Denver affordable housing plan would cost average homeowner an extra $12 a year. Developers would pay a lot more.
Coming $150M-plus proposal by Mayor Hancock, City Council members would increase property taxes, create impact fees to fund subsidies
Mayor Michael Hancock promises improvements to affordable housing and employment
Denver Post
Homeowners won’t be as likely to notice
their share of the $150 million-plus bill for Denver’s proposed 10-year
affordable housing plan as will developers, who would be hit with big
one-time fees.
Details of the funding plan, which Mayor
Michael Hancock’s office announced Tuesday, show that a
soon-to-be-proposed property tax hike would amount to $12 a year — $1 a
month — for the owner of a $300,000 home, which is around the median
value in Denver.
But new development-impact fees that would
provide the second half of the money in Hancock’s funding proposal
amount to $1,500 on a new 2,500-square-foot house. For a new
25,000-square-foot commercial building, such as a bank branch or a
Walgreens, the development fee would cost $42,500, while the fees for
hotels, office buildings and larger developments would go still higher.
After unveiling the funding plan for
the affordable housing proposal, which has been in the works for a year,
Hancock said the goal was to share the cost as broadly as possible.
He portrayed the affordability challenge as “an issue that is hitting at the heart and future vitality of our city.”
At the same time, Hancock and City
Councilwoman Robin Kniech defend the proposed development fees as low
compared with other cities that long have had similar developer charges.
They cite a city feasibility study
showing the fees won’t jeopardize the profitability of new development,
while Hancock predicts that the city’s market-rate housing — even with
fees likely absorbed at least in part into housing prices — will stay
competitive.
The plan for the city’s first dedicated funding sources for affordable housing calls for an infusion of money to boost city subsidies and housing programs. The initiative is aimed at supporting the construction or preservation of 6,000 income-restricted rental and for-sale homes
by the private and nonprofit sectors, helping a range of Denverites
from the homeless and very poor to more moderate-income residents who
still struggle to afford to live in the city.To pay for that, Hancock and City Council members plan to propose an increase of 0.5 mills on city property tax bills next year. Besides the impact on homeowners, commercial property owners would pay $145 more each year for every $1 million of valuation.
The four types of proposed development fees would be assessed per square foot: 60 cents for single-family and duplex homes; $1.50 for multifamily housing; $1.70 for hotel, office, retail and other uses; and 40 cents for industrial or agricultural uses.
“Our proposal … will absolutely have a
meaningful impact,” Hancock said at Tuesday morning’s news conference.
“Now, I know some people will say our plan isn’t bold enough. I’ve
already heard that. Others will say, ‘It’s too expensive and we can’t
afford it.’
“But let me say very clearly to them: We can’t afford not to
do this. This risk is too high, and the status quo isn’t an option
anymore. This is a fair and balanced approach. We tried to make it as
simple as possible. It’s equitable, and it’s a communitywide approach so
that everybody can participate in addressing this very critical issue
in our city.”Although Hancock’s advisers have worked for a year with Kniech and Councilman Albus Brooks on the proposal — and solicited input from developers and the community — the proposal is likely to face some push-back from other council members, developers and taxpayer advocates. The council could vote on the proposal by late August.
One council member with questions is Kevin Flynn, whose more suburban southwest district remains more affordable than central Denver and faces less development pressure. He is interested in examining how the money might be used to help residents stay in gentrifying neighborhoods.
“I’m glad to see that at least the reliance on the property tax is 50 percent, rather than more,” he said of the funding plan. “Frankly, I would like to see that be even lower, with more reliance on the development fee — just from a matter of principle.”
Hancock’s advisers and Kniech say that compared to cities across the country with similar developer impact fees, including Boston, Denver is starting with rates on the relative low end. They wouldn’t be indexed to inflation, leaving it up to the council whether to adjust the fees later.
Standing next to Hancock and Kniech, Denver developer Susan Powers voiced support for the plan, noting that her partner’s 72-unit affordable housing development opened with a 1,200-person waiting list.
“This is not just about the buildings. It’s about the people (struggling to afford to live in Denver),” she said. “These are the lives of real people who are your employees, your children, your friends and your neighbors, who are all feeling the impact of this.”
To justify the fees, the city last month released a consultant’s “nexus study” that examined the link between different types of new commercial and residential developments and the resulting need for housing they generate in the city by creating jobs. In essence, it attempted to quantify the extent new buildings and development activity contributed to the city’s affordability gap.
Developers would have an option to build affordable housing units instead of paying the fees. The new fees would replace the city’s Inclusionary Housing Ordinance, which requires that developers building 30 or more condos set aside 10 percent for income-qualified buyers.
Exemptions from the new development fees would apply to affordable housing developments, government projects, homeless service providers and replacement homes built following catastrophic events. But the fees would be charged for additions to existing structures, including home additions, if they increase the overall square footage.
On Monday, Hancock had discussed affordable housing as one of many challenges facing Denver residents during his State of the City address. But he left the funding details for Tuesday’s announcement.
His staff will present the funding plan to a council committee Wednesday, and the intended timeline calls for formal consideration of the proposal by early August, with a public hearing Aug. 22 and a final council vote Aug. 29.
City officials are planning a public meeting on the plan for 6 p.m. July 21 at North High School.
The property tax increase and new development fees, if passed, would take effect Jan. 1.
Year to year, officials say, the city’s approach would meet evolving housing assistance and project needs under the guidance of a new 21-member advisory board that the mayor and council would appoint. It would include city officials, affordable housing wonks, developers and community members.
Denver is in a position of being able to increase property taxes without a new vote of the people because city voters approved 2012’s Measure 2A, which freed the city from the spending caps in the Taxpayer’s Bill of Rights. Hancock’s office has said it was considering an increase in the rate of up to 1 mill under the extra capacity that exists because of 2A.
At 0.5 mills, said deputy chief of staff Evan Dreyer, the tax hike would raise roughly half of the $155 million projected in the next decade for the housing fund, with the rest coming from the development fees. Those are expected to fluctuate with the city’s economy while property taxes grow steadily.
How affordable housing fund would work
Denver’s proposed housing fund would be the city’s first to have dedicated local funding sources. It would supplement state and federal programs that have supplied most of the subsidies the city has provided as loans and grants to help pay for projects by nonprofit and private developers and the Denver Housing Authority.- Dedicated income: Over 10 years, with some fluctuations based on the economy, roughly half of the estimated $155 million raised for the fund would come from an increased property tax rate and the other half from new development impact fees.
- Project support: The city will solicit proposals from nonprofit and for-profit developers for projects that would use city assistance, most often in the form of loans, to support income-restricted housing, most often apartments. The city’s proposal sets an 8 percent cap on administrative/overhead costs for overseeing the new fund.
- Who would qualify: Income restrictions on rental housing produced as part of the program would limit tenants to making 80 percent of the area median income, or $64,100 for a family of four at current limits. For-sale affordable housing typically is available for buyers who would be restricted to 100 percent of the median income, or $80,100 for a family of four. The new fund also could supplement federal funding the city uses for homeownership programs, which offers down-payment assistance or mortgage assistance for those making up to 120 percent of the median income, or $96,120 for a family of four. Within each income category, lower qualification limits apply to smaller households.
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