Denver to require a landlord license?

Question

Hey Denver landlords and house hackers ... the city of Denver is considering a proposal to require Denver rental owners to get licensed for all their rental properties. The stated goals are to better understand the housing stock in the city and to ensure safe rental properties.

The proposal would require landlords to:

• Pay a one-time application fee of $25
• Pay a license fee that is good for four years$50 for a single unit/parcel$100 for 2-10 units/parcel. It goes up from there for bigger apartment buildings
• $50 for a single unit/parcel
• $100 for 2-10 units/parcel. 
• It goes up from there for bigger apartment buildings
• Obtain an inspection of the property within 90 days of application (unless your building is less than four years old)
• Provide a copy of the lease to the tenant
• Provide a copy of tenant rights and tenant resources to the tenant
• Ensure all owner-supplied appliances are working

• $50 for a single unit/parcel
• $100 for 2-10 units/parcel. 
• It goes up from there for bigger apartment buildings

For a traditional SFH rental, you'd pay $75 up front and then $50 every four years after that. You'd also have to pay for the inspection, and it appears in Sec. 27-199(c) that you also have to have a new inspection every four years. So let's say you get a bottom basement inspection -- no sewer scope, no radon test -- that could be as low as $275. You're looking at paying $325 for each separate unit every four years. (A touch more if you own a duplex or bigger multi-unit.)

This does not apply to short-term rental or Airbnb operators.

I have some philosophical thoughts on this (which I think might be counter to many of the more libertarian vibes on BP), but my main question is about Denver house hackers. We have a lot of rent-by-the-room buyer clients and buyers who look for that home with a basement apartment or separate space to create extra income. Are there any concerns this could raise for house hacking or the rent-by-the-room model? Because the city is not doing the inspection (you hire your own), I don't see any issues, but I do worry a little about that.

Here's a news story about the proposal. Here's a link to the actual proposed ordinance.

What are your thoughts?

Nicole Burke · Answer

I attended one of the community meetings regarding this legislation.  During that meeting, someone asked about house hacking and the response from Councilwoman Gilmore (creator of the bill) clarified that licensing requirements would NOT apply to situations where the owner of the home is residing there.  Also, the inspection checklist is being developed this summer and will not be as extensive as a typical inspection is now.  They estimated the cost to be around $150 for this, so I am not sure if that is just inaccurate or there will be a new and different cheaper inspection available from service providers. It will also be on the landlords/pms/owners to upload the completed inspection certificate to the state - they are not relying on providers to do this.  Valid and completed inspection is not required to start advertising or place a tenant.

Mike F. · Answer

Just a single example of the absurdity of these new regulations is the new regulations on late fees. 5% or $50, only applicable on the 8th day of not paying the rent. Our legislature has essentially changed every tenant's due date for rent to the 7th of the month. Nothing a landlord can do other than say please, please pay your rent on time, every tenant can now just wait every month to the 7th to pay their rent and not a thing a landlord can do about it. That is insanity. Denver will soon be requiring every landlord to educate their tenants on their rights, again essentially providing them with a document that teaches them how to game the system. Every tenant will soon have a document provided by their own landlord telling them they can wait a week each month to pay the rent with impunity.

Mike F. · Answer

I took totally disagree with these new laws, and see them as the typical results we have been experiencing routinely with the current political administration in power in Colorado and more to come. We are actively avoiding purchasing any long-term rental units in Denver do to these laws and the perception that only more are to come. We only invest outside of Denver now.

This is just the beginning, more to come, more restrictions more rules, higher fees all in the name of protection of renter's rights, with rules and fees that affect a large majority of compliant investors to police a tiny percentage of violators. No different than the envirotest debacle of taxpayers paying millions of dollars a year who own automatically compliant automobiles that basically can't violate clean air rules to pay for the ability to police a tiny percentage of vehicles that could, might or do violate the clean air rules.

James Carlson · Answer

@Nicole Burke

Great info about house hacking not falling under the new Denver rule. But I still wonder about rent-by-the-room model. A lot of house-hackers move out after a year or two and repeat the process. They continue to rent their first space by the room, and I wonder if that's treated any differently.

@David Williams I wonder the same thing. Or maybe I don't wonder about it at all. "Unofficial" duplexes are by definition against Denver zoning codes. If you're not in an TU zoning area, you can only rent that basement space while you live there. Once you move out, the whole place should be rented as a single unit, hence the SU (single unit) zoning. Not lecturing here. I appreciate the hustle of anyone doing it, but I do think that could present problems if landlords try to get licenses for both units.

James Carlson · Answer

@Mike F. and @Jim Piety

If you're philosophically opposed to any restrictions on how you rent your place, okay. That's a stance. It's not mine, but I am open to arguments about government intrusion.

But outside a generic opposition to new regulations, the letter of this law is just not that crazy, and if you're making a numbers-based decision, the potential home-value appreciation and rent-appreciation in a market like Denver makes it very attractive. You can still raise rents as much as you want, just only once a year. You can still evict people. You just have to wait a little longer. There's a reason we're seeing more and more wealthy people parking cash in Denver real estate, and it's not because they like to lose money. It's because they have a vested interest in a valuable long-term asset.

That's my take, anyway.

Jim Piety · Answer

@James Carlson

I disagree with this policy philosophically and, while it is nominal, will likely increase over time. Regardless, I'm not bothered by it because these type of costs will just be passed on to the renter in a city that's already experiencing skyrocketing rents.

David Williams · Answer

Thanks for the post @James Carlson. Great summary of the info! And thank you @Nicole Burke for the info, that's good to know it won't affect owner occupants who househack.  I'm wondering how it would affect investors who have an unofficial up/down duplex that has a lease in both units, but not zoned duplex?

David Williams · Answer

@James Carlson That is a good point. I'm with you on applauding people's hustle and I also believe Denver is a city that needs all the rental units it can get to maintain affordability for renters. The zoning laws are the laws, so I cannot imagine the city would be ok with permitting two rental licenses. Will be interested to see how it all unfolds.

Andrew Syrios · Answer

They are getting more and more arduous in more and more places. I suspect we'll see a lot more of this kind of thing going forward all over the country.

Denver to require a landlord license?

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