With a supermajority, the legislature has been busy crafting bills that will radically alter the real estate landscape. The recent proposal allows the state to dictate zoning in every county throughout Colorado and eliminate single family zoning. Colorado mayors are not happy! What is in 105 pages of the radical new proposal sponsored by the governor(SB-23-213)? Will this increase affordable housing as prescribed. Unfortunately, the numbers tell a radically different story of how this will work out and mayors across the state are angry!
What is in the proposal for Statewide zoning?
The proposal is extremely radical. Historically zoning has been done at the county level as each county has unique needs. For example the need for affordable housing in Telluride is drastically different than in Rocky Ford and Denver’s needs/desires are different than Boulder or Castle Rock. The legislature, in their utmost wisdom, thinks that a one size fits all is the solution to affordable housing for the entire front range.
- Shift to Centralization of zoning to the state as opposed to the counties
- Eliminate any county growth caps
- Eliminate any caps on the number of unrelated people that can live in a property, for example this would theoretically allow 20 people to live in a 1 bedroom apartment; this is a huge issue in the resort communtities
- Allow Accessory dwelling units on any single family lot
- Allow duplexes/ and triplexes on any single family lot
- Eliminate parking mandates: to build a house you would no longer need to provide parking. I’m not sure how they think people will get around or to places like Breckenridge without parking?
Note, the above is for tier one cities, with less stringent policies for smaller markets. For example, Rural resort job centers would have to submit land-use codes compliant with the bill to the state by December 2026. Any rural resort job centers that don’t meet the minimum standards under the bill’s flexible option would have to operate under the state’s model land-us code starting in June 2027. The bureaucracy from the new statewide zoning will be monstrous.
How does this play out in real life?
As you can see from the chart, the numbers do not work in the markets that need housing the most. The numbers clearly show that increasing the density in high cost areas will only increase the population and do nothing to solve the affordable housing issues facing each of these communities.
For the analysis, I assumed that a builder/developer would buy and existing house as each of these communities that needs affordable housing is basically built out. As you can see even under optimistic scenarios, the cheapest unit would be around 500k. This is far from an affordable housing unit in Denver. Furthermore, in Aspen, the cost would be 2.2m, I doubt many baristas, teachers, or police officers could afford this.
| Statewide Zoning changes for affordable housing | |||||
| *** assume build a triplex; 1k each unit *** | |||||
| Average home price | $/ft to build | Build Cost | Total Cost | Cost/unit | |
| Boulder | $ 1,100,000 | $ 600 | $1,800,000 | $2,900,000 | $ 966,667 |
| Denver | $ 800,000 | $ 400 | $1,200,000 | $2,000,000 | $ 666,667 |
| Aspen | $ 2,000,000 | $ 1,500 | $4,500,000 | $6,500,000 | $ 2,166,667 |
| Scenario 2; assume you buy a basic teardown in Denver | |||||
| Denver | $ 250,000 | $ 400 | $1,200,000 | $1,450,000 | $ 483,333 |
Colorado Statewide zoning has Enormous impacts to communities
- Huge growth in desirable areas, let’s use an example of Boulder. If now every lot can be redeveloped into a triplex this will radically increase the number of people. Unfortunately, the buyers of these properties will need even more services as builders are not building work force housing, they are building market rate housing.
- Large increases in taxes to support new growth: Somebody is going to have to pay for all the infrastructure improvements from more water to roads to police/fire, etc… The areas that are already struggling with growth like Boulder or Telluride will have an even harder time with the large increase in people
- Parking: I’m not sure how I grasp the concept that parking is not needed. A car might not be needed in downtown Denver but it is a requirement in almost every other city/county
- Quality of life: huge impact on quality of life due to large increases in population without increases in infrastructure. For example, assume you live in a single family in boulder, next door is a rental that can now allow an unlimited number of people/students to live there, the impact will be enormous.
