Rent Control Issue Digs Up Old Skeletons

By Robert Davis 

Denver experienced one of the highest growths in the country of cost-burdened renters from 2007-2017. (Credit: ApartmentList)

After Democrats took control of Colorado’s state legislature in 2018, fair housing advocates began to chatter about how to increase housing opportunities for the state’s most vulnerable residents.

Instead, leadership in the House and a majority of state senators bickered over enacting a rent control policy. 

“I don’t think cities and counties should be in the business of telling businesses how to run their businesses,” Sen. Angela Williams (D-Denver) said before the Senate Committee of the Whole in mid-April. 

Williams was referring to SB19-225, a bill that would have allowed local governments to set their own rent control policies but was laid over until the next session convenes in January 2020. 

Although she co-sponsored a bill increasing the amount of time a landlord must give a tenant before eviction, Williams stops short of approving of rent control, unlike some of her colleagues. 

“One of the biggest issues across the state is the ability of people to afford to live in their communities,” Sen. Robert Rodriguez (D-Denver) told the Senate State, Military, and Veteran’s Affairs Committee during his testimony for the bill’s passage. “This bill will give a tool to local jurisdictions to look at options for putting affordable housing into communities. We are allowing different communities to come up with different solutions.”

Rodriguez argued the bill would help address the growing disparity between housing costs and language from CRS 38-12-301 that prohibits municipalities from addressing the problem themselves. 

“Since 2000, the state’s need for affordable housing in all geographic regions has grown exponentially,” the bill reads. “Among other effects, the immense demand for affordable housing represents a significant impediment to economic growth and opportunities for residents within the state as the majority of renters in Colorado are rent-burdened…”

According to a study conducted by real estate listing site ApartmentList, 51 percent of renters in Denver are cost-burdened. That means they spend more than 30 percent of their income on housing. 

“Denver doesn’t have a housing crisis,” Sen. Julie Gonzalez (D-Denver), one of the four co-sponsors of the bill, told the committee. “There is plenty of construction out there. But, Denver has an affordable housing crisis.”

Rent control will likely be a tough sell even with Democrats in control of the state government. Denver’s history with rent control adds an even greater challenge. 

Old Bones

In 2000, The Colorado Supreme Court decided in the case of Town of Telluride v. Thirty-Four Venture that state statutes that prohibit rent control policies supersede “the authority of a home rule municipality to regulate rents,” according to the majority decision. 

At issue was a town ordinance, Ordinance 1101, that imposed an “affordable housing” requirement on new developments in Telluride. The ordinance required developers to create affordable housing for 40 percent of the employees generated by new developments and imposing deed restrictions in order to fix rental rates. 

The majority concluded that the ordinance stood in opposition to CRS 38-12-301, which defines rent control as a statewide concern, and thereby prohibits local governments from making their own rules regarding rental properties. 

In his dissent, Judge Greggory Hobbs joined former Chief Justice Mary Mullarkey in rejecting the majority’s overly-broad interpretation of rent control.  They argued that the majority had relied on a distortion of what the rent control policy actually meant and the economic factors that made the General Assembly consider passing as rent control bill in the first place. 

“A shortage of affordable housing exists in Telluride because of a high degree of capital investment in development projects, rather than the stagnant investment that motivated rent control,” the dissent reads. “Thus, the economic condition precipitating the creation of Ordinance 1011, and consequently, the intended effect of that ordinance to mitigate the deleterious effects of high levels of economic development are not within the scope of ‘rent control’ as the General Assembly understood it.”

Local Answers

Now, it seems the same question has returned. But, are the circumstances the Supreme Court considered still valid? If not, what does that mean for the future of rent control in Denver?

Colorado has seen a large swath of foreign investment in its real estate market since 2012. According to a report by The Denver Channel, foreigners poured in over $1 billion into Colorado real estate, mostly from countries such as Canada, Singapore, France, China, and Germany. 

These investments, along with state and local policies, have made it much harder for people to become homeowners. It has also incentivized those that have extra capital to become landlords, which has created a vicious cycle for renters to escape. 

Colorado is considered a landlord-friendly state according to a survey conducted by real estate website RentCafe.com. Their survey lists factors such as state law having now statute regarding a maximum security deposit that landlords can charge for a one-year lease and providing no timetable for them to recover their possessions as reasons for their designation. 

The Colorado Center for Law and Policy’s (CCLP) 2018 State of Working Colorado Report adds weight to this problem by pointing out that the people who are most affected by these one-sided rental laws often can’t afford to move once their landlord files for eviction. 

Opponents argue that wages in Colorado have risen, therefore placing the burden back on the renter to save money for an inevitable move. The CCLP report points out that Colorado’s wage growth is not due to numerical wage growth. Instead, workers are working longer hours to make up the difference between their wages and the city’s increasing cost of living. 

“Good jobs that provide the income and benefits necessary for a foothold in the middle class are harder to find while the basic needs such as housing, health care and child care are increasingly out of reach,” the report reads. “Deeply rooted structural inequality keeps women and people of color from achieving their full potential. Internationally, the U.S now lags behind most developed nations in measures of income equality and socioeconomic mobility.” ■