“Every time I turn around there is yet another proposal to implement rent control. The newest house bill concerning requiring just cause for an eviction recently passed its first hearing. On the surface it sounds harmless, but the details are the most troublesome of any real estate bill I have seen so far. It prohibits rental increases on lease renewals. The costs to property owners and ultimately renters will be astronomical”.
What is in House Bill 23-1171 Just cause for eviction
The bill prohibits a landlord from evicting a residential tenant unless the landlord has just cause for eviction. Just cause exists when:
- The tenant continues to fail to pay rent after the landlord provides the tenant timely written notice of such nonpayment;
- The tenant commits a substantial violation and does not cure it within 10 days after the landlord provides the tenant written notice of the substantial violation;
- Conditions exist for a no-fault eviction;
- The tenant refuses to allow the landlord to enter the residential premises after the landlord has provided written notice of such entry at least 48 hours before attempting such entry, unless the rental agreement specifies a longer period of advanced written notice; or
- The tenant refuses to sign a new rental agreement with terms that are substantially identical to the tenant’s current rental agreement, so long as the landlord proffers the new rental agreement at least 30 days before the expiration of the current rental agreement.
The following conditions constitute grounds for a no-fault eviction of a tenant, with certain limitations:
- Demolition or conversion of the residential premises;
- Substantial repairs or renovations to the residential premises; or
- Occupancy of the residential premises assumed by the landlord or a family member of the landlord.
A landlord that proceeds with a no-fault eviction of a tenant must provide relocation assistance to the tenant in the amount of 2 months’ rent plus the amount of one additional month of rent if any of the following individuals reside in the residential premises at the time the landlord proceeds with the no-fault eviction:
- An individual who is less than 18 years of age or at least 60 years of age;
- A low-income individual; or
- An individual with a disability.
If a landlord proceeds with an eviction of a tenant of a residential premises in violation of the new provisions, the tenant may seek relief as provided in existing laws concerning unlawful removal of a tenant.
The bill is rent control under a different guise of “eviction prevention”
Under the bill, property owners would be required to offer a lease renewal that includes “terms that are substantially identical to the tenant’s current rental agreement” Essentially this bill would prohibit property owners from increasing rents on lease renewal and if they did “substantially” increase rent then the owner would have to pay 3 months rent to the current tenant.
In the bill it does not define “substantial” so any increase would be considered substantial. There is no debate that this is rent control that would by all purposes prohibit property owners from raising rents.
Substantial increases on items such as taxes could not be passed through
Property taxes in Colorado are increasing on average 36%. I would define this as a substantial increase, yet under this bill these tax increases could not be passed onto the tenant. Furthermore utilities have risen on average of 50% over the last 18 months and insurance has also increased substantially due to increased rebuild costs. This is on top of higher labor, material, maintenance costs, etc..
Under this bill these items could not be passed onto tenants in lease renewal as they would be considered substantial increases and subject the owner to pay out to the tenant 3 months of rent.
How has rent control worked in other cities?
Rent control is not widespread in the U.S. According to a recent study by the Urban Institute, 182 municipalities in the U.S. out of about 89,000 have rent control regulations, and all of them were in New York, New Jersey, California, Maryland, or Washington D.C. The reason it is not widespread is that rent control doesn’t work and over the long term has the opposite effect.
Rent Control reduces supply:
According to the Brooking institute, a liberal leaning organization:
DMQ find that rent-controlled buildings were 8 percentage points more likely to convert to a condo than buildings in the control group. Consistent with these findings, they find that rent control led to a 15 percentage point decline in the number of renters living in treated buildings and a 25 percentage point reduction in the number of renters living in rent-controlled units, relative to 1994 levels. This large reduction in rental housing supply was driven by converting existing structures to owner-occupied condominium housing.
New York Case Study:
When I think of rent control, the first city that comes to mind is New York (hopefully everyone remembers the sitcom friends based in rent-controlled apartments). So how has NY fared as a result of their rent control ordinance? Not so well. According to the NY Daily: Median apartment rents in the city have increased 75% since 2000 — a rise 31 points greater than in the rest of the country, according to a report released by the city controller’s office. Over the past decade, 400,000 affordable housing units renting for $1,000 or less have disappeared, Stringer said.
Summary
Just cause for eviction is a terrible idea. Every major legitimate study done by both liberals and conservatives has proven that implementing rent control leads to less affordable housing and increased costs for tenants. We have already watched this movie in cities throughout the country as rent control decreases supply of affordable housing as units are converted and or sold. Without the ability to raise rents on renewal as costs rise, the loss of affordable housing will decline at an increasing pace. This has been proven time and time again and will happen in cities throughout Colorado.
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