Rent Control: Yes or No?

In April of 2019 a bill was introduced to the Colorado State Senate seeking to allow the institution of rent control policies, titled the “Rent Stabilization Act”. Bill 19-225, would repeal the ban of rent control that has been in place for almost 40 years. If the Bill were to pass, it would give local governments the ability to control rent increases and the power to enforce these policies within each individual county. Statewide, Colorado is faced with the challenge of managing a booming economy and extreme population growth. This has increased the demand for housing and created a shortage of affordable housing despite stagnant wage growth.

Amongst real estate investors, developers, home owners, state and local elected officials and the general populous, there are mounting concerns of the effects of allowing and instituting rent control policies and the effect it will have on neighboring counties. Developers understand the additional risk and uncertainty a rent control policy could have on their future projects. Denver and its surrounding counties would benefit from the additional supply of new units, naturally meeting the cities demand and lowering rents city wide. The looming threat of rent control policies could cause developers to consider building elsewhere. These decisions, if made, could reduce the housing supply and have a long-term negative effect on the housing market. In addition to decreasing the number of construction jobs in the Denver area. When developers and investors determine that a property is no longer profitable because of rent control policies, they will be forced to make changes likely resulting in an even tighter housing market.

Economic analysis has shown that rent control policies do not work in many cases. Examples can be seen in cities such as New York City and San Francisco. In each case, the cities goal was to control rents by instituting a rent control policy aimed at providing more affordable housing options for lower income families categorized as the, “greatest need” for affordable housing in specific neighborhoods. By instituting a rent control policy on specific units in specific neighborhoods, the opposite happened. The benefit was actually provided to the tenants currently occupying the rental unit covered under the rent control policy, despite the current tenant not fitting the category of the “greatest need” for affordable housing. This resulted in the current tenant being unmotivated and unlikely to move from this unit and giving them a better quality of life. But…

What about the person who is in the greatest need and is still unable to find a suitable affordable unit?

Could it benefit the government to consider other options outside of rent control to produce more affordable housing?

The influx of high-income renters and the high cost of construction has paved the way for developers to produce high-end product. Could state and local legislators consider changes in zoning, ways of reducing the cost of construction and enticing developers to produce a lower more affordable income housing and still see the profits needed?