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Boulder’s affordable housing approach was once a trailblazer. Now, Denver is catching up.

When Gov. Jared Polis and Democratic allies sought to overhaul land use rules in the state last year in hopes of spurring more housing development they faced immediate blowback from municipalities intent on protecting their local control.

Seeking housing solutions

From the mountains to the prairies, Colorado’s housing crisis is squeezing state residents in ways that make drastic choices an all-too-common part of their cost-of-living calculus.

Click here to read more from this series.

But one Front Range city publicly supported that ultimately doomed legislation. That was Boulder, the college town and tech hub with a well-earned reputation for anti-development policies.

In Denver, some leaders eyed Polis’s proposal with cautious optimism. If other cities added more housing density it could take some of the pressure off the state capital where housing prices have exploded over the last decade driving gentrification in many of the city’s historically Black and Latino neighborhoods.

City Council President Jamie Torres did wonder how Polis’ reforms might impact Denver’s nascent Expanding Housing Affordability program.

The EHA took effect in July 2022 and is known in government parlance as an inclusionary zoning.

It requires developers of market-rate residential projects of 10 or more units to dedicate between 8% and 15% of those units as affordable housing for 99 years. Developers can opt out of building those units if they pay steep fees in lieu of construction — a minimum of $270,000 per unit — or directly negotiate other offsets with the city housing department.

Torres and the City Council didn’t have to wonder how the bill would interact with Denver’s approach for long.

The land use reform effort fell flat last spring. The sweeping package is now working its way back through the legislature in more bite-sized pieces. While that process plays out, Denver officials continue to wait for the EHA program to bear fruit and provide more options for people struggling to balance their housing costs and basic needs like food and health care. City planning officials contacted for this story said they did not have data showing how many new affordable units have been created under the EHA policy.

Meanwhile, Boulder — among the first cities in the country to enact an inclusionary housing ordinance in 2000, according to city officials — has continued to refine its requirements. The city increased its demands on market-rate projects in 2018, now mandating developers provide at least 25% of units as affordable housing, pay cash in lieu of construction into the city’s affordable housing fund or provide other offsets.

The two communities have starkly different housing landscapes but share one feature in common: they are pricing out low- and middle-income residents.

Boulder’s experience with inclusionary housing provides a glimpse of how those mandates can play an important role in shaping a city’s housing market. But it also demonstrates the limitations of the approach when even market-rate construction does keep up with demand.

“Sometimes these problems can feel overwhelming,” Boulder Mayor Aaron Brockett said of the housing crisis. “But every single unit of affordable housing is making an enormous difference for the family living there.”

Successes — and limits — of Boulder’s policy

Boulder tracks its affordable housing stock on an online dashboard. Denver is working to launch one of its own soon to track the EHA policy’s progress, city planning officials say.

According to Boulder’s data, 8.3% of all housing in the city was permanently affordable as of 2022. That’s 3,946 apartments, townhomes, and other housing types in a city of roughly 105,000 people, according to the U.S. Census Bureau.

Boulder’s goal is to reach a point where 15% of its housing stock is permanently affordable. It’s a moving target, officials acknowledge.

Not all of those affordable homes were created under the inclusionary housing ordinance but the policy is a cornerstone of the city’s efforts. Boulder’s policy is tilted in the opposite direction of Denver. Fees in lieu of construction are low, maxing out at $47 per square foot for most projects. That adds up to less than $40,000 to opt out of building an 800-square-foot apartment. Naturally, paying those fees is far and away the option developers prefer.

Cash coming into the city’s affordable housing fund provides flexibility, Brockett said.

“Take the typical 100-unit development; we could get 25 units on site” Brockett said. “With cash on lieu, we are able to leverage that up to 30 to 40 (affordable) units.”

The city’s primary partner for delivering those affordable projects is the local housing authority, Boulder Housing Partners. The organization taps into federal low-income housing tax credits and other funding tools to finance development but the city’s support is critical to filling in the gaps, said Jeremy Durham, the organization’s executive director.

“I don’t think it’s possible to build in Boulder without substantial local investment just because of how expensive it is to build in this community,” he said.

Boulder Housing Partners currently has 1,597 permanently affordable units in its portfolio, Durham said. City inclusionary housing funds contributed to 64% of those.

Rebecca Herr lives in a Boulder Housing Partners building, the Canyon Pointe apartments for seniors on the western end of Walnut Street. The building was built in 1979 before the inclusionary housing ordinance.

Herr, 68, made sacrifices to live in Boulder for the last 50 years even as she watched working-class friends move to more affordable communities. She didn’t travel beyond camping or wringing an extra day out of work trips with her daughter. She visited food banks when necessary.

By her count, she has lived in 27 places in the city since 1973.

“Every time the rent went up $100 or more a month, I had to move because my income never went up $100 a month or more,” Herr said. “I never had a chance to build wealth. I just paid for my right to stay here.”

Finally, in December 2022 after months of waiting and dozens of emails to the property manager, Herr was selected from a pool of applicants and moved into her apartment at Canyon Pointe. She pays $462 per month, one-third of her monthly Social Security income. Her apartment is close to a senior center. She has a view of the mountains. She can finally breathe and focus on things she enjoys like camping trips or leading sign language classes for people with hearing loss like her.

“The Boulder plague has spread, you know, and it’s awful,” Herr said of the state’s affordable housing crisis on a recent afternoon. She gestured at her apartment. “If they can invest in more of these properties, there’s a need now that I don’t think there’s been in previous years and it can help bring things into balance.”

