Local Affordable Housing Requirements Are Coming—What Should You Know?
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Local Affordable Housing Requirements Are Coming—What Should You Know?

Brownstein Client Alert, May 24, 2021

On May 7, 2021, House Bill 21-1117 was passed by the Colorado General Assembly and is on the governor’s desk for signature. As detailed in our Brownstein Client Alert on Feb. 18, 2021, HB 21-1117 authorizes local governments to require construction of affordable housing within their boundaries without being in violation of the state statute prohibiting rent control (see C.R.S. Sec. 38-12-301). Specifically, HB 21-1117 exempts local government land use regulations that restrict 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.” Subject to referendum, HB 21-1117 will take effect in early September, based on when the legislature adjourns. Attention now shifts to cities and counties as they take up varying ordinances to require affordable housing as part of new developments.

Some key questions local governments will grapple with:

What does “existing” and “newly constructed or redeveloped” mean?

While the original text of the bill provided that any local government land use regulation only restricts rents on newly constructed or redeveloped housing units, the bill as revised added a new sentence to the end of subsection (1)(e.5) that provides “Nothing in this subsection (1)(e.5) is construed to authorize a local government to adopt or enforce any ordinance or regulation that would have the effect of controlling rent on any existing private residential housing unit in violation of section 38-12-301” (emphasis added). There is no guidance provided in this additional sentence, or in the original text of the bill, as to what “existing” means or what “newly constructed or redeveloped” could be construed to mean. Therefore it will be left up to each of the local municipalities to define at what point in the entitlement process a development is considered “existing,” and thus is exempt from the new requirements, versus being considered not far enough along and falling within the newly enacted local regulations. In Denver, historically this turning point has occurred when a site development plan has been submitted, but that may be changing as well. Community Planning and Development in Denver has been indicating that it will be something more than a concept-level submittal, but no specific bright line rule is in place at this time. However, each municipality in the state will decide for itself at what stage a project is when the new requirements apply, which will certainly create uncertainty in the market for developers.

What meets an action to increase the overall number and density of housing units?

The other change in the text of the bill is the inclusion of a new subsection (1)(e.7) providing that, in order to exercise the authority granted by subsection (1)(e.5), the local government must demonstrate that it has taken one or more of a list of actions to increase overall number and density of housing units in its jurisdiction, or promote or create incentives to the construction of affordable housing units. The list of actions includes adopting changes to the local government’s zoning to increase overall density and availability of housing; reduce or eliminate utility charges, regulatory fees or taxes applicable to affordable housing unit projects; grant affordable projects material regulatory relief from any type of zoning or development regulations that would ordinarily apply; adopt policies to make surplus government-owned property available for development; or adopt other regulatory measures that are designed and intended to increase the supply of housing.

These are all positive steps, but they apply generally across the jurisdiction without guidance as to how the local government should act with respect to specific projects. Additionally, the list of action items are an “or” list, so the local government only has to demonstrate that they undertook one option in order to check the box of having complied with this subsection of the bill and move forward with enacting a local affordable housing regulation applicable to specific projects. Finally, it is unclear at what time the local government must demonstrate they undertook the chosen action, whether that be just before enacting their own affordable housing regulation, or whether it could have been five to 10 years ago.

What variety of requirements will be established by different local governments?

The addition of subsection (1)(e.7) to the bill provides a relatively easy threshold inquiry that the local government must take before enacting a regulation, but it does not create any guardrails around what type of affordable housing regulations the local governments may proscribe or what types of alternatives and options they must provide to land owners and developers. In particular the final bill does not place an upper limit (such as no more than X% of affordable housing at X AMI, etc.). It is likely that different municipalities will take different approaches in evaluating what requirements are appropriate. Different opinions on what the real estate market can handle could lead local governments to enact regulations where new development cannot be achieved and thus exacerbate the current inflation of prices in the housing market. The Colorado Municipal League and other proponents of the bill argued that local governments would not go too far as it would further hamper housing.

The result of HB 21-1117 will be a patchwork of regulations across the state that will require developers and landowners to understand and navigate across the jurisdictions in which they have pending or prospective development projects. Brownstein will continue tracking each new local regulation closely and will provide further information as the process unfolds.

This document is intended to provide you with general information regarding an affordable housing bill in Colorado. 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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