Colorado Bill Empowers Local Governments to Require Affordable Housing

Colorado Bill Empowers Local Governments to Require Affordable Housing

Feb 18, 2021

Client Alert

Brownstein Client Alert, February 18, 2021

On Feb. 17, 2021, four Colorado state legislators introduced a bill that would authorize local governments to require construction of affordable housing within their boundaries without being in violation of the state statute prohibiting rent control.

House Bill 21-1117, sponsored by House Reps. Susan Lontine (D-Denver) and Serena Gonzales-Gutierrez (D-Denver) and Sens. Julie Gonzales (D-Denver) and Robert Rodriguez (D-Denver), adds a provision to the Local Government Land Use Control Enabling Act of 1974 (C.R.S. section 29-20-101 et seq.) expressly allowing local governments to regulate development or redevelopment in order to promote the construction of affordable housing units. Further, the new legislation expressly exempts the Colorado statutory prohibition on rent control (see C.R.S. section 38-12-301) from applying to any local government land use regulation that restricts rents on newly constructed or redeveloped housing units as long as “the regulation provides a choice of options to the property owner or land developer and creates one or more alternatives to construction of new affordable housing units on the building site.” If passed, the bill would become effective on Sept. 1, 2021.   

In 2000, the Colorado Supreme Court ruled in Town of Telluride v. Thirty-Four Venture, 3.P.3d 30, that local governments cannot require developers to include affordable housing units in new rental developments. The court concluded that this practice, known as inclusionary housing, is a form of rent control which is prohibited by state law as described above (see C.R.S. section 38-12-301). The current statutory prohibition on inclusionary housing applies only to rental housing and does not extend to for-sale residential developments. In fact, many local jurisdictions already require that for-sale residential development either construct affordable units or pay cash in lieu. Some local governments, like Denver, impose an affordable housing linkage fee on all commercial and residential development.

House Bill 21-1117 would overturn Town of Telluride, opening the door for cities and counties to extend inclusionary housing requirements to rental housing. Stakeholders are focused on adding guardrails to the bill regarding the number of affordable housing units that could be required and the strength of the offered alternatives to enable developers to continue to build rental housing in Colorado.

Local governments have already begun considering the types of regulations they will enact should House Bill 21-1117 pass, including analyzing the types of public outreach the local government will undertake prior to implementing its own regulations, how to ensure the local government’s regulations will satisfy the requirements of the state statute, when the local government’s regulations will become effective and which development projects already in the pipeline will be subject to the local government’s regulations.

Local governments are also considering: what types of rental housing will constitute “affordable housing units,” the level of area median income (AMI) requirements and what alternatives to constructing housing on the subject property will be offered to developers and property owners. These alternatives could include density increases in exchange for construction of affordable housing units, payment of fees in lieu of construction, constructing affordable housing units at offsite locations and other similar options.

This flurry of local government activity related to House Bill 21-1117 requires developers and landowners to understand and navigate the patchwork of new regulations across the jurisdictions in which they have pending or prospective development projects in the event that the legislation and, in turn, the regulations pass. Brownstein will continue to monitor House Bill 21-1117 as it moves through the Colorado state legislature, as well as the local government activity related to the bill.

Please contact Blair Lichtenfels, Caitlin Quander or Sarah Mercer with any questions.

This document is intended to provide you with general information regarding a Colorado bill authorizing local governments to require construction of affordable housing units. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.

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Blair E. Lichtenfels Shareholder T 303.223.1190
Caitlin Quander Shareholder T 303.223.1233
Sarah M. Mercer Shareholder T 303.223.1139