Colorado's attractions, from the Rocky Mountains to urban centers like Denver, draw millions of visitors annually, creating opportunities for short-term rental entrepreneurs. The state's skiing, outdoor recreation, and growing cities have established it as a top vacation rental market.
Navigating Colorado's regulatory landscape presents significant challenges due to its localized approach to short-term rental oversight. The state delegates regulatory authority to local governments, creating a patchwork of requirements that vary dramatically from one city or county to another—sometimes with notable contrasts between neighboring communities.
This guide covers short-term rental laws in Colorado, from the state's non-intrusive approach to specific requirements in major cities.
Understanding Colorado Short-Term Rental Laws
Colorado takes a local approach to short-term rental regulation, with virtually no statewide oversight beyond basic tax collection. This decentralized framework has created a diverse regulatory landscape where vacation rental rules vary significantly across jurisdictions.
The variation between cities and counties isn't merely administrative—it can determine whether a property can legally operate as a short-term rental. Some Colorado communities like Denver have implemented strict regulations limiting short-term rentals to primary residences only, prohibiting investment properties. Other areas allow non-primary residences to operate as vacation rentals with specific licensing and operational requirements.
This localized regulatory approach reflects Colorado's tradition of strong local governance. It allows communities to tailor regulations to their specific needs, but it creates complexity for property owners, especially those with multiple properties across different jurisdictions. A rental property management strategy that works in one Colorado city might be prohibited in a neighboring community.
The regulatory landscape has become more dynamic recently. Due to concerns about housing affordability, neighborhood character, and public safety, many Colorado communities have tightened oversight of short-term rentals. Regulations when you purchased a property may change, affecting your operational model and return on investment.
For property owners and investors, this evolving landscape makes thorough research and ongoing monitoring of local regulations essential. Understanding the specific rules for your property's location is the basis of legal compliance and successful operation in Colorado's short-term rental market.
Definition of a Short-Term Rental
Colorado lacks a uniform definition of short-term rentals, but most jurisdictions share a common understanding of vacation rentals. This agreement provides a baseline for local regulations, though specifics vary.
In most Colorado cities and counties, a short-term rental is a residential unit rented to guests for less than 30 consecutive days. This timeframe distinguishes short-term or vacation rentals from longer-term leases, which fall under different regulations.
City-specific definitions may include additional details:
- Denver defines short-term rentals as properties rented for fewer than 29 nights and requires them to be the host's main residence.
- Other jurisdictions have slight variations in the day count (e.g., less than 28 or 31 days) or additional criteria related to rental frequency or qualifying property types.
Types of properties for short-term rentals include:
- Single-family homes
- Condos and apartments
- Rooms within a home
- Duplexes and townhomes
- Accessory dwelling units (in certain jurisdictions)
Traditional accommodations like hotels, motels, and bed and breakfasts fall under separate regulatory frameworks with specific licensing and operational requirements. The distinction between a bed and breakfast and a short-term rental can be unclear, but usually hinges on food service, management presence, and the number of units.
In many Colorado communities, a key distinction is between owner-occupied (or primary residence) and non-owner-occupied short-term rentals:
- Owner-occupied/primary residence rentals are those where the owner lives in the property for a significant portion of the year and rents it out only when not using it or rents a portion while living there.
- Non-owner-occupied rentals are investment properties where the owner does not live on-site and the property is used primarily or exclusively as a vacation rental.
This distinction can impact permitting eligibility. Some jurisdictions, like Denver, prohibit non-owner-occupied rentals entirely, while others, like Colorado Springs, allow them in certain zones.
Understanding the specific definition in your jurisdiction is crucial, as it determines the regulations for your property and the requirements for operation.
Starting a Short-Term Rental Business in Colorado
Launching a short-term rental business in Colorado requires navigating local regulations, with requirements varying by location. Success depends on thorough research and adherence to local rules, which may change as communities refine their approach to vacation rentals.
1. Investigate Local Regulations
Before buying a property or converting an existing one to a short-term rental, investigate the regulations in your city and county. Colorado's localized approach means requirements can vary significantly even between neighboring communities.
This preliminary research is important in Colorado, where some jurisdictions have implemented strict limitations on short-term rentals:
- Denver restricts short-term rentals to primary residences only, prohibiting investment purposes.
