Denver needs more affordable housing not just for those with the lowest incomes, but also for teachers, firefighters, restaurant workers—people who make our city the great place we all love. This is an issue that affects all of us, and as a city we can do more and do better to address the housing needs of all residents. For the last few months, city staff, local partners, and members of the community have been working to develop a draft policy approach that will be refined based on public comments received.
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Download draft policy approach(PDF, 2MB)
Timeline and Next Steps
City staff will compile and synthesize all comments received by December 31, 2021, and identify areas for needed refinements. A revised policy approach, including the specific proposed changes to the Denver Zoning Code (DZC), Denver Revised Municipal Code (DRMC), and Rules and Regulations (R&R) will be released for community review in early 2022.
The legislative review process, which includes public hearing before City Council and Planning Board, will begin in spring 2022.
Denver City Council is expected to consider this proposal in spring 2022. This proposal must be adopted by Denver City Council before it will become effective.
The proposal balances the immediate need for affordable units with the need to provide adequate time for existing projects to move through development permitting under today’s regulations and linkage fee schedules. As such, it includes the following provisions:
Projects under Site Development Plan (SDP) review could continue under existing rules if they have a:
Additional flexibility is proposed for projects that have longer required review procedures under Large Development Review (LDR) or subdivision rules.
Projects under residential review (one to two units, small additions, etc.) could continue under existing rules if they have a:
building permit submitted by June 30, 2022, and have paid all applicable plan review fees;
AND a building permit approved and issued by December 30, 2022 (6-month window).
- The city is proposing to apply a mandatory affordable housing requirement to new residential developments of 8 or more units to ensure that as new residential buildings are added, so are new affordable homes. This will provide much-needed new workforce housing options in Denver.
- Understanding that these policies will have an impact on home builders, the proposal includes zoning and financial incentives, such as flexible parking requirements or permit fee reductions, to help partially offset costs and encourage more affordable housing.
- Finally, for construction that is not affected by the mandatory affordable housing requirement proposed above (commercial development and residential development of 7 or fewer units), the proposal includes an increase to the linkage fee to support the creation of future affordable housing. The proposed fee increase will bring Denver more in line with other cities along the Front Range and nationally.
- Importantly, the proposal considers that these tools should be applied in a way that reflects the different market conditions in the city.
Why this is the right approach
|Project Guiding Principles
||Key Goals of Proposed Policy Approach
|An equitable program that addresses housing needs for residents and families with low moderate incomes in every Denver neighborhood.
- An increase to the linkage fee would provide greater support for the city’s affordable housing fund, which prioritizes housing for residents with the highest need.
- Requiring affordable housing units on site for developments of 8 units or more encourages the construction of more units and more mixed-use developments, supporting moderate-income housing needs.
|A predictable program that provides clarity and transparency of process, requirements and outcomes.
- Proposal sets clear and predictable requirements and provides clarity of outcomes to the development industry and the community.
|A market-based program that responds to varied market conditions and partnership opportunities.
- Proposal was informed by financial feasibility analysis.
- Alternatives and incentives provide flexibility while still addressing key housing needs.
- How the tools are applied will reflect different market conditions in Denver.
This effort is considering three tools--described below--to increase the supply of affordable housing, create a more inclusive and equitable community, and take advantage of current and planned transit investments. These tools use the private development market to produce and fund affordable housing. As such, they must respond to market demands and remain financially feasible.
To learn more about the city's housing priorities and programs, and for more on market conditions, housing production, and funding, visit Housing an inclusive Denver and the Denver Affordable Housing Dashboard.
What it is: A fee paid by all new development to support Denver's affordable housing fund.
What the project will do: Consider increasing the existing fee to reflect market conditions and bring in more funds for affordable housing.
What it is: A policy that requires new residential development to include affordable units. Due to a change in state law in spring 2021, cities across Colorado now have more flexibility to establish inclusionary policies.
What the project will do: Examine how this policy could be used in Denver for both for-sale and rental housing.
What it is: A policy that provides incentives to projects--such as taller buildings, less parking, lower fees--in exchange for adding affordable housing units. Incentives can also be a part of an inclusionary housing program to offset the cost of providing affordable units.
What the project will do: Create zoning incentives that can be applied across the city, focused on areas with easy access to public transit.
Housing is considered affordable when a resident or family spends no more than 30 percent of their income on where they live. But as a policy, affordable housing isn’t just about who can pay their rent. It also affects the local workforce and the economy. Below we address common questions about affordable housing and why it matters. We also define common terms related to affordable housing policy so that everyone can participate in this important conversation.
What is affordable housing?
Housing is considered affordable when no more than 30 percent of a person or family’s income covers the rent or mortgage. This leaves money for other necessities like food, healthcare, transportation, education, childcare and savings.
There are two types of affordable housing.
