Widespread agreement exists that Colorado is facing a housing affordability crisis. But opinions differ on how to tackle the problem.
Since 2010, Colorado’s population has risen by more than 13 percent. The median price for a Denver-area home price sits at $427,000, a nearly 6.6 percent increase from just one year ago. On the rental market, Denver has more than a 93 percent occupancy rate, meaning very little inventory is available to meet the needs of the increased population.
The Colorado Legislature has a real opportunity to make headway in solving this problem.
After the November elections, Democrats hold “trifecta” control of the state government after gaining control of the Senate. This enables them to consider and pass legislation with greater ease. They are backed by Gov. Jared Polis, who is focused on housing affordability. It is critical he continue to work towards holistic solutions towards solving the housing crisis rather than perceived “quick fixes.”
Some members of the Legislature see enabling rent control as the solution. They are seeking to overturn state law prohibiting municipalities from enacting this flawed policy.
But rent control is an outdated concept that historically has had the opposite of its desired effect and has been nearly universally rejected by economists. If allowed in Colorado, it will make the housing affordability crisis worse, leading to higher rents in the uncontrolled market for Colorado renters.
While the intent of rent control laws is to assist lower-income populations, numerous studies have shown that rent control fails to improve the availability of affordable housing. We know with certainty that artificially depressed rents discourage private investors from constructing new rental units. That’s why the majority of states — including Colorado — have laws in place that prohibit local municipalities from implementing rent control.
On the same day that the Democratic party in Colorado increased its majority in both chambers, a ballot initiative to allow rent control failed in California. Proposition 10 sought to overturn state law that restricts the scope of rent control policies. That measure threatened to usher in new and aggressive rent control regulations. California voters wisely rejected the measure by a margin of 62 percent to 38 percent, recognizing that rent control is a false panacea that only exacerbates the availability of affordable housing.
San Francisco and New York, two cities with rent control, now have the highest median rents in the country. In San Francisco, rent control has had a perverse effect, causing an even tighter housing market and higher housing costs. The median rent for a one-bedroom apartment in San Francisco is more than $800 higher than the next closest city.
While rent control is universally known to be ineffective and harmful, we cannot ignore the fact that a growing number of working Americans are struggling to find housing they can afford. It is a clear strain on families that must be addressed.
Working together, state and local government, along with the private sector, must address the tremendous shortage of homes and remove barriers to adding more supply. Only new apartment and housing development will mitigate the supply-demand imbalance that causes lack of affordability. Sufficient supply will drive down rents. Removing barriers includes, among other approaches, streamlining approval processes, creating incentives to encourage higher density development near transportation hubs and making better use of underutilized buildings and raw land.