have been completed that resulted in no Order to Show Cause (unable to prove charges) 1 Order to Show Cause is pending approval by Director

Denver Short Term Rental Survey Results Number of replies as of 1/10/2018: 246 Question 1 - Why did you get licensed? (all that apply) 92% - I wish to follow the law. 48% - I want my guest to feel safe in a licensed rental. Question 2 - Where did you learn of the requirements to obtain an STR License? 64% - Thru the STR platform 4% - “Stay Legit” advertisement Question 3 - Will you be renewing your STR Business License? 77% - Yes 9% - No   Question 4 - If you answered "No" to Question 3, why? Varied answers. Most common: “rules are too hard to navigate”, “moving out of state”, “will rent for long periods of time for now” and “not worth the trouble”

STR Survey Question 5 - Using any number from 0 to 10, where 10 is extremely easy and 0 is extremely difficult, what number would you use to rate how easy or difficult it was for you to navigate the STR Business License website (www.denvergov.org/str)? Average: 6.5 Question 6 - Please rate the level of difficulty for each part of the online STR registration process: (the majority said) Registering through the STR business license website: Somewhat easy Obtaining my Denver Lodger’s Tax ID: Easy/ Some what easy Understanding STR License Requirements/Ordinance: Moderate/Difficult Identifying License Number (BFN): Easy/Moderate Question 7 - What platform(s) do you use to conduct STR operations? (all that apply) 95% - AirBnB 12% - VRBO

STR Survey Question 9 - How often do you rent your home? 35% - One reservation a week 25% - Several reservations every week Question 10 - If you did not conduct short-term rentals (rentals for less than 30 consecutive days), what would you do? 56% - Nothing 37% - Rent long term Key takeaways from survey: Improving the online STR registration process: Website could be more user friendly Simplify application process  Allow for the platforms to collect the taxes on behalf of the hosts. Conduct research of high concentration zip codes

Audit Findings and Implementation Plan Audit Recommendation 1.1-Compliance with Applicable Laws Audit Recommendation Department Response The Director of Excise and Licenses should evaluate current and future Department of Excise and Licenses short-term rental licensing and enforcement policies and procedures to ensure compliance with the Denver Revised Municipal Code and other applicable laws, including those related to proof of possession, insurance coverage, processes for issuance and denial, and administrative citations. Agree-EXL will continue to review and adjust STR enforcement practices to ensure compliance with legal requirements. In conjunction with the STRAC and other stakeholders, an in accordance with our STR Strategic Enforcement Plan, EXL will review licensing requirements for potential modification and to establish liability coverage limits and will require documented proof of possession rather than self-certification.

Audit Findings and Implementation Plan Audit Recommendation 1.1-Compliance with Applicable Laws, Continued Audit Finding-1.1 Current State Action Item/Status D.R.M.C. requires license applicants to submit documented evidence of ownership —referred to as “proof of possession”—of the rental property, or to secure written permission from the property owner to operate a short-term rental. Procedures do not currently require an applicant to submit documented proof of possession at the time of application. In process: Adding additional document requirements to the application to prove possession. E.g., copy of lease, copy of drivers license, letter of approval from property owner, etc. D.R.M.C. requires a short-term rental host to acquire fire, hazard, and liability insurance coverage, specifying that liability coverage limits are to be set by the Director of Excise and Licenses. Insurance coverage limits not yet set. Under review: Set insurance requirements by rule Require applicants to upload proof of insurance upon application D.R.M.C. prohibits Excise and Licenses from issuing a license to an applicant who has overdue fines, assessments, or fees owed to the City. Law also prohibits the department from issuing a license to an applicant who has outstanding warrants for arrest in any municipality. Outstanding debts or warrants for arrest are not currently reviewed on application. Under review with City Attorney’s Office D.R.M.C. specifies requirements for the content of an administrative citation, method of delivery, and timeframes for appeal. Appeals of administrative citations are currently allowed to be submitted within 14 days. Partially complete: Changed Administrative Citation appeal deadline to 14 days from 10 days per the Administrative Citation procedures in the D.R.M.C.