- Colorado Springs prohibits non-owner-occupied rentals in single-family zoning districts.
- Other communities have distance, density, or zoning limitations.
Purchasing a property without understanding these limitations could result in an unusable investment. Start your research with your city and county’s local government website, focusing on planning departments, business licensing offices, and tax collection agencies.
2. Obtain Licenses and Permits
Most Colorado cities require specific licenses or permits for short-term rental operations. These local authorizations are essential for legal compliance and typically involve:
- Application forms with comprehensive property information
- Proof of ownership and residency status (important in jurisdictions with primary residence requirements)
- Safety certification or inspection reports
- Proof of liability insurance.
- Local contact information
- Payment of licensing fees
For example:
- Denver requires a short-term rental license and a Lodger's Tax license.
- Fort Collins offers primary and non-primary STR licenses, with eligibility depending on location and usage.
- Westminster charges a $200 license fee.
In addition to short-term rental permits, you need general business licenses at the city and/or county level. The application processes vary, with some cities offering online systems and others requiring in-person submissions and inspections. Processing times can range from a few days to several weeks, so prepare accordingly.
3. Understand Zoning Restrictions
Zoning regulations are a significant barrier to operating a short-term rental in Colorado. Many cities restrict short-term rentals to specific zoning districts or impose different requirements based on the property’s zone.
For example:
- Colorado Springs prohibits non-owner-occupied rentals in single-family zoning districts (R-E, R-1 6, R-1 9, and Single-Family PDZs) and requires a 500-foot separation between non-owner-occupied rentals in other zones.
- Fort Collins allows short-term rentals in single-family homes and townhomes but not in multifamily buildings.
- Denver allows short-term rentals only in residential zones and as primary residences.
Before purchasing or converting a property, verify that short-term rentals are permitted in your zone, and check for distance requirements, density limitations, or property type restrictions. This information is available through city planning departments or zoning offices.
4. Comply with Safety Standards
Safety requirements for Colorado short-term rentals typically include:
- Working smoke detectors and carbon monoxide alarms
- Fire extinguishers
- Emergency exit plans
- Compliance with building regulations
- Maximum occupancy limitations based on square footage and bedroom count.
- Proper electrical and plumbing systems
Many jurisdictions require initial safety inspections for the permit application process, and some mandate periodic re-inspections to ensure compliance. These standards meet regulatory requirements and help protect guests and minimize liability for property owners.
In Colorado's mountain communities, snow removal, carbon monoxide safety (due to gas heating), and wildfire evacuation plans are prioritized. These concerns translate into extra safety requirements for short-term rental properties.
5. Register for Tax Collection
In Colorado, short-term rental operators have several tax obligations:
- Lodging Taxes: Many Colorado municipalities impose lodging taxes on short-term stays. For example, Denver charges a 10.75% Lodger's Tax, while Fort Collins imposes a 3% lodging tax.
- Sales Taxes: State and local sales taxes apply to short-term rentals. Colorado's state sales tax is 2.9%, with additional local taxes varying by jurisdiction.
- Business Personal Property Tax: Some jurisdictions assess business personal property tax on furnishings and equipment used in short-term rentals.
- Occupational Privilege Taxes: Cities like Denver and Aurora charge occupational privilege taxes on businesses and employees.
To collect these taxes, register with the Colorado Department of Revenue for state taxes and your local tax authority for municipal taxes. Platforms like Airbnb and VRBO collect and remit some taxes in certain Colorado jurisdictions, but operators are responsible for ensuring all tax obligations are fulfilled.
Clear record-keeping is essential for accurate tax reporting, including documentation of rental income, occupancy periods, and collected taxes. Many professional hosts use specialized software to track these obligations and ensure compliance with local requirements.
6. Secure Insurance
Standard homeowners insurance typically doesn't cover commercial short-term rental activities, creating a potential coverage gap for unprepared operators. Adequate insurance for Colorado short-term rentals includes:
- Property coverage for the home and its contents.
- Liability protection for guest injuries, which many jurisdictions require minimum coverage of $500,000 to $1 million.
- Loss of income coverage
- Coverage for Colorado-specific risks such as winter weather damage and wildfire.
