On April 2nd 2019, a news story was released out of FOX Denver that announced that lawmakers within the State of Colorado are considering the option of rent control. This would involve a repeal of a law that previously prohibited rent control.

In short, it would mean that various cities could actually set limitations on just how much landlords could actually charge their tenants for residing in their properties. In this article, you will learn about rent control and its potential impacts throughout Colorado.

Larimer square in Denver Colorado

What is Rent Control?

Rent control is a special type of policy that is designed to regulate the overall amount that landlords increase the amount that they charge on rent for residential properties.

It also places an immense amount of restrictions on evictions.

According to research, this is designed to enhance the overall quality of life for tenants, who benefit immensely from rent control. Generally speaking, tenants are able to pay less each month in rent – which results in having to move less often.

This is highly beneficial to tenants who reside in cities that have low supply in rentals, but a high demand and increase rent amounts to reflect that.

Has Rent Control Been Effective?

To date, New York, California, New Jersey, Maryland, and the District of Columbia are the only areas in the United States where laws concerning rent control exist. However, other areas in the nation have carefully considered special legislation that would remove the bans on rent control. These include Oregon, Washington, Illinois, and now Colorado.

In Oregon, it was passed and a cap on rent was put into place. While this does seem to provide benefits to tenants, many landlords have either completely sold out or redeveloped their properties.

While it does provide initiatives for those that must rent their residences, it does not seem to provide landlords with many initiatives – especially those that have property in areas where demand is exceptionally high and supply is low.

In fact, it seems to negatively impact the financial livelihood of property owners.

Keys Open Front Door

How Would Rent Control Affect Colorado?

Depending on where rent control was integrated in the State of Colorado, it could affect areas in different ways.

In areas where there are schools or a large amount of job opportunities, rent control would help in providing housing units that are more affordable for families.

In rural areas, this type of control could devastate communities – in terms of the landlord point of view.

If rent control is put into effect, other expenses that property owners have will need to be considered. If not and the property owner starts to lose money, it could result in available rentals being completely sold and a reduction in the amount of rental properties that are currently available.

Will Progress Slow?

Many feel that integrated rent control is a bad move, economically-speaking.

This is mainly due to the fact that it feeds into reducing the general supply of rental units available for families and drastically increases the rent amounts for those units that are under the control.

The next negative effect of rent control being in place is that the development of rentals will relocate into areas where there are no levels of rent control and slow the overall progress of the areas where there is rent control.

In short, this means that the rent amounts will drastically increase in the suburb regions of the state.

While rent control is supposed to be helpful, it could result in many unfavorable effects in and around the cities where it is put into place.

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Increase Supply to Reduce Demand

To truly address the issue, it is best to leave rent control out of the picture. Instead, communities should focus on initiatives that will allow property owners and development companies to place their focus on increasing the supply of rental properties. In effect, this would help to reduce the overall demand of such properties.

The true problem is supply.

We have to focus on getting more residential units into the picture for families to choose from. If we pull in rent control, it will be as if tenant is working against landlord.

Before too long, the property owners will simply bail out rather than be limited in what they need or want to charge.

If this occurs, it will only complicate the situation further.

When is “Enough” Truly Enough?

Based on a ruling from the United States Supreme Court, it states that landlords will be able to get profits under the rent control measure that will allow them “enough to maintain their buildings”.

Who determines what “enough” is and will “enough” truly be enough? That is the question.

With rent control put into place, the landlords will simply lose all incentive in rental property investments. In fact, most will opt out of the rental business, completely. When this happens, it will cause severe spikes in higher housing costs.

As homes go up, people will be dissuaded from moving to areas where there is rent control – especially if rental units are limited.

Financial Breakage

We know that wages are at an all-time low. Despite the employment opportunities available, people just are not making the money that they need to make to make ends meet. This is why rent control is even an option being placed on the table.

However, the wheel can spin both directions.

Yes, we can go ahead and integrate rent control in certain areas, but what will happen to the property owner’s finances?

They will suffer.

As a result, they will pull out of the market by selling out. When they sell out, those rentals that were available will also be out of the market. Then, what happens? There is no place to rent.

Instead of creating an economic barrier that will affect all, it is likely best to opt for averages and to encourage companies to pay more.

Not only will it help the housing market, but it will also boost the economy.

If you are a landlord or are considering buying rental property in Colorado, get in touch to see how this might affect you.

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