overcoming barriers to affordable housing in colorado · other costs are rising across the board...

October 2016

Overcoming Barriers to Affordable Housing in Colorado Creative solutions for developers, public officials and housing advocates

Colorado

Colorado

contents

Writer: Eric Peterson

Introduction 3

Who Cares, and Why? 4

How This Report Came to Be 4

GettingtoSolutions 5

PeerCity#1:Portland 6

CaseStudy:RedOakPark 9

PeerCity#2:Austin 10

PreservationStrategies 11

CaseStudy:AriaDenver 13

PeerCity#3:Boston 14

BestPractices 15

CaseStudy:PeakOne,Frisco 16

Outside-the-boxStrategies 17

What’sNext? 18

Glossary 19

EricisaDenver-basedwriterspecializinginbusinessandtravelwriting.He'swrittenaboutmusic for Westword,skiingfortheNew York Daily News,andrealestatefor Building Dialoguemagazine,whileauthoringdozensofguidebooksforFrommer'sTravelGuidesandhisownRambleGuidesseries.He'salsothe editor of Confluence Denver and CompanyWeek.

Cover photo and left:TapizatMariposa,anaward-winning,mixed-incomeredevelopmentofdecayedpublichousingat10thandOsagestationinDenver.Photo credits: Cover/p.2DenverHousingAuthority;p.4PerryRoseLLC;p.6AnkromMoisan;p.7DenverHousingAuthority,ULIColorado;p.8CityofSeattle;p.9ULIColorado;p.10NelsonPartners;p.11EnterpriseCommunityPartners,Inc.,ShopworksArchitecture;p.12UrbanLandConservancy;p.13PerryRoseLLC;p.15BrynnGrey;p.16BrynnGrey;p.17BoulderHousingPartners;p.18CityandCountyofDenver,UrbanLandConservancy;p.19CityandCountyofDenver,BoulderHousingPartners;BackCoverDenverHousingAuthority

ULI Colorado thanks Housing committee co-chairs Lynn Crist, Chad Holtzinger, and Chuck Perry, along with volunteer James McMurray, for their leadership on this project.

ULI Colorado: Affordable Housing ReportOctober 2016

Almost 20 years ago, my kids got a great start thanks to an inspiring young art teacher at the neighborhood elementary school. But unlike older teachers, who often lived nearby and walked to work, this teacher commuted 30 miles by car to an affordable home for his growing family. The reason: our neighborhood was quickly gentrifying with home prices out of reach of a starting teacher’s salary.

After a year, he (sensibly) took a job closer to home and was replaced by a mediocre art teacher. My kids survived into fairly creative adulthood. But therein lies a parable and a microcosm for the affordable housing crisis that faces metro Denver and much of our state.

With home prices rising and salaries stagnant, many workers cannot afford to live close to work. They "drive to qualify," leading to such side effects as sprawl, congestion, and air pollution. In some communities, service jobs and even higher-paying positions (and for that matter, seats on civic and volunteer boards) go unfilled. Growing companies that can't house their workforce may leave or not come to Colorado in the first place.

This creates challenges from community cohesiveness to economic development. Travel down the pay scale and the issues become more critical. Lower-income families beset by high housing and travel costs may not be able to afford healthcare or healthy food for their kids -- and we all pick up the public health tab later. Some fall from the housing market all together into homelessness.

What is causing Colorado's housing crisis? How come the median Colorado home cost is one-third above the national average? Factors include rapidly rising prices, stagnant incomes, production that does provide enough homes to not keep up with population growth, outmoded zoning, and "not in my backyard" resistance to infill development and density.

This report faces these issues realistically, but it is also designed to offer hope. The Urban Land Institute (ULI) is a 40,000-member nonprofit think tank that engages the expertise of 26 different professions to help communities deal with such tough land use issues. ULI Colorado's 1,250 members and others in the state's real estate community have devised numerous innovative and practical solutions to build more housing for a wider range of incomes.

Funded by an Urban Innovation Grant through the ULI Foundation with additional support from the Perry Rose Company and Shopworks Architcture, this report highlights techniques to attract private and public investment to build more affordable housing, especially in walkable, urban infill, and transit-oriented locations, with access to jobs and economic opportunities.

To research this report, our writer Eric Peterson interviewed nearly 25 experts in Colorado and beyond. Topics he covered include:

• creative finance, • public-private partnerships, • methods to reduce land and construction costs, • regulatory innovation, • development approval strategies, and • initiatives to promote the development and preservation of affordable housing.

