Denver chipping away at covenant violations on affordable homes

The Denver Office of Economic Development reported Wednesday that 130 of 306 properties have come into compliance with covenant restrictions designed to preserve affordable housing in the city.

But another 176 remain out of compliance, and the city will start taking a tougher hand in dealing with some of those owners.

The homes, mostly in northeast Denver, contained restrictions on how much price appreciation owners could claim when they went to sell. Future buyers also had to meet income limits to qualify for a property.

But seven months ago, the city discovered more than 300 homes, nearly a quarter of the total, may be in violation of the covenants. Some owners, despite receiving a discount and incomequalifying for the program when they bought, failed to disclose the covenant restrictions whenitcametimetosell.

Over time, awareness of the affordability restrictions were lost. And while some title insurers noted the covenants, others did not. City officials have also come under fire for not keeping a closer watch over the program.

“Our homeownership program provides a critical path for residents to live and stay in Denver. We are thrilled to report that we’ve made great progress on bringing 130 affordable homes back into compliance, while avoiding displacement,” Eric Hiraga, executive director of the office, said in a statement.

One of the toughest predicaments involves buyers who didn’t know they were purchasing homes with affordability covenants and who earned too much in come to qualify. Last week, Denver City Council approved revisions to the city’s inclusionary housing ordinance to temporarily waive income restrictions for those owners.

Starting this month, the city will take a tougher stance with owners who have ignored invitations to participate in its Compliance Resolution Program and clear up covenant violations. Notices will go out to owners and businesses who the city believes are “blatantly” disregarding the program.

The city’s economic development office also reported that it initially thought another 263 homes had dropped out of the program following a foreclosure sale. But on closer examination, 49 of the homes were purchased by someone other than the holder of the first mortgage, meaning those properties still carry affordability covenants.