Serious setback on housing

News that the city of Denver may have imperiled or even lost nearly a third of its deed-restricted affordable housing stock is devastating.

More than ever, Denver needs these units to be reserved for lower-income residents who otherwise have been priced out of the city.

And the timing couldn’t have been worse.

Denver is in the middle of launching its new $15 million-ayear affordable housing program, funded with a dedicated property tax and increased fees on developers, and the program clearly needs to be winning in the court of public opinion if it’s to succeed. Already the plan is a hard sell to Denverites suffering from increasing property tax bills.

Reports that units once designated to be affordable have slipped back to the whims of market forces do not instill confidence that taxpayer dollars will be used to great effect as the city tackles this issue.

According to The Denver Post, and first reported by 9News, the Denver’s Office of Economic Development found that of 1,302 homes with affordability deed restrictions, at least 300 homes are breaking at least one covenant rule.

Take the case of Juan Carlos Peñalver, who lives in Green Valley Ranch. He purchased an income-restricted home in 2016, despite the fact that he made too much money to qualify. Additionally, Peñalver’s home had a covenant restricting the re-sale value to a 5 percent increase every year. His attorney says Peñalver only just learned of the restrictions and paid $30,000 more than the allowable price.

Peñalver is not to blame for this predicament: homeowners ought to be able to trust realtors, and they pay hefty prices for title companies to ensure they aren’t missing any such restrictions when they make the single-largest purchase of their lives.

So who is to blame? Clearly the city needed to take a more proactive approach to these affordable units, looking at them as public assets that need to be protected.

If the restrictions were included in title papers, then the fault — and likely the liability to cover the cost of coming into compliance — falls on the title companies that were paid at the time of sale to not only search for such restrictions but to also provide insurance in the event of a title dispute. If the restrictions were not properly recorded, it’s likely the fault of the developer or the public trustee’s office that handles deeds.

We hope the city aggressively investigates and pursues a means to get these properties back on the affordability track. But this is also a lesson we are glad the city is learning now: once the fight to create an affordable unit is won, that unit must be protected for the next home buyer, especially since most affordable housing developments these days are receiving state or federal tax credits to help offset the cost of development and could soon be receiving city dollars.

There are safer ways for a city to protect these affordable units than deed restrictions put in place by developers.

The land trust model, for example, would ensure that the city is at the table for every sale of an affordable unit. In those programs, the nonprofit or government entity maintains control of the land under the single- or multi-family dwelling unit.

The city’s five-year affordable housing plan approved in February includes a provision about exploring the creation of land trusts.

We hope that provision gets appropriate emphasis given this latest development.