Boulder eviction measure on the Ballot, no free lunch, impact on real estate

Boulder city council recently approved a new ballot measure that has gathered enough signatures to appear in November.  The new initiative is “No evictions without representation” to provide legal assistance for anyone facing eviction.  What is in the ballot measure?  How will this impact real estate and rentals in Boulder?

What is in the ballot measure?

The new initiative will provide free legal assistance for anyone that is facing the eviction and requests assistance.  Unfortunately, the initiative is not really free, there will be a $75 dollar a unit fee.  For example a 100 unit housing complex would pay 7500 in fees to fund attorneys for people facing eviction.  You can bet this fee will be passed on to renters in the form of higher rents.

I’m a bit perplexed as to the objective of this initiative.  Almost all evictions are filed for non-payment of rent.   Property owners are in the business of collecting rents as opposed to evicting tenants.  Evictions are expensive and prolonged processes that they seek to avoid.  In the new initiative if someone doesn’t pay rent, they can get an attorney for free to represent them.  The tenant and attorney show up to court and the judge asks if they paid rent, the answer is no.  Unfortunately having an attorney is not going to change the outcome of the case as it is a clear issue, either rent is paid or not.  All the measure does is prolong the process.

I’m not the only one a bit confused: “Ninety percent of the evictions in Boulder County are for non-payment of rent, and an attorney present will not change the outcome of that eviction hearing,” said Todd Ulrich, board president of the Boulder Area Rental Housing Association

Law of unintended consequences

I think it should be required that everyone running for a public office should have to take a basic class in economics.  Unfortunately, the consequences of this ballot initiative will far outweigh any benefits.  In the real world nothing is free and this is especially true for this initiative.

1. Rents will go up for everyone: The costs associated with this initiative are far greater than $75/unit. As evictions take longer, these costs will need to be included in future rents to ensure the landlord is still profitable.  For example, if an eviction costs 1500 now and rises to 3000 due to the legal maneuvering and delay tactics of the attorneys then these costs will be passed on to renters through higher rents in the future.
2. Less likely to rent to marginal tenants: Landlords understand economics, if it takes twice as long and costs twice as much on an eviction then they are less likely to take a chance on a marginal tenant (for example someone with a lower credit score).  This will make it harder, if not impossible for some tenants to rent a property in Boulder.
3. If you had an eviction, one strike you are out: With evictions taking considerably longer, someone who got evicted prior will be highly unlikely to rent in Boulder again.  Any new landlord will see (call the prior complex for a reference or see on the credit report/background check) that there was a prior eviction and not rent to them.  As the eviction process is longer and more expensive, landlords will not take the risk.

Summary

The Boulder initiative to provide free legal representation is unfortunately anything but free.  The unintended consequences of this initiative far outweigh any gain from having a lawyer.  Having a lawyer does not change the fact that the tenant did not pay rent, it merely delays the inevitable while substantially increasing costs.  These costs will ultimately be borne by property owners and passed on to renters in the form of higher living costs.  There is no free lunch.  I wish our elected officials and voters from both parties would take a basic economics class to understand this concept.

Additional reading/resources

1. https://www.dailycamera.com/2020/08/18/boulder-city-council-campaign-organizers-agree-to-eviction-ballot-measure-changes/
2. https://www.dailycamera.com/2020/08/18/boulder-city-council-campaign-organizers-agree-to-eviction-ballot-measure-changes/

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Written by Glen Weinberg, COO/ VP 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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