Denver City Council may toughen affordable housing law
Denver Mayor Michael Hancock. (Cyrus McCrimmon, Denver Post file)
The plan also would give developers alternatives aimed at making compliance in pricier neighborhoods more attractive.
City leaders from Mayor Michael Hancock to City Council members long have called for a rewrite of the 2002 Inclusionary Housing Ordinance. The rule requires new condo developments of 30 or more units to mark down 10 percent of them to affordable prices for qualified buyers.
Although it covers only for-sale housing, the law is significant because Denver is hamstrung by a state law and court rulings that don't allow affordability requirements for rental properties. That's not the case in other big cities.
Since its creation, the law has been beset by controversy. Some developers and critics view it as government overreach into the housing market.
But few dispute its ineffectiveness. In the past five years, only 16 units have resulted from Denver's law, city officials say. That's because fewer new large-scale condo developments have broken ground, and housing prices are booming again.
Some developers find it more worthwhile to "buy out" of the requirement by paying the city a penalty amounting to half of the adjusted price. Their market-price profit offsets that cost.
It's happened time and again — including with recently built downtown high-rises. The Spire's developers paid the city $3 million rather than include dozens of affordable units, city data show.
Councilwoman Robin Kniech, who has spearheaded the rewrite and briefed a council committee Tuesday, says that's got to change.
"I'd rather have homes (for lower-income families) than cash," she told The Denver Post. "We really want to increase flexibility."
Her proposal includes hiring an "independent adviser" to help developers look for alternatives to meet the 10 percent affordable-unit requirement.
But it also would include a harsher penalty for some areas, to make it harder for developers to sidestep the 10 percent set-aside in the areas where affordable housing is hardest to find.
In neighborhoods with medium home values, the penalty would stay the same, at 50 percent of the marked-down unit price. It would decrease to 25 percent in lower-priced neighborhoods.
But in more expensive neighborhoods, including those in and around downtown and developing areas near transit, the penalty would jump to 75 percent.
On the incentive side, complying with the law brings a flat $5,500 rebate per affordable unit currently.
Kniech would increase that to $6,500 in medium neighborhoods and as high as $20,000 in high-priced areas, although she acknowledges that's still a dime in the bucket.
The city would pay a reduced rebate of $2,500 per unit in neighborhoods with lower home values, where there's less need for affordable housing, in Kniech's view.
To qualify for an affordable unit, homebuyers typically must make less than 80 percent of median income, from $42,950 for a single person to $61,350 for a family of four.
A side effect of developers' frequent opt-out payments has been that the city, by dipping into the housing ordinance fund, has helped finance projects producing 447 affordable units since last year, including 70 downtown.
But city officials don't see that as sustainable.
Kniech still is fine-tuning her plan by meeting with developers and housing advocates.
On Tuesday, her presentation was greeted with some skepticism, but other council members applauded her efforts.
"I question the buy-out option," said Councilman Paul Lopez, who represents west Denver, suggesting the city shouldn't let any developers get a pass from meeting the affordability requirement.
The Health, Safety, Education & Services Committee could consider a formal proposal July 22, with a final council vote in August.
Jon Murray: 303-954-1405, jmurray@denverpost.com or twitter.com/JonMurray
Updated June 18, 2014 at 3:45 p.m.: This story as been updated to reflect that Denver would pay a reduced housing rebate of $2,500 per unit in neighborhoods with lower home values, where there's less need for affordable housing.
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