Denver City Councilmember Shontel Lewis wants to stop cash-wielding investors from gobbling up once-affordable homes in gentrifying neighborhoods, often with slogans like “We Buy Houses.”
These investors post signs, call residents and send faux-personalized notes offering cash for older properties. After buying, the investors immediately sell the property, often earning tens of thousands of dollars without making improvements.
In a presentation about the idea, Lewis decried such tactics as “high pressure” and exploitative, designed to take advantage of vulnerable people who weren’t planning to move and may not know the value of their property.
Predatory investors often prey on communities of color and parts of town where people have low incomes and little credit, Lewis said. The practice “spurs gentrification.”
These investors do not need state real-estate licenses and are not specifically regulated by Colorado law, Lewis said. The investments often take place as new amenities or infrastructure are built, raising property values.
The problem was brought to Lewis from a resident in her district, and she said it’s more urgent than ever as the city plans to turn the former Park Hill Golf Course into the city’s fourth-largest regional park, potentially heating up the property market in Lewis’s northeastern district.
“A lot of the residents in the surrounding area are receiving these requests to sell their homes,” Lewis said at a recent presentation. “And so we wanted to be able to get ahead of folks being displaced in Park Hill in particular.”
The proposed fix
The city would put limits on “residential wholesalers.”
Here’s how the proposed law defines them: “any person or entity who is in the business of purchasing or soliciting for purchase a residential property, not for use as a residence for the residential property wholesaler, and with the intent to assign the contract for sale or resell the property for a profit.”
This definition would not include licensed brokers or agents or those who “substantially improve the residence” before selling the property. Lewis said it would not prohibit “fix and flippers.”
Lewis has been researching how other cities, such as Philadelphia, Baltimore and Atlanta, have regulated predatory investors.
The bill she’s proposing would require residential wholesalers to register with Licensing and Consumer Protection, a city agency that might add its own additional requirements beyond the law. The city would be required to report the number of residential wholesalers and the transactions that they conduct.
Licensing and Consumer Protection would also create a “do not contact” list for homeowners who don’t want to hear from unsolicited buyers. If they violated the no-solicitation list, the investors could be fined.
Finally, the law would ban residential wholesalers from the following:
- Doing business without a license
- Knowingly being dishonest or making false promises
- Contacting residents on the no-solicitation list
- Repeatedly contacting a resident “with the purpose of harassing, molesting, threatening, coercing or intimidating the residential property owner.”
Wholesalers would also be required to notify sellers that they intended to resell the property for profit and give sellers at least three days’ notice ahead of a contract.
What’s next?
The proposal still has a long way to go in the city’s legislative process.
Licensing and Consumer Protection director Molly Duplechian said there are a lot of details that would need to be worked out to actually implement the program.
At a meeting on Monday, other council members were generally supportive of curbing the practice but had questions about how effective such laws are in other cities and how they would be implemented.
Lewis plans to refine the measure, work with various city departments, and eventually present it formally to a city council committee.