Audit Findings and Implementation Plan Audit Recommendation 1.2- Rules and Regulations Audit Recommendation Department Response Action Items/Status The Director of Excise and Licenses should review and update all Department of Excise and Licenses rules and regulations to reflect current STR enforcement practices, including those rules and regulations related to administrative citations. Disagree-EXL rules are intentionally written to apply to all of the more than 100 license types the Department issues for clarity and ease of use by the community, applicants, licensees, the department, hearing officers and other stakeholders. In addition, EXL is still in the process of assessing and monitoring its STR program in accordance with our strategic plan and it would be premature at this time to make a decision whether or not unique administrative citation rules are needed for this specific license type. N/A Audit Recommendation 1.3-Performance Evaluation Audit Recommendation Department Response Action Items/Status The Director of Excise and Licenses should develop and implement an approach for evaluating the effectiveness of its STR enforcement strategies and tactics, including a suite of measures to assess the efficiency and effectiveness of enforcement processes. Agree-EXL is committed to measuring progress toward strategic goals to ensure the effectiveness and efficiency of the short-term rental program. Once we are one year into the program and can establish the baseline data for this seasonal industry, specific measures will be identified and monitored to inform ongoing adjustments to programmatic tactics. In Process

Audit Findings and Implementation Plan Audit Recommendation 1.4- Neighborhood Impact Audit Recommendation Department Response Action Items/Status The Director of Excise and Licenses should develop and implement an approach for tracking and analyzing data to evaluate the impact of STRs on the City’s neighborhoods, including the effect of STRs on housing affordability. Disagree-EXL is collecting data that can be used to analyze the impact of STR’s on affordable housing and neighborhoods. We are also making that data publicly available for research and analysis by interested parties. However, affordable housing analysis is beyond EXL’s expertise and analytical capabilities. While we agree that this type of analysis may be interesting, it would be inappropriate and irresponsible for EXL, a business licensing organization, to conduct such an analysis based solely on the short-term rental data collected secondary to licensee compliance. In addition to making the data publicly available, EXL has notified peer agencies of the data as one potential data point in an affordable housing analysis. N/A Auditor’s recommendation was for a specific rule for Administrative Citations for STR’s

Audit Findings and Implementation Plan Audit Recommendation 1.5-Data Reliability Audit Recommendation Department Response Action Items/Status The Director of Excise and Licenses should improve the reliability and quality of short-term rental enforcement data by developing policies and procedures to ensure that the data collected is complete, accurate, and valid. Agree - EXL agrees with the need to improve data reliability over the long-term. Now that the program is one-year in and is beginning to mature, we will continue to actively work towards insuring data collected is complete, accurate and valid. In Process

Audit Findings and Implementation Plan Audit Recommendation 1.6/1.7 –Contracting Practices/Business Case Analysis Audit Recommendation Department Response Action Items/Status For future procurement of STR enforcement software services, the Director of Excise and Licenses should adhere to the requirements outlined in Executive Order No. 8B. This will be accomplished though conducting a business case analysis to compare the operational effectiveness, suitability, cost, and risk associated with available alternatives. When considering alternatives, the Director should also consider mission threats and dependencies on other programs. Excise and Licenses, in consultation with Purchasing and the City Attorney’s Office, worked on the procurement and selection of the vendor for STR enforcement software services per the requirements outlined Executive Order 8B. Given the uniqueness of the services being requested and the limited number of candidates in the market at the time, Excise and Licenses conducted an appropriate business case analysis when procuring STR enforcement software services. Moving forward, we will ensure documentation of vendor selection. Complete

Audit Findings and Implementation Plan Audit Recommendation 1.8- Lodgers Tax Validation Audit Recommendation Department Response Action Items/Status The Treasurer should improve the Treasury Division’s data validation policies and procedures to ensure that all persons holding an STR business license have obtained a Lodger’s Tax license and identification number and are paying all applicable taxes. Excise and Licenses has worked with Treasury and Technology Services to enable real-time verification of Lodger’s tax account numbers when registering or renewing business licenses. Complete

Going forward Additional enforcement tools: Short term: Mid-term: Complaint notification Denver Police Department-communication and strategy Mid-term: Audit implementation item of adding additional document requirements on application New rule: No STR can violate the health, safety and welfare Long term: Add additional ordinance language (or rules?) that define the primary residence (e.g. Boulder) E.g., Occupancy limits, advertising regulations, nuisance abatement, etc. Next Meeting: March 27, 2018, 4pm Possible Agenda Items: Insurance limits Proposed rules for additional enforcement tools

Questions? www.Denvergov.org/STR