Opinion: Study shows why rent control doesn’t work

Terry Simone
President, Colorado Apartment Association

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In the Denver area, the population has grown dramatically faster than construction of new housing units. Just under 500,000 people have moved to the Denver metro area since 2009, and approximately 124,000 new apartment units have been constructed. As a result, the cost of housing in Denver has increased significantly. There are simply not enough apartments for people moving to the Denver metro area.

To make the housing situation worse, the price of homes has significantly risen. Specifically, the median price of a home has increased from $220,000 to $450,000 since 2009 (104.6% total increase). New residents are having a difficult time finding homes in their price range. The average cost of renting has increased from $820 to $1,410 (7.6% per year, or a total of 70.6% total).

This growth in housing cost is leading some policymakers to consider various versions of rent control as a method of holding down housing costs.

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A study by the National Apartment Association examined the impact even a 7% rent cap would have on four metropolitan areas, including Denver, and highlighted the effect that rent control would have on the housing market.

According to the analysis, conducted by Capital Policy Analytics, the impact of imposing a 7% rent growth cap in Denver would equate to $462 million decrease in property value and a loss of $3.5 million in property tax revenue. In addition, such a rent cap could lead to a decrease in new apartment supply of 9,348 by 2030. A 7% rent cap would even put 35,163 units at risk through 2030 due to decreased maintenance.

The solution to this housing crisis doesn’t need to be a rent cap. Capital Policy’s analysis shows that these policies decrease the housing supply, harm the condition of existing housing stock and lower property values, which leads to lower tax revenues. These policies ultimately limit job growth and negatively affect local economies. While rent control may appear like a quick fix to Colorado’s rental housing shortage, policies that limit growth like rent control harm those who most need help.

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With nearly 500,000 Coloradans calling apartments home, it is more critical than ever to use sustainable and sensible solutions to Colorado’s housing supply shortage.

NAA’s latest findings, combined with 40 years of research demonstrating the failure of rent control policies, underscores the importance of lawmakers looking at real solutions that provide tangible benefits. Fortunately, there are plenty of those “real solutions” out there. The Colorado Legislature can lift barriers to construction to allow the industry to build the tens of thousands of new apartments, at all price points, that Colorado needs annually to meet the current demand. Increased land grants and expedited building permits for the construction of affordable residences will create new housing opportunities at a faster fate.

The state government can negotiate with housing developers by reducing building permit fees and tap fees, or contributing land in exchange for long-term restriction on rents or sales prices. Additionally, our legislators can empower residents by funding more affordable housing vouchers and reducing the administrative burdens of accepting the vouchers. Larger government grants for existing programs like LIVE Denver, the Lower Equity Income Voucher program, will connect more vacant rental units with working families and individuals.

There is not one right solution for Colorado’s affordable housing shortage. However, as the NAA study shows, there is one wrong solution: rent control. Colorado legislators and citizens must come together to find a multilayered approach to affordable housing with the combined public and private efforts. Implementing a “quick fix” like rent control will only exacerbate the problem policymakers are trying to solve and further burden low- and middle-income renters.

Courtesy National Apartment Association

Featured in CREJ’s February 2020 Multifamily Properties Quarterly

Edited by the Colorado Real Estate Journal staff.