Click here for resources on important issues impacting the housing market today.
In Colorado, the cost of housing continues to increase as demand outpaces supply. In turn, the cost of rent is increasing almost as fast as the cost of housing units. This causes some Coloradans to struggle to afford rent. As a solution, some Colorado state legislators have proposed the idea of rent control. However, governmental price fixing does more harm than good. Rent control policies make the problem worse by reducing the incentives to build new housing units or improve existing housing units. The solution to Colorado’s housing shortage is to create more housing, preserve existing housing, and streamline the process of transferring housing from one user to the next.
Source of income legislation would require property owners to participate in voluntary federally-subsidized housing programs like Section 8. However, regulatory compliance with these voluntary programs can be expensive and beyond the sophistication of small landlords. The cost of participation ends up being paid by residents who aren’t in the program, which raises the rent for everyone. The solution is to fix the federal program to make participation not so expensive, not force all residents to pay for participation in a broken program.
Late fees must be agreed to by the resident and must be reasonable. Because “reasonableness” can be vague, there is interest in a mandatory cap on late fees. Defining a reasonable late fee for every transaction in the state is difficult because of the wide variety in each transactions, delinquent balances, and level of lateness. It is also difficult because the late fee is not interest on the past due balance, but compensation for the administrative costs of a delinquent account. We believe an initial late fee of the greater of 15% of the balance due or $50.00 and a daily late fee and of the greater of 2% of the balance due or $20.00 defines reasonableness in this large variety of transactions.
A residential lease is one person loaning a property to another. People are motivated to loan a property when they know they can get it back quickly. The process to get a property back when someone doesn’t voluntarily return it or stop paying for it is currently between two and four months (depending on the county and fact pattern). Any policy that increases the time it takes to get a loaned property back increases the cost of borrowing the property and increases housing costs.
Growth limits are restrictions placed on housing developers to cap construction in a pre-determined area. In Lakewood, an ordinance recently passed that will limit annual growth of new residential construction to one percent of housing stock in the city. The system limits permit requests for new dwelling units and would mandate that the Lakewood City Council vote to approve or reject projects of 40 or more housing units. The intention is to encourage redevelopment and protect open space. However, growth limits also cause rental prices to skyrocket. Any statewide measure similar to Lakewood’s introduced will lead to dramatically higher housing costs as supply falls even further behind demand.
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