Many Colorado municipalities require proof of liability insurance for the license application. For example, Denver mandates $1 million in coverage, while Colorado Springs requires $500,000. Even where not explicitly required, appropriate insurance protects your investment and provides essential liability coverage, especially given Colorado's outdoor recreation focus and injury risks.
7. Establish Local Management
Most Colorado cities require short-term rental operators to designate a local contact person to address issues promptly. This is particularly important for out-of-state owners who cannot respond to emergencies or complaints.
The local contact must:
- Be available by phone at all times.
- Respond to issues within a specified timeframe of 30-60 minutes.
- Access the property.
- Be empowered to address problems.
Colorado Springs requires a 24-hour local contact, and similar requirements exist in other Colorado communities. For non-local owners, this necessitates hiring a professional property manager or establishing a relationship with a trustworthy local contact who understands the regulatory requirements in your jurisdiction.
Licensing Requirements
Colorado lacks a statewide licensing system for short-term rentals, allowing cities and counties to establish their own permitting and registration requirements. This decentralized approach results in varied processes across jurisdictions, though most major Colorado cities have implemented some form of licensing or permit system.
Local licensing typically involves a combination of these elements, with specific requirements differing by jurisdiction:
Denver
Denver's short-term rental licensing system is one of the most restrictive in Colorado:
- Licenses are limited to primary residences (where the owner lives at least 183 days a year).
- You need a short-term rental license and a Lodger's Tax license.
- All advertisements must display license numbers.
- Licensees must keep their contact details updated with the Department of Excise and Licenses.
- $1 million in liability insurance.
- Application involves verifying primary residence status and tax compliance.
Colorado Springs
Colorado Springs distinguishes between owner-occupied and non-owner-occupied properties:
- All short-term rentals require permits.
- Applicants must provide proof of primary residence (for owner-occupied rentals), liability insurance ($500,000 minimum), and listing on a hosting platform.
- A Short Term Rental Checklist, Owner Acknowledgment, and Short Term Rental Affidavit are required.
- Non-owner-occupied rentals face additional location restrictions, including prohibition in single-family zoning districts.
Aurora
Aurora classifies short-term rentals as home occupations requiring:
- City business license
- Display license number on all listings.
- Primary residence requirement
- Compliance with home occupation standards restricting commercial activity in residential areas.
Fort Collins
Fort Collins offers various license types based on usage:
- Primary STR license for properties that are the owner's main residence.
- Non-primary STR license for investment properties (with location limitations)
- The application requires proof of ownership, liability insurance, and primary residence (if applicable).
- Local point of contact registration
- Compliance with occupancy limits and parking requirements
Application processes typically involve submitting detailed information about the property and owner, including:
- Property address and specifications
- Owner identification and contact information
- Floor plans and parking details.
- Local contact details
- Proof of insurance.
- Certification of adherence to safety standards
License fees range from $100 to $200 annually, depending on the jurisdiction. For example, Westminster charges a $200 fee, while Fort Collins charges $100 for annual renewal of primary STR licenses.
Local licenses and permits typically have defined validity periods—usually one year. After this period, renewal is required. The renewal process involves confirming compliance with regulations, updating property information if needed, and paying fees.
License Renewals
Maintaining valid licenses and permits for Colorado short-term rentals requires attention to local renewal processes and deadlines. Most jurisdictions require annual renewal of short-term rental licenses or permits, though the timing and procedures differ.
The renewal process involves:
- Submitting a renewal application before the expiration date.
- Paying renewal fees. Fort Collins charges $100 for annual primary STR license renewal.
- Updating property and contact information as necessary.
- Confirming adherence to local regulations
- In some cases, undergoing re-inspection to confirm ongoing safety compliance.
Unlike some states that coordinate renewal deadlines, Colorado's localized system means each permit follows its own timeline, typically based on the initial approval date rather than a standardized calendar. This creates individualized deadlines that vary from one property to another, even within the same city.
Property owners and managers must track renewal deadlines, as operating with an expired license can result in significant penalties. Many jurisdictions impose fines for operating without valid licenses, and some impose additional penalties for repeat violations, including potential license revocation or ineligibility for future licenses.
Some Colorado cities have implemented grace periods for renewals, but these vary and shouldn't be relied upon. The safest approach is to calendar renewal deadlines well in advance and start the process early to account for potential delays or issues.
