A first-of-its-kind proposal in Colorado to provide local governments with the power to levy a tax on vacant homes, sometimes referred to as a “ghost tax,” was rejected by the House Finance Committee on Monday.
But that doesn’t mean the concept won’t materialize another day or in another way, , where affordable housing advocates have discussed bringing it forward for rental units.
Pioneered in Vancouver, B.C., and copied in Oakland and San Francisco, residential vacancy taxes are both novel and controversial. Communities facing severe housing shortages and affordability problems view them as a tool to convert empty homes into permanent residences, or to generate tax revenues to help fund affordable housing if those conversions don’t happen.
“It was disappointing to have the bill die in committee when we were very willing to continue to make adjustments and concessions. This concept has been needed for several years, and I am glad to be able to start this conversation in the legislature,” said Rep. Brianna Titone, D-Jefferson County, a co-sponsor of the bill, alongside Rep. Elizabeth Velasco, D-Glenwood Springs.
Had passed, Colorado would have become the first U.S. state to broadly authorize a vacancy tax.
The bill would have allowed local governments lacking home-rule status to charge an excise tax on vacant homes with voter approval. Communities could define what they considered vacant, the amount of taxes to be charged, and how the revenues generated could be spent on housing.
Home-rule municipalities have the power to implement an excise tax on vacant homes; none have done so. One intent of the bill was to create a more level playing field, allowing counties, which are almost all statutory, to more easily cooperate with towns and cities in addressing housing shortfalls.
In an effort to blunt Front Range opposition, the bill was amended set a vacancy rate threshold of 25% or higher, which is way above the home vacancy rates seen in the state’s most populated counties.
“In some areas of the state, 40% of habitable homes sit vacant — not under construction, not for rent, but unused — contributing to an acute housing shortage for workers and families, even as hundreds of homes remain empty,” Titone said during the hearing on Monday.
Hinsdale, San Juan, Summit, Mineral, Pitkin, Grand, Routt, Jackson and Eagle counties have some of the highest vacancy rates in the state including second homes, according to the U.S. Census Bureau’s American Community Survey.
While counties, school districts and special districts can collect property taxes on homes, empty or not, municipalities tend to lose more than they gain when full-time occupants are missing. That’s because towns and cities rely heavily on sales tax revenues, which absentee owners don’t generate as permanent residents do. Nor do empty homes generate lodging or short-term rental taxes.
Those missing revenue streams can create a financial strain, local government leaders argue. Compounding matters, many mountain communities are limited in terms of the land they can develop. When the limited lots are tied up hosting homes that sit empty, workers don’t have the homes they need and are forced into long commutes. That makes it harder for those communities and local businesses to provide the services needed to support a tourism-based economy.
“Housing that’s affordable to service workers, teachers, nurses and public safety workers is one of the most pressing challenges facing Colorado communities, and this bill provides municipalities and counties with an important tool to address it. Colorado mountain resort communities are facing a workforce housing crisis that is threatening their economic viability,” Elizabeth Haskell, a legislative and policy advocate for the Colorado Municipal League, testified at the hearing.
The CML teamed with the Colorado Association of Ski Towns and elected officials in several mountain resort towns to testify in support of the bill. Supporters from the Front Range, including Jefferson and Clear Creek counties, as well as southeastern Colorado, also weighed in.
The argument originating from places like La Junta isn’t about converting vacation homes, but rather incentivizing investors and heirs to release empty homes that they are sitting on and not rehabilitating. Given that builders won’t touch those areas, even restoring a dozen or two old homes can go a long way in boosting the housing stock.
Testifying on the other side were Realtors, the Colorado Association of Homebuilders, the Colorado Apartment Association, the Colorado Competitive Council, as well as owners of second homes and those concerned more broadly about the erosion of private property rights.
“You can’t make housing more affordable by making it more expensive,” said Tyrone Adams, CEO of the Colorado Association of Realtors. “This bill invites arbitrary and inconsistent application across the state.”
Homes can end up vacant for a host of reasons, Adams said. Owners may be called away to a military deployment, take a job in another city, or find themselves in an extended care facility. Older mountain residents may not be able to live at altitude any longer, but they may want to retain a property for their family.
In a weaker economy, finding tenants might take longer, rehab efforts might be harder to finance, and builders might find themselves with excess inventories that require time to clear out. A natural disaster, such as a wildfire, could result in lengthy repairs and periods of vacancy.
While the Vancouver tax did reduce the vacancy rate, it failed to improve overall housing affordability, said Parker White, executive director of the Colorado Competitive Council. The only reliable way to improve affordability is to create conditions where builders can generate more supply, he said. That comes through reducing regulations, lowering fees and speeding up approval times.
That surge approach has worked for apartments in metro Denver, where rents have fallen to early 2022 levels, and where older market-rate units now can compete with income-restricted housing units built using tax credits.
“In short, this is more of a funding mechanism than it is a housing affordability piece of legislation,” White argued.
Some of those testifying noted that voters in mountain communities have rejected changes needed to boost workforce housing, essentially rejecting the tools they had at hand and then asking for a new one.
For example, Steamboat Springs voters, despite having one of the highest housing cost burdens in the state, rejected a 9% tax on short-term rentals and a 0.2% city sales tax to fund affordable housing development. In March 2024, voters, in a special election, rejected the annexation of the 420-acre Brown Ranch property, which would have allowed the Yampa Valley Housing Authority to construct 2,264 housing units.
The Town of Vail blocked Vail Resorts’ efforts to build 60 to 70 units of workforce housing, arguing it would harm the habitat of a herd of Bighorn Sheep in the area. Officials argued that the project could be built elsewhere and then tried to condemn the land so they could acquire it, triggering a lawsuit.
This is in a town where the and the average home price is $1.7 million, according to Zillow.
Others argued that second homeowners often make significant contributions to local communities via philanthropy, even if they don’t buy as many tchotchkes and hoodies from the Main Street tourism shops. And they heavily support local schools that their children will never attend. And there is the convertibility problem.
High-end vacation homes don’t switch easily to workforce housing, especially in expensive places like Aspen and Vail. Nor do low-end vacation homes, like summer cabins in the Foothills. And not all vacation homeowners are wealthy. Many have scraped by for years to establish a family refuge. Some retirees living on a fixed income testified that any new taxes would push them over the edge.
In the end, arguments from opponents were enough to sway three Front Range Democrats on the Colorado House Finance Committee — representatives Sean Camacho of Denver, Bob Marshall of Highlands Ranch, and Rebekah Stewart of Lakewood — to join Republicans to indefinitely postpone the measure by a 7-4 vote on Monday evening.
Titone, who is in her last term, argues a vacancy tax deserves continued consideration even if the first attempt stalled. Vancouver lowered its vacancy rate by 1.5 percentage points, and its “Empty Homes Tax” generated $194.3 million in revenues to support affordable housing, according to a 2024 study from the C.D. Howe Institute.
The record is more mixed in California. A San Francisco Superior Court judge ruled in 2024 that the tax was unconstitutional because it violated property-rights protections and penalized owners for not renting their units. But a legal challenge in Oakland, where the tax focused more on vacant land and buildings rather than rental units, went in the city’s favor.
In Denver, where empty apartments are more of an issue than empty homes, housing advocates are trying to coalesce support for a vacant rental tax, which could be implemented independently of state authorization, given Denver’s home-rule status.
“I hope that what we have learned, and will continue to learn from other places where this is being adopted, the legislature can find a framework that everyone can agree with to help the small businesses and workers in our resort towns,” Titone said.
