Town of Telluride v. Lot Thirty-Four Venture, L.L.C

Brief Fact Summary. The Town of Telluride enacted an ordinance which was intended to provide affordable housing to employees of developments by requiring developers to create affordable housing for forty percent of employees generated by the development. This ordinance was challenged on the basis that it was a rent control, in violation of a statutory prohibition against rent control.

Synopsis of Rule of Law. Where an ordinance of a town constitutes an attempt to control rent, in contravention of state law, the ordinance will not be enforceable.

Facts. The Town of Telluride enacted an ordinance (1011) which imposed an affordable housing requirement on new development. The ordinance requires developers to mitigate the effects of new development by providing affordable housing units for forty percent of the new employees generated by such development. The requirement is to create 350 square feet of housing space for forty percent of the proposed employees to a development. This requirement could be satisfied by 1. Constructing new units and deed- restricting them as affordable housing. 2. Deed-restricting “existing free market units” as affordable housing. 3. Pay fees in lieu of deed restricted housing. Or 4. Convey land to the Town of Telluride with a fair market value equivalent to the fee paid under the third option. Thereafter, the town enacted certain guidelines for affordable housing which stated that if the developer chooses either deed restriction option the guidelines will set maximum rental rates per square foot. The
unit’s maximum rent is computed by multiplying a constant money amount, such as $1.42 for a single bedroom apartment, with the total square footage. The guidelines place a cap on increases for housing at 2.5% per year, unless the town’s Housing Authority allows a higher increase. The sale of deed restricted property is limited to qualified residents or to a qualified owner who will rent to qualified residents. The maximum sale price per square foot is capped, as is the annual growth of that price per square foot. The guidelines also set a price for the payment in lieu of construction option where the payments would be used by the town to create affordable housing. Lot Thirty-Four Venture, L.L.C., (Thirty Four Venture) is a developer who challenged the restrictions imposed by the ordinance and guidelines on the basis that they constituted rent control in violation of a Colorado statute prohibiting rent control when municipalities attempt to control rents on private property. Both town
and Thirty Four Venture moved for summary judgment in the trial court, and the town’s motion was granted. The intermediate appellate court reversed. The Town of Telluride appealed.

Issue. Do the provisions of the ordinance and guidelines constitute an attempt at rent control in violation of the statute prohibiting rent control by municipalities?

Held. Yes. Judgment of the intermediate appellate court affirmed.
When construing the statute proscribing rent control, in the absence of legislative definitions, the Court will be guided by the language of the statute and give the words therein their plain and ordinary meaning.
Rent control mean that allowable rent is capped at a fixed rate with only limited increases. Because the ordinance clearly fixes the maximum rent for the affordable housing units and also limits the increase per year to 2.5%, the ordinance clearly contemplates rent control.
Because the statute’s meaning is clear, legislative history need not be considered. Also, because the meaning of the town’s ordinance is clear, the conditions which gave rise to the enactment of the statute need not be considered.
The Court finds that the most important fact is that the ordinance forces developers to offer space to rent at a level below that which the market can bear. The statute proscribing rent control does not distinguish between pre-existing property and developed property, so it is unimportant that the developer could plan to include a certain amount of affordable housing in the development.

Discussion. This case is an example of the difficulties rapidly developing communities face. Rent control statutes, although not considered by this Court, are possibly not aimed at prohibiting the type of conduct in which the town engaged. However, when, as here, the meanings of the competing laws are clear, the state statute will take precedence over the local ordinance.