Most local authorities send renewal notices as a courtesy, but the responsibility for timely renewal rests with the property owner. Changes in contact information or mail delivery issues can result in missed notifications, making tracking of renewal deadlines essential.
The renewal process allows local authorities to verify continued compliance and implement any regulatory changes since the initial license was issued. It is crucial to remain informed about evolving short-term rental regulations in your jurisdiction.
Required Documents
Operating a short-term rental in Colorado requires maintaining various documents to demonstrate compliance with local regulations. These materials support the initial license application, facilitate ongoing operations, and may be requested during inspections or in response to issues.
Essential documentation typically includes:
- Proof of property ownership, like a deed or property tax statement, establishes your legal right to operate a short-term rental at the location, especially in cities with primary residence requirements.
- Many jurisdictions use property information including address, floor plans, and number of bedrooms to determine maximum occupancy limits and ensure the property meets basic guest accommodation requirements.
- Identify owners and operators, including government-issued ID and reliable contact methods. This ensures authorities can reach the responsible party and verifies operators meet residency requirements for specific permit types.
- Local contact information for the property management representative, available around the clock to address issues promptly, especially for absentee owners.
- Proof of insurance coverage for short-term rental activities. Many Colorado cities specify minimum liability requirements. Denver mandates $1 million and Colorado Springs requires at least $500,000.
- Tax identification numbers, including EIN for businesses or SSN for individual owners, along with state and local tax registration information, enable proper tax collection and reporting to authorities.
- Compliance certifications for safety inspections, zoning approvals, and local ordinances verify the property meets standards for guest safety and neighborhood compatibility.
Responsible operators maintain additional records to support their business operations, beyond these regulatory documents, including:
- Guest agreements and house rules
- Cleaning and maintenance records
- Tax payment records and receipts
- Communications with local authorities or neighbors.
In Denver, where primary residence requirements exist, operators must maintain additional documentation demonstrating that the property serves as their primary residence. This documentation includes voter registration, tax returns listing the property address, or utility bills showing consistent usage.
Organizing these materials in physical and digital formats ensures quick access. Many professional hosts create comprehensive digital filing systems with backup copies of critical documents, protecting against loss and enabling remote access.
Taxes for Short-Term Rentals
Colorado imposes significant tax obligations on short-term rental operators at both the state and local levels. Understanding and fulfilling these tax responsibilities is essential for legal operation and financial management of vacation rental properties.
Lodging and Occupancy Taxes
Many Colorado municipalities impose specific lodging or occupancy taxes on short-term accommodations:
- Denver charges a 10.75% Lodger's Tax on short-term rental revenue.
- Fort Collins imposes a 3% lodging tax on rentals under 30 days, to be submitted monthly.
- Other cities have their own rates and collection systems.
These taxes support tourism development, marketing, and infrastructure and are administered by local rather than state government.
Sales Taxes
Colorado's sales tax system includes:
- State Sales Tax: 2.9% statewide sales tax collected by the Colorado Department of Revenue.
- Local Sales Taxes: Additional city and county sales taxes that differ by jurisdiction.
- Special District Taxes: Some areas have additional taxes for regional transportation or other specific districts.
In Denver, the combined sales tax rate is 8.81%. This does not apply directly to the rental but rather to any taxable goods provided as part of the accommodation.
Business Personal Property Tax
Some Colorado jurisdictions assess business personal property tax on furnishings and equipment used in short-term rentals. Denver's rate for residential properties is 7.2%, though specifics for short-term rentals were not fully detailed.
Occupational Privilege Taxes
Certain Colorado cities impose occupational privilege taxes on businesses and employees:
- Denver charges an Employee OPT rate of $5.75/month, a Business OPT rate of $4.00/month per taxable employee, and an OPT rate of $4.00/month per owner, partner, or manager.
- Aurora imposes a $2/month per employee occupational privilege tax, matched by the employer.
Tax Collection and Remittance
While major booking platforms like Airbnb and Vrbo collect and remit some taxes in certain Colorado jurisdictions, these arrangements don't necessarily cover all applicable taxes or may apply only to direct bookings. Operators are responsible for fulfilling all tax obligations.
