Colorado Democrats are divided over President Biden’s embrace of rent caps

President Joe Biden’s proposal this week to limit rent increases in larger apartment buildings across America has advanced an idea long embraced by progressive housing advocates in Colorado — but, in a split among Democrats, is being opposed by Governor Jared Polis.

Furthermore, rent stabilization policies at the local level are actually illegal under Colorado law.

Unveiled by Biden as he tried to fend off calls to step aside in the presidential race. the plan would limit annual rent increases 5% for properties with more than 50 units. That would concern more than 20 million units nationally about half of all rental properties in the US.

The plan would jeopardize valuable tax write-offs as a way to get landlords on board. A landlord who didn’t comply with the limit would lose access to a tax deduction that would allow him to write off depreciation as the properties age. While the exact numbers may vary, several housing experts told JS that the depreciation is significant.

The proposal, which has a good chance of becoming law, would also exempt new properties in an apparent effort to blunt widespread criticism that rent caps hinder development.

Biden’s plan comes as rents and home prices in Colorado have soared in recent years. At the same time, evictions have increased sharply, with a record number filed in Denver last year Data shows the city is on track to break that record again in 2024.

The high cost of housing is one of Coloradans’ top concerns, polls show, and lawmakers have proposed sweeping housing reforms in recent years.

But Democrats’ near-supermajority in the Capitol has at times speculated about the best way to handle the crisis.

“We were very pleased with President Biden’s announcement because it would prevent landlords from participating in what is happening now, which is the continued and uncontrolled inflating of rents, forcing tenants to either pay for the roof over their heads or feed their families. or receive critical medications,” said Carmen Medrano, the co-chair of Colorado Homes for All. The housing coalition has supported legislation that allows local governments to introduce rent caps.

Colorado law now prohibits cities from implementing rent stabilization or rent control policies. Recent efforts by lawmakers to repeal that ban have failed, despite opposition from Polis and other Democrats.

But Biden’s embrace of the policy is a shot in the arm for advocates who have argued that rent caps are critical to protecting vulnerable tenants. Medrano pointed to one 2023 survey which found that Coloradans showed 60% support for rent control policies in their local communities.

What Polis and other opponents say

Still, the cap faces an uphill climb: Biden is fighting for his political life amid concerns from voters and senior members of the Democratic Party about his ability to campaign and defeat Republican Donald Trump in November.

Even if the president stays in the race and wins, the November elections will also determine which party controls each chamber of Congress. Anything less than a Democratic trifecta in the White House and Congress would likely spell doom for rent cap legislation, assuming there was enough support even among elected Democrats.

Given that Democrats in Colorado have repeatedly clashed over the issue, that’s not a certainty either.

Biden’s proposal was opposed this week by the landlord lobby and Polis. On the social media platformHe argued that Biden’s rent cap would stifle development and raise costs.

In recent terms, Polis has taken a supply-side approach that aims to remove local barriers to development. While he and Democrats had success on that front this year, it will take years for these reforms — and the denser apartment development they promise — to bear fruit.

Policy spokeswoman Shelby Wieman declined an interview request about Biden’s rent cap proposal. In a statement, she wrote that Polis “knows this will require congressional action, which is unlikely to happen, and looks forward to many future discussions about ways to save Americans money on housing. The president’s interest in this issue is a good first step.”

Rent caps have received more attention in recent years as home prices have risen nationally. Oregon now limits annual rent increases to 7%, plus an inflation factor (will be 10% this year). St. Paul, Minnesota, adopted a 3% cap in 2021, but policymakers rushed to add exemptions soon after as development collapsed.

The debate over the effectiveness of the policy has also continued. The Biden administration pointed to a New York University White Paper which states that ‘broad’ regulations and relatively high ceilings would be effective if they were accompanied by subsidies for people with lower incomes. Opponents have repeatedly maintained that rent caps are broadly counterproductive Brookings Institution Report 2018 argued that they are helpful to tenants in the short term, but harmful in the long term.

Drew Hamrick, senior vice president at the Colorado Apartment Association, derided rent caps as a failed policy. He said they benefit tenants lucky enough to end up in a price-controlled unit, but otherwise stifle development and limit on-site improvements.

“Completely at the mercy of business landlords”

Still, these concerns can be addressed by a nationwide – rather than city-by-city – approach, Hamrick and others said.

While implementing rent caps in one city may encourage developers to look elsewhere, a nationwide approach would help neutralize landlords’ ability to look for greener pastures. The Biden administration’s proposed exemption for new construction theoretically reduces fears that property owners would stop building apartments altogether.

“The fact that it would have a nationwide impact eliminates that,” Hamrick said. “But it still has a chilling effect on investment in general. What you worry about is that these pension plans and insurance companies that are actually financing the construction of housing in the U.S. are going to find better places to park their money than real estate investments because there are artificial ceilings.”