Colorado Representative Shannon Bird
Colorado Representative Jenny Willford
As a bill moves through the Colorado Legislature that would allow local governments to implement rent control, two representatives from North Metro Denver don’t see eye to eye.
According to the bill summary, HB23-1115 would repeal previous statutes that prohibit counties and municipalities from implementing rent control.
“...the bill permits a local government to have or adopt an ordinance or regulation that is expressly intended and designed to increase the supply of affordable housing,” the summary reads.
It comes with requirements, such as requiring that cities exempt any units or construction less than 15 years old from rent control. It also said the limit of rent increase must not be less than three percentage points above the consumer price index, with reasonable increases that reflect actual costs of substantial improvements.
The bill passed the House 40-24 on Feb. 27 with five Democrats joining Republicans to vote no. Rep. Shannon Bird of Westminster was one of those Democrats.
“I don't believe that rent control is an effective policy to cure our state's housing affordability crisis,” Bird said in an interview.
Citing economics as a basis for her reasoning, she said the state fell behind with meeting the housing demand of the growing population. With rent control, she fears fewer people will invest in building rental properties or offering their homes to be rented.
“No person is forced to own an apartment building. No person is forced to offer homes for rent,” she said. “When you tell someone they cannot make a market rate of return on the money that they are investing, they will find a way to invest their money to get a better return.”
That translates into a disincentive to build the housing the state needs, she said, and that will affect more than just the municipality it may be enacted in.
Bird, who also served as a Westminster city councilor, understands the local control aspect of it — one city deciding if it fits their needs or not, but she sees it as a regional issue.
“When you restrict supply in one city because of a rent control policy, residents who were previously looking for a place to live in that city and now cannot find a place because supply is constricted there, will go to neighboring cities, where perhaps there is no rent control, and maybe more supply,” she said.
More people looking for housing in other cities will increase the price of housing in those cities, she said.
If rent control was passed in Westminster, Bird foresees a drop in the amount of people willing to build new apartments in the city, and fewer people offering their homes for rent.
Another tool in the toolbox
Rep. Jenny Willford of Northglenn sees it differently. She voted yes on the bill, citing her experience as a Northglenn city councilor.
“I know that local governments are really on the frontlines of trying to solve a lot of problems that our residents face and this is, in my mind, another tool in the toolbox,” Willford said.
Many other advocates for rent control reason their support for similar reasons: allowing the policy in addition to many others.
“I think these issues are really multifaceted and really layered,” she said.
After the Marshall Fire, she heard stories from residents across Northglenn and Thornton whose rent was raised by hundreds of dollars. That led to displacement.
“Then having to figure out where they're going to go next because they can't afford to stay where they are,” she said. “That’s not right.”
She heard from a resident who already works two jobs and lives off Huron and Kennedy, whose rent rose $600 since she began renting.
“These are the stories that we are hearing of folks not able to continue to live in the places they’ve lived for some time, and it’s heartbreaking,” Willford said.
She noted that when residents move, they uproot their whole community, and it takes time to reestablish themselves elsewhere.
Willford said that most of her support for the bill comes from giving local governments the opportunity to build a policy that works for them.
“What will work in somewhere like Durango probably won't work in Northglenn, especially as a community of renters and homeowners,” she said.
The policy, she sees it, is about rent stabilization and doesn’t see it negatively affecting housing quality or affordability. She thinks it will help prevent people from being priced out of their communities.
“It's a measure that can keep current folks from being displaced from their neighborhoods. And that's a really important thing when you're thinking about the fabric of our communities,” Willford said.
From the economist
Dr. Alexandre Padilla, professor of economics at Metropolitan State University of Denver, didn’t offer encouraging results from research and cities with rent control.
“From an economist viewpoint, there's a host of costs (and) negative, unintended consequences to rent control,” he said.
One unintended consequence, he explained, comes from the shortage left by rent control. With lower rents attracting a lot of people, not everyone will be chosen for housing.
And the people who need the lower price aren’t always the first in line for the housing, with those who can afford to rent at a higher price also vying for the spot. It also leads to an increase in discrimination, since owners will not allocate the property to whoever is willing to pay the most.
“You're going to use some kind of subjective mechanism to decide who gets it, and that's when you're going to use your own personal biases to decide who gets that unit,” Padilla said.
He confirmed Bird’s view that rent control will discourage people from building homes and apartments.
“The goal of any developer is to make profits. If you cannot rent, as a landlord, what the market price dictates, you are less likely to rent out your units,” he said. “And you are more likely to convert those units into something else, like offices.”
That translates into less housing, which translates into higher prices, which translates into more displacement, Padilla said.
“There's only a few people that benefit from rent control, (that) is the people that actually get to rent at that price,” he said. “But again, they’re not necessarily the people that rent control is trying to help in the first place.”
He also confirmed Willford’s view that community building is very important to communities, and with rents going up, people will be priced out. However, in the long term, rent control may play out other negative consequences for the community, such as a landlord selling their properties to be turned into something else.
He also noted that mandating lower rents may encourage the owners or the landlords to compensate for the decrease in revenues. That can translate into less amenities or less maintenance that is usually provided.
A small benefit of rent control provides those paying lower rents with more money to spend on other things. But it didn’t outweigh the negatives of the policy, and he pointed to New York City and San Francisco.
Padilla said both cities enacted rent control, but are now rolling back the law, and not requiring new buildings to be under rent control.
“Be careful what you wish for,” he said.
Both representatives offered other solutions to the housing crisis. Bird said the state needs to incentivize more building through tax subsidies and making it less expensive.
She champions tax credits targeting people who make between 60% and 80% of the area median income, which she sees as the middle-income range and also touching the lower income range.
According to the Tax Policy Center, money comes from the federal government to the state, and state agencies issue the credits to private developers of affordable rental housing projects, called Low-Income Housing Tax Credit (LIHTC).
There are three ways to qualify for the credits, depending on what percentage of residents at specific incomes will inhabit the properties.
Bird also said there needs to be incentives to build more housing by making it less expensive to build housing. That comes from municipalities, with things like tap fees, design standards and the process itself.
“A lot of that is going to be local governments making decisions to make it less expensive,” Bird said.
It also comes from litigation risk. She said there aren’t enough homes that people can afford to buy, pinning litigation risk as one of the major reasons.
“Our state has not been building condos for middle income people since about 2010. There are people who believe that the laws were changed in our state to make it really easy to sue builders who build condominiums,” she said.
With those laws, she thinks the pendulum has swung to the point where builders can’t afford the high cost of insurance. She said many of the laws were passed in 2010 because many of the condos built were “garbage.”
“Your laws need to strike the right balance where you hold developers appropriately accountable, but also don't make it so easy that anytime someone builds a condo, it's a certainty that they're going to be sued and that's about where our market is right now,” she said.
Willford said she’s interested in the legislature passing policies that help further homeownership. She also wants to take a closer look at the land use bill that will be coming forward.