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Denver council approves creation of city’s first affordable-housing fund

An affordable housing proposal aimed at raising more than $150 million in the next decade from property taxes and new development impact fees prompted drawn-out debate in recent months.

But after drawing a counter-proposal and heavy doses of second-guessing, the measure won an easy victory Monday night.

With a 9-4 vote, the council created the city’s first-ever dedicated local funding sources for affordable housing — approving a plan that’s been portrayed by its backers as a modest first step; by housing advocates as too little, too late; and by some developers and business interests as an overreach that could drive up market rents and building prices.

In the end, supporters’ embrace of amendments from skeptics to address concerns on secondary parts of the bill boosted its margin by winning over Kevin Flynn and Debbie Ortega. Among late changes Monday was a 7-6 vote to add a 10-year sunset on the bill’s components, forcing a review by the council down the line.

“The reality is that when you have competition, it forces conversation,” said Chris Herndon, who proposed the losing alternate bill. It would have delayed the new money-raising sources from taking effect to allow more study of the sources and, potentially, the size of the plan, while dipping into city reserves for first-year spending.

Mayor Michael Hancock’s administration, which backed the main proposal with council members Robin Kniech and Albus Brooks, says the city will see the effects of the new ordinance soon — although not as widely as many hope.

Next year, after taking effect Jan. 1, the new tax and impact fees are expected to bring in $10 million. An additional $5 million one-time infusion could come from city reserves, including marijuana taxes, as proposed in Hancock’s 2017 budget.

That money for the first year would set in motion project subsidies and land purchases that potentially could produce, above and beyond the city’s current programs, 653 new income-restricted apartments and other homes, according to city officials’ plans. And about 250 households could receive emergency assistance to help them to stay in their homes.

Council members acknowledge that’s a drop in the bucket compared with the tens of thousands of households, including some in the middle class, that struggle to afford their rents within Denver city limits.

“We have a displacement crisis in Globeville-Elyria-Swansea,” said Maria Campos, a Globeville community activist, during a news conference by northeast Denver advocates before the meeting began at 5:30 p.m.

Raymunda Carreon, who has lived in Swansea for 16 years, said she, her husband, a plant worker, and four children and grandchildren were on the verge of being unable to afford the two-bedroom duplex they rent. They had owned a home but lost it several years ago after their son came down with lupus, and medical bills mounted.

In May, Carreon said through a Spanish interpreter, their landlord sold the home. The new landlord increased their $600 monthly rent by $400, she said, and placed them on a month-to-month lease. “We have been looking for a place to rent or buy, and we cannot find anything,” she said.

In all, city officials say their plan will subsidize the preservation or building of 6,000 income-qualified housing units. That’s in addition to the 1,400 or so units that the city is projected to support in the next decade, via loans and grants, using existing state and federal funding programs.

To qualify for rental housing, a family of four, for example, would need to make $64,100 or less under current limits set at 80 percent of the area median income. The income limits may be higher for some for-sale housing that’s built through the program.

The proposal’s main sponsors argue it’s an important first step. For months, though, it has faced concerns from housing advocates that it’s far too modest to tackle Denver’s growing affordability gap.

And business interests and some developers have opposed the new development impact fees, also called “linkage fees.” The one-time fees would range from $1,500 for a standard new house to six or even seven figures for large hotels and office buildings. Although some other cities have adopted fees with much higher rates, opponents argue they are unfair burdens for developers — and possibly consumers — to absorb.

Some have argued for nixing the fees and instead doubling the proposed property tax activation of a half-mill. The half-mill rate would cost $12 a year for the owner of a $300,000 home.

“Why we don’t adopt a property tax and take advantage of near-zero rates (for bonding) is beyond me,” Gene Myers, CEO of Thrive Home Builders, said in testimony during a public hearing Monday night. “We’re actually making housing less affordable for everyday people by increasing the costs with a linkage fee.”

The fees, assessed during the permitting process and rising with inflation, range from 40 cents to $1.70 per square foot, depending on the type of new building or expansion project.

Myers was among several speakers who supported the idea of an affordable housing fund but not the fees during the hour-long public hearing.

Councilman Paul Kashmann later responded: “I’m not out to ravage the development community. It would be stupid. It would make no sense to the health of our community. But we are asking them to take a bigger bite,” and for him, the fees were key to his support.

Herndon’s alternative proposal to allow time for more consideration of different sources of money ended up with support from the three other council members, Rafael Espinoza, Wayne New and Kendra Black, who voted against the main bill for varying reasons. Black proposed the successful 10-year sunset amendment for the main proposal’s tax and fees.

In a statement, Hancock praised the council: “Tonight, our city took a significant step forward in keeping Denver accessible to our workers and families,” he said, and then gave a nod to other housing challenges in a city with little recent condo construction. “From here our work continues undaunted to spur the creation of diverse housing options throughout the city. Together, we will remain relentless in our pursuit to ensure that our people are able to build equity and wealth through homeownership.”

Basics of the affordable housing plan:

• Scope of plan: City officials say the plan could raise $156.4 million from a new half-mill property tax increase and new development impact fees. The plan calls for the preservation or building of 6,000 units, beyond the 1,400 or so that its normal housing programs are projected to underwrite in the coming decade.
• First-year projections: The property tax hike is expected to produce $6.5 million next year, and development fees (also called linkage fees) will generate $3.5 million as projects go through permitting. A one-time addition of $5 million from general fund reserves is planned, including $1.5 million in proceeds from the city’s recreational marijuana sales tax.
• First-year activity: City officials have outlined a potential $15 million plan for 2017 to get the program started. It includes: $9.4 million to support development projects producing income-restricted apartments or for-sale homes, totaling 533 units; $3 million for land acquisition for property that can be used for future projects, potentially producing another 120 units; and $1.5 million for emergency assistance to 250 households at risk of being priced out of their housing. About $600,000 would go to administration of the new housing fund, and $500,000 would be set aside for reserve uses.

Sources: Denver City Council documents, Denver mayor’s office.