Short Term Rentals and Denver Housing Prices

The development of online short term rental (STR) platforms like Airbnb and VRBO have unlocked a tremendous opportunity for many to become property owners. This has led to a surge in demand for housing. The resulting impact of this surge, especially in the midst of broader housing affordability concerns, is of central interest to policy makers, developers, homeowners, and investors. According to a number of sources1,2, the growth of STR’s has pushed up the price of homes. In response to the perception that STR’s restrict the supply of homes for sales, some cities in Colorado have taken steps to limit the number of properties that can be used as STRs. Breckenridge City limits the percentage of properties that can be used as STRs to 10% in most of the city area, but allows up to 51% along and nearby Main Street and upwards of 100% in and around Breckenridge ski resort.3 Salida caps the number of properties to 314,4 and Ouray caps the total number of licenses to 120 at any given time5, to offer a few examples. The purpose of this article is not to determine whether STRs overall are a positive or negative economic development, but rather to attempt to quantify any price impact on housing; hopefully to the benefit of policy makers or investors.

The figure below shows three lines. The dark blue is the observed home price index (HPI) for the Denver Metropolitan Area. The Orange and Green lines are two different models developed by Centennial Economics that attempt to recreate the observed data through formulas that take into account interest rates, employment in Denver, and lags of HPI itself6. The only difference between these two models is that the green line includes STRs as a variable, and the orange line does not.

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Observed and Modeled Denver HPI

Note that these lines are indistinguishable until the mid 2010s, when the first STR licenses were issued. Although not exactly matching, the two models follow roughly the same trajectory until about 2021. The number of STR licenses is estimated to have risen from just above 300 licenses in 2019 to over 1,000 in 2022, and close to 2,500 in 2025. Starting in 2022, these two models diverge significantly. The model that includes typical indicators of home prices, like interest rates and employment, ceases to be enough to replicate observed home price increases, where it was highly effective in years previous. The addition of the STRs as a variable brings the model back into alignment with observed experience.

The difference between these two models can therefore be estimated as the price impact of STR properties in Denver. The median home price in Denver is reported as $586,000 by Re-Colorado for September 20258, the last month where full data is available for our modeling. The model with STRs included is approximately 13% higher. 13% of the median home price is close to $76,000.

Why does this matter? Certainly for Denver, STRs have had a material impact on the price of housing. Policy makers seeking to influence the price of homes in their community may view limiting or expanding STRs as a key policy lever. Before expending resources toward such a policy, it is important to quantify their impact on prices. It’s possible in a given community that STRs have had very little impact. It’s possible that they have a substantial impact. If you are a potential or current investor in the STR market, understanding how much STRs have already impacted your market may help you build a picture around whether properties are over or under valued; whether the market is saturated or still has room to grow, and given the rate of change in the number of STR properties, how much you might expect prices in your market to change should you wait to buy or sell.

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1. “Is the Growth of Short-Term Rentals Fueling the Region’s Housing Crisi”. Mid-America Regional Council. October 28, 2024. https://www.marc.org/news/economy-housing/growth-short-term-rentals-fueling-regions-housing-crisis

2. Achen, Paris. “Affordable Housing Vs. STRs: What Does the Data Say?”. Rent Responsibly. September 21, 2024. https://www.rentresponsibly.org/affordable-housing-vs-strs-what-does-the-data-say/

3. https://www.townofbreckenridge.com/departments/finance/business-and-accommodation-unit-licenses/accommodation-unit-short-term-rentals-licenses/development-of-license-caps-and-regulations

4. https://www.cityofsalida.com/clerk/page/short-term-rentals

5. https://www.cityofouray.com/city_offices/community_development_vs3/short-term_rentals.php

6. In other words, does the level of home price appreciate three months ago, for example, predict how much home prices should appreciate this month.

7. STR data is taken from the Denver city ‘Open Data Catalogue' (linked below), which provides a list of the current active, pending and some inactive licenses in the current month. Centennial Economics has not been regularly collecting this data since the mid 2010s, but the license numbers indicate the initial year a license was issued. In this way, Centennial Economics can estimate the number of units that were operating as STRs in the past. If a property had an active license, but was allowed to expire however, it would not appear on the data set. Therefore, the data presented here should be viewed as the minimum number of STRs in the past.

https://opendata-geospatialdenver.hub.arcgis.com/datasets/e1d2f11c3865401ea8591949bb19eec8_67/explore

8. Re Colorado. “September Housing Market Reports”. https://recolorado.com/september-housing-market-reports/