Every time I open the news, I’m amazed at what is happening in the Colorado legislature.  As a rental property owner, I cringe as it is becoming next to impossible to cost effectively operate a rental property.  The new bill is titled “safe housing”. Who doesn’t want safe housing for tenants?  Unfortunately the bill does considerably more that will put many landlords out of business.

 

What is in the new bill for safe housing?

The bill would set a seven- or 14-day deadline for landlords to repair certain issues after being notified. Landlords would be required to document all communication with tenants.

The 42-page bill would also require landlords to pay for hotel rooms in certain cases and allow tenants to withhold rent if repairs are not made.  There is a lot in the 42 pages, here are some highlights:

1. Minor items like a plumbing back up even if it is due to the tenant are catastrophic for the property owner: In the case of a violation, the tenant must be awarded statutory damages equal to the tenant’s actual damages and the higher amount of either three times the monthly rent or five thousand dollars, as well as any other damages, attorney fees, and costs that may be owed.
2. The bill does not differentiate between minor and major items and the cause of the items. For example, the bill emphasizes mold from moisture.  If the tenant continues to take a shower and doesn’t properly operate a fan then mold could occur and the owner is liable for damages.
3. 42 pages of minor items: For example the bill focuses on electrical, if an outlet is overloaded because a tenant plugs in two hairdryers at the same time, the owner is now on the hook for damages as the unit is no longer habitable.

Statement from the Apartment association:

“This bill would require rental housing providers to make repairs of maintenance issues that may not have been reported by residents, treats minor maintenance issues as if they were catastrophic, requires repairs within time frames that are not physically possible to comply with, and creates such steep penalties for housing providers that residents will find it more profitable to intentionally damage their units than take care of them. These added operational costs will cause fewer rental units to be built, more rental units to be taken off the market and rents to rise. Burdensome laws like this continue to make Colorado a more expensive place to live.”

Legislation will increase corporate ownership of properties and eliminate small owners

Legislation like this bill will ultimately drive out small property owners.  Small property owners don’t have the ability to comply with the rules and timelines in this regulation.  For example, let’s say someone owns a rental house, they go out of town with no cell coverage, during that time a toilet backs up due to the tenants usage.  The property owner is now on the hook for an uninhabitable unit and subject to huge expenses and litigation.  Assume they were only renting the property for 1200 a month (small one bed condo) and are now subject to a 5k penalty.  A small landlord will not be able to survive with this regulation and will ultimately sell their units. Large corporate property owners will be left as they are the only ones with the resources (24 hour maintenance, attorneys on staff, etc..) to effectively operate.

 

Summary

The proposed legislation on habitability is a disaster that will greatly increase litigation and costs for property owners.  If this legislation passes you will see a huge number of landlords decide to sell as it is no longer profitable to operate rentals.  This will be most profound at the lower price points as these are typically older properties and more at risk for issues.  These lower cost properties are the lower cost rentals thereby eliminating a huge number of low-priced rental properties.

The legislation how it is presently written will radically decrease the supply of rentals and make it next to impossible for anyone to offer a lower cost option.  This legislation is a terrible idea for Colorado and further increases the cost of living and the homelessness we are experiencing in the Denver metro area.

 

Additional Reading/Resources:

1. https://www.denver7.com/news/investigations/putting-landlords-on-notice-proposed-bill-would-strengthen-tenant-rights-in-colorado
2. https://leg.colorado.gov/sites/default/files/documents/2024A/bills/2024a_094_01.pdf

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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.

Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado.  My goal from this blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…

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