This report will help private and nonprofit homebuilders, public officials, real estate financiers, housing advocates, and communities overcome the obstacles to creating more affordable housing.

There are many reasons for a spectrum of community members to support affordable housing in a broad range, from very low-income homes to those that can cost $450,000, even with a subsidy or incentives.

As our environment becomes more fragile and society becomes increasingly fractured along class lines, it is clear that this is the right direction to achieve the ULI mission "to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide."

Introduction: Cause for Hope Among Affordable Housing Challenges

– Michael LecceseExecutiveDirector,ULIColorado

Colorado

• Ifyouareaprivatedeveloper,anaffordablehousingprojectisaproductwith a built-in and permanent market,andyoucangenerateconsistentcashflowforyears.

• Ifyouareanelectedofficial,anincreasedsupplyofaffordablehousinghelpsoffsetgentrificationthatstressesandscattersyourconstituents.

• Forenvironmentalists,affordablehousingembeddedincompact,existingcommunitiescan help preserve agricultural and natural lands, and decreasevehiclemilestraveledandcarbonemissions.

• Employerswithaccesstoaffordablehousingcanattractandretainahealthy, productive, talented, and available workforce.

• Expertsineconomicdevelopmentsayaffordablehousingkeeps our state and region competitive,andattractsgoodjobsincleanindustries

• Neighborhoodadvocatesmayfeelreliefthatteachers,firefighters,and even their own children and parentshaveaffordableoptionsintheircommunities.

Who Cares, and Why? How this Report Came to BeInsummer2015,ULIColorado'shousingcommitteeheldworkshopstoidentifybarrierstoaffordablehousing.The25-membercommitteeconsistingofhousingdevelopersandpolicyexpertsidentifiedbarriersinfourareasthatthisreporttackleswhileidentifyingnextsteps:

1) RegulatoryConstructiondefectsissues:Lawsuitsandlackofinsurancechoicesavailabletodevelopersandbuildershavedrasticallycurtailednewdevelopment,removingahugechunkofthemarketforentry-levelbuyers,curtailingdevelopmentattransit-servedsites,anddrivingpricesupforotherproductssuchasrentalapartmentsandsingle-familyhomes. Inclusionaryhousingordinances(IHOs):ThesehavehadmixedsuccessinColoradocommunitiesandarenotalwayspopularwithdevelopers.Inaddition,IHOrequirementstoincludeapercentageofaffordablehousinginnewdevelopmentsdonotapplytorentalhousing.Thisissueisamplifiedbytheshortageofnewcondoconstruction.

Zoning:Rezoningtohigherdensitiesfacesanuphillbattleforpublicapproval,anditaddstimeandcosttoaproject.Parkingrequirementsareoftentoohigh(andexpensivetofulfill,especiallyattransit-servedsites).Toomanycommunitiesenforcelow-densityzoningwithnoopportunitytofillin"themissingmiddle"withtownhomes,smallerapartmentbuildings,andgrannyflats.

2) SocialEveninurbanneighborhoods,the"notinmybackyard"movementremainsstrong.Somecitizensobjecttotheheight,bulk,anddesignofnewinfillbuildings.Othersworryabouttrafficandparking. Manyneighborhoodsexcludeopportunitiesnotjustforlower-incomepeople,butforsingle-parentfamilies,seniors,andmiddle-incomeworkers. Gentrificationhasbecomeagrowingissueasrisingpricesinthecorepushoutworkingfamiliestotheedgesofthemetropolis.Somecommunitiesarelosingtheircoreofmulti-generationfamiliesaswellasaccesstotheworkforcethatprovideslocalservices,frombaristastonurses.

3) Physical constraintsManyneighborhoodslackbasicinfrastructure,suchassidewalks,safestreets,transit,accesstohealthyfood,andurbandrainage.Theseareasmaybetheleastexpensivetobuildin,butlacktheamenitiesneededforactiveliving,economicopportunities,andaccesstohealthyfoodchoices.

4) EconomicDevelopersfacehighcoststoprovidetheinfrastructure(drainage,sidewalks,plazas,openspace,streettrees,andlandscaping)neededforahealthy,walkablepublicrealm.InColorado,thetoolsofurbanrenewalthatcanprovidecreativefinancingstrategiesarebeingcurtailed. Othercostsarerisingacrosstheboard–forland,construction,rent,andhomepurchases. Inrecentyears,constructioncostshaverisenasmuchas50percent,creatingyetanotherchallengetowardprovidingaffordablehousing. Thepublicsectorhaslimitedresourcestoprovidetaxcreditsorcashsubsidiestobuildinfrastructureorhousing.

