New CO outlaws housing caps

Colorado is expensive (as shown above for Boulder) and the legislature thinks they once again have the answer.  In the last legislative session all eyes were focused on a sweeping land use proposal basically outlawing single family zoning which was ultimately defeated.  But, while the focus was on defeating the larger measure, another measure slipped through that took local land planning away from local cities.  Who will be impacted by this new law?  What does this say about the future of land use in Colorado and local control?

 

What is in the new land use legislation?

The act preempts any existing local governmental entity housing growth restriction that explicitly limits either the growth of the population in the local governmental entity’s jurisdiction or the number of development permits or building permit applications for residential development or the residential component of any mixed use development submitted to, reviewed by, approved by, or issued by a governmental entity for any calendar or fiscal year and forbids the enactment or enforcement of any such future local housing growth restriction.

The measure not only outlaws future housing caps in Colorado, but it also renders growth control policies that already exist obsolete. Besides Lakewood, Golden and Boulder have growth limits. Cathy Kentner, who spearheaded the campaign for Lakewood’s Strategic Growth Initiative in 2019, said state lawmakers have “usurped” the will of voters in the city of 156,000.

Here is the full bill in case you are look for some “exciting” reading: https://leg.colorado.gov/bills/hb23-1255

Who will this bill impact the most?

When I think of growth initiatives, the first city that comes to mind is Boulder, CO.  In the 70’s they first implanted a growth cap to try to stop “urban sprawl”.  On the surface, I would think that Boulder would be wildly opposed to this measure.   The reaction is the opposite of what I would expect as Boulder has already started changing their land use code without any drama.

The reason Boulder’s response is muted is because Boulder is basically 100% built out so there are very few if any large-scale developments as there is just not the land to build on.  The same is true for Golden Co which also has basically been built out.  There is basically no impact on these two cities due to the availability of buildable parcels.

On the flip side, places like Lakewood and Lafayette could have enormous impacts as there is still ample room to develop in and around these cities. Residents passed a land use plan in Lakewood that rapidly slowed down building as infrastructure was not keeping up with development.   I think we will now see a considerable number of large projects come forward in Lakewood over the next several years (once the economy settles down and financing is more normalized).

The bigger question is who has control over zoning/housing?

Passing statewide land use policies is a slippery slope.  Under the current model voters in their respective cities decide what is best for their communities.  For example, Lakewood voters supported an initiative to cap residential growth at 1% of existing stock.  The state government essentially preempted the will of the local voters by a statewide initiative.  It begs the question of what is next.  Colorado is a diverse state but increasingly being run by the front range even though Steamboat or Grand Junction’s needs are drastically different than the Denver metro area.

Next legislative session housing will be back in focus again

The passage of the elimination of growth caps highlights that housing will be back in focus again in the coming session.  The legislature feels that they can legislate Colorado’s housing issues from Denver as opposed to addressing the real issues of housing.  Just changing land use does nothing to actually resolve the issues causing huge statewide shortages in housing.  Housing in Colorado is limited for a few primary reasons:

1. Desirable place to live/work: People want to live in Colorado for the lifestyle, proximity to the mountains, great airport, good weather, etc….  As Colorado remains desirable, demand continues to increase or at least stay constant leading to shortages.
2. Expensive to build: Colorado is expensive to build in especially along the front range, there are limitations on water which caps the number of units, land is expensive, labor costs are higher than other areas, and material costs are high.
3. Government rules/regs further increase costs: Government regulations have further decreased the ability to build affordable housing that is not subsidized.  For example in Denver there are impact fees, green building requirements, etc… all of which add considerable costs.

Summary

Trying to legislate from Denver a solution to the housing crisis is bad policy as it does nothing to address the affordability issues throughout the state.  As you look at the recent bill to eliminate growth initiatives, this does nothing to address “affordable” housing as there is no requirement for affordable housing in the growth bill.  Government policies along with increased demand, and the high building costs will ensure that new developments built are for higher income buyers and renters as it is not possible to build affordable units without government subsidies.

Our legislature is going down a slippery slope of taking away land use decisions from local governments and it looks like this trend will continue in the next legislative session.  The elimination of growth initiatives will merely result in more high-end housing that is not affordable for the average worker.  This will ultimately make our housing situation worse as more workers will ultimately be needed for schools, police, grocery stores due to the increased population.

Additional Reading/Resources

1. https://leg.colorado.gov/sites/default/files/2023a_1255_signed.pdf
2. https://www.denverpost.com/2023/05/08/land-use-colorado-legislature-polis-local-control/
3. https://coloradosun.com/2023/08/09/growth-cap-polis-lakewood-golden-boulder-lafayette-housing-legislature/

 

 

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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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