Denver affordable housing proposal is worth a try
As Denver officials gear up to spend the city’s new affordable housing fund, they’d be foolish to ignore a proposal that could provide the biggest bang for the buck as well as a relatively quick return on investment.
It could create hundreds, and possibly thousands, of income-restricted apartments from existing units — at the voluntary initiative of the owners. And the Apartment Association of Metro Denver, which developed the plan, says it apparently would be unique in the nation.
The basic concept is fairly simple: Owners of apartment buildings could voluntarily offer a percentage of units at below-market rent to income-qualified tenants in a 10- or 20year commitment in return for an up-front payment from the city in an amount that is agreeable to both parties (you didn’t think
this was going to be a gift, did you?). So in a 100-unit complex where one-bedroom units go for, say, $1,500 a month, the owner might offer to rent 10 units for $900. If the city was interested in affordable units at that location, it would negotiate a legally binding deal with the owner to be administered by the Office of Economic Development or Denver Housing Authority.
RedPeak Apartments CEO Mike Zoellner, who had a hand in developing the idea, tells me the goal is to provide housing to working people with incomes between 50 percent and 100 percent of the $56,000 metro median. And while it’s natural that some apartment owners in this high-demand market would balk at committing even a small percentage of units to the red tape needed to administer compliance, Zoellner believes many would participate, slashing rents on those units.
“We’ve met with a number of large owners and are convinced the interest is there,” he says.
The idea is hardly a silver bullet, of course. But then what “affordable housing” policy is? The spike in rental and housing prices in recent years is no mystery. When public officials welcome a surge of new jobs but tamp down housing supply with a host of land-use and growth rules (many of which seem eminently reason- able when considered in isolation), the result is higher prices. The Denver Post reported in September that metro Denver had created nearly 146,000 new jobs in the previous three years but added only 24,000 new homes, and this gap between supply and demand didn’t start then.
And while rental prices have dipped in recent months, they’re still higher than a year ago.
A sensible response to this shortfall would be for officials across the metro area to systematically review ideas to encourage the full range of housing — without undermining neighborhoods, of course — rather than lean mainly on the hope that they can subsidize and tax their way out of the problem. Cities that dedicate far higher taxes and fees to housing than Denver haven’t succeeded in making their towns affordable. In fact, many — such as Mountain View, Calif., with its staggering $25 per-square-foot fee on developers — are among the least affordable places in the nation.
To his credit, Denver Mayor Michael Hancock has helped lead the so-far futile attempt to prod the legislature into addressing obstacles to condominium construction, which has fallen off the cliff over the past decade because of litigation. But Denver’s main focus has been the traditional route of creating a housing fund, which the council approved in September and which will raise $10 million a year through a property tax hike and development fees.
My own preference would have been for the city to find another source for the fund, as several council members urged. Whatever good the new money will do, it will also have the ironic and corrosive effect of boosting housing prices further, since the development fees range from $1,500 for a standard new house to six or seven figures for commercial buildings.
Councilwoman Kendra Black tells me that one alternative she favored was to earmark some of Denver’s marijuana taxes for affordable housing — anticipating the governor’s more recent plan to set aside a portion of state pot taxes for housing for the homeless. Black argues that it makes more sense to funnel a property tax hike toward civic amenities or infrastructure that benefit all taxpayers.
She’s right, but the die is cast. And now it’s up to officials to seek the maximum leverage from their modest pot of money for affordable housing. If they’re sincere about that, they’ll take a close look at the proposal from the Apartment Association, which has been endorsed by the Downtown Denver Partnership, for enticing existing owners from every corner of the city into the effort.