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Denver Tightens Its Grip on Affordable Housing Stock

On Monday, Denver City Council passed a new ordinance to extend the lifespan of one of its most critical resources: income-restricted rental units.

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By now, you’ve gotten the message: Sky-rocketing rents are displacing low-income Denverites whose incomes aren’t keeping pace (and whose is?). City officials, as we’ve documented, are locked in a sort of wrestling match with the forces of supply—or lack thereof—and demand. As worries over housing continue to inflate, a critical resource was slipping away: the affordable units themselves.

Properties typically have a minimum lifespan of affordability; in Denver, it was 20 years. That meant that in the next five years, about 1,700 income-restricted units—or 8.5 percent of the city’s stock of about 20,000 affordable housing units—were at risk of having their status expire, according to the Denver Office of Economic Development (OED). On Monday night, after hearing OED’s case for an extension, City Council passed an ordinance to increase the lifespan of new income-restricted rental properties to 60 years.

While the lifespan issue isn’t new, its inherent cost is a concern amidst the growing housing crisis. The change is an important victory for Mayor Michael Hancock’s housing affordability plan, but for-profit and nonprofit developers raised concerns about the feasibility of maintaining affordable units for six decades, and advocated for a delay in implementation to allow them to adjust. (The Council did amend the bill last week to delay implementation until February 2019, so stakeholders can have a seat at the table in creating the rules and regulations for the new law.) If this all seems complicated, well, it is. Here’s what you need to know.

Sixty years sounds like a long time, is that crazy?

It’s far from the longest period affordability among high-cost cities. Boulder, for example, keeps affordable units in perpetuity, meaning forever. Seattle, a sister city to Denver in many ways, sets its minimum period of affordability at 50 years.

Who develops affordable housing in Denver, anyway?

Affordable housing in Denver is built by a combination of three groups. The first two are mission-driven nonprofits (think Colorado Coalition for the Homeless) and quasi-governmental organizations (like the Denver Housing Authority), which have an expressed goal of creating and managing affordable housing. The third group is made up of for-profit developers who build affordable developments or include affordable units in their otherwise for-profit developments (and in turn benefit from things like tax credits and higher density zoning, which allows for bigger developments).

Will this change hinder those developers?

In a Safety, Housing, Education, and Homelessness City Council committee meeting on October 3, Laura Brudzynski, OED’s director of housing policy said, “We did seek out feedback from our partners at the state that are experts in tax credits, investors, as well as other lenders, and do not believe that a 60-year covenant period will have a negative impact on the opportunity to invest in these low-income housing tax credit developments, generally.”

Other developers worry that it will. “This is very troubling to say the least,” says Andrea Marela, president and CEO of NEWSED, a mission-driven developer. “What is clear to us, as well as members of NDC [a coalition of nonprofit developers], is that a vote at this time would be extremely premature… We currently have a couple of properties in the market right now that were only erected recently and already are seeing a myriad of [maintenance] issues. [This rule change] would really hinder our ability to do the kinds of improvements that we need. We are all for affordability in the long term, but it has to be done in the right way.”

A house needs a lot of work in 60 years’ time. Are these units going to be disheveled by the end of this?

Currently, developers access city funding to rehab their affordable housing units. Brudzynski says it’s up to future City Councils to allocate funding that developers can access for maintenance of their income-restricted units during the new 60-year period of affordability. Lack of a crystal ball notwithstanding, she expects that will happen. This was a major concern developers voiced at last week’s public hearing before City Council.

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What if the housing market changes significantly in the next 60 years, and the locked-in stock of income-restricted housing becomes an impractical problem for the city?

Some funders outside of Denver, like the Colorado Housing and Finance Authority, use policies that allow for flexibility of how much developers can rent their units for over time. Income restriction for affordable units is set via Area Median Income (AMI) levels, or percentages of the neighborhood’s AMI. This means that income-restricted units are priced to be affordable to individuals making a set percentage of their what their neighbors make (anywhere from 0 percent 80 percent, determined by developers and policy makers). So, if a crop of affordable housing units comes online to serve a current need for housing at 50 percent AMI, but in 40 years there’s a need for housing at 30 percent AMI, rules for those units could be adjusted. This isn’t written into the ordinance that just passed, but Brudzynski says it will be explored in the rule-making process associated with it.

What kind of longterm impact will this ordinance have?

The average family living in affordable housing stays in a given unit for six years, Brudzynski says, so the city’s investment in each new affordable unit can now be expected to benefit about 10 families, as opposed the current average of four or five.

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