More housing for struggling parents at risk of becoming homeless or increased development costs that will not only drive up apartment rents in Denver but also hurt small business owners looking to get into new commercial space?
Projecting what the Denver City Council’s late-night adoption of the long-in-the-works “expanding housing affordability” policy on Monday will mean going forward depends on the prognosticator’s perspective.
The policy, codified via three bills adopted Monday night, has two main facets. First, it will require any new development of 10 or more apartment or condo units submitted for review after July 1 to set aside between 8 and 15% of those units as income-restricted affordable housing. Depending on where a project is being built — in a so-called “typical market” in the city or in high-cost areas like downtown or the Cherry Creek neighborhood — and how many units are being set aside, the affordable homes must be available to people making between 60 and 90% of the area median income.
The Apartment Association of Metro Denver has been critical of the policy since the city first released specifics for public review in February. The organization argued that with incentives from the city that it views as small potatoes at best, the added cost of building affordable units will either be passed on to the rest of the renters in a building or prevent projects from being built in the first place.
City Councilwoman Robin Kniech, one of the policy’s main drivers, said on Monday that the industry’s sky-is-falling rhetoric is overblown but the apartment association’s feelings about the policy did not soften over time.
“The cause of Denver’s rising housing costs is low supply. Not only will (the policy) fail to address this fundamental problem – it will exacerbate it, creating a new disincentive for housing developers,” Executive Vice President Mark Williams said in a statement Tuesday. “Going forward, we hope city leadership continues more prudent, pro-development policies, removing barriers to building and creating new incentives for developers.”
The other critical leg of the policy is a major increase in the linkage fees charged on most other kinds of commercial and residential development. The fees feed into the city’s affordable housing fund that is deployed in a variety of ways to combat the housing crisis.
The city compromised on that front when tweaking the policy, spreading the increases out over a more than three-year period. But the final per-square-foot rates will be substantially higher compared to the gentle annual increases tied to inflation that developers are used to.
Fees on new commercial, office, sales and services spaces will go up from $1.86 per square foot today to $3.90 per square foot on July 1 in desirable areas like downtown. By July 1, 2024, those fees will be $8 per square foot downtown. That’s an increase of roughly 330%.
Tyler Carlson, a real estate professional with Denver’s Evergreen DevoCo Inc., has been active in policy advocacy for the International Council of Shopping Centers. He spoke against the affordable housing proposal at Monday’s meeting.
He knows there is an affordable housing crisis in Colorado, but he said there is also a commercial real estate affordability crisis, he said. Policies like Denver’s will drive up the costs for commercial tenants. Deeper-pocketed national companies like Chipotle and McDonald’s might be able to take the hit, but small businesses could lose opportunities.
“This is just exacerbating the challenges of getting small businesses into new-built space,” Carlson said.
Ethan Hemming, the CEO of Warren Village, a nonprofit organization that provides affordable housing, early childhood education and other support to single parents and their children, is among those who was celebrating the council’s vote on Tuesday. Warren Village has land in west Denver where it plans to build a new facility with housing enough for 74 low-income single parents and their children. Under the enhanced incentives offered through the policy for developers who go beyond minimum affordability requirements, the project can now grow to four stories and 89 units, room for 15 more families.
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“I just hope that it really motivates nonprofits like us and private sector (housing) providers to do more for people in Denver,” Hemming said of the affordable housing policy.
Warren Village’s west Denver project will be submitted to the Colorado Housing and Finance Authority seeking tax credit financing in August.
Kyle Piccola, the spokesman for Healthier Colorado, a nonprofit advocacy organization focused on improving health outcomes in the state, is also counting Monday’s votes in Denver as a big step forward. The organization views stable housing as foundational to health and advocated at the state level for the 2021 law that made Denver’s inclusionary housing requirements possible.
“We are so happy to see that after years of planning, years of partnering with many diverse stakeholders, we finally have a viable path and a policy we can implement to finally get roofs over the heads of families in Denver and keep people housed,” he said.