Frequently Asked Questions (FAQs)
PERMANENT FUND FOR AFFORDABLE HOUSING IN DENVER
>> How do Denver’s property tax rates compare throughout the metro area?
Denver’s property tax rates are considered competitive compared to surrounding jurisdictions:
>> Would this property tax rate make Denver higher than the national average? How would Denver’s residential property tax rates compare to the largest U.S. cities?
Denver’s rate would remain very competitive.
>> Do other cities in the metro area impose impact fees?
Yes, such development or impact fees are actually quite common as a source of revenue for jurisdictions across the Denver metro area, funding public investments as affordable housing, transportation, parks and public schools. The application of such fees varies by development type—single-family or duplex properties, multi-family buildings, non-residential or commercial uses, or mixed-use projects:
>> But won’t fees on development impact harm Denver’s economic boom, driving developers elsewhere?
We firmly believe that this impact fee will not impede development. Extensive analyses have gone into what revenue sources Denver could consider, and at what rate. We know that this fee, which is by no means unique, would be among the lowest in the country. And it doesn’t take an economist to know that development overall, especially the kind Denver has experienced in the past five years, drives the demand for housing. So we think linking development to affordable housing is appropriate.
>> Was this process rushed, with revenue sources defined arbitrarily?
Not at all. We spent a year working openly with the stakeholders, experts, consultants, and the public to arrive at what we genuinely believe is a fair and balanced proposal. No one we have heard from or worked with questions the pressing need for Denver to better address its housing affordability challenge. The call for action is universal among all interest groups, perhaps most vocally among private citizens themselves.
>> How did this become a local revenue issue? I thought the federal government provided public dollars for low-income housing.
That has been the case for decades, although federal dollars coming to local communities have been shrinking steadily. Denver’s annual allocation from the U.S. Department of Housing and Urban Development (HUD) has dropped by more than a third since 2010. Many observers predict that the federal funding will never again match the peak levels of six years ago (when the country was struggling to rise from the recession). Like many other cities, Denver realizes that it must reduce its reliance on Congress and create better local solutions for housing needs.
>> What would happen to Denver’s Inclusionary Housing Ordinance, which has required residential developers of projects of more than 30 units to include affordable units, either through onsite building, an off-site alternative resolution creating affordable housing, or a cash in lieu payment?
If adopted by Denver City Council, this new resolution would actually replace the IHO, which would no longer be in effect as of January 1, 2017. After that date, with this permanent fund in effect, an individual new-construction residential project would actually bring less revenue than under the IHO, but this new fund’s “fair share” approach significantly broadens the responsibility for affordable housing overall—not simply placing the burden solely on developers of new residential units but to everyone on a much wider spectrum, including every Denver homeowner and commercial interests of all kinds.
>> Is it fair to ask lower-income, working families who struggle to make their mortgage payment as it is to contribute to this fund through property taxes?
Under this proposal, the property tax impact annually on a house worth $300,000 is expected to be about $12 over a year--literally, $1 a month. For houses with a lower value, obviously the tax is lower as well. We know that working homeowners appreciate that there are community residents who are less fortunate, facing rising rents and housing instability. This proposal asks that anyone who owns a residence in Denver, or who owns or develops commercial property, share together in the burden of affordable housing costs so that a safe, decent place to live can be possible for all Denver residents.
>> What innovations does the Denver Office of Economic Development (OED) have planned with the implementation of this fund?
As the fund program manager, OED plans to streamline investments and create competitive application cycles; transition from rolling applications to a semi-annual competitive application aligned with the Colorado Housing Finance Authority (CHFA) tax credit application and allocation; create an online shared application for Low-Income Housing Tax Credit developments so developers only have to apply to CHFA, the Colorado Division of Housing and OED once and each entity can evaluate such applications simultaneously, reducing the time to approval; create a Request for Proposal process to invite, incentivize new and innovative ideas from the development community to address Denver’s housing needs; and develop term sheets posted online to provide transparency for internal and external housing stakeholders in how OED housing investments will be evaluated.
>> What other affordable housing policies is the city exploring for the creation of housing?
