Three recent developments, one a bill before the Colorado state legislature, another a referendum in Denver, and the last a decision by the Colorado Court of Appeals, highlight some of the challenges for residential development in the Denver metropolitan area. Despite increasing in population by nearly 16% since the 2010 census, the metro area faces an increasingly complicated landscape for residential development. This article will briefly outline these recent events and challenges.
- HB23-1190: Right of First Refusal for Local Governments on Mixed-use and Residential Multi-family Property Sales
HB23-11190 is currently under consideration during the current 2023 Colorado legislative session. The proposed bill, if passed into law, would give the state and local governments right of first refusal to purchase any residential or mixed-use multi-family properties with five or more residential units (or three or more units for rural areas) for the purposes of using the properties for affordable housing.
The bill broadly defines triggering events, which impose an obligation for owners of such properties to inform the local government of an intent to sale, thereby setting in motion the opportunity for the local government or state to acquire the property. Triggering events include entering into a listing agreement with a real estate brokerage, entering into a contract with a potential buyer’s broker, executing a letter of intent to sell, providing a signed property disclosure to a potential buyer, and listing property for sale.
Penalties for failure to appropriately disclose an intent to sell would lead to a statutory penalty of $50,000 or 30% of the purchase or listing price, whichever is greater.
This bill will be monitored closely during the current legislative session.
- Referred Question 2O: Political Backlash Reflects Anti-Development Sentiment
On April 3, Denver voters resoundingly defeated a ballot referendum that would have allowed for the building of nearly 3,200 new housing units. Referred Question 2O was voted down by approximately 60% of Denver voters and is believed to reflect a pervasive anti-development sentiment among Denver residents.
At issue was a 155-acre property in northeastern Denver – the Park Hill Golf Course. The property was subject to a conservation easement in favor of the City and County of Denver, dating back to 1997 requiring the land to be occupied, used, and maintained as a regulation-length 18-hole golf course. The owner of the land at the time of inception of the conservation easement was given $2 million from the City and County of Denver in exchange for the easement.
The golf course was closed in 2018 and sold to a local developer in July of 2019. The developer sought to transition the property into a mixed-use development with affordable housing, a grocery store, and open space, and specifically engaged the community through discussions and surveys for public input into the planned development. However, the developer was met with aggressive community pushback, including from a community group that eventually brought suit against the City and County of Denver regarding the property. The opposing community group took the position that the purpose of the easement was to create open space and that development of any sort in the location was prohibited.
In the fall of 2021, Initiative 301, proposed and advocated for by the opposing community group, was approved by Denver voters. This measure required a citywide vote in order for any conservation easement to be lifted. By the end of 2022, as the vote over the easement approached, the development firm had worked with the City of Denver’s Community Planning and Development department to create a plan for the property. This plan included more than 100 acres of park space, a community center, some retail space (including space specifically set for a grocery store), and a mix of income-restricted and other rental housing units. All that was stopping this development from proceeding was a simple vote: yes on 2O would lift the easement.
Despite a long campaign and efforts to engage with the community by the developer, Denver voted no. The easement remains in place and development appears to be prohibited at the site. Many who supported the development plan believe that anti-development sentiment was a major factor in the ultimate success of the campaign to prohibit lifting of the easement and subsequent development of the property. This opposition to development has played out not just with the Park Hill Golf Course, but with smaller projects across Denver.
- Keeping Up With Water Conditions: A Cautionary Tale for Developers in Drought-Heavy Areas
With much of the west in the midst of a “mega-drought,” developers must take special considerations and appropriately assess risks for projects in areas with challenges to water resources. Developers cannot simply trust that local municipalities in Colorado will be able to obtain ample water resources to support ongoing residential development.
Thornton is Colorado’s sixth-largest city. Emblematic of Colorado’s rapid growth, its population has skyrocketed from 50,000 in 1985 to approximately 147,000 in 2022. City officials predict it could grow up to 240,000 by 2060. However, despite decades of planning for growth, Thornton is now facing a major water shortage, and city officials have effectively halted new multi-family residential projects.
For the last 40 years, Thornton had been working to acquire land in nearby jurisdictions, including Larimer County, with significant water supplies, and build a pipeline to transport the water to the city in Denver’s northern suburbs. In 2018, using its administrative power under Colorado’s land use laws, the Board of County Commissioners of Larimer County rejected Thornton’s application to complete its water pipeline. After Larimer County rejected Thornton’s application, Thornton appealed the decision to a state district court. Thornton lost this administrative appeal, and then lost its next appeal to the Court of Appeals, in the fall of 2022.
Thornton’s loss in the 2022 Colorado Court of Appeals case puts every interested party in a holding pattern. It is unclear when a settlement could be reached, let alone when the pipeline (or an alternative source of water) to Thornton would be completed. Some speculate this matter may not be resolved until 2026, at the earliest. For one of Denver’s most desirable suburbs, this means a huge area for residential development may be closed for the near future.