Dedicated affordable housing units - These are usually created through public assistance and public-private partnerships. They are essential for ensuring affordability in neighborhoods where market rents are rising rapidly. They are also well suited to create inclusive communities and provide affordable housing to households with very low incomes. There is commonly a deed restriction or other regulating mechanism that keeps the rent or sale price low and ensures the cost remains affordable over a period of time. This project will focus on increasing the supply of dedicated affordable units.
Naturally occurring affordable units - These are units that may rent or sell at affordable levels, but are not legally required to stay at a certain price and may grow unaffordable over time. These units are commonly provided by the private sector. Examples include older apartments that have not been remodeled or refurbished. These units become less affordable when housing prices increase because there is more demand. Additionally, they can also be redeveloped into more expensive units that are no longer affordable.
Why is affordable housing important?
As housing costs go up, more families in Denver are spending more of their budgets on where they live or finding themselves priced out of neighborhoods. Citywide plans and policy documents reflect this need and call for new tools to create more housing opportunities.
Additionally, when housing is unaffordable, we see the following things happen:
- Individuals and families are forced to leave their homes and neighborhoods
- Pre-existing inequities get worse when low-income individuals or families can’t live in areas with good access to jobs, multi-modal transportation, parks and other amenities.
- Less money flows into the local economy. This is because when a greater portion of people’s incomes goes into housing costs, less money is left over for other types of spending that can support the local economy.
- Economic growth within the region slows as employers cannot find workers who can afford to live close to their jobs.
- Traffic becomes more congested and public infrastructure costs grow as workers live further away from jobs.
What is AMI and why does it matter?
Area Median Income (AMI) is a measure that helps determine whether a person or family is eligible to rent or buy an income-restricted apartment or house. AMI thresholds are adjusted by the number of people in a household and vary by location. This allows income-restricted housing programs to determine eligibility using income levels that make sense for the area.
For example, the average income for a two-person household in Pitkin County is $88,400. This would be referred to as 100% AMI in Pitkin County. In Trinidad, Colorado, 100% AMI for the same size household is $56,200.
Instead of thinking about AMI as a table of numbers, it’s important to understand that these categories represent people with jobs working in a range of professions who are supporting a range of household sizes.
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Do inclusionary housing policies increase overall housing prices?
Research on the impact of these policies on housing prices and production is mixed. The outcomes depend on what the policy does and on the housing market. Evidence suggests that strong housing markets can make it easier for developers to contribute below-market units or units that more people can afford. When calibrated properly to the market, these policies have not driven up housing costs. Additionally, combining requirements with other incentives such as additional stories, lower fees, and flexible parking requirements can off-set the cost of providing affordable units.
Do inclusionary housing policies slow down housing development?
The pace of housing development depends on numerous factors including population and employment growth, available capital, available land, and developer capacity, among others. An analysis of the permit activity in cities similar to Denver found that permits increase prior to adoption of inclusionary housing policies, decline shortly after adoption, and return to pre-adoption levels typically within one year.
What types of incomes and household types are served by these tools?
Market based tools are best set-up to serve low- to moderate-income individuals and families. For Denver, these are households with incomes between $40,000 and $80,000. These tools are best set up when they complement other programs. Housing for extremely low to very low income households, residents transitioning out of homelessness, and residents with special needs is typically provided by public and nonprofit organizations. That type of housing requires a significant subsidy. In this process, we will further refine the income levels served by these tools.
Does building only market-rate units create more affordability?
Market-rate housing production tends to be associated with higher rental costs in the short run—and lower median rents in the long run. Both market-rate and affordable housing development can contribute to affordability, but subsidized units have a higher and much more immediate impact.
In places with strong housing markets, older market-rate housing becoming more affordable as new units are built happens slowly. It can take decades before those units become affordable for low income households.
Who lives in the units created through inclusionary housing policies?
Inclusionary housing polices tend to target households that earn 60 percent to 120 percent of the area median income. These can be successful in creating workforce housing (the type of housing that is affordable for a range of jobs such as teachers or firefighters) in communities where the cost of living high.
Inclusionary housing is a useful mechanism to give residents the opportunity to stay in their communities and benefit from the amenities and economic opportunities brought by investment. In addition to increasing the amount of affordable housing, these policies can create more mixed-income communities. Research on the effectiveness of inclusionary housing at improving economic opportunity generally finds that these policies increase access to economic opportunities for low income households.
Is inclusionary housing the same as rent control?
Rent control is a cap on rent increases that applies to rental units owned and operated by the private sector. Inclusionary housing takes many forms but generally applies only to a portion of newly built units. It is often at least partially offset by additional stories, fee waivers, and parking reductions. Inclusionary housing also allows rents to move with household income increases.
Where will the zoning incentive for taller buildings apply?
The city’s plans call for creating more housing opportunities that more people can afford in areas near train stations and bus stops. We will also consider using potential incentives in regional and community centers and corridors, where multi-family and mixed-use development is appropriate and where people can live near jobs and amenities. Through this process we will work with the community to decide where it makes the most sense.
Why has housing become unaffordable?