"I have seen changes in the lives of people given the opportunity to live in affordable housing. This is not just about real estate – this is about people."

–SusanPowers,president,UrbanVentures&co-founder,MothersAdvocatingforAffordableHousing(MAAH)

Easter egg hunt at Aria Denver, a mixed-income community on the site of a former convent in West Denver.


"It's not 'those people' we're talking about. It's 'us people.' It's me and my staff. I live in

deed-restricted housing." –JenniferKermode,executivedirector,SummitCombinedHousingAuthority

Getting to Solutions: Collaboration is Key"All of these are 2 per cent solutions. You're just going to have to stack up as many good ideas as you can"–StocktonWilliams,executivedirector,ULITerwilligerCenterforHousing

Consideringthegrowingchasmbetweenhousingcostsandincome,solutionsrequirescollaborationacrossmunicipalandjurisdictionallines."It'snotonlyaDenverissue,it'saregionalissue,"saysRickPadilla,directorofhousingandneighborhooddevelopmentfortheCityandCountyofDenver."Ourpopulationisgrowingmuchfasterthanourhousingstockandthegapcontinuestogrow."

What's Working # 1: Tax Credits to Attract Private Investment "The private sector has to be every community's first responder to affordable housing demand. [Otherwise] about 25 percent of every community will not be able to participate in the traditional housing market."

–BetseyMartens,executivedirector,BoulderHousingPartners

Establishedin1986,thefederalLow-income Housing Tax Credit (LIHTC) programhasfinancedroughly90percentofaffordablehomesintheU.S.,includingmorethan45,000inColorado.ThekeytothissuccessisLIHTC’sabilitytoattractprivateinvestmenttohelpmeetaffordablehousingneeds.

AwardedbytheColoradoHousingandFinanceAuthority(CHFA)andusedtogenerateequityintheprojects,thestate'scumulativetotalof$259millioninfederaltaxcreditshascatalyzedmorethan$5billionofconstructionandhelpednearly90,000householdsachievehomeownership.

"AllroadsleadbacktoCHFA,"saysDaceWest,executivedirectorofMileHighConnects."We'rereallyluckytohaveahousingfinanceagencyasthoughtfulasIthinktheyare.They'redrivingatonofcreativethinkinginthetaxcreditworld."

Butthecompetitionforthefederal9percentLIHTCshasgottenfierce,asnumeroustraditionaldevelopershaveenteredthemarketinrecentyears.(Therearealsocompetitiveandnoncompetitive4percentLIHTCsforacquisition/rehabandnewconstruction,respectively.)

Afterworkinginmarket-ratedevelopmentsincethe1980s,AndyAllison,presidentofAllisonManagement,branchedintoLIHTC-basedaffordablehousingprojectsinBoulderinthe2000s.Allisonsaysit'sultimatelynotunlikeotherdevelopment:Timingandfinancingareall-important."ThechallengeisyouhavetogetfrompointAtopointBwithyourownmoney,"hesays,whereasnonprofitstypicallybuylandthenpursuefinancingwithaslower,moredeliberatepace.

"Ipartnerwithalotofnonprofits,soI'mnottryingtodiminishtheirrole,"saysAllison,"butwhenyouhavemoneyinthedeal,itjustmakesitworkquicker."

CarlKoelbel,vicepresidentofacquisitionsanddevelopmentatDenver-basedKoelbelandCompany,aprivatedeveloperthathasinvestedheavilyinaffordablehousing,saysmarket-ratedeveloperscanbeattractedtoaffordable

affordable“Our population is

growing much faster than our housing stock and the gap continues

to grow.”–RickPadilla,Director

ofHousingandNeighborhoodDevelopment,

CityandCountyofDenver

"All roads lead back to the Colorado Housing and Finance Authortiy

(CHFA). We're really lucky to have a housing finance

agency as thoughtful as I think they are.

They're driving a ton of creative thinking

in the tax credit world."

–DaceWestExecutiveDirector,MileHighConnects

Colorado

housingbecausedevelopmentfeesarehigherandriskislower."Oncethecreditshavebeenawarded,thereislimitedriskassociatedwiththedealswiththegreatercertaintyofpayment,whichiswhyaloweroverallreturncanmakesense,"heexplains.

