Colorado Legislature Removes Ban on Affordable-Housing Requirements

Over two decades after a Colorado Supreme Court decision banned municipalities from placing affordable-housing requirements on rental developments, the state legislature has voted to reverse that prohibition.

"We’ll be able to increase our stock of affordable-housing units, which is direly needed," says Representative Susan Lontine, a Democrat from Denver who co-prime-sponsored House Bill 1117, which authorizes municipalities to enact the long-prohibited affordable-housing requirements.

HB-1117, which Governor Jared Polis is expected to sign soon, will give towns and cities the ability to require a developer to include affordable-housing units in a new rental project while also offering developers as-yet-unspecified ways to opt out, which could include paying money in lieu of constructing affordable units, or even donating land.

Local-control advocates have sought to repeal the prohibition on what's known as "inclusionary zoning" ever since a 2000 Colorado Supreme Court decision regarding a Telluride rent-control issue ended up affecting the entire state.

The legal tangle dates back to 1981, when residents of Boulder pushed an initiative seeking to institute rent control on existing buildings. The Colorado Legislature responded by passing a bill that banned rent-control ordinances. But while municipalities didn't enact rent-control policies from 1981 to 2000, plenty created ordinances that required set-asides in developments for affordable-housing units.

But then came the 2000 ruling from the Colorado Supreme Court known as the Telluride Decision, which essentially placed a statewide prohibition on inclusionary-zoning policies.

Since then, much of Colorado — especially the Denver metro area — has become less and less affordable.

As Robin Kniech, an at-large Denver City Council rep and technical advisor for HB-1117, points out, rents in Denver have grown 77 percent over the past ten years. "Supply hasn’t created affordability in Denver," she says.

Over the past five years, state lawmakers have tried numerous times to pass bills that would legalize inclusionary zoning policies. Last year, efforts to pass a bill were upended by the COVID-19 pandemic, so lawmakers kicked the proposal to 2021.

The Colorado House voted on the bill in March strictly along party lines, with Democrats unanimously supporting HB-1117 and Republicans uniformly opposing it. But on May 3, the Colorado Senate voted in favor of the bill in a bipartisan fashion, as Republican senators Kevin Priola of Adams County and Don Coram of the far southwest portion of the state — including Telluride — approved it.

Getting rid of the prohibition on inclusionary zoning has broad support among voters in Colorado, according to Magellan Strategies, which recently conducted a poll showing that 69 percent of voters support such a move.

Aside from some Republican lawmakers, the bill's main opponents have been involved in real estate and development. For example, the Colorado Apartment Association opposed the bill, which the organization's general counsel, Drew Hamrick, refers to as "de facto anti-growth legislation."

According to Lontine, negotiations between lawmakers, the Colorado Municipal League — a strong supporter of the bill — and the governor's office resulted in an amendment that placed slightly more onerous requirements on municipalities considering passing an inclusionary-zoning ordinance.

Prior to adopting such an ordinance, a local government has to demonstrate a "commitment to increasing the overall number and density of housing units" within its boundaries and to "promoting or creating incentives to the construction of affordable housing units," the bill's language states. Municipalities can demonstrate these commitments through a variety of different ways, including by changing zoning regulations to "increase the number of housing units allowed on a particular site" or by "promoting mixed-use zoning that permits housing units to be incorporated in a wider range of developments."

Lontine didn't mind making that amendment to the bill, she says, but simply wanted to ensure that the proposal wasn't prescriptive, with specific percentages for affordable-housing units in any inclusionary-zoning ordinances. The bill allows leeway for a city council in one municipality to require 20 percent of the units in a new development to be affordable for people making 60 percent or less of the area median income (AMI), while a council elsewhere could adopt totally different numbers.

And, while noting that the city can meet the standards that the amendment requires, Kniech explains that Denver is a "cautionary tale for those who persist under the mistaken impression that simply upzoning or allowing ADUs [accessory dwelling units] will magically solve affordability. Twenty years of Denver experience and data prove that growth doesn't produce affordability for households at the income levels of guidance counselors or nursing assistants or carpenters without policy requirements or subsidy. Period."

After it's signed by Polis, HB-1117 would take effect in September — but Denver should be able to hit the ground running. In recent years, city officials have been working on a project that's examined potential inclusionary zoning policies, density bonuses for affordability and the city's linkage fee, which requires that a developer pay a small amount to compensate for the impact that a project has on overall affordability. Denver has an especially low linkage fee when compared to other cities around the country, according to Kniech.

Those involved in the project, which is being led by the Denver Department of Community Planning and Development, will present a package of recommendations toward the end of 2021. Kniech anticipates that Denver City Council could then pass an inclusionary-zoning ordinance in early 2022.

"Projects that were past a certain point," she notes, which were "fairly far along in terms of its concept...would be grandfathered."