2024 Market Review / 2025 Preview - Property Owner Update
Dear Grace Property Management Owner,
I hope this letter finds you well. The purpose of this letter is to provide our property owners with an overview of what has transpired in the Colorado rental market during 2024 and to preview what to expect in 2025. Although this letter is extensive and some of the market trends are sobering, we take seriously our commitment to keeping you informed.
Looking back on 2024:
Twelve months ago, in our review of 2023 I wrote: “The primary story of 2023 was the impact of new legislation on the rental industry in Colorado. In our 45 years of business we have never experienced such sweeping or impactful law changes. It is not an overstatement to say that the culmination of the 9 new laws that passed have significantly changed the landscape of property management in Colorado, shifting more burdens to property owners while expanding the rights of tenants.”
Legislative Challenges
Our legislative summary of 2024 can be summed up using those same sentences but substituting ‘the 9 rental laws passed in 2023’, with ‘the additional 13 rental laws passed in 2024’. A short summary and link to each new law is below. For proper context, we have ordered the laws by significance of impact to the rental industry, beginning with the least significant and continuing to the most significant.
SB24-058 Landowner Liability Recreational Use Warning Signs
Concerns, private land use for recreational use
HB24-1051 Broadband Services for Multiunit Buildings
Landlords may not prohibit broadband services in multifamily properties.
HB24-1294 Mobile Homes in Mobile Home Parks
Long and complex bill with many moving parts impacting mobile home park management.
HB24-1051 Towing Carrier Regulation
Towing companies are forbidden from patrolling or monitoring properties to enforce parking restrictions on behalf of property owners. 24-hour notice is required before any vehicles may be towed.
HB24-064 Monthly Residential Eviction Data & Reporting
Requires tracking and reporting of eviction filing information in each county.
HB24-1007 Prohibits Residential Occupancy Limits
Prohibits municipalities from having unreasonable occupancy limits.
View Grace Management’s Full Breakdown
HB24-1175 Local Governments Rights to Property for Affordable Housing
Creates a right of first refusal and a right of first offer for local governments to make an offer to purchase certain types of multifamily rental properties.
HB24-1259 Price Gouging in Rent Declared Disaster
Prohibits rent increases over a specified amount in cases and locations of declared disaster areas.
HB24-1099 Defendant Filing Fees in Evictions
Eliminates the fee for defendant (residents) filing an answer in an eviction proceeding.
HB24 -1318 Modify Rental Premises Person with Disability
Requires landlords to pay all costs of property modifications for tenants with disabilities. (previously these cost had to be paid by the tenant).
View Grace Management’s Full Breakdown
HB24-1286 Equal Justice Fund Authority
Creates the “equal justice authority” and implements a new charge to landlords for legal filings, which will be used for legal representation of low-income renters.
HB24-1098 Cause Required for Eviction for Residential Tenants
Long and complicated law, with a primary impact requiring landlords to offer lease renewals to tenants in all but a few specific instances. Defines lease non-renewals as ‘no fault evictions.’
View Grace Management’s Full Breakdown
HB24-094 Safe Housing for Residential Tenants
The longest and most complex of all bills in the session. Redefines how maintenance must be handled on all residential properties. Will result in increased maintenance costs for landlords.
Although it would not be practical to discuss these bills in any detail in this letter, I have highlighted six of the more significant impacts of the bills below:
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Landlords must offer to renew tenant lease agreements even if there have been lease violation issues. The ONLY reasons landlords may non-renew a tenant lease are:
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If the owner is selling the property
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If the owner is demolishing the property
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If the owner is moving into the property
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If the property requires substantial renovations
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If the eviction process has happened 3 times during the lease term
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If the tenant refuses to sign a new (and reasonable) lease
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In the rare instance of a lease non-renewal, landlords must give tenants a 90-day notice of non-renewal.
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Landlords must offer to place the tenant in a hotel (at landlord’s expense) if any repair is deemed a habitability issue. The hotel must meet specific requirements, including having the same number of beds as the property and being located close to the rental home. The landlord must also pay the tenant a per-day food expense.
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Landlords must now pay into a fund when filing for an eviction, and the money in this fund will be used to provide tenants with free legal services.
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Tenants may file an answer to any legal eviction claim at no charge.
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Property modifications for tenants with disabilities must be paid for by the landlord.
As one Colorado real estate attorney stated when speaking on these bills “It is virtually impossible for Landlords to comply with all of the requirements in these bills…”
We continue to analyze the impacts of these bills, and others, through our ongoing video educational page at https://www.rentgrace.com/owner-faq
We have also been tracking multiple state and federal rules impacting rental properties including ‘HUD Fee Policy’, ‘HUD Use of Housing Vouchers’, the Colorado State Attorney Generals Office, the ‘Biden-Harris Administration Takes on Junk Fees in Rental Housing to Lower Costs for Renters’, ‘HR.6542 -No Hidden FEES Act of 2023’, ‘FTC Action Against Invitation Homes For Deceiving Renters’, ‘White House Blueprint For A Renters Bill of Rights’, and other resources.