Some strategies to advance affordability are not allowed in Colorado, such as rent control or requiring market rate apartment buildings to set aside a portion of their units as affordable even without a city subsidy. However, there are many other strategies Denver is already pursuing, in addition to the new Fund: (a) a right of first refusal to purchase any expiring affordable rental projects to facilitate preservation; (b) down payment assistance and tax credits for moderate-income homeowners--find more information at https://www.denvergov.org/content/denvergov/en/denver-office-of-economic-development/housing-neighborhoods/ready-to-buy.html; (c) using revolving loans to finance affordable housing so that funds come back to the city for future investment; (d) leveraging the savings from jail and hospital visits to pay for the supportive services that help homeless individuals successfully stay housed; (e) providing incentives for unsubsidized (market) affordable housing to remain available for low- and moderate-income families; and (f) acquiring vacant and publicly owned land throughout the city, but especially in neighborhoods vulnerable to gentrification, to reserve for future affordable housing development. We will continue to work to identify new policy tools.
>> Are we requiring affordable housing in projects receiving public subsidies, like tax increment financing (TIF)?
While Denver does not have a formal policy on the inclusion of affordable housing on TIF projects, affordable housing is a high priority for the City and for the Denver Urban Renewal Authority that administers TIF for Denver. Most TIF projects do offer affordable housing. Recent examples include the redevelopment of the former University of Colorado Health Sciences Center (10th and Colorado Blvd), the redevelopment of the former St. Anthony’s Hospital site (W. Colfax), and the mixed condo/townhome project underway at 2460 Welton.
>> How are people protected from inefficient developers if there is a cap on construction defects?
Denver passed an ordinance limiting the ways our building codes can be used in litigation in situations where no harm has occurred, and to ensure owners of condominium complexes have notice before their units are engaged in litigation. But nothing in these changes limits the ability of a homeowner from seeking redress from the builder of their unit to correct damages resulting from improper construction according to the provisions of their condo agreement, whether that process is through the courts or through arbitration.
>> Could this new fund be used to finance the development of land trusts that hold a large group of homes affordable over a period of time even when the owners change?
Yes. The new funds could be used on a variety of affordable housing tools, including land banking until land can be developed for affordable housing, financing the construction of new housing, preserving existing housing, or other innovative tools like land trusts.
>> Can Denver create density bonuses so new development creates affordable housing?
Density bonuses are intended to trade additional height on new buildings in exchange for adding affordable units; they have had mixed success in those cities with such policies in place. In some Denver neighborhoods like downtown, where there are no or very high height limits already, a density bonus would not be possible. In other places, additional height doesn’t make sense under the city’s overall land use and zoning code, so the density bonus also wouldn’t work in there, either. However, for the remaining areas, where more height is possible but hasn’t yet been granted, the city is exploring the potential for piloting a density bonus near a transit station in a quickly developing area near downtown, and hopes to have a final proposal later this year.
>> Who will be eligible for the new affordable housing built with these funds?
Each housing development receiving these funds will have specific income limits, and families will have to demonstrate they earn less than the income limits for the particular housing to qualify. Developers will be required to comply with federal Fair Housing Law with regard to advertising housing and not discriminate in the selection of tenants. Overall, the city intends to invest in a range of housing at different income levels: rental housing for families earning between 0% and 80% of Area Median Income (AMI) ($64,100 for a family of 4), and for-sale housing for families earning 100% of AMI ($80,100 for a family of 4).
>> Will there be any preference for any specific group of people to be able to live in the new affordable housing built with these funds?
Federal Fair Housing Law provides strong protections against discrimination in renting or selling housing. These laws are intended to protect against discrimination on the basis of age, race, etc. In order to protect against discrimination, Fair Housing mostly prohibits providing preferences to one group over another, because of the risk of discriminatory impacts, except in very narrow circumstances outlined in federal rules. Preferences can be allowed for some vulnerable groups like veterans, the homeless, or senior/disabled if a building is designed or a unit is designated for that population and certain criteria are met, but beyond that, residency preferences are generally not allowed.
>> What can be done about the long waiting lists for housing?
Waiting lists are long right now because there is a shortage of units and a significant demand for affordable housing. The city does not build or own affordable housing directly. Instead, we invest in housing built by Denver Housing Authority (a quasi-governmental housing entity), nonprofits, or other affordable housing developers. Each housing owner controls and determines their own wait list procedures and rules.
>> Why are landlords not accepting Housing Choice vouchers?