Mostobserverssaythestate's4percentLIHTCs,launchedin2001andtwicesincerenewed,areagreattool.The$5millionprogramin2015was"arelativelysmallsliceofthepie,"butaneffectiveone,saysSaraReynolds,executivedirectorofHousingColorado."Wenearlydoubledproductioninthatoneyear."

Withthestatecreditsextendedto2019duringthe2016legislativesession,Reynoldsisoptimisticsuchreturnswillcontinue."Thinkofwhatfiveyearsofdoublingaffordablerentalswilldo.That'sareallybiggamechanger."

However,she'squicktonotethattaxcreditsonlyprovideequityforrentalhousing."Wedon'thaveanythingtoprovideresourcesforhomeownership,"saysReynolds.

Anotherpromisinginitiativethat'sajointeffortofthecityofDenverandCHFA:arevolving affordable housing loan fundofabout$10million.TheCityandCountyofDenver'sPadillalabelsita"gap-filler"thathashelpedfund300affordablehomesandisreplenishedaslow-interestloansarerepaid."That'saveryinnovativetool.We'vetalkedtocitiesaroundthecountrywhoareveryinterestedinit."

Market-ratedevelopershavealsobroughtfreshideasandcompetitiontofederalLIHTCs,buttherearesimplynotenoughtaxcreditstogoaroundinColorado,letalonetheentirecountry.Thereissomehopeforafive-year,50-percentincreaseinavailablefederaltaxcreditswithnewbipartisanlegislationintroducedin2016,butseveralobserverssaytherearemorereasonstofearforfuturedecline.

What's Working # 2: Special Funds Launchedin2013,thefirst-of-its-kind Denver Transit-Oriented Development (TOD) Fund hashadabigimpact.It'sexpandedbeyondcitylimitsandnowtakesaregionalapproachtocreateandpreserveaffordablehomesintransitcorridors.

"Thatisabestpractice,"saysStocktonWilliams,executivedirectoroftheULITerwilligerCenterforHousinginWashington,D.C."Notmanycitieshavedonethat,butit'sonlyreallythetipoftheiceberg."

ThefundismanagedbyEnterpriseCommunityPartnersandstakedbygovernment,privatesector,andnonprofitfunding.Ithasgrownfromitsfirstiteration--aDenver-focused$15millionfundwithDenver'sUrbanLandConservancy(ULC)asthesoleborrower--toa$24millionfundwithmultipleborrowersinsevencounties.

TheTODFund"fillstheveryspecificgapofensuringthecostcertaintyoftheland,"saysBradWeinig,programdirectorforTransit-OrientedDevelopmentforEnterpriseCommunityPartners."Wedon'twantthecostoflandtoescalatetwotothreetimeswhilethey'rewaitingfortaxcredits."

Anexample:ULCboughta1.4-acreparcelnearthe38thandBlakerailstationinDenver'shipRiNoareawiththehelpofthefundforlessthan$30persquarefootin2011;recentdealshavesoaredwellpast$100persquarefoot.

Whiletheplannedmixed-useprojectonthesiteisstillawaitingfederaltaxcredits,Weinignotes,"Evenintheworstcase,thesiteisstillownedbyamission-drivenorganizationthatcontrolsvaluablelandatalow-costbasis."

LikeDenver,Portlandisinahole.Thecityiscurrentlyshortabout24,000affordablehomes,andprojectionsestimatethatnumberwillincreasebyabout10,000by2035.

About10percentof125,000rentalhomesarepermanentlyaffordablecitywide.InurbanrenewalareaslikePearlDistrict,thatnumberis30percent.Representingabout15percentofPortland'slandarea,suchareashaveusedtax-incrementfinancingtoraisemorethan$275millionforaffordablehousingsince2007.

"Portlandhaddoneareallygoodjobontheurbanrenewalareas,"saysPortlandHousingBureauDirectorKurtCreager."Ineedresourcesfortherestofthecity."

They'restartingtostackup.Asof2015,alodgingtaxhasbeenredirectedfromthegeneralfundtothePortlandHousingBureau,withrevenueprojectionsfor$14.4millionover10years.AndafterOregonliftedthenation'ssecond-to-lastinclusionaryhousingbanin2016,Portlandisimplementinganordinancerequiring20percentof20-unitprojectstobeaffordableat80percentAMI.InJune,Portlandenacteda1percentexcisetaxonmostnewconstruction,anda$258milliongeneralobligationbondtofurtherfundaffordablehousingisontheballotinNovember.

Allinall,Creagercallsit"arobustsetoftools"thataddressthereturn-centeredstrategiesofpublicly-tradedrealestateinvestmenttrusts(REITs)."Nowtheyhavetocometothetable."

