Nine years ago, one of Silverthorne’s few income-restricted housing properties was sold to a private firm. The sale — at a price that was double the property’s assessed value — raised worries in the high-cost mountain community that the new owner of the Blue River Apartments might lift rent caps that had kept its 78 units affordable when the requirements lapsed.

That expiration had been set for this year, and local officials were sufficiently concerned that they struck a deal with the new Greenwood Village-based owners to extend the affordability protections through at least the end of 2025, in exchange for $650,000.

But if the town had known about the sale ahead of time back in 2015, said Ryan Hyland, Silverthorne’s town manager, then officials could have tried to cobble together the money to buy the apartment complex — or arrange its sale to someone else.

As Colorado faces a tidal wave of expiring affordability requirements in the coming years, state lawmakers hope to give local authorities the opportunity Silverthorne didn’t have. House Bill 1175, which has already passed the House, would grant municipalities a right of first refusal to buy subsidized-housing properties when they come up for sale and would also require more notice of expiring affordability covenants.

Once the owner reached a price with a private buyer, the town or city — or a group acting on its behalf — could step in and match the offer, ensuring the units wouldn’t convert to market-rate rents once affordability requirements expire.

“When those expire, (the new owner) could be charging market rents. That’s a smart business decision, if you’re purchasing a property and if you’ve got that on the horizon,” Hyland said. “As you can imagine, there’s those types of deals that happen and the local government has no idea they’re happening, so there’s no opportunity for conversation.”

In the case of Blue River Apartments, as the initial expiration date approached, the president of Tralee Capital in 2020 told the Summit Daily that he wasn’t ready to say how the rental rates would change.

The bill passed the House 38-23 earlier this month and is now headed to the state Senate. It’s the second attempt by a group of Democratic lawmakers to pass a right-of-first-refusal policy, which they say would give local governments the chance to protect renters from for-profit developers that purchase properties and hike rents.

The first swing at passing the policy was a more expansive approach that also would have applied to sales of market-rate buildings. It passed the legislature last year after extensive debate and negotiations.

But business groups successfully lobbied Gov. Jared Polis to veto it, sparking sharp criticism from the Democratic legislators who backed it.

The veto spurred supporters to narrow their approach this year. They focused on preserving the state’s existing subsidized housing stock, which is in danger of shrinking in coming years, said Rep. Andy Boesenecker, a Fort Collins Democrat.

Colorado is home to roughly 111,000 subsidized units with affordability requirements, according to Colorado Housing and Finance Authority data. It’s expensive and complicated to build subsidized housing projects, and developers lean largely on federal tax credits to make the financing work.

Those tax credits include requirements that rental rates be capped based on certain income levels.

But the requirements are time-limited, often lasting at least 30 years. In the coming decade, 15,000 affordable units here will no longer be subject to the caps that keep them within reach for lower-income Coloradans.

That doesn’t mean those properties will immediately be sold or switched to market-rate rents or prices. But the looming expirations are a warning sign for housing advocates as they scramble to protect the state’s affordable housing stock.

When subsidized properties with expiring affordability requirements are purchased by private companies, “we see quick and significant increases in rent — we see less of an investment in maintaining the property and caring for residents,” said Kinsey Hasstedt, the senior program director for state and local policy at Enterprise Community Partners. “So we are trying to disrupt that.”

Preserving housing or chilling markets?

Opponents and skeptics, representing business groups and property owners, have argued that the bill would hamper development in the state.

“Our biggest fear all along with this has been: Are we going to create a chilling effect on capital and the markets, and then we won’t get the results that we want, which is more housing in the marketplace?” said Ted Leighty, the CEO of the Colorado Association of Home Builders, in testimony during an initial committee hearing in February.

But supporters say preserving subsidized housing is particularly important now — not only because of the expiring affordability requirements but also because of Polis’ preferred solution to the housing crisis: more housing, built more densely, across Colorado cities.

While some of the advocates backing the right-of-first-refusal bill also support Polis’ land-use reforms, that policy approach, if successful, will take years to bear fruit. They repeatedly have stressed the need to provide help in the meantime, given the severity of the state’s housing affordability crisis.

“We have to start by preserving the existing affordable housing that we have,” Hasstedt said. “Otherwise, we’re just going to keep digging the hole deeper, and we’re never going to get out of it.”

The change in approach, along with amendments made during the bill’s journey through the House this year, has successfully neutralized some of last year’s opposition, including from groups representing bankers and title insurers.

But other old foes, including the Colorado Apartment Association and the powerful business group Colorado Concern, remain opposed. So do Republican legislators, who view the bill as an encroachment on property owners’ rights.

“If you’re thinking about investing $20 million into an affordable project in Colorado, then you’re still concerned about having this cloud on the title of what you develop, and (some may decide) to go elsewhere because of it,” said Drew Hamrick, the senior vice president of governmental affairs for the apartment association. “We still believe and worry about the stigmatizing effect it has on housing investment.”

Hamrick argued that the policy would depress prices on developments because would-be buyers wouldn’t invest as much time or money in researching and bidding on properties that may end up being owned by a local government anyway.

He said he supported another  piece of the bill that would give local governments a “right of first offer” on for-sale, market-rate properties. But he was flatly opposed to the rest.

Other groups and entities seeking changes to the bill have links to high-profile developers and property owners.

The path to governor’s desk

The bill now heads to the Senate, where the broader measure passed last year after delays and negotiations. If the new version passes, the bill will enact the first statewide right of first refusal of its kind in the country.

Some cities, counties and housing organizations have a version of the policy, and lawmakers in Maryland have advanced legislation that includes a right of first refusal for tenants to buy their residences.

Denver also has a similar policy that seeks to preserve subsidized housing properties. Renee Gallegos, the deputy director of housing opportunity for the city’s Department of Housing Stability, said it had been used twice in recent years, via a nonprofit partner, to buy properties and sell them as condos with affordability requirements.

Should HB-1175 clear the Senate, the final say would again rest with Polis.

In his veto letter last June, he said he didn’t support a right of first refusal “that adds costs and time to transactions.” Sponsors this year have worked to trim the timelines in the bill, expediting sales as well as local governments’ decisions on whether to exercise their right to step in.

In a statement to The Denver Post on Friday, Polis spokeswoman Shelby Wieman said the governor “appreciates the dialogue happening with sponsors and all stakeholders” and that Polis “will continue to monitor this bill as it moves through the legislative process.”

Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot.