Democrats in the Colorado Legislature are back for it. In their never-ending quest to make everything “fair,” they submitted and sent to the governor’s desk a bill regulating lease contracts for houses across the state. Unfortunately, as is the custom in such political decisions, these changes will do nothing but harm the very people whom the Democrats claim they want to protect.
The essence of the bill is that it will become much more difficult for landlords to evict tenants due to non-payment of rent. In the wake of the COVID-19 pandemic and a federal eviction moratorium imposed by the CDC (since when does the CDC regulate housing?), Colorado lawmakers are proposing to strip homeowners of the right to various late payment penalties and reimbursement of court costs when filing an eviction case.
My guess is that these bleeding hearts believe that these new laws will reduce the likelihood of attempting (or succeeding) an eviction of a homeowner. However, such regulations will do nothing more than increase the cost of running a business for homeowners. My question to these masterminds is this: who do you think will ultimately pay for all the extra costs and difficulties? This is exactly the same question we should ask those who think excessive corporate taxes will solve the problem of income inequality. Who ultimately pays?
The answer is, of course, the buyer (or in this case the renter). Home prices in Colorado have skyrocketed over the past few years. Instead of slowing down this rocket, it will give additional boost to the fuel for the engine. And instead of punishing big companies, which Democrats always imagine as the snide whips of the world, there is a much better chance of punishing family operations.
The 2018 National Association of Realtors ™ Rental Financing Survey found that a whopping 72.5% of single-family rental units and 2-4 apartments were privately owned (known as family transactions). 71% were managed by these individuals, not management companies. The average cost of operating each leased unit in 2017 was US $ 5,270. We can only guess what this number is now, given that the cost of housing and construction is coming into orbit.
Most of these owner-operators (as well as large companies) also have mortgages on their rental properties – mortgages that must be paid off or the owner will be foreclosed if not paid, which will crowd out the tenant anyway.
Putting additional rules on homeowners will do nothing but reduce their risk taking. It is almost impossible to find a rental right now if you have a bad credit history and / or low income. Democratic action in the Colorado legislature will only exacerbate this problem. Why would an owner risk someone with a shaky financial history when they could be left without a choice if and when that tenant runs out of rent? Answer: you wouldn’t.
My wife and I became landlords a little over two years ago and took the risk of renting an apartment to families with bad credit history. We succeeded because they were exemplary tenants. But even with the rent paid on time every month, we didn’t kiss like thugs. Our total profit over two years was about $ 3,000 after paying off the mortgage and completing the refurbishment as needed. We’re glad we were able to help people who needed a break. But this should not be expected of all market participants.
Landlords are often people who want to earn a retirement or passive income. SB 21-173 will do nothing but rob this nest, abuse the poor, and throw our market rental prices into the stratosphere.
Tony Joya is a Colorado Springs realtor and a member of several city councils and commissions. You can contact him at email@example.com…