Theinclusionaryhousingordinance(IHO)has"beenprettysuccessful,"saysSarahZahn,seniorprojectmanageratPortland'sGerdingEdlen,amarket-ratedeveloperthat'sworkedinaffordablehousingsinceitsfoundingin1996.However,there'sacatch."Inyear11,thesehomesaregoingtoreturntomarket-rate.Itremainstobeseenhoweffectiveit[theIHO]willbekeepingthosehomesaffordable."

Thenewexcisetaxrepresents"asignificantchangeforfolksincommercialandresidentialtohaveanewfee,"saysZahn."There'salevelofrecognitioninthedevelopmentcommunityinPortlandthatweneedaffordablehousing,butthere'salsoalevelofnervousness"thatfeesmaybepassedontoconsumersintheformofhigherhousingcosts.

Peer City # 1: Portland, Oregon

The Abigail is a six-story, mixed-use development

that adds 155 new homes to Portland’s

Pearl District. The building will be mixed-

income, with 128 affordable apartments for families earning 30 to 60 percent AMI and the balance at market-

rate rents.


"TheTODFundhasdonewhatitsetouttodo,"saysULCPresidentandCEOAaronMiripol."Thefundhastobemuchlarger.Weneedafundthat's$100million.Weneedafundthatcandopreservationandstayindealsforalongerperiodoftime.Wedon't[yet]havethemoneytobuyandholdexistingproperties."

What's Working # 3: Land use strategiesStatewide,landcostshavebeenincreasingrapidly.Thatfixedcostishardtomitigate.Thebeststrategiesofteninvolvethewaysinwhichweusetheland.

ChadHoltzinger,presidentofShopworksArchitectureinDenver,advocatesforadensitybonusfordeveloperswhoincludeaffordablehousingaspartoflargeprojects.ThecontinuingDenverightupdatetoBlueprintDenveroffersanidealopportunitytoaddsuchanincentive,headds."Thisisarealgoodchancetotakemostofthoselessonsandredothe[zoning]code,"saysHoltzinger."Tome,densityisthetopicandit'sgoingtobethefight,too."

Densitybonusesworkbasicallylikethis.Communitiesallowdeveloperstobuildmorehomesaspartofasingleprojectinreturnforarequirementtocreateapercentageofthosehomesasaffordable.Intheorytheeconomyofbuildingatabiggerscalehelpsunderwritetheadditionalaffordablehomes.

Holtzingerseesthistoolasagreatwaytoattractmoremarket-ratedeveloperstobuildmoreaffordablehomes."Ifyoucantakeafive-storyandturnitintoaseven-storyortakeaneight-storyandturnitintoa10-story,"hesays."Theproratashareofthosesunkcostsonasquare-footbasisarereduced."Municipalitiescanalsohelpbyapplyinga"lightregulatorytouch"tospeedtheprocessofdevelopment,hesays.

InplaceslikeVailandCrestedButte,density"hastobepartofthesolution,"headds,butit'stypicallyapoliticalnon-starter.Hecallsaffordabledevelopmentswithonly10homesperacre"awasteofanopportunity."

stra

tegi

esPeer City # 1: Portland, Oregon

Denver Housing Authority’s nine-phase, $150 million Mariposa project is transforming a dangerous, unsightly public housing project into a healthy, mixed-income neighborhood next to a light-rail station.

ULI Colorado volunteers help build Habitat for Humanity’s first attached housing in Denver’s Montbello neighborhood.

According to U.S. Census estimates, more than 100,000 people moved to Colorado in 2015 while builders added only 25,000 homes to the housing stock. Roughly 40,000 homes would have been necessary to match the influx of new residents for 2015 alone.

Colorado

Community land trusts (CLTs) canshapelanduseandfosteraffordablehousingbyfixingthecostoflandbeforeitescalatesinahotmarket.Byofferingdevelopersalong-termleaseontheland,landownerscanmitigateriskandofferameansofachievingandprotectingcommunitywealth.CLTsofferabufferforrisinglandpricesinhotmarketsandhelpprotectresidentsfromdepreciationincoolmarkets.

ULChasusedCLTsforanumberofprojectsandtypicallyleasesthelandtopartners99yearsatatime."Eachdealisdifferentasourintentistomakesurethedealworks,"saysULC'sMiripol."Inmost instances, our partner pays us adevelopmentrightfee–typicallyatleast75percentbelowmarketvalueoftheland–upfrontandthenpaysusanominalannualgroundlease,anywherefrom$300to$2,500amonthbasedonthesizeofthedevelopmentandthevalueoftheland."

