Analysis: Housing affordability crisis has been a bonanza for many Coloradans

Scientists who study the origins and evolution of the universe have a problem: At an intergalactic scale, the universe as we can see it through our telescopes doesn’t behave like it should. The clusters of galaxies that make up the structure of deep space move in a way that, as far as we can observe, violates the laws of gravity and general relativity.

Connecting the news in Colorado to the big picture. Astrophysicists, though, have long since settled on an explanation for this. They’ve calculated that a large percentage of the total mass of the universe is not, in fact, observable, but “dark matter,” which can’t be detected on the electromagnetic spectrum. We can be confident that dark matter exists because of the gravitational forces we see it exert on visible matter, even if we can’t point it out and acknowledge it directly.

As Colorado policymakers step up their efforts to address the state’s housing shortage, they’re encountering a similar problem: Colorado’s housing market, and the state and local policies that shape it, don’t always behave like they should.

If you’ve casually followed the housing debate at the Colorado Capitol over the last year or so, the gridlock on these issues may seem inexplicable. Nearly everyone agrees that it costs too much to buy or rent a home in Colorado these days. Basic laws of supply and demand tell us that, in general, the more housing units are built, the more these costs will come down. So why has it proved so difficult for state and local governments to simply pass measures that will increase the supply of housing?

The answer, in large part, is the dark matter of housing politics — a truth that is rarely if ever directly acknowledged in legislative hearings or news stories but exerts a powerful influence on the policy outcomes we have been able to see.

The truth is that for many Coloradans, the housing affordability crisis hasn’t been a crisis at all. It’s been a bonanza.

The total market value of all residential property in Colorado more than doubled over the last decade, from $483 billion in 2013 to well over $1 trillion today according to state data. Only a small portion of that increase came from the 300,000 or so units of new housing stock built during that period. The rest — an astounding windfall of nearly $500 billion in new wealth — simply accrued to the homeowners, landlords, lenders and investors who owned the state’s other 2.3 million housing units.

Debates over housing policy tend to be dominated by vague ideas like “neighborhood character,” quality of life and sustainable growth. Far less attention is paid to the fact that in contrast to renters and first-time buyers, Colorado homeowners materially benefit when home values soar, and they are strongly incentivized to support policies that keep prices rising.

If you doubt the power of those incentives, just take a look at Steamboat Springs, where voters last month defeated a city-backed proposal to build 2,200 new units of affordable housing on a newly annexed property known as Brown Ranch.

The project was opposed by Citizens for a Better Plan, a committee that raised about $25,000 to spend on radio ads and yard signs decrying the Brown Ranch plan as “too big” and urging the city to “scale it back.” Disclosure reports show that 46 people contributed more than $20 to Citizens for a Better Plan, and at least 44 of them own real estate in or near Steamboat Springs, according to Routt County property records. Several top donors were local business owners and developers with extensive real estate holdings in the area, while others own a single, modestly sized home.

But what unites these opponents of the Brown Ranch plan is that they have all benefited enormously over the last 10 years from Steamboat’s tightly constrained housing market. The total value of the properties owned by the 44 Citizens for a Better Plan donors increased from $44.5 million in 2015 to $111.8 million today, a review of assessment records shows.

It would be unfair to deny that these homeowners, and the rest of the 3,149 Steamboat residents who voted to reject the Brown Ranch plan, may have held sincere beliefs about the project’s financial sustainability or traffic impacts. But it would also be naive to ignore the fact that when it comes to their personal net worth, many of them had a million or more reasons to feel that way — and what’s true of the housing market in Routt County broadly applies to Colorado as a whole.

That the gains of an average homeowner may be “unrealized,” in investing parlance, doesn’t mean that they’re fictitious. Even as an asset that’s held onto for a lifetime, real property is a powerful engine of generational wealth, helping to reinforce longstanding patterns of inequality. In plenty of other cases, homeowners can reap the benefits of well-timed sales, vastly improved credit ratings and borrowing power, or the white-hot short-term rental market, especially in resort towns like Steamboat.

If all of this sounds obvious, it doesn’t always appear to be obvious to many of the high-ranking state officials working on bringing Colorado’s housing costs down. In an interview last year, Gov. Jared Polis, who has made housing his top second-term priority, spoke about “solving” the affordability problem for cost-burdened renters.

“It’s not so much about who solves it for them, it’s about solving it,” Polis told CPR News. “Should mayors solve it? Should a governor solve it? Should the Legislature solve it? What I say is just empower the property owners themselves to solve it, and the market and the property owners will do that.”

But skyrocketing home values aren’t likely to ever be a problem that current property owners want “solved.” Polis found that out the hard way last year, when his ambitious package of reforms to increase housing supply went down in flames. Parts of that package have been revived in piecemeal fashion in the 2024 legislative session, but many of its most notable reforms either didn’t return or appear likely to face substantial legal challenges if passed.

Mountain resort towns, meanwhile, have largely been exempted from this second attempt at Polis’ “More Housing Now” plan. Census data shows that in many of these counties, fewer than half of homes are owner-occupied primary residences, making the gap between the haves and have-nots all the more evident.

But the dynamic is the same everywhere. It’s true in Fort Collins, where homeowners have waged a bitter fight against the city’s plans to increase housing supply and density, and in Boulder, where similar battles have raged for decades. For every tenant paying an extra $100 a month in rent, there’s a landlord pocketing that much in profit, and for every first-time buyer paying twice as much for a house as it cost a decade ago, there’s a seller cashing out that much in equity.

Polis and his allies have basic laws of economics on their side when they say that to bring costs down, Colorado needs to build more housing. But as they fight policy battle after policy battle in an effort to turn their agenda into reality, the unseen wealth being amassed by property owners helps explain why so many Coloradans prefer the status quo just fine. Until state and local leaders realize exactly what they’re looking at, none of their theories will quite make sense.

Editor’s note: The Trendline series on Colorado Newsline offers analysis on public policy in Colorado. Articles explore ways to think about the news based on research, history and other important context, helping Coloradans connect the headlines to the big picture. Colorado Newsline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Colorado Newsline maintains editorial independence. Contact Editor Quentin Young for questions: info@coloradonewsline.com. Follow Colorado Newsline on Facebook and Twitter.