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.  As you can imagine Alamosa has radically different needs than Boulder or Telluride, yet the state is proposing a one size fits all.  Unfortunately, the numbers tell a radically different story of how this will work out.

 

What is in the proposal for Statewide zoning in Colorado

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.  The legislature, in their utmost wisdom, thinks that a one size fits all is the solution to affordable housing.

  1. Shift to Centralization of zoning to the state as opposed to the counties
  2. Eliminate any county growth caps
  3. Allow Accessory dwelling units on any single family lot
  4. Allow duplexes/ and triplexes on any single family lot
  5. 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?

How does elimination of single family zoning in Colorado 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 buildBuild CostTotal CostCost/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

 

Enormous impacts to communities

  1. Huge growth in desirable areas, let’s use an example of Breckenridge. 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.
  2. 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
  3. Parking: I’m not sure how I grasp the concept that parking is not needed.  In markets like Steamboat a car is needed the same with Alamosa.  A car might not be needed in downtown Denver but it is a requirement in almost every other city/county
  4. Does nothing to solve affordable housing issues: Places like Breckenridge 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.

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

A proposal for statewide zoning is a disaster. The reason zoning has always been done on the local level is because each city is unique in their needs and desires.  Denver is drastically different than Telluride or Meeker and yet under the proposed statewide zoning the solution would be the same.  For example, it would be impossible to live in Meeker without the ability to park a vehicle as there is no bus service.  Furthermore, in Telluride mandating triplexes on each lot would lead to a catastrophe for the town with growth that they would not be able to handle.

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.  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 neighbhorhoods.

 

Additional Reading/Resources:

  1. https://www.denverpost.com/2023/01/23/affordable-housing-colorado-legislature-land-zoning/
  2. 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 MagazineThe 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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