Denver City Council gave final approval Monday to the creation of a new special revenue fund to hold fee-in-lieu dollars paid to the city as part of its Expanding Housing Affordability Guidelines.
The Mandatory Affordable Housing Fee-In-Lieu Fund will hold money developers pay to the city should they decide not to build affordable housing on that site. The fund is designated to create additional affordable housing throughout the city.
Council approved the housing affordability program in early June, which requires that a certain amount of affordable units be developed alongside market-rate condos and apartments, with zoning and financial incentives included as well.
City officials are pursuing the strategy amid an acute shortage of housing units in metro Denver and elsewhere in the state. One report says the state is nearly 200,000 units behind population housing needs, and the deficit is projected to reach more than 500,000 units by 2031. The city is also struggling to shore up its permitting process, which is struggling with delays. Indeed, the amount of time it’s taking Denver to approve building permits has grown exponentially in recent months, in some cases over a year, a situation that is only exacerbating the metro's housing woes.
Under the Mandatory Affordable Housing Fee-In-Lieu program, builders can either build more affordably priced units as part of any construction or pay a fee to offset construction of affordable units elsewhere. Supporters call such programs as inclusionary housing policies.
This applies to new developments of 10 units or more, regardless if it’s residential or non-residential. If the new construction is less than 10 units, builders will pay a one-time linkage fee to go toward the city’s Affordable Housing Fund, unless the development already includes affordable housing.
The guidelines require that 8% of a project’s units be priced to serve those who fall into the 60% of area median income for apartments and 80% of AMI for ownership units. Builders can price units closer to market price in exchange for building 12% of their units as affordable.
No council members called out the bill establishing the fund for a vote or discussion, so it passed unanimously in a block vote.
Builders and realtors earlier expressed doubts whether those plans will help or hurt housing in the neighborhoods that were disrupted the most by the pandemic and whether the proposed guidelines will actually deliver more affordable and workforce housing.
On March 14, a group of 25 builders, developers and real estate groups wrote the city’s Community Planning and Development staff, asking whether some of the proposed measures would prove counterproductive in renewing the vitality of the city's central neighborhoods.
Builders privately also expressed concerns that the city’s processing time for permits had slid considerably over the course of the pandemic, and that a rush of new development plans timed to beat the guidelines would create an even greater load.
Officials who signed the letter warned that more stringent requirements for areas defined as “high markets” could actually have the opposite effect — steering developers away from projects in parts of the city that need them most. Those groups included the Denver Metro Chamber of Commerce, Cherry Creek Area Business Alliance, Denver Metro Association of Realtors, Urban Land Institute, and developers L. C. Fulenwider and McWhinney.
Mark Samuelson contributed in this report.
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