The Senate sponsor of a bill to give Colorado local governments a right of first refusal on most apartment complexes that go up for sale made a slew of concessions to get the proposal out of a key committee Tuesday — but not enough to win over developers opposed to the idea.
House Bill 1190, sponsored by Democratic Reps. Andy Boesenecker of Fort Collins and Emily Sirota of Denver, now heads to the Senate floor with a much better chance of passage to Gov. Jared Polis’ desk. But in addition to business and property groups, the measure now could face blowback from proponents like local officials who say the changes added in the Senate Local Government and Housing Committee may tie their hands too much to render the potential new law effective.
If it becomes law, HB 1190 would make Colorado the first state in which all city and county governments have a right to match the offer made on sales of certain multifamily properties and purchase the housing complexes instead. At a time when Colorado has become the eighth-most-expensive state for renters, proponents say the bill could give governments the chance to invest in properties that often are sold too quickly for them to compete on and that that they then could maintain as affordable housing.
But with critics warning the proposal could chill investment in new housing at a time when the state desperately needs more housing stock, the bill faced a tough path through the Senate. So, Sen. Faith Winter, D-Westminster, added amendments Tuesday to address complaints on the length of time governments could hold up transactions, the breadth of properties the bill could affect and the possibility of mom-and-pop units being caught up in the bill.
Significant changes
The new amendments, all accepted by the committee, would:
- Increase the minimum number of units in a property that falls under the law — previously set at three units in rural and resort towns and five in urban counties — to five in rural/resort areas and 15 in urban locations;
- Exempt any properties from the law that have received their certificates of occupancy within the past 30 years, a major change after the original language of the bill did not put any boundaries around properties’ age;
- Require local governments to assert their right of first refusal within seven days of the announcement of a potential sale, make an offer within another 30 days and have another 60 days to close, for a total of 97 days of potential consideration to intercede in transactions. HB 1190, as it came out of the House, would have required an initial decision within 14 days, an offer within 60 more days and a closing within 180 more days;
- Exempt from the law properties under foreclosure and properties being sold to a mission-driven nonprofit;
- Allow local governments to create an evaluation rubric for potential properties that could be used to identify properties quickly that would not be right-of-first-refusal candidates; and,
- Repeal the law in August 2028.
The amendments’ most important impact Tuesday was that they won support for the bill from Sen. Dylan Roberts, the Avon Democrat widely viewed as the swing vote on the committee. Roberts said he still has philosophical challenges with the idea of government inserting itself into private transactions but said the new guardrails make him comfortable with the way the bill would achieve its purpose.
“I think the need is clear … And I like the point you made that this will not be used often,” Roberts said before the 4-3, party-line vote, echoing the arguments of several county commissioners that they don’t have the financial reserves to acquire much property. “It could be a valuable tool to alleviate the affordable-housing crisis we are having in many counties.”
Business opposition to right of first refusal
While groups such as the Downtown Denver Partnership thanked Winter for the changes, particularly the shorter transaction-consideration timelines and the exemption of properties less than 30 years old, other opponents said the bill still will stifle multifamily investment. Transactions with investors often play out over just a matter of days, so forcing them to pause for three months — a timeframe in which changing interest rates or market conditions could drive down property values significantly — is “too much time,” said Ted Leighty, CEO of the Colorado Association of Home Builders.
Even with the exemption of properties built in the past 30 years, Colorado Apartment Association Senior Vice President of Government Affairs Andrew Hamrick estimated the law would apply to $3 billion of the $6.5 billion worth of rental property in Colorado. That will force many potential investors in new building projects to look to other, less-intrusive states and, by limiting the potential buyer market, will depress sales prices in a way that could reduce local property-tax revenues, he said.
“It is a massive seizure of property rights from Colorado landowners, giving that right to local governments,” Hamrick said. “What Colorado needs to do is encourage the flow of capital into our state, not chase it away.”
Supporters’ differing reactions
The amendments also worried some of the long-time proponents of the bill.
Summit County Commissioner Tamara Pogue said it would be “virtually impossible” to create a standard rubric for evaluating property transactions that applied to all types of housing in her resort county. And, she said, the 30-year exemption would nix purchase opportunities of “the vast majority” of units withing traditional workforce neighborhoods.
“I am concerned about some of these amendments, as I believe they will severely limit our ability to use this tool effectively,” Pogue said before Larimer County Commission Chairwoman Jody Shadduck-McNally acknowledged that she shared similar concerns.
Other proponents, however, said the changes could improve the bill.
Jonathan Cappelli — executive director of Neighborhood Development Collaborative, a group of 20 nonprofit housing developers — said the proposed rubric will help the process move more smoothly. With the Front Range now the fifth-most-expensive area for housing in the country, this can allow governments to step in and provide a different outcome when they see the potential sale of affordable properties that could lead to displacement of essential workers if new buyers improve the properties and bump rents to market rates.
“The ratio of new affordable housing to non-affordable housing is decreasing at a staggering rate,” Cappelli said. “This is not about handcuffing the strengths of capitalism. It’s about suppressing the dark side of capitalism.”
If approved by the Senate in the coming weeks, the significantly changed bill then will need to go back to the House for concurrence with the amendments.