Colorado lawmakers consider slate of bills to create more housing options in the state

Affordable Housing construction in Fort Collins
Posted at 7:04 PM, Feb 13, 2023

DENVER — Housing is a top priority for Colorado lawmakers this legislative session.

The topic is so important to the Democratic leadership that Governor Jared Polis mentioned it no fewer than 20 times in his annual State of the State address last month.

But how to create affordable housing in the state — and how much of a role the legislature should play in that discussion — depends on who you ask.

Already, a number of bills have been introduced on the topic, and several more are expected to come. Here’s a look at a few of them:

Just cause for eviction

After introducing a bill to allow local governments to implement rent stabilization, eviction defense attorney and state Rep. Javier Mabrey has now introduced a bill that would ban landlords from evicting tenants without just cause.

“There are evictions that happen for no reason, but it's very clear that the underlying motive may be racial discrimination or gender discrimination,” Mabrey said.

Mabrey says one of his eviction defense colleagues recently worked on a case where a tenant was evicted after rebuking the sexual advances of her landlord.

“The court ruled that the landlord essentially had full right to evict now,” Mabrey said.

House Bill 23-1171 says tenants who are following the rules and paying their rent on time should be able to continue to live in their apartment.

A just cause for eviction would include failure to pay rent, breaking the rules in a substantial way, refusal to let the landlord enter the property, a no-fault eviction, refusal to sign a new rental agreement, demolition or conversion of the property, substantial repairs or renovations to the property or if the landlord wants to live there or have a family member live there.

If the landlord pursues a no-fault eviction, they must provide the tenant with relocation assistance that’s equal to two months rent. If the tenant is elderly, low income or has a disability, the landlord could be required to pay an additional month of rent to the tenant.

“I think this is an anti-displacement policy. This will keep communities together,” Mabrey said.

In January, the Biden Administration published its own blueprint for a renter's bill of rights that Mabrey says supports his calls for this type of tenant protections.

However, opponents say this bill would mandate endless leases. The Colorado Apartment Association opposes the bill, saying rental agreements are for a certain amount of time and the owner should have the right to get the property or space back after that time. Otherwise, the transaction is effectively a sale, the association says.

The group also believes this bill would prohibit month-to-month leases and would make it impossible to get a tenant who is a disruption to their neighbors but who isn’t necessarily violating rules to lease.

Finally, they worry this will result in higher housing costs for everyone.

Eviction protections for residential tenants

Another bill aiming to offer more tenant rights is House Bill 23-1120, which would require landlords and tenants to go through mediation in eviction proceedings if the tenant qualified for financial assistance.

Tenants who receive supplemental security income, federal Social Security disability insurance or financial assistance from the Colorado Works program would be allowed to enter mandatory mediation with landlords.

The mediation requirement does not apply if the tenant did not disclose their financial assistance to the landlord.

The Colorado Banker’s Association, Colorado Association of Home Builders and Colorado Concern are among the opponents of this legislation, which will face its first committee hearing Tuesday.

Prohibited provisions in rental agreements

A third bill making its way through the state legislature stipulates that rental agreements cannot include certain provisions.

House Bill 23-1095 passed its first committee last week and will undergo floor work on Tuesday.

Colorado already has a few provisions in place to regulate what can and cannot appear in a rental agreement in the state. This bill aims to add on to that list.

If passed, rental agreements would not be able to include a waiver of the right to a jury trial or a waiver of the ability to bring, join, litigate or support group lawsuits among other things.

It is facing opposition from the Colorado Competitive Council, the Colorado Association of Home Builders and several metro chambers of commerce.

First right of refusal

One of the more controversial housing bills to come out so far this session is House Bill 23-1190, which would create a first right of refusal for local governments.

“The bill really gives framework and time for local governments to be competitive while a seller still stays in the driver's seat for the transaction,” said Rep. Andrew Boesenecker, D-Fort Collins.

This means cities and counties would have the right to try to buy apartment buildings and multifamily units before real estate groups or other investors.

“Oftentimes, what happens is these buildings are closed on because hedge funds and private equity can come with cash, and so the transaction is complete before a local government even has an opportunity to evaluate what the impact will be on affordable housing,” Boesenecker said.

The first right of refusal would apply to buildings with five or more units in urban counties, and buildings with three or more units in rural counties. Local governments would be given 14 days to submit their offer letter saying they would like to preserve their right of refusal, then another 90 days to make an offer and secure the financing, along with another 180 days to close.

Boesenecker says this would give cities and counties time to tap into loans, along with federal relief dollars and state grant money that’s available, to purchase affordable housing.

“We need to preserve affordable housing and communities, and I think this bill does exactly what's been a challenge for so many local governments,” he said.

Peter LiFari, CEO of Maiker Housing Partners, the housing authority from Adams County, knows firsthand how hard it can be to compete with investors and real estate groups to buy these buildings. He tried to acquire a 100-unit, naturally-occurring affordable housing building for the county in 2021, but the bid fall short of another group.

“We were able to set up our capital stack in a manner that we thought was going to be competitive, but were about $3 million off the best and final offer that the market commanded. We weren't notified of that,” LiFari said.

If this bill was the law at the time, LiFari would have not only been notified but could have had additional time to secure the grant funding to make up that $3 million difference in the bids.

“We would have applied judiciously and very quickly to the Division of Housing to tap into some of their existing grant funding,” he said.

LiFari insists that this bill would help increase engagement between property owners and the local government, and benefit both the sellers and the affordable housing community.

Boesenecker says the building’s seller would still be able to name their price and have the option to sell or not to sell. They would be able to waive the first right of refusal if non-government buyers agree to include certain affordability elements in the building.

Local governments would also not be required to bid on these buildings.

Opponents of the legislation, however, say this bill applies to too many housing units and could backfire, meaning there would be less housing created overall.

“One of our problems with the bill is that (it) applies to so much more real estate than is necessary to chase the solution that they're looking for,” said Drew Hamrick, general counsel for the Colorado Apartment Association. “What this does is give them the option to purchase even luxury apartments.”

Hamrick says the state needs to create more housing with new construction projects, and to do that, it needs to encourage investors and developers to come to Colorado. He worries that a bill like this would discourage that investment and cause so many lengthy delays in the sale of properties, creating a chilling effect on the market.

“If you are the buyer of one of these developments, and you're asked to wait 14 months in order to complete your transaction, you got to deal with interest rate risk, you've got to deal with changing markets,” Hamrick said.

There are several changes Hamrick would like to see with the bill.

He would like to see it only apply to buildings of 50 units or more. He believes the bill should only apply to existing affordable housing units in the state and not the entire real estate stock. Instead of a first right of refusal, he would like to see a simple notification of the request for offers or the auction of the property, so that cities and counties can have a seat at the table like any other buyer.

“We want to have policies that encourage housing units, not discourage them,” Hamrick said. “It's not going to only mean less affordable housing, it's going to lead to less housing overall.”

If passed, Colorado would be the first state in the country with such a policy. Prince George’s County in Maryland has a similar policy, but not the entire state.

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