Colorado renters fall behind as lawmakers line up more tax cuts for homeowners

A tower of downtown Denver residences is seen on Feb. 18, 2023. (Quentin Young/Colorado Newsline)

Colorado lawmakers are headed back to the state Capitol next week, where they’re expected to pass yet another round of property tax cuts to reduce costs for homeowners. But it appears the 1.7 million Coloradans who live in rented homes will again be largely excluded from the conversation at the statehouse — even though they’re the ones who have been hit hardest by rising housing costs.

Connecting the news in Colorado to the big picture. Gov. Jared Polis announced earlier this month that he would convene a special session of the General Assembly beginning Aug. 26, saying it was necessary to avert the drastic state and local budget cuts that would be necessary if Colorado voters in November pass a pair of property tax initiatives backed by two right-wing anti-tax groups.

Those groups, Advance Colorado and Colorado Concern, want deeper and longer-lasting cuts than those contained in a bipartisan compromise passed at the end of the 2024 legislative session. Polis and his fellow Democrats, who hold large majorities in both chambers of the Legislature, have outlined a second, more aggressive package of property tax cuts and growth caps that they hope will convince the groups to withdraw their initiatives before a Sept. 6 deadline.

SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX

If it goes through, the deal — negotiated this summer behind closed doors — will be the fifth time in four years that Colorado lawmakers have stepped in to slash Colorado’s property tax rates, which rank as the third-lowest in the nation, according to the Tax Foundation. The tax-cutting spree, which began in response to a post-2020 spike in Colorado home values, has ranged from one-time rate reductions to the so-called “permanent solution” of this year’s Senate Bill 24-233 , which lasted less than three months before lawmakers opened up negotiations again.

Proponents of the cuts have pitched them as a way to save Coloradans money in a period of rising living costs. But reducing property tax rates directly benefits only the two-thirds of Colorado residents who own their homes. While anti-tax groups argue that property tax savings are passed on to renters, their claims are widely ridiculed by tenants who have experienced year after year of soaring rents in Colorado’s red-hot housing market.

What’s inarguable is that Colorado’s decade of surging property values, combined with lawmakers’ moves to target relief for homeowners, has left the one-third of Coloradans who rent their homes in a substantially worse financial position. The yearly scramble at the Capitol to blunt any potential spike in tax obligations has helped further flatten costs for property owners who already benefit from a fixed mortgage payment (or no mortgage payment at all), while renters have been left to the mercy of market forces.

It hasn’t taken long for the cost gap between renters and homeowners to widen significantly. As recently as 2016, the typical monthly cost of a three-bedroom rental unit in Colorado was equal to the total monthly payment made by the owner of a similarly sized home. But while monthly homeowner costs have risen by about 30% since then, rent payments have skyrocketed by 50% to 60%, according to U.S. Census Bureau data.

This widening disparity means that today, homeowners are getting far more bang for their housing buck — in simple terms, an entire extra bedroom’s worth, since the median rent for a two-bedroom apartment is now roughly equal to the monthly costs of owning a typical three-bedroom home.

During last year’s special session on property taxes, lawmakers passed a handful of smaller relief measures aimed at renters, like a $30 million boost to rental assistance programs. But the compromise that led to SB-233’s bipartisan passage in May didn’t include any similar policies, and it’s not clear if this year’s special session will, either.

Median home values in Colorado more than doubled between 2014 and 2022, generating an astounding $500 billion wealth increase for Centennial State homeowners as a whole — a windfall in which renters didn’t share. For many homeowners, these huge gains may be “unrealized” for now, but that doesn’t mean they’re fictitious. Homeownership is a powerful engine of generational wealth , and owners stockpiling equity in their fast-appreciating assets reap substantial benefits in the form of higher credit ratings, improved borrowing power and other key financial indicators.

Meanwhile, on the losing side of this equation, renters and first-time buyers — especially those who don’t stand to inherit wealth in the form of home equity or other assets from their family — fall further and further behind. Every dollar spent on soaring rents is a dollar that can’t be saved for a down payment on a home.

Housing researchers track the number of U.S. residents who are “cost-burdened” by their homes, defined as spending more than 30% of a household’s monthly income on housing payments.

Colorado tenants are vastly more likely to be cost-burdened than their homeowning neighbors. More than half of all renters in the state spend more than 30% of their income on housing, and just 1 in 5 spends less than 20%. For homeowners, the figures are almost exactly reversed, with more than half spending less than 20% per month on housing, and fewer than 1 in 4 cost-burdened. And this metric, too, shows the gap between renters and owners widening since 2015.

DONATE: SUPPORT NEWS YOU TRUST