Although these laws are complex and required significant and immediate operational changes, through our internal analysis and by working closely with our legal counsel, we were able to make all necessary changes. This ensures that we keep your rental property legally compliant and still provide you and your property with maximum legal protection.
Renter Demand Decreases
Aside from these changes to the legal landscape, the Colorado rental market experienced decreasing renter demand in 2024. This was due to an increase in the supply of rental properties and a simultaneous decrease in renter demand. The decrease in demand is the result of multiple factors including renters doubling up with roommates, young people choosing to live at home longer, and less migration to Colorado from other states.
Property Cost Increases
A recent Wall Street Journal article described the ongoing cost increases of property ownership as “spiraling”. This is an accurate description when looking at the annual cost increases for fixed expenses such as property taxes, HOA dues, and property insurance rates, as well as variable expenses such as property repairs and capital improvements.
Looking ahead to 2025:
Given the numerous challenging bills passed in 2024, we expect to see additional proposed rental industry bills in 2025, including a proposed bill on rent control.
We expect renter demand to continue to slow in 2025, resulting in flat rents and increased move-in incentives offered in an attempt to fill vacant rental properties. Renter demand is also very segmented based on property type and location. This means that some property types (such as moderately priced single-family homes in the suburbs) are seeing fairly strong demand, while other property types (such as condo or townhome properties in downtown Denver or Aurora) have very little renter demand.
View our analysis of this topic
While we expect rents to stay flat in 2025, we expect the costs associated with property ownership to continue to increase, but at a somewhat moderated increase as compared to the increases of 2024.
Our overall expectation for 2025 is a repeat of 2024: rental supply is up, renter demand is down, rents are flat, expenses are up, and legal risks have increased.
While this may not be the most attractive rental market for investors, it is important to keep in mind that for the past decade, we have experienced unprecedented rent growth, annual double-digit home price appreciation, and generationally low interest rates. What we are experiencing now is simply the market correcting back to a more moderate position as we come out of a decade long hyper-growth cycle.
Protecting Your Property In 2025
We have several strategies in place to ensure you and your property remain protected and financially strong:
#1 – Resident Retention:
As the financial costs of resident turnover have always been the most significant expense landlords face, we will continue to focus heavily on resident retention in 2025. In 2024, our lease renewal rate was 82% - meaning that 8 of every 10 residents renewed their lease and stayed in their property. We are very proud of this number as it represents hundreds of thousands of dollars our owner-investors saved in unnecessary turnover and vacancy expenses. Although life circumstances will always result in some residents having to move out of their properties, we will work to ensure our quality residents remain in their properties in 2025.
The reason we are able to achieve this industry leading lease renewal percentage is largely due to creating a positive experience for our residents during their lease term. Things like fast repair services, online payment options, and good old fashion customer service ensure our residents feel respected and want to stay with us.
#2 – Minimizing Vacancy Time During Turnover:
For those properties that do experience turnover in 2025, we will ensure the property is brought back to full rent-ready condition as quickly and economically as possible. Our premium property marketing package ensures maximum visibility to people looking for a rental and our leasing team constantly monitors activity. This high touch process allows fast feedback to ensure that the property is priced appropriately and that we minimize vacancy time.
#3 – Competitive Vendor Pricing:
We screen all of our third-party vendors annually on pricing, quality of work, and timeliness. We will continue to ensure that we receive competitive pricing as we benefit from both our internal economies of scale and a loosening in the labor market.
#4 – Our Risk Mitigation Guarantee
We are proud to continue offering our owners our $1,000 risk mitigation guarantee. This exclusive guarantee provides your property up to $1,000 in legal fees in the event of an eviction or pet damage, at no cost to you. (click here to view details)
#5 – Property Specific Risk Assessment Analysis
We are reviewing each property we manage for a risk assessment analysis. This analysis takes into consideration property location, type, size, age, geographic trend, fixed holding costs, and anticipated maintenance costs. If you own a rental property with a greater than aveage risk assessment, we do recommend you consider selling that property and converting it to a lower risk property, which will also generate a higher financial return. If you would like to schedule a personalized risk assessment with us, e-mail Greg@RentGrace.com.
We believe the long-term outlook for real estate investors is positive and we remain committed to the principle that when property management is performed with integrity, both the property owner AND the resident benefit. We are committed to serving both our owners and our residents by providing safe and fair priced housing.
Of final note is an update on our Grace-Gives fund. This is an internal rental assistance fund into which we donate money for every lease we sign. This money is then used to help responsible residents pay their rent if they encounter an unexpected financial emergency. Since its creation 6 years ago, Grace Management has paid out rental assistance of over $55,000 to some of our most vulnerable residents. Thank you for helping to make this possible.
If you have questions on any of the above or would like to discuss your property or other real estate investment options, please reach out to us.
On behalf of the entire Grace Property Management team, and on behalf of your resident – thank you. We are grateful for the opportunity to partner with you and we look forward to serving you in 2025 and beyond.
Marc Cunningham, President
Grace Property Management
