Rent Control doesn’t work because it has the unintended consequence of removing the financial incentive to create new housing units, to improve existing housing units, and it restricts resident mobility. The result is always less available housing and higher prices.
Doing away with the statewide ban on local rent control ordinances, as is proposed by House Bill 23-1115, will have no positive effect on housing supply. Increasing the supply is the single greatest way to achieve more affordable housing for all Coloradans.
Colorado needs more housing supply to drive down prices. While artificial price restrictions can help a few of the people that well-intentioned lawmakers hope to help, costs will go up for everyone else. By enacting rent control regulations, we will lose any momentum we need to solve the current housing shortage, hurting housing now and in the future.
For more than 40 years Colorado law has prohibited local governments from enacting rent control ordinances. This is both a recognition of the damage rent control can do to available housing, and also a recognition that one local government’s housing policy can negatively impact neighboring communities.
If Denver enacts rent control and builders decrease new housing units in Denver because of it, the cost of housing in all the surrounding areas will be driven up because of it. People in Aurora and Westminster will end up paying more for housing because their neighbor artificially reduced supply with the rent control ordinance.
Unfortunately, building permit applications have already significantly gone down due to the “Affordable Housing” ordinance that was implemented in July of 2022 by the City and County of Denver. This ordinance requires most planned housing developments to include a percentage of low-income units. In the first three months of the ordinance’s implementation, new housing permit applications in the third quarter of 2022 dropped 88% from the second quarter. According to Apartment Insights, permits for new housing units were surging before the ordinance put a halt to new construction.
Denver doesn’t have the housing to lose. We need to be stepping on the gas, instead of enacting regulations that hit the brakes on new development.
If there is no incentive for developers to build housing, they simply will not build. When legislation enforces policies that reduce those incentives or impose restrictions that disincentivize building, housing prices will continue to increase.
Owners of existing housing, too, will lose incentive to remodel and upgrade their housing units. There is no reason to invest in upgrades if the improved property is going to generate the same rental income.
Not only is choice restricted by the slowdowns in new development and upgrades, renters slow their frequency of movement. Rent control encourages people to cling to the rental housing they have with below market rates rather than move to the housing they want. We all end up with a harder time finding a place to live with rent control.
Allowing cities to enact rent control will only cause housing to cost more and be less available, compounding the problem instead of solving it.
Rent control has failed everywhere it’s been tried. Most recently, St. Paul, Minn., enacted rent control in 2022. “Permitting data suggests Minneapolis is the beneficiary of St. Paul’s rent control folly,” the Wall Street Journal editorial page said. “Multi year data shows a 68% increase in Minneapolis multifamily permitting since the passage of St. Paul’s rent control.” Rent control reduces housing for the people who need it most, no matter the place or policy.
Affordable housing is a long game, not likely to succeed with haphazard policy. Inevitably, rent control hurts the people it is trying to help.
The only solution to high-priced housing is to build more supply. Colorado needs to focus on policies that encourage the creation of more housing units. Multifamily units are a particularly useful means of dealing with our housing shortage because they are more energy-efficient, require less land, are less expensive and allow people to live closer to where they want to live.
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