CRE Industry Advocates Sue Colorado, Denver Over Energy Regulations

A coalition of Colorado CRE professionals and advocates from the state’s hospitality sector filed a federal lawsuit in Denver Monday.

The suit challenges state and city of Denver building performance regulations, which the groups say will create “new and unexpected burdens” on a regional real estate sector already hampered by high interest rates and a limping office market.

In a joint statement, the members of the Apartment Association of Metro Denver, the Colorado Apartment Association, the Colorado Hotel and Lodging Association and NAIOP Colorado announced their intention to challenge the energy performance standards for large buildings that were established last summer by the state’s Air Quality Control Commission.

The lawsuit also contends the state mandates violate the decades-old federal Energy Policy and Conservation Act, which the group says prohibits state and local regulations that are stricter than federal law.

According to The Denver Post, the lawsuit names a variety of state and city government offices and officials as defendants, including the state’s Department of Public Health and Environment, the Colorado Energy Office and both departments' executive directors. Also named are the Denver Office of Climate Action, Sustainability and Resiliency, the Denver City Council and Mayor Mike Johnston.

Officials from Colorado and Denver agencies reportedly declined to comment on the lawsuit, referring to policies that ban them from speaking about litigation.

In their statement, the associations said their members had worked to design and construct sustainable buildings that benefit their tenants and the environment and had provided technical and economic input for the policies that helped establish the current regulations.

However, the statement continued, those strategies “must be executed in concert with other Colorado priorities, including growing the availability of sustainable housing and strengthening Colorado’s ability to provide good-paying jobs for its citizens.”

Andrew Hamrick, general counsel and senior vice president for both apartment associations involved in the lawsuit, told Bisnow that Colorado consumers would end up footing the bill for these regulations, especially since the new requirements would force building owners to retrofit natural gas systems in favor of electrical systems.

“It’s a system where single-family homeowners get one source of energy and poorer, renting families have another,” he said.

Retrofitting existing natural gas heating systems is also expensive, “but then the electricity needed for the purposes of heating a home, or the water used by the home, is a much, much more expensive source of energy,” he added.

In 2021, the Denver City Council passed new code requirements for existing commercial and multifamily buildings regarding gas-powered space and water heating, as well as cooling equipment. As of Jan. 1, most gas furnaces and water heaters are no longer allowed in new commercial and multifamily construction. Permits for gas systems, meanwhile, won't be issued for existing buildings starting next year, and after 2027, “permits will no longer be issued for any gas heating and cooling equipment in commercial buildings.”