More than two decades ago, Telluride’s leaders were grappling with the growing pains of a booming resort industry. Housing prices shot up, forcing many workers to live outside of San Miguel County.
The town responded by passing an ordinance in 1994 requiring developers to create affordable housing for a portion of the new workers generated by their projects. The idea was for builders to take responsibility for the new workers a larger community demands, but who might not earn enough working as a teacher, police officer or retail clerk to live there.
A developer sued, and in 2000 the Colorado Supreme Court ruled that requiring developers to include affordable housing in new projects is illegal because it’s a form of rent control prohibited by a 1981 state law.
In the years after the ruling, cities and counties looking to boost their affordable housing stock have passed policies to navigate around the Telluride decision or, in the eyes of developers, have walked right up to the legal line. Now, state Democratic lawmakers want to seize on an opening left by the Supreme Court to reverse the decision entirely.
House Bill 1117 would modify state land-use statutes so that local governments can require affordable housing in new or redeveloped projects without running afoul of the rent-control prohibition.
Colorado’s housing crisis has worsened in recent decades, from communities in the Denver-metro area to mountain resort towns like Telluride. Colorado has added nearly 1.5 million people in the past two decades, and as more demand drives up housing prices and new construction lags, it’s largely low- and moderate-income workers who are priced out of housing.
About 22% of renter households in Colorado are extremely low-income, with 74% of those households paying more than half their income toward housing, according to the National Low Income Housing Coalition.
Cities and counties need all the tools they can get to increase their affordable housing supply, said state Rep. Susan Lontine, a prime sponsor of the legislation along with fellow Denver Democratic state Rep. Serena Gonzales-Gutierrez.
“These are the people that keep our society healthy and educated and moving, and they can’t afford to live where they work,” Lontine said. “And this is a piece of the puzzle to help us address affordable housing for folks who desperately need it.”
Democratic lawmakers have introduced versions of this legislation unsuccessfully before, with the proposal dying last year after the coronavirus pandemic reshuffled the Legislature’s priorities. Now, with Democratic majorities in both the House and Senate, the proposal has a solid chance of passing.
Under HB 1117, developers must be given alternatives to building affordable units on-site. For example, they could trade those for affordable units built elsewhere, pay a fee into an affordable housing fund, or any number of other options. The bill leaves it up to local governments to decide if they want to adopt such policies and what that menu of options for developers would be.
Housing advocates argue policies that allow local governments to require affordable housing as a condition of development – known as inclusionary housing – isn’t a silver bullet, but an important supply-side solution to getting more units built.
“You might hear that if we just allowed more density, more growth, then we wouldn’t need this bill,” Robin Kniech, a Denver city councilwoman, testified at a House Transportation and Local Government committee meeting earlier this month. “... In the last 20 years since this court decision, Denver has built 62,000 new apartments, the vast majority are luxury, they are not priced anywhere close to what these families can afford.”
Prioritizing affordable housing is also crucial to maintaining public support for the state’s economic growth, especially as it continues to draw new residents, bill sponsors say.
“The best way to keep our communities supportive of growth is to show them that housing for our existing workforce will be included in it,” Gonzales-Gutierrez said.
Inclusionary housing policies have grown in popularity nationwide, with more than 900 local governments adopting such programs, according to the Grounded Solutions Network, an advocacy group that has promoted inclusionary policies.
Research is mixed about how inclusionary policies – which vary widely – affect private housing markets, and their success in getting new affordable units built depends on location, the market, how long policies have been in place and other factors, according to an Urban Land Institute report.
A number of industry groups, including the Colorado Apartment Association, Colorado Association of Home Builders and Colorado Association of Realtors, are against the bill and want to see specific “guardrails” for cities on what affordable housing requirements should look like.
“The development community needs predictability, we need a clear understanding of what opportunities exist to help subsidize and afford to build this affordable unit,” said Caitlin Quandre with NAIOP Colorado, which represents commercial real estate developers. “It really creates a patchwork quilt that can be really unpredictable for development.”
Developers have raised concerns that cities will introduce requirements that could jeopardize the financial viability of projects, or that the cost of affordable units would be passed on to other renters in the same complex.
Andrew Hamrick, general counsel for the Colorado Apartment Association, said the bill should require governments to pitch in – either through subsidies or other measures – to fill that gap.
“Inclusionary zoning affordable housing projects can work, but they require that the local government contribute to their fair share of affordable housing. And this bill removes all obligation or all incentive for a local government to do just that,” Hamrick said.
Rep. Andy Pico, R-Colorado Springs, said while affordable housing is an urgent problem in Colorado, he opposes requiring developers to build affordable units.
“What you’re going to do is you’re going to undermine the construction of a new housing,” Pico said. “It is not rent-controlled by the strict definition of the term. But it is rent control in effect because you’re requiring percentages within the construction.”