Report: Allowing rent control in Colorado would bring unintended consequences

Coloradans would experience a number of unintended consequences if the legislature repeals the state's prohibition on local governments enacting rent control, according to a policy organization.

Denver could lose approximately 17,000 housing units by 2030 if House Bill 23-1115 is passed, according to a study by the Common Sense Institute, a free-enterprise think tank.

“Though HB23-1115 is well intentioned, rent control policies come with a slew of costly, unintended consequences for both tenants and the cities in which they’re enacted,” Chris Brown, vice president of policy and research at CSI, said in a statement announcing the report.

Current Colorado law prohibits local governments from enacting laws that control rent on private residential property or private residential housing. If local governments are allowed to adopt rent control, the bill states they must be uniformly applied among all renters and all private residential properties and housing units. However, controls may not be applied for 15 years from the date when the first certificate of occupancy was issued on a residential property or housing unit, with the exception of mobile homes.

The bill also states annual rent increases must not be for less than the percentage increase in the consumer price index plus three percentage points. It also allows reasonable increases reflective of actual costs incurred and documented by landlords completing substantial renovations. It also exempts rent charged by nonprofit organizations and regulated by the U.S. Department of Housing and Urban Development or other state or federal programs that restrict or limit rent.

The Common Sense Institute report found housing affordability is near an all-time low and is driven partly by a deficit of more than 100,000 units. It said that cities with rent control find it disruptive to markets and doesn’t increase affordability.

The organization estimates Denver would lose 16,547 housing units at a 3% rent cap and 9,348 at a 7% cap. Plus, it estimates the property value of Denver’s apartment buildings would decrease $462.2 million, resulting in a loss of $2.6 million in property tax revenue.

The report noted rent control is a contentious issue when attempting to solve housing affordability challenges.

“While rent control may seem like a logical solution to rising housing costs, evidence suggests that it can have significant unintended consequences on the housing market, particularly on the supply of new housing units,” the report said. “The potential negative impact on housing supply in Denver, estimated to be as high as 17,000 units by 2030 if rent control is implemented, would be a significant setback in meeting the demand of anticipated future residents and filling the existing supply gap. As lawmakers continue to explore solutions to housing affordability, it is essential to consider all potential consequences, especially those with strong evidence that they undermine the very goals of the policy in the long run.”

The bill is scheduled to come before the Senate’s Local Government and Housing Committee on March 28.

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