Legal Experts Weigh in on Colorado Housing Issues

It was an interesting 2023 legislative session for housing in Colorado as the state continues to deal with a shortfall. 

According to an executive order from Colorado Gov. Jared Polis in August, the state currently has unmet housing needs of tens of thousands of units. 

“This Executive Order instructs specific Agencies to inventory programs that provide support to local governments, for housing development, transportation, economic development, and water infrastructure and conservation and develop recommendations to further the strategic growth goals outlined in this Executive Order,” the document explained. “This Order also directs the Division of Housing (DOH) within the Department of Local Affairs (DOLA) to make their programs and timelines more efficient.”

“Colorado is at a crossroads, we can take action to help create more housing now or we can go the way of California where home prices are upwards of $1 million,” said Polis in an August press release connected to the order.

Some major housing bills did fail in the most recent legislative session. House Bill 23-1190, which was vetoed by the governor June 6, would have created “a right of first refusal of a local government to match an acceptable offer for the sale of a multifamily residential or mixed-use rental property consisting of 15 or more units in an urban county or 5 or more units in a rural or rural resort county,” according to the bill summary.

Senate Bill 23-213 also failed, which could have done multiple things including providing more affordable housing options.

“The bill would have required the Department of Local Affairs to adopt model codes to increase higher density housing options and to create methodologies for assessing and planning for residential housing needs,” according to the Aug. 10  final fiscal note for the proposed bill. “Local governments would have been required to adopt model codes or develop new local zoning and building codes meeting minimum standards.”

Law Week recently spoke to two legal experts in housing to get their take on things.

Charlie Smith, a shareholder at Brownstein Hyatt Farber Schreck in the real estate department, expanded on HB23-1190.

“The idea was that would give these local governments another tool in their toolbox to acquire properties, convert them to affordable housing and add to the affordable housing stock in the state,” Smith said. 

Smith said there were quite a few problems with the bill.

“While the intentions were noble and good, it would have represented a significant disruption in the marketplace and not actually have accomplished the objectives that the proponents were seeking to accomplish,” Smith added. 

He noted there were some mechanical issues for how the process would work out and it could have significantly delayed deals from closing in the private marketplace which could turn private buyers away from the market in Colorado. Smith said what they were hearing anecdotally from real estate development companies and investors if the bill passed, they would blacklist Colorado. Smith added there were loopholes in the process that could have significantly delayed deals with the government entity and the property owner, which would concern investors in real estate because of timeline issues for selling the property.

And the resources of local governments was another factor, Smith noted.

“These local governments generally don’t really have the resources to acquire many of these kinds of projects,” Smith added. “There was really, very little practical upside to what would have happened with the bill if it had passed.” 

Blair Lichtenfels, a shareholder at Brownstein Hyatt Farber Schreck,  is the co-chair of the firm’s real estate department. 

She explained there are likely a few reasons the SB23-213 failed including its size (it was 154 pages in its last revision) among other things. 

“I think ultimately the municipalities — counties and cities were uncomfortable giving up so much … of what they perceived as their local control, local land use rights to the state,” Lichtenfels said. “I think at the end of the day, those municipalities exercised a lot of influence on their various elected state representatives and state senators to push back on the bill, even in instances where I think some people felt the objectives were really great.”

Lichtenfels noted it’s important to focus, not on why the bill failed, but on what’s happening next. She expects the governor to bring forward items in a piecemeal fashion during the 2024 session and earlier — SB23-213 was introduced in late March.

“I think it will be interesting to see if the governor’s office is able to sort of work with some of these stakeholders in advance, to come up with timelines and processes and procedures and new laws that are palatable to the local municipalities,” Lichtenfels said. 

As for the positives from the most recent legislative session, Smith pointed to HB23-1255 which got passed and prohibited the imposition of limits on growth which could have an impact on the housing supply

In July 2023, a study was also released on the possible conversion of some Denver office buildings to housing.

“This is the topic du jour,” Lichtenfels said. “It certainly is worth exploring in certain instances. … We’ve been talking to a ton of different clients about this, a ton of different stakeholders in the community … and I think one of the things that we’re hoping is that business and city leaders will come together to talk about ways that we can actually  incentivize this type of development where it’s appropriate.”

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