Town of Telluride v. Lot Thirty-Four Venture, L.L.C.
3 P.3d 30 (2000)
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Rule of Law:
A municipal ordinance that sets a base rental rate for certain housing units and strictly limits future rent increases falls within the plain meaning of "rent control" prohibited by state statute. Such a state statute preempts a home rule municipality's authority because rent control is a matter of mixed state and local concern, and where a local ordinance and state statute conflict, the state statute prevails.
Facts:
- Lot Thirty-Four Venture, LLC acquired two lots in a visitor-oriented zoning district in the Town of Telluride.
- The Town of Telluride enacted Ordinance 1011, which required new developments to mitigate their impact by creating affordable housing for 40% of the new employees they were projected to generate.
- The ordinance provided developers with several compliance options, including constructing new housing units with fixed rental rates or imposing deed restrictions on existing market-rate units to fix their rental rates.
- Other options included paying fees to the Town in lieu of creating housing or conveying land to the Town.
- The Town also adopted Affordable Housing Guidelines that set specific maximum rental rates per square foot for the designated affordable units.
- These Guidelines also capped annual rental rate increases for the affordable units at 2.5%, unless a higher increase was approved by the Telluride Housing Authority.
Procedural Posture:
- Lot Thirty-Four Venture, LLC sued the Town of Telluride in San Miguel County District Court (trial court) to enjoin enforcement of Ordinance 1011.
- The trial court granted summary judgment for the Town of Telluride, holding the ordinance did not constitute 'rent control' under the state statute.
- Lot Thirty-Four Venture, LLC, as appellant, appealed to the Colorado Court of Appeals.
- The Court of Appeals, an intermediate appellate court, reversed the trial court, finding the ordinance was a form of rent control prohibited by state law.
- The Town of Telluride, as appellant, successfully petitioned the Colorado Supreme Court for a writ of certiorari.
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Issue:
Does a municipal ordinance requiring new developments to include affordable housing units with capped rental rates constitute "rent control" prohibited by a state statute, and if so, does the state statute preempt the home rule municipality's authority to enact such an ordinance?
Opinions:
Majority - Justice Kourlis
Yes, the ordinance is a form of prohibited rent control, and the state statute preempts the town's authority. The term "rent control" in the state statute is unambiguous and encompasses any measure that would control rents. Ordinance 1011 falls within the plain meaning of rent control because it sets a base rental rate and strictly limits its growth, operating to suppress rental values below their market values. The existence of alternative compliance options does not change the nature of the rent-capping provisions themselves. Furthermore, the issue of rent control is a matter of mixed state and local concern. Applying a four-factor test, the court found significant state interests in statewide uniformity, preventing extraterritorial economic impacts, and maintaining a stable rental housing market. Because the issue is of mixed concern and the Town's ordinance directly conflicts with the state's statutory ban, the state statute supersedes the ordinance, rendering it invalid.
Dissenting - Chief Justice Mullarkey
No, the ordinance is not the type of rent control the state legislature intended to prohibit, and it addresses a matter of purely local concern. The majority's interpretation of "rent control" is overly broad. Legislative history indicates the state statute was enacted to prohibit traditional rent control schemes that applied to existing housing stock, not innovative land use regulations for new developments. Ordinance 1011 is fundamentally a land use regulation designed to mitigate the impacts of new development, which is traditionally a matter of local concern. It differs from classic rent control because it applies only to new construction, is triggered by community impact, and provides developers with non-rent-capping alternatives. As a land use regulation of local concern, the Town's home rule authority should prevail over the conflicting state statute.
Analysis:
This decision significantly curtails the power of Colorado's home rule municipalities to address affordable housing shortages through inclusionary zoning ordinances that involve rental price caps. By defining "rent control" broadly according to its plain meaning rather than its historical context, the court established a precedent that limits local governments' ability to impose price-based conditions on new development. The ruling forces municipalities to seek legislative amendments or devise alternative affordable housing strategies that do not directly control rental rates, potentially shifting the focus to mechanisms like controlling sale prices, providing density bonuses, or relying solely on in-lieu fees.
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