At a contentious town council meeting in Breckenridge, Colorado—after five hours of public comments overwhelmingly against the measure—the council voted unanimously to cap short-term rental licenses at 2,200. The regulation slashed around 275 units from the market, in a move that upset hundreds of property owners in the area—many concerned about their livelihood. The move is part of a growing trend in Colorado’s high country, where resort towns have turned down rental applications, increased rental regulations, and cut the number of permitted vacation rentals.

A short-term rental—often referred to colloquially as an “Airbnb”—is a furnished property rented out for a relatively short period, more akin to staying in a hotel than signing a lease. These properties can include sprawling mansions, quaint beach houses, apartments, single bedrooms in a larger unit, or even parked RVs, backyards, and treehouses. While serving the same basic purpose as a hotel but with an often wildly different guest experience, short-term rentals have become increasingly popular for several reasons, including price, privacy, location, uniqueness, and the personal touches of a host who actually owns the property. As of 2019, nearly twenty percent of the United States population—over sixty million people—had used a short-term rental, and before COVID, that number was steadily rising.

It may seem counterintuitive that these resort towns are aggressively capping short-term rental markets, as most local economies are invariably based on tourism. The vast majority protesting these moves are, predictably, owners and operators of short-term rental units worried about their income. However, they are not the only group whose income is affected by these regulations. Due to the unique nature of mountain resort towns, many of these areas are somewhat remote, and there are not enough long-term rentals in the area to accommodate the workforce required of a tourist destination. As a result, businesses are struggling to find and retain staff. Proponents of the rental permit cap hope that slowing the growth of short-term rental properties will eventually lead to more availability of affordable long-term housing.

There are other reasons that cities around the country have attempted to regulate the short-term rental market. For example, in a setting completely different from the ski hills of Colorado, San Diego, California passed a measure six months prior to Breckenridge’s that cut short-term rental licenses by twenty to thirty percent. There, proponents were not concerned about the lack of long-term rentals so much as they were about preserving the character of their neighborhoods. Advocates of the license cap complained that their neighborhoods had lost their sense of community, and many once-peaceful areas had turned unruly, with problematic hosts renting out rowdy party houses with little or no oversight.

San Diego has tried for years to gain control over the exploding growth of short-term rentals; during that time, two short-term rental giants—Airbnb and Expedia (parent company of HomeAway and VRBO)—funded a referendum drive that killed far more onerous regulations. So it is no surprise that the San Diego City Council lost an advertising battle against companies valued at $130 billion and $21 billion, respectively. Still, the Council is not powerless to limit rental licenses under the scope of its regulatory powers. However, communities like those in the Colorado high country and coastal California are now facing a new regulatory challenge when it comes to their neighborhoods: the advent of commercialized fractional homeownership.

Nascent startups, backed by venture capital, are now buying houses in vacation markets—the very same markets that are wrestling with short-term rentals—and turning them into limited liability companies (LLCs), then selling off fractions of the house/LLC to individuals interested in owning a second home. The concept is geared toward people in the market for a vacation home who may not have the capital or the time for full ownership of a second home. Purchasing part of the LLC entitles individuals to use the home for a commensurate part of the year; they are then responsible for a monthly fee that includes services such as cleaning, maintenance, and property management.

This may sound like a strikingly familiar setup to anyone who has sat through a timeshare presentation for a free steak dinner. A timeshare is a prepaid lifetime commitment that grants annual visits to the same resort; in addition to the upfront lump sum payment, annual maintenance fees are required. Reduced to its essence, fractional homeownership is the purchase of a share in a property that allows one to use the property for an allotted amount of time per year, with mandatory annual fees, including cleaning and maintenance. This certainly sounds like a timeshare, only with a different name. To add to the similarity, these allegedly different property types exist in overlapping areas. The vast majority of fractionally-owned properties are located in resort towns in the mountains of Colorado, Utah, and Wyoming, coastal or wine-country California, and a few in Arizona and Florida. This overlaps with the most popular timeshare states—Florida being the unquestioned leader—with California, Arizona, and Colorado near the top of the list as well.