Denver seeks to capitalize on homebuilding activity with new affordable housing regulations
Photo: Colin Lloyd/Unsplash
By Robert Davis
Denver officials are hoping to capitalize on increased homebuilding activity with a new policy that seeks to ensure affordable units are included in new developments.
The proposal would require new developments of 10 or more units to designate a certain amount of the units as affordable for households making up to 80% of the area median income. The units must remain affordable for a period of 99 years, regardless of whether the unit is rented or sold. In higher-cost areas such as downtown, the policy would require developers to provide more affordable units.
Community Planning and Development (CPD), one of the agencies that is developing the plan, said the plan will require all units to be affordable to households making up to $84,000 per year.
In addition, the plan also calls for a gradual increase of Denver’s linkage fee, a fee that is assessed against new developments that funds future affordable housing development. Currently, the linkage fee ranges between $0.66 per sq. ft. in residential units up to $1.86 per sq. ft. in commercial and industrial contexts. If adopted, the plan would raise this fee to between $4 per sq. ft. and $8 per sq. ft. by July 2024.
CPD said other cities across the U.S. have already implemented similar policies. The agency added that this tool became available to them after state lawmakers passed House Bill 21-1117 last year, which expanded local authority to regulate affordable housing development in Colorado.
“Anyone who has been in Denver for some time can tell you how difficult it can be to find a place that’s affordable, especially if your income has not increased as much as rents and home prices have over the past decade,” said Laura Aldrete, executive director of CPD. “This proposal is a big step toward the city delivering on our commitment to help address housing affordability.”
One reason why Denver officials are pushing for the policy now is that building activity in the Mile High City is accelerating. According to building permit data from CPD, the number of multi-unit and mixed-use permits skyrocketed between 2020 and 2021. The number of housing units built in multi-unit structures increased by 45% up to 6,585 last year while the number of mixed-use permits increased fourfold up to nearly 1,700.
Overall, new development permits for multi-unit and mixed-use development filed with CPD last year carried a valuation of more $1.4 billion compared to the more than $550 million worth of permits pulled in 2020.
The policy could also help the city build more missing-middle and workforce housing, two housing types that have been decimated over the last decade.
According to a recent state report, Colorado’s homebuilding activity slowed by approximately 40% between 2010 and 2020. At the same time, the state’s population grew by 15%. This dislocation of supply and demand has sent home prices upward and eliminated more than 300,000 units that were once affordable to households making up to $45,000 per year.
Data from the Department of Housing Stability (HOST), another agency involved with the policy proposal, shows that there are approximately 72,000 households in Denver make up to $45,000 per year but there are only 9,000 income-restricted units available to them.
“One in three households in Denver struggles with housing costs, and 46,000 are paying more than half their incomes toward housing,” said Britta Fisher, HOST’s executive director. “These are our restaurant workers, childcare providers, and social workers – the people who make our city run. This proposal helps ensure they cannot only work here, but can afford to live here, too.”
The proposed policy is available for public comment through March 14. City Council is expected to take up the proposal later this spring.