CPD Wants Sharper Teeth to Address Affordable Housing Gaps
By Robert Davis
Community Planning and Development (CPD) outlined its plans to address affordable housing gaps vis-á-vis new regulatory tools during the Budget & Policy Committee meeting on Thursday.
The agency said the latest phase of its Affordable Housing Zoning Incentive Project is a market-based solution that will establish a citywide zoning incentive for affordable housing, bolster Denver’s linkage fee, and prepare the city for state law changes concerning inclusionary zoning.
CPD is currently performing public outreach efforts about the plan. The agency anticipates sending the full legislative package to City Council by the end of the year.
Analiese Hock, CPD’s project manager, said the efforts are necessary because the agency’s current toolset for providing affordable housing is almost obsolete when compared to peer cities like Austin, Atlanta, and Seattle.
“We’re looking to move away from the current calculations that are based on building use, size, and all kinds of factors toward a model that is more predictable. For example, it could be as simple as requiring 15 percent of new units to be affordable across the board. But we’re still looking at our options,” Hock said.
CPD’s affordable housing project began in 2020 with a focus on citywide zoning incentives. The project has since expanded to include a range of housing solutions “to fulfill Comprehensive Plan 2040's vision for an inclusive, connected, and healthy city,” the agency wrote on its website.
In the agency’s background report, CPD identified a significant gap in its tools available to provide affordable housing for people earning between 51 percent and 100 percent of Denver’s area median income (AMI) over the next two decades.
According to the Department of Housing Stability (HOST), that range includes single-earners who take home an annual salary of $35,000 to $70,000. A family of four could earn no more than $100,000 to qualify.
The average home price in Denver is nearly $600,000, according to the Colorado Association of Realtors. This prevents federal mortgage agencies like Freddie Mac and Sally Mae from lending to many would-be homebuyers in Denver with bad credit, or who may be housing burdened by the purchase of the home.
Meanwhile, conventional mortgage lenders require a 20 percent down payment on properties above the baseline conforming loan limit, also known as a “jumbo loan.” Loan limit property valuation levels are set by a permanent formula established under the Housing and Economic Recovery Act of 2008.
In 2021, most counties across the country saw their baseline limit increase by $37,850 up to $510,400 because of the stellar home price gains during 2020. Denver’s limit was capped at $596,850.
Hock said Denver has sufficient tools to build affordable housing for people earning less than 50 percent AMI and for those above 120 percent. These projects are often funded through webs of intergovernmental programs and market-rate development.
Filling that gap between 51 and 100 percent AMI requires Denver to find ways to incentivize private sector building with zoning and inclusionary housing regulations, she added.
Denver uses three interrelated tools to build affordable housing: linkage fees, inclusionary housing ordinances, and incentive zoning.
Linkage fees are assessed alongside standard construction permits and are based on a building’s use and square-footage. The funds generated from the fees are dedicated to building affordable housing projects. Denver’s linkage fee is $1.61 per sq. ft. for multi-unit dwellings and $.65-cents for single-family units.
However, developers may be exempted from the fee if they sign an affordable housing agreement, are obligated to provide affordable housing by the zoning code, or if the project is supported by local or federal funding, according to the ordinance’s final rules and regulations.
The result is that Denver’s affordable housing fund fluctuates from year to year, making it hard for the city to predict how much funding it can provide for affordable housing projects. According to HOST data, Denver’s collected just $1.1 and $1.3 million from its linkage fee in 2017 and 2018, respectively. In 2019, it collected $10.2 million.
When compared to Seattle, Atlanta, and Austin, Denver’s linkage fee is far below the others. Atlanta’s linkage fee starts at $50 per sq. ft. and increases based on the project specification. Meanwhile, Seattle’s ranges from $9 to $40 per sq. ft., according to CPD’s presentation.
CPD and members of City Council agreed that the plan needs to include a way to provide more predictable outcomes for both developers and communities.
Councilwoman Amanda Sandoval (District 1) said regulatory red tape and unpredictable plan reviews are the main reasons people in her district don’t apply to build accessory dwelling units (ADUs) on their property. In turn, she said the unpredictability makes it difficult for her to continue to legislatively rezone parts of her district.
“The more predictability we can provide for our developers and our community, the better outcomes we can achieve,” she said. “As much as our developers are unhappy, our community is unhappier with some of the things that have happened. That’s why whenever we talk about our developers, I always talk about the community. That’s who we are building these projects for.”
CPD also identified ADUs as a means of achieving greater housing flexibility and affordability in Denver but doing so would require strengthening the city’s Inclusionary Housing Ordinance (IHO) and Incentive Zoning practices.
Denver’s IHO was originally passed in 2013 and requires new developments with over 30 units to provide 10 percent of the units as affordable housing.
Incentive zoning exists in small areas of the city as well. The practice provides developers with additional height waivers in exchange for affordable housing. The 38th and Blake Station is a model incentive zoning project.
However, these ordinances only apply to for-sale housing. Rental controls are outlawed by state statute under the 2002 Telluride decision. This means that while lawmakers can help homeowners find affordable housing, they are powerless to provide it to renters.
COVID-19 increased the need for affordable rental housing and lawmakers in the General Assembly responded by advancing HB21-1117. If passed, the bill will allow municipalities to subvert Telluride and regulate development as they see fit.
CPD said it is closely watching the bill because it will influence how the agency proceeds in the near future.
Meanwhile, Denver is exploring other ways to incentivize affordable housing. One option is to combine its affordable housing programs with the Denver Green Code Pilot Program. This combination would offer a fee reduction of up to $50,000 for building permits and expedited plan reviews in exchange for new developments of affordable units and green infrastructure.
CPD is also working with agency partners to coordinate more parks and green space throughout the city’s transformations.
“Cities are ecosystems. They’re not just about housing people. They’re also about transportation, food systems, and open spaces. They’re living beings,” Hock said.