The ordinance’s ability to deliver for people living on the low end of Boulder’s housing spectrum meets a significant need, said Eric Budd, a housing activist and part of the leadership for the Boulder Progressives organization. But it is tied to deliveries of market-rate housing and adds costs for developers who already struggle with the city’s market conditions.

Meanwhile, little housing is available to middle-income earners, driving them to the periphery of town or to other communities they have to commute from. Budd wants to see more housing built in Boulder, period.

“The higher and higher you make those (inclusionary housing) fees the less and less market-rate housing you’re going to get,” Budd said. “I think an argument could be made at 25% Boulder is too high. It’s stifling those market-rate units.”

The Boulder City Council considered lowering requirements for for-sale projects in its latest updates to the ordinance language in hopes of spurring more on-site construction of permanently affordable middle-income units, said Sloane Walbert, Boulder’s inclusionary housing program manager. Leaders ultimately decided against that change based on projections the lower requirements would not generate enough new affordable middle-income housing — units priced at 100 to 120% of the area median income — to offset the loss of housing fund revenue.

As Denver program percolates, renters hang on

The construction industry was sounding the alarm that inclusionary housing rules would add costs and drag down new construction deliveries in Denver before the City Council adopted the EHA policy in 2022.

But Robin Kniech, the former three-term city councilwoman who was a driving force behind the legislation, didn’t agree then and doesn’t agree now. Kniech said the research she reviewed while working on the ordinance reinforced her view that including affordable units in projects was a manageable cost to developers.

“Seat belts add costs to cars but we decided that it’s worth it,” she said.

But so far, Denver doesn’t have much to show for the policy it enacted almost two years ago largely because developers rushed to beat the clock and avoid the new regulations and the planning department is still working through that backlog.

As outlined in a presentation to the City Council’s land use, transportation and infrastructure committee in February, developers submitted 261 conceptual-level project plans in the three months before the EHA policy took effect. That is about two-and-half times the median number of plans submitted to the city in an average three-month period, according to Emily Collins, the city’s EHA program administrator.

Collins’ presentation also showed a slowdown in new submittals since the EHA program was enacted. There were 258 new submittals in all of 2023, down from 446 in 2021.

Kniech points to the many other factors weighing on development in the post-COVID-19 world  — persistently high interest rates, higher-than-ever construction costs and finite land. She and city planners predicted there would be a rush to seek permits ahead of the policy’s effective date followed by a lull. It will take time for the market to adjust and return to a normal cadence.

“We had a Super Bowl extravaganza. (Developers) were taking every piece of land and every financing package available,” Kneich said. “So have apartment permits slowed? Yes. We told you they would as they have in every city after that initial binge.”

Large projects — like a massive redevelopment planned for the parking lots around Ball Arena — and rezoning of other parcels around town to make way for future multifamily projects are signs of big things to come, Kniech says.

Many developers do not share the former councilwoman’s optimism. They include David Zucker, the co-founder and CEO of Zocalo Community Development and former chair of the State Housing Board.

His company builds high-end market-rate developments, fully affordable tax credit projects and mixed-income projects. The firm’s Weathervane development is on pace to deliver 317 new apartments — including 80 income-restricted affordable units — in east Boulder over the next few months.

Zucker’s concern with Denver’s policy — and inclusionary housing in general — is that a fixed set of demands on development that doesn’t account for other shifts in market forces is enough to undo projects before they even begin. By his estimate, construction hard costs — already rising sharply before COVID — have gone up 40% in just the last two years. Interest rates have increased tenfold.

In accordance with the state law that opened the door for Denver’s EHA program, the city offers incentives to offset including affordable housing in projects. Those include reduced parking requirements, cheaper permits and exemption to affordable housing linkage fees on any commercial space in the project. But those savings aren’t enough to offset soaring construction costs and an extremely challenging financing market, Zucker said.

“It is likely that we will be in an era of higher interest rates for what could be years and if that’s the case, it’s that much more difficult to deliver affordable housing of any type and especially EHA if it’s riding the coattails of market-rate development,” he said.

Zucker praised the permitting fast lane that Denver has created for fully affordable projects, but the city’s stubbornly inefficient project review timelines are another burden that must be ironed out if the city wants to get the most out of its affordable housing efforts, he said.

The same goes for Boulder. Zucker estimated that the city’s review and permitting processes added tens of thousands of dollars per unit to the cost of the Weathervane project.

While developers and city officials adjust to Denver’s new regulatory world, many renters are hanging on by a thread.

In northeast Denver, Kayla Greathouse is weighing her options as she falls further behind in rent.

Greathouse moved out of an income-restricted townhouse in 2021 to rent a bigger four-bedroom, 2.5-bath house in Green Valley Ranch. It’s space enough for her, her two children, her nephew, and her mother.

But her rent has steadily climbed. She now pays $2,800 per month when accounting for rent and fees.

Greathouse was laid off from her job with the U.S. Small Business Administration in September and has been living off $610 in weekly unemployment since. It’s not enough to cover her housing let alone food and other essentials. She is hoping to receive rental assistance but has yet to be approved.

“It’s scary,” Greathouse said. “Who wants to get put out? Then you have to start all over again.”

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Updated March 11, 2023, at 5:30 p.m. Because of an error by a reporter, this story originally mischaracterized Boulder’s recent consideration of changing the percentages of affordable housing requirements. The City Council considered lowering the requirements for for-sale projects in hopes of encouraging developers to build more affordable middle-income housing.

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