In recent years, Colorado has been a poster child for the U.S. housing crisis. Previously a relatively affordable state, it has seen home prices increase nearly sixfold over the past three decades.
Like elsewhere, there’s no single reason why real estate has become so expensive in Colorado. Instead, there are several: demand is rising among millennials, seniors are remaining in their houses longer, investors are buying second homes and short-term rentals, and housing construction has failed to keep up.
The result? Colorado has been experiencing declining population growth, increasing homelessness and hiring challenges for employers.
But new legislation may change that.
This year, Colorado’s General Assembly passed several laws that, from my perspective, will make Colorado a national leader in expanding housing affordability.
On May 13, Colorado Gov. Jared Polis signed a bill requiring local governments to plan and zone for more apartments and condominiums near transit stations. On the same day, he signed a law allowing accessory dwelling units – small apartments located on the same lot as a single-family house – to be constructed. These bills followed others that eliminated minimum vehicle parking requirements for apartments and preempted local rules prohibiting people from living with roommates. These changes will make housing more affordable by allowing developers to build more housing at a lower cost.
Even more legislation, including a bill that would give local governments a right to purchase existing homes to preserve affordability, will soon reach the governor’s desk.
Governments need to end rules that prevent developers from building new homes. For decades, economists have observed that restrictive zoning laws in some of the nation’s wealthiest cities are a major factor blocking development.
Unaffordable housing in prosperous U.S. cities has far-reaching effects. It increases the household wealth gap between existing, higher-income homeowners and renters. It reduces workforce dynamism, as workers can’t afford to move to places where they might find better-paying, more-productive jobs. This, in turn, hurts national economic growth. Unaffordable housing also aggravates racial inequity and accelerates gentrification and displacement in lower-income neighborhoods.
Colorado’s transit-oriented housing law is intended to address these issues. It may prove more effective than other states’ interventions.
Beginning with Oregon in 2019, several states attacked single-family zoning by overruling local zoning laws that only allow one detached home per parcel. Many cities have passed similar changes.
Advocates herald these reforms, but it has produced little new housing.
My research demonstrates some of the issues with well-intentioned single-family zoning reforms: It is too expensive and difficult to finance projects that add just one or two additional units. What’s more, small projects don’t attract experienced developers.
Allowing higher-density housing, reducing development fees and speeding up permitting time frames will result in more homes more quickly.
Colorado’s legislation does a better job of harnessing market forces. The state’s new transit-oriented development law requires 31 cities to plan and zone for housing at an average density of 40 dwelling units per acre within a half-mile of a fixed-rail transit station or high-frequency bus corridor. That’s roughly equivalent to a three- or four-story apartment building.
Denver region’s transit agency has 77 light-rail stations, and the law will force local governments to plan and zone for approximately 60,000 housing units around those stations alone. That number of units would help to close Colorado’s 101,000-unit housing shortage.
The new law builds on experiments in Massachusetts and California, where state governments have begun to require towns to zone for and eliminate red tape on moderate-density housing near transit. Colorado’s law goes further by allowing much denser development.
By design, residents of these new homes will have easy access to public transit, which should ease Colorado’s air-quality issues. As a result, a broad coalition of housing, transportation and environmental advocates supported the bill.
Colorado’s transit-oriented law also addresses a common argument against state intervention in land-use regulation. Opponents argue that state laws governing land use eat away at local communities’ right to govern themselves.
Local control is political, if not legal, dogma in many states. The Colorado bill allows cities to determine where in their transit areas to permit multifamily housing. A town could spread the required units throughout its transit areas, for example, or concentrate them in a particular location. But they can’t opt out of building them in the first place.
Brian J. Connelly is an assistant professor of business law at the University of Michigan Ross School of Business. Distributed by The Conversation and The Associated Press.