Most housing vouchers are tied to federal programs with guidelines establishing maximum rents where vouchers can be used. Market rents in many buildings in Denver are higher than the maximum rents that the federal guidelines allow, and landlords are reluctant to lower their rents to be able to accept vouchers. Other landlords may not be willing to meet other program requirements, like inspections, even if their rents are low enough to qualify. Historically, vouchers become easier to use when economies slow down and landlords have more competition to fill apartments. Meanwhile, Denver is part of a Metropolitan Mayor’s Caucus initiative working to increase the number of landlords willing to accept vouchers, especially for our most vulnerable residents such as veterans, by providing extra insurance and financial incentives.
>> Can the city control rent in the private market, or prevent landlords from raising the rent on current residents?
The State of Colorado has a prohibition on “rent control” that prevents the city from passing laws to keep rents at a certain level. We can only restrict the rent on apartments that receive public funds, which is why having additional funds to invest in more homes is important to providing more affordable housing.
>> How is the City helping existing homeowners stay in their homes?
Denver has a property tax rebate program to help low-income senior citizens and disabled residents get a portion of their property tax back after it is paid. The program is available to homeowners and renters (who pay property tax through their rents). Find more information about the property tax rebate program and apply at https://www.denvergov.org/content/denvergov/en/treasury-division/property-taxes/refund-payment-to-seniors-and-disabled.html. Denver also funds the Denver Urban Renewal Authority (DURA) to provide low-interest loans for home improvements needed for life and safety, with no payment requirements until sale of the home. Find more information about DURA’s single family rehab program and apply at http://www.renewdenver.org/housing-rehabilitation/single-family-rehab-loan-program.html.
>> Can Denver stop out-of-state investors from buying properties here?
No. The U.S. Constitution prohibits governments from stopping investment or commerce from crossing state borders in most circumstances. In addition, out-of-state investors are also investing in and building some of the new affordable housing coming into Denver, in some cases helping to solve the challenge alongside our local developers and programs.
>> What is the definition of affordable housing?
The national standard, as defined by the United States Department of Housing and Urban Development (HUD), is that a home is “affordable” to a family if they are spending no more than 30% of their income on the rent or mortgage. Denver’s proposed fund is intended to provide rental housing to families earning from 0% and 80% of Area Median Income (AMI) ($64,100 for a family of 4), including permanent supportive housing for the homeless, low-income rental housing, workforce rental housing, and for-sale housing for families earning less than 100% of AMI ($80,100 for a family of 4). HUD provides standards that are updated annually for the maximum rent, or mortgage, a family can afford based on their income, in order to ensure they aren’t spending more than 30% on housing. These prices are adjusted for unit bedrooms. The 2016 standards are available here.
>> How many people are currently in need of affordable housing?
There is no data source that can count every family in need of affordable housing in a dynamic city where people are moving in, and some are moving out, every day. We know that more than 80,000 families earning less than 80% of Area Median Income ($64,100 for a family of 4) are paying more than 30% of their income for housing, which means they’re at risk of losing their housing or sacrificing other necessary expenses.
>> How much do you need to make hourly to be able to afford to live in Denver?
To be able to live modestly in Denver, the Colorado Fiscal Policy Institute estimates that a single individual would need to earn $28,829 per year. That translates to $555 a week or $13.88 an hour for a 40-hour per week worker. Workers earning less than $13.88 per hour might work more hours at a job or multiple jobs to make ends meet in Denver, especially if they are supporting additional family members. The median wage in Denver--the level at which half make more and half make less--is $19.41 an hour. Find the Colorado Fiscal Policy Institute’s full analysis of Denver wages and cost of living here: http://www.coloradofiscal.org/wp-content/uploads/2015/05/Denver-Cost-of-Living-and-Wages-Issue-Brief-5-18-15.pdf.
>> What about communities who are being involuntarily displaced?
The city recently completed a gentrification and displacement study to help us understand the changes underway in some of the Denver neighborhoods experiencing rapid demographic change, and to help identify which neighborhoods are next at greatest risk. The study outlines many strategies for avoiding displacement when new investment comes to a previously low-income area. One intention of the new fund is to be able to invest proactively in creation or preservation of affordable housing in neighborhoods at risk of, or already experiencing, displacement to improve the chances that low and moderate-income families can afford to stay and have new, safe housing options available.