- Gentrification on Steroids: The way this proposal is written there is no requirement for affordable housing so the most desirable redevelopment properties are the cheapest properties. The least expensive properties now are the most likely used for lower income housing, With the new upzoning these properties are now much more valuable being developed into multifamily thereby eliminating the last remaining lower cost housing option
- Does nothing to solve affordable housing issues: Places like Boulder will have 3 times the people that will need even more teachers, baristas, grocery store workers, etc.. that still will be unable to live in the area therefore exacerbating the current housing issues. The current proposal has no requirements for affordable housing construction.
Colorado Mayors are pissed at the new proposal!
According to a recent Denver Post Article, mayors from several Colorado cities sharply criticized Gov. Jared Polis’ sweeping land-use reform bill Thursday as state overreach, with some floating lawsuits to block what they describe as infringement on local control.
“I think that’s something that cities and the (Colorado Municipal League) would certainly have to consider because local control is sacred,” said Arvada Mayor Marc Williams. “I really see this as the camel’s nose into the tent. So I think we have to be aggressive in our opposition.”
“All of a sudden the state legislature in their wisdom is saying, ‘You’re not doing a good enough job, you don’t know what you’re doing, we do, we’re going to tell you what to do,’” said Colorado Springs Mayor John Suthers, whose city just completed its own land-use reform. “I just resent it. Most large cities have been going through processes very similar to what Colorado Springs has done. But apparently, we’re too stupid to understand the need for affordable housing and only the state understands what we need to do.”
Gainsville, FL tried the elimination of SFR zoning and it didn’t work out well
In Gainesville, upzoning single-family neighborhoods citywide to allow for duplexes, triplexes and fourplexes became a lightning rod for frustrations about rising costs and neighborhood change in the rapidly growing midsized city. The ordinances faced a great deal of backlash when they passed last year, but pro-housing groups and officials are surprised by how swiftly the reforms were undone.
Opponents of zoning reform say that the plan was too unpopular to stomach. Last summer, residents loudly expressed concerns about threats to property values, influxes of students into family neighborhoods, a dearth of true affordability and accelerating gentrification in some of Gainesville’s predominantly Black neighborhoods. At city commission hearings, in the Gainesville Sun’s opinion pages and on the “Save Gainesville” Facebook page, residents panned the zoning changes, calling them a “costly ill-conceived boondoggle,” “unconscionable” and “possibly catastrophic.”
“This was my fourth campaign for office. I’ve never, unfortunately, seen something that was [so] widely unpopular on the doorsteps,” said Mayor Ward. That opposition, Ward says, came from all corners of Gainesville: owners and renters, young and old people, Black and white residents.
The issue was quickly defeated along with the council members that voted in the initial proposal. I assume the same will happen in Colorado if the Legislature continues down their current path.
Summary
Unfortunately the current legislature, with a super majority, seems to be full of “interesting” ideas that have no resemblance to what actually happens in real life. A statewide zoning ordinance is another example that defies logic and any basic economic principles.
There is no requirement for affordable housing in the legislation. It will actually have the opposite effect of the original intention to increase affordable housing as more higher priced units are built in expensive markets further increasing the demand for service workers like Baristas, grocery workers, police, etc… while still pricing these same workers out of the area and radically changing the character of neighborhoods.
This new legislation is by no means a done deal.There will be stiff resistance from mayors and residents throughout the state as government overreach radically alters what has traditionally been a local decision. If the current administration crams this bill through, I foresee a statewide ballot initiative to return land use planning to local governments.
Additional Reading/Resources:
- https://leg.colorado.gov/sites/default/files/documents/2023A/bills/2023a_213_01.pdf
- https://www.denverpost.com/2023/03/26/colorado-polis-housing-affordability-zoning-reform/
- https://www.denver7.com/news/politics/colorado-democrats-unveil-a-massive-housing-policy-bill-that-would-significantly-rewrite-land-use-policies
- https://coloradosun.com/2023/03/22/colorado-local-housing-preempetion-bill/
- https://www.denverpost.com/2023/01/23/affordable-housing-colorado-legislature-land-zoning/
- https://www.bloomberg.com/news/articles/2023-02-02/how-gainesville-s-yimby-zoning-reform-was-undone
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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