Tax reporting and remittance schedules vary by tax type and revenue volume:
- Monthly, quarterly, or annual reports
- Detailed records of rental income and taxable transactions.
- Timely payment of all collected taxes
Income Taxes
Rental income from short-term rentals in Colorado is subject to state and federal income taxes. Colorado has a flat income tax rate of 4.55%, while federal rates depend on your overall income and filing status.
Short-term rental operators can reduce their tax burden through various business-related deductions, including:
- Property depreciation
- Mortgage interest
- Property taxes
- Utilities and internet
- Cleaning and maintenance expenses
- Furnishings and supplies
- Platform commission fees
- Marketing expenses
- Professional service fees
Proper record-keeping is essential for maximizing deductions while complying with tax regulations. Many professional hosts work with accountants specializing in short-term rentals to enhance their tax strategy and ensure accurate reporting.
Statewide Rules
Unlike states with comprehensive vacation rental legislation, Colorado has taken a hands-off approach at the state level, with minimal regulations specific to short-term rentals. This absence of statewide rules has created an environment where local governments exercise primary regulatory authority, leading to significant variation across the state.
Colorado's state-level approach lacks a statewide licensing system, uniform operational standards, and preemption of local regulatory authority. This contrasts with states like Florida or Arizona, where state law establishes baseline requirements and limits local government restrictions.
Colorado's approach aligns with its tradition of local control and allows communities to develop regulatory frameworks. Mountain resort towns facing housing shortages and high tourism impacts can implement different strategies than urban centers or rural communities with varying priorities.
State-level regulations mainly relate to general business operations, not specific short-term rental rules:
- Tax Requirements: State law establishes a 2.9% state sales tax for short-term rentals. This creates a consistent baseline tax obligation regardless of location.
- General Business Regulations: If operating as a formal business entity rather than as an individual, short-term rental operators must comply with standard business registration requirements.
- Building and Safety Codes: State codes establish minimum standards for all residential properties, regardless of use, and are not specific to vacation rentals.
This minimal state framework means the regulatory landscape is defined almost entirely at the local level. Cities and counties exercise broad discretion to establish their own requirements, restrictions, and operational standards.
This state-level approach creates opportunities and challenges for property owners and investors. The absence of uniform statewide restrictions allows potential operation in areas with minimal local regulation, but it also creates a complex patchwork of requirements across jurisdictions that requires careful navigation.
Currently, there’s no indication that Colorado plans to implement comprehensive statewide short-term rental legislation, so the current localized regulatory approach will persist.
Short-Term Rental Regulations by City
Colorado's major cities have distinct regulatory approaches to short-term rentals, reflecting their unique housing markets, tourism patterns, and community priorities. Understanding these city-specific regulations is essential for successful operation in various markets across the state.
1. Denver
Denver, as Colorado's capital and largest city, has implemented strict short-term rental regulations to preserve housing for permanent residents.
Denver defines short-term rentals as properties rented for fewer than 29 nights and restricts them to primary residences—where the owner lives at least 183 days per year. This prohibits investment properties from operating as short-term rentals within city limits.
Key Regulations:
- Only primary residences can be operated as short-term rentals.
- A short-term rental license and a Lodger's Tax license are required.
- All advertisements must display license numbers.
- $1 million liability insurance is required.
- Regular tax filings and remittances are necessary.
Denver enforces these regulations, with potential fines and penalties for violations. The city has dedicated staff monitoring listings and investigating suspected non-primary residence operations. The primary residence requirement is enforced, with the city requesting utility bills, tax returns, or other documentation to verify compliance.
Tax Rates:
- Lodger's Tax is 10.75% of revenue.
- Occupational Privilege Tax (OPT): The employee OPT rate is $5.75/month, Business OPT rate is $4.00/month per taxable employee, and OPT rate for owners/managers is $4.00/month per owner, partner, or manager.
- Sales Tax: If applicable, the combined rate is 8.81%.
- Business Personal Property Tax: 7.2% for residential properties.
2. Colorado Springs
Colorado's second-largest city has developed a nuanced approach that distinguishes between owner-occupied and non-owner-occupied properties, with different regulations for each.
Colorado Springs requires permits for all short-term rentals and implements different rules based on occupancy status and zoning. The city's regulations balance tourism and neighborhood character.