Rising housing costs cannot be attributed to one single issue. They are a result of many different economic factors locally and globally. For example, in recent years, labor and material costs have grown by more than 50 percent. Land costs have doubled in many of Denver’s neighborhoods. Investors have sold homes they rented to new homebuyers displacing renters.
For many in Denver, this means that wages and incomes have significantly lagged increases in housing costs. As Denver looks toward the future, it will have trouble providing housing to its growing workforce in critical industries without creating affordable housing.
Comparing increases in rent, home value and income
Between 2021 and 2019, median rent increased 77 percent, median home value increased 79 percent and the median income for a 2-person household increased 32 percent.
Will these tools serve those experiencing homelessness?
Programs serving individuals and families with very low incomes require significant public assistance funding or subsidy. This would include those who make less than 30 percent of the average income and those experiencing homelessness. Incentives and inclusionary tools serve moderate and workforce housing needs, but the linkage fee can provide increased revenue to meet the needs of our most vulnerable through the creation and preservation of new housing, along with the necessary services to support those individuals and families. Additionally, if these tools are adopted, they can alleviate current HOST resources serving higher incomes and enable resources to be re-prioritized to areas with the greatest housing need.
How does state law impact the proposed program requirements?
This spring, the Colorado General Assembly passed House Bill 21-1117, which allowed Denver and other communities across the state to require affordable housing on all new for-sale and for-rent housing. Specifically, the bill enables “local governments to regulate the use of land to promote the construction of new affordable housing units.”
As such, the city’s draft proposal will only apply to the construction of new housing units. The bill also requires a “choice of options… and creates one or more alternatives to the construction of new affordable housing units on site.” The draft proposal provides a clear fee-in-lieu to the construction of affordable housing on-site and provides for other negotiated alternatives.
Additionally, the law requires that local governments demonstrate their commitment to “increase the overall number and density of housing units… or create incentives to the construction of affordable housing units.” The proposal provides additional incentives to promote the construction of both market rate and affordable housing units.
How does this program fit into the City’s approach to meeting Denver’s Housing needs?
The Expanding Housing Affordability program is designed to be complementary to the Department of Housing Stability’s (HOST)’s efforts across the spectrum of housing needs. The mandatory housing component of the program is designed to work within the market to produce a modest yet consistent contribution of affordable for-rent and for-sale units, in mixed-income development throughout the City, including high opportunity neighborhoods. Creating truly mixed-income communities by integrating affordable homes into market-rate developments is an outcome that has proven challenging for HOST to achieve historically given limitations of state law and funding sources. The mandatory housing program anticipated for adoption in 2022 will change that!
The linkage fee remains a critical funding source for HOST’s program, particularly toward the creation of new affordable homes. By increasing linkage fees, again within what the market can feasibly absorb, this crucial and flexible capital resource will continue to provide much needed funding that HOST can use to leverage private resources and maximize its production of much needed affordable housing.
How will we ensure that units remain affordable for the long term?
The draft proposal sets a 99-year affordability requirement for the income restricted units. This will ensure that these homes remain affordable for generations to come. HOST staff will work proactively with property owners and managers, providing support and technical assistance as needed to ensure ongoing compliance through consistent and reasonable reporting requirements.
How are the rent or sale prices for the affordable homes set?
HOST will post a table showing maximum allowable rents and sales prices for affordable each year on its website. The maximum allowable rents/prices at applicable area median income (AMI) thresholds, are calculated based upon a presumed household applying no more than thirty percent (30%) of its monthly gross income from all sources to a housing payments, including utilities.
How are linkage fee funds used?
Per Denver Revised Municipal Code Section 27-150(b), revenues from the linkage fee must be used exclusively for increasing the supply of affordable rental and for-sale housing, including renter and homebuyer assistance programs, for households earning eighty percent or less of AMI.
Cost Burdened: Refers to those who pay more than 30 percent of their income for housing and may have difficulty affording necessities such as food, clothing, transportation, and medical care.
Extremely Cost Burdened: Refers to those who pay more than 50 percent of their income for housing and may have difficulty affording necessities such as food, clothing, transportation, and medical care. Additionally, they may be at high risk of displacement.
Change in cost burden
Among renters earning between $35,000 and $50,000 annually (40-60% AMI):
- In 2010, four out of ten were cost burdened.
- In 2019, eight out of ten were cost burdened.
Among renters earning between $50,000 and $75,000 annually (60-100% AMI):
- In 2010, one out of ten was cost burdened.
- In 2019, four out of ten were cost burdened.
Housing Continuum: The spectrum of all possible housing conditions one might experience – from homelessness to seeking affordable and workforce rental housing to attainable homeownership.
Strong Housing Market: The housing market is considered "strong" when there is a lot of demand (people looking to rent or buy) and a lot of supply (new housing getting built). A good housing market provides a good opportunity to use market-based tools, like the three being studied as part of this project, to encourage the creation of more affordable housing.