Local Governments: We’re Setting Rents in Colorado

Local governments may soon be empowered to influence rents in Colorado, threatening both the state’s recent population growth and job prospects for building professions. A bill introduced during the Spring of 2019, Senate Bill 19-225, called “The Rent Stabilization Act”, would allow local governments greater say in setting maximum rental policies in their communities. The uncertainty and incongruence of local policies across Denver, and by extension, the state of Colorado, means that commercial real estate development firms may be hesitant about taking on new projects in Denver and beyond.

Rent Control, Explained

Legislation that’s described as “rent stabilization” has the function of telling landlords they must keep the amount of rent they charge for a unit within a certain range. According to some recent studies, it often has the opposite effect, destabilizing the rental market. Even though the state’s population has increased and construction jobs picked up in response to housing needs, the uncertainty of wondering which municipality will adopt rent control regulations has commercial real estate development firms hesitating before building more units. A downturn in building may also affect civil engineering firm, who’d loose out on work if new units aren’t being built.

The Ripple Effects of Rent Control

When local governments get involved and impose rent stabilization measures, sometimes it backfires. Instead, small landlords decide to sell their buildings. With the housing stock depleted, rents actually go up. Sometimes, residential properties can lose value, too, as assessments can decrease. As property assessments decrease, so does the amount of tax collected on those properties, which can have a seriously adverse effect on critical municipal services, including utilities, public safety, and education.

Alternative Solutions

Lawmakers’ goals in providing more affordable housing are to be applauded. But rather than effectively punishing landlords with increased and inconsistent restrictions and regulations across cities, towns, and villages, it may be better to work with commercial real estate development firm and civil engineering firms to enhance the housing stock. Builders who take into account factors like transit access and other amenities when considering new projects may be those who experience the least ill effects from a law like the Rent Stabilization Act.