Key Regulations:
- Permits required for all short-term rentals.
- Owner-occupied STRs are allowed in all zones where residential units are permitted.
- Non-owner-occupied STRs are prohibited in single-family zoning districts (R-E, R-1 6, R-1 9, and Single-Family PDZs).
- Non-owner-occupied STRs in other zones must be at least 500 feet apart.
- Maximum occupancy is 15 total occupants, which includes two occupants per bedroom plus two additional.
- Weekly trash collection is mandatory.
- No weddings or large events are permitted.
- 24-hour local contact
- A minimum liability insurance of $500,000 is required.
Colorado Springs enforces these regulations through permit reviews, complaint response, and monitoring. The city's approach balances tourism needs with residential preservation through targeted zoning restrictions and operational standards.
Tax Rates:
- City sales tax applies, with specific rates not specified in the research.
3. Aurora
Colorado's third-largest city considers short-term rentals as business activities and regulates them as home occupations, with specific requirements based on this classification.
Aurora defines short-term rentals as rentals of residential rooms or properties for under 30 days and requires business licensing. The city's approach integrates vacation rentals into existing business regulatory frameworks instead of establishing separate systems.
Key Regulations:
- City business license required.
- Listings must display the license number.
- The main residence must be the property.
- Only one listing or booking at a time is permitted.
- Hosts are responsible for guest behavior and effects on the neighborhood.
- HOAs may have additional prohibitions that override city permission.
Aurora enforces these regulations through standard business licensing compliance mechanisms. The city's approach emphasizes the primary residence requirement to preserve neighborhood character and housing availability.
Tax Rates:
- City lodger's tax of 8%
- City sales tax of 3.75% applies to tangible personal property.
- Occupational privilege tax of $2/month per employee, matched by employer.
4. Fort Collins
Fort Collins, home to Colorado State University, allows primary and non-primary short-term rentals with specific limitations based on property type and location.
Fort Collins defines short-term rentals as accommodations offered for less than 30 consecutive days. It offers different license types depending on whether the property is a primary residence and how often it is rented.
Key Regulations:
- Both primary and non-primary STR licenses are available.
- Short-term rentals are allowed in single-family dwellings and townhomes but not in multifamily buildings.
- The zoning map indicates where primary and non-primary STRs are permitted.
- The local point of contact must register.
- Occupancy limits and off-street parking requirements apply.
- HOA covenants must permit STRs.
- The application requires proof of ownership, liability insurance, and primary residence (if applicable).
Fort Collins enforces these regulations through licensing reviews and complaint response. The city's approach balances the economic benefits of short-term rentals with housing availability concerns through targeted property restrictions and zoning limitations.
Tax Rates:
- City lodging tax applies to rentals under 30 days, remitted monthly.
Bottom Line
Operating a short-term rental in Colorado requires navigating the state's localized regulatory landscape. Property owners must take a specific approach to compliance and operational planning, with minimal state-level guidance and significant jurisdictional variation.
Before investing in a short-term rental property:
- Research thoroughly. Understand local regulations, including licensing, zoning, and operational standards. This should be location-specific and include consultation with city planning departments, business licensing offices, and possibly legal advisors.
- Consider location carefully. Local regulations may make some areas significantly more favorable for short-term rental investments than others, even within the same region. Denver's primary residence restriction prohibits investment properties, while other communities allow non-owner-occupied rentals with limitations.
- Budget for compliance costs, including license fees, tax obligations, insurance requirements, and ongoing operational expenses. These costs vary by jurisdiction and should be included in your financial planning.
- Implement professional management practices. Professional standards for guest screening, property maintenance, noise management, and neighbor relations help prevent problems and support your business’s sustainability, regardless of local requirements.
- Stay informed about Colorado's evolving short-term rental regulations, as many jurisdictions are modifying their approaches due to housing concerns and community feedback. Monitoring local government communications and participating in local host associations can help you anticipate regulatory changes.
The short-term rental landscape in Colorado presents both opportunities and challenges. Operators can build successful businesses that positively contribute to Colorado's tourism economy while maintaining good relationships with local communities and authorities by understanding and adhering to local regulations. Proper compliance avoids penalties and supports the long-term viability of your vacation rental investment in the Centennial State.
