While local housing experts agree the rising rental costs in the Pikes Peak region need to be addressed, most do not believe the answer lies in a proposed legislative measure that would have allowed local municipalities in Colorado to set rent control policies.
The controversial Senate Bill 225 is likely dead prior to its second reading in the state Senate after being laid over to Thursday, May 2, leaving insufficient time for the bill to progress through both chambers before the session ends Friday, May 3, after the Business Journal went to press.
The bill sought to repeal a 1981 law signed by Democratic Gov. Dick Lamm banning rent control in Colorado. Local governments’ inability to regulate skyrocketing rents has led to the displacement of renters from Denver and other larger communities, according to the measure. Those renters often land in smaller communities where existing housing is not sufficient to meet the increased demand.
“As a result, countless Colorado renters are unable to live in close proximity to their place of employment,” the legislation states.
Average rental rates in Colorado Springs rose from $959.76 in the first quarter of 2016 to $1,130.25 in the first quarter of 2018, according to the Colorado Springs Metro Area Apartment Vacancy and Rent Study.
Of the 93,535 total rental households in the Colorado Springs metro area, 51,004 spend more than 30 percent of their income for housing, according to a 2018 analysis conducted by rental listing site Apartment List.
FOR AND AGAINST
Andrea Chiriboga-Flor, an organizer with Denver-based women and family advocacy nonprofit 9to5 Colorado, told Colorado Public Radio in January that each city could tailor its approach to its specific housing market. Common approaches include a cap on year-over-year rent increases or a temporary stabilization of rent, she said.
Chiriboga-Flor, who is part of a coalition of housing and economic justice groups pushing the bill to end the rent control ban, told CPR the fear that “people would have to roll back rent costs is just a misconception.”
But opponents of the bill — including Laura Nelson, executive director for the Apartment Association of Southern Colorado — say evidence shows the cons of rent control far outweigh the pros.
“It is not good for the rental housing industry,” Nelson said. “The numbers just don’t add up.”
With members of the Baby Boomer generation retiring and Millennials moving out of their parents’ homes for the first time, developers couldn’t build new housing fast enough, creating a supply problem not just in the Pikes Peak region, but nationwide, Nelson said.
“There is a huge demand for rentals and there is not enough supply,” she said.
Rent control policies would benefit only current tenants, Nelson said. The practice would not create more housing options for an already strapped market.
“Anyone looking for a unit now, they most likely won’t find one,” she said. “[Rent control] doesn’t help the people moving to the area, or the people moving out for the first time.”
According to a 2018 report from the State Demography Office, between 235,000 and 250,000 people moved into Colorado each year from 2011 to 2016, and between 160,000 and 190,000 people moved out of Colorado during that same period — meaning the state’s population grew by about 60,000 to 70,000 people each year.
Beth Roalstad, executive director of housing nonprofit Homeward Pikes Peak, said while there is no shortage of single- and multi-family construction in Colorado Springs and El Paso County, most of it is intended for higher-income households.
“I like to think of economics as, if you build more at the higher-income levels, then those individuals will vacate older properties and the lower-rate rentals … and that will create openings at the bottom level, but we have not seen that kind of fluidity in our local economy to the extent that we need,” Roalstad said. “I think the vibrancy that we were looking for in our own housing market … hasn’t taken place in the last 18 months.
“Some of it comes down to, it’s not as profitable to create affordable housing,” Roalstad added. “It’s hard for for-profit businesses to plan a lower margin of profit when there still is a need for construction for medium- to high-income individuals.”
Like Nelson, Roalstad agreed that implementing rent control would not address the heart of the Springs’ affordable housing problem.
“It seems like an outdated method to address the real issue,” Roalstad said. “The real issue is being able to have enough housing units across the spectrum that allow a family who can only afford $750 a month in rent that kind of option. That is a product we know we will fill, and we can keep renters in there.”
A growing community like the Springs needs both low-income housing developments and projects aimed at the medium- and higher-income residents, Roalstad said. Rent control could also create segregations in the community even beyond those that exist naturally, she said.
“We already have naturally occurring low-income neighborhoods because the housing stock is older. Our clients live in apartment buildings that are easily 20 to 30 years old,” Roalstad said. “But that’s OK — our clients have safe and decent places to live, and that’s important.
“I think that forcing rent control on a community is the most controversial way to preserve naturally occurring low-rental housing units.”
Colorado’s natural boom-and-bust cycle economy is likely to help stabilize rising housing costs eventually, Roalstad said.
“Certainly Colorado has been growing as a place for people to move and businesses to expand, and we’ve really enjoyed this economic growth period,” Roalstad said. “History tells us there’s going to be slowing, and there could even be shrinkage, so perhaps there would be natural things in the marketplace that will rein in the rise of rental rates.”
Opponents of the bill also expressed concerns that the negative effects of rent control could trickle into neighboring municipalities that opted not to implement the policy.
That is a very real concern in Colorado Springs, both Nelson and Roalstad said.
“If one city passes it and the other doesn’t, their values will drop, so it’s less tax money and cities surrounding it will be affected,” Nelson said. “If the property decreases in value enough, it will affect property taxes.”
Homeward Pikes Peak’s clients already are feeling the effects of skyrocketing rental rates in Denver, Roalstad said, and rent control in the capital could possibly exacerbate that.
“I can’t predict the actual impact, but it will affect the clients of Homeward Pikes Peak because we’re already feeling the effects of the rise in rental rates,” Roalstad said. “We started to see increased rental rates in Colorado Springs because the demand was growing — that’s just supply-driven economics. If there is pressure from the north, it will continue to affect our current market.”
Wages nationwide have not kept pace with cost-of-living increases, and it’s no secret that this has led to less-than-affordable rents, Nelson said. However, it will take a multifaceted approach — including developer incentives, tax credits and a combination of private and public monies — to solve that problem, rather than the one-size-fits-all solution of rent control.
“It’s going to take a lot of creativity and a lot of people working together to increase affordable housing,” Nelson said. “There are lots of parts and pieces.”
Communities have small tools at their disposal that can benefit developers looking to build affordable housing, Roalstad said, including waiving certain fees at the city and regional level.
“As I have learned in this last year, when you’re planning an affordable housing project, you have to plan for construction costs and fees,” Roalstad said. “There are a lot of different expenses, and if there’s any way to shave off a couple hundred thousand dollars, it benefits the whole project. If there are small ways a city can look at helping ease the process, there will be more [development].”