One year after Gov. Jared Polis vetoed a bill to give local governments a right of first refusal on many apartment complexes going up for sale, the Colorado Legislature sent him a modified version on Wednesday that sponsors say was rewritten to deal with his concerns.
In that sense, House Bill 1175 may get the happy ending for its supporters that last year’s bill could not, albeit in a way that will impact fewer properties. Still, the bill drew bipartisan opposition and is likely again to generate veto requests from developers and apartment operators who say its restrictions will slow property sales and leave investors less likely to fund projects despite a desperate need to increase Colorado’s housing portfolio.
After being introduced in a form that would give cities and counties less ability to declare their right to match any offer for an apartment complex, sponsors added changes this year in both the House and the Senate — as recently as Tuesday — to try to appease opponents. Cosponsoring Rep. Andy Boesenecker, D-Fort Collins, said before the House voted to concur with Senate amendments and send the bill to Polis that the changes occurred after talks with the administration, pointedly addressing issues from the 2023 veto letter.
“In the Senate we accepted a negotiated amendment that was done in conjunction with stakeholders and the office of the governor,” Boesenecker told the House. “We are supportive of the changes. We think it makes the bill both meaningful and implementable for our local governments.”
Colorado state Reps. Andy Boesenecker and Emily Sirota seek concurrence on their right-of-first-refusal bill on Wednesday.
What the right-of-first-refusal bill does
This year’s version of the bill gives cities and counties a right of first refusal specifically on apartment complexes of at least five units that are going up for sale after having been built with some public funding contingent on rents remaining below market prices. HB 1175 requires owners to notify the government of any covenant expiration two years before it occurs and gives that government 14 days to preserve its right of first refusal, 30 days to match any offer the seller has received and 60 days to then close on the sale.
While that provision affects about 1,400 properties statewide, the bill also creates a right of first offer that mandates a wider group of building owners notify local governments before putting onto the market any property at least 30 years old with between 15 and 100 units. This gives cities and counties seven days to assert their interest in the properties and another 14 days from that point to make an offer that can be rejected or accepted by the seller, further requiring any transaction must be completed in another 90 days.
If Polis signs the bill, Colorado will become the first state to bestow such rights on local governments, which supporters say is necessary to allow them to compete for existing below-market-rate housing and stop investors from buying it, improving it and raising rents. The Front Range has experienced particularly significant jumps in housing costs, so much so that bill backers say they are driving public-safety workers, teachers and other service professionals out of communities, depleting both public and private workforces.
Differing views of local governments and apartment owners
“We can’t adequately address affordable housing if we are sliding backwards,” Eagle County Commissioner Matt Scherr told the Senate Local Government & Housing Committee on April 25, saying more and more previously low-cost complexes are being sold before officials even now they are on the market and can consider bidding on them.
A construction crew builds a multifamily housing development in downtown Denver.
Polis vetoed a more expansive version of the bill last year, however, writing that he felt it would “discourage investment at a time when the market cannot bear much risk” and saying it could run counter to his efforts to boost affordable housing. While opponents say this bill is less onerous, many say the state should not have a right of first refusal at all and should only get right of first offer on already covenanted affordable housing.
The offer-and-acquisition timelines that stretch for months do not reflect the speedy pace of transactions and will cause investors who might think about building housing here to do so instead in states like Utah or Texas without such restrictions, said Andrew Hamrick, general counsel for the Colorado Apartment Association. Plus, the bill literally takes from property owners the fundamental right to decide if they want to sell their property and to whom — a change that will chill construction and make it even harder for governments to maintain the affordability of a limited supply of housing.
“Still very much a pig”
“This one is marginally better. But it’s adding lipstick to a pig who is still very much a pig,” said Tyler Carlson, CEO of Evergreen Development, in the Senate committee hearing. “In our mind there is no reason a local government needs to insert itself into every market transaction … Local government needs a scalpel, not a chainsaw, when it’s trying to protect affordable housing.”
Sponsoring Democratic Sens. Faith Winter of Broomfield and Sonya Jaquez Lewis of Longmont added an amendment in committee that would allow local governments also to purchase mixed-use projects that include affordable housing. Then on the floor yesterday, they presented one last amendment that would require local governments’ offers to match both the price and other conditions demanded by sellers, tweak some timelines in the bill and repeal the law in five years.
Jaquez Lewis also clarified that the public loans, grants or tax credits that would qualify properties to have to submit to a first right of refusal are only those applied to the actual housing and not to improvements to parking lot or land surrounding the homes.
“We have narrowed this bill incredibly,” Winter said.
Republicans continue to oppose right of first refusal
Colorado state Sen. Barbara Kirkmeyer speaks against the right-of-first-refusal bill in the Senate.
Republicans — as well as two Senate Democrats and three House Democrats — disagree. Sen. Barbara Kirkmeyer, R-Brighton, said the bill imposes conditions affecting potential sale of properties 15 to 20 years after they may have agreed to take public financing without having any idea that it would hold up future sales even after their debts are paid.
“It is not appropriate to coercively force the extraction of property rights from individuals, as this would do,” said Senate Minority Leader Paul Lundeen, R-Monument.
Now, however, the one person who will get to decide if the policy is appropriate enough to become state law is Polis. With the session scheduled to end by midnight today, the Democratic governor has until June 7 to sign or veto bills from the General Assembly.