ThriveHomeBuilders'ElementsprojectatStapletonoffersanotherroutetomitigatinglandcosts,albeitararerone:free land.Inthe1990s,masterdeveloperForestCityStapletonagreedtomake10percentofStapleton'shomesaffordable.Asthecommunityswelledto18,000residentsin2016,thetotalof300affordablehomesreachedonlyabouthalfthatbenchmark.

Tohititsrequiredtarget,ForestCitynegotiatedadealwithDenver-basedhomebuilderThrive.ForestCitygaveabout5.5acrestoThrivealongwithasupplementarycashsubsidytobuild165for-saletownhomespricedunder$200,000forbuyersearning80percentofareamedianincome(AMI),withadeedrestrictionthatlimitsthesaletobuyersinthatsameincomebracket.ThrivebrokegroundonthefirsthomesinJune2016.

"We either make decisions to use land differently or make the decision to pay more to keep communities as they are because we like their character."

–BetseyMartens,executivedirector,BoulderHousingPartners

In 2009, Vancouver, B.C, began encouraging the construction of ‘laneway’ (carriage) houses. Today fully one-third of the city’s single-family homes have laneway houses, adding more than 25,000 homes to the housing supply. Homes average 550 square feet and rent for $1,200-$1,800 a month filling a middle-income nook in an expensive market.

“You wonder how many developers can afford this,” says Thrive CEO Gene Myers, noting that subsidy and free land donated by Forest City Stapleton was worth $50,000 to $100,000 per home.


Butrepeatingsuchadealisnoeasyfeat."Youjustwonderhowmanydeveloperscanaffordthis,"saysThriveCEOGeneMyers,notingthesubsidytotaled$50,000to$100,000perunit.

Still,freelandisworthseekingandsometimessurprisinglyavailableinunlikelyandexpensivelocations.InpriceydowntownBoulder,twochurchesarenegotiatingtopartnerwithprivatedeveloperstoconverttheirparkinglotsintoaffordablehousing.A2015studycommissionedbyULIWashington,D.C.,surveyedthepotentialforpublicagenciestodonatesurpluspropertiestobeusedforaffordablehousing.Thestudyfoundthatdonatedfreelandcanreducethecostofdevelopingnewaffordablehousingbyasignificant$25,000to$100,00perunit.

Zoning tweaks offeramorenavigablepath.KimballCrangle,ColoradomarketpresidentforWisconsin-baseddeveloperGorman&Company,saysthestate'ssuburban-urbaninterfaceischangingandzoningneedstochangewithit.

"OnecitydoingamazingworkisWestminster,"saysCrangle.WiththearrivalofcommuterrailinJuly2016,localofficialsareadoptingamoreurbanapproachforplanningandzoning.

GormanisworkingwiththeAdamsCountyHousingauthoritytodevelopthe$24millionAlto,whichmixes70affordablehomeswithofficesandcommunityservicesnexttoanewcommuterrailstation,greenway,andpark.Theprojectwilltransformasuburbanstreetscapewithdatedgardenapartmentsintoawalkable,mixed-useurbansetting.

Inclusionary housing zoning ordinances(IHOs),requiringthatacertainpercentageofhomesinnewdevelopmentsbeaffordableinexchangeforcertainexemptions,canhelpcounteractthisdynamic,buttheyareoftendifficulttoimplement.Iftheincentiveistooweak,developersoftenfightthepolicyortrytogetaroundit.Whileinclusionaryzoninghasproducedhundredsofaffordable

"One city doing amazing work is Westminster," says Kimball Crangle. With the arrival of commuter rail in July 2016, local officials are adopting a more urban approach for planning and zoning around the station area at 72nd and Federal. An attractive station design, new nature park, and collaboration with neighboring Adams County are luring new housing to this once-

neglected area only 11 minutes by train to Denver Union Station.

TheaveragehomecostinBoulderrecentlypassed$1million.Yetagood-sizedpercentageofthecommunity'spopulationconsistsofworking-classLatinofamilies,whooftenliveinsubstandardandcrowdedmobilehomeparks. In1997,BoulderHousingPartners(BHP,thecity'shousingauthority)acquiredafive-acremobilehomeparkinnorthBoulder.Establishedintheearly1960sasBoulderMobileManor,theparkwasblightedandpronetoflooding.BHPhadalong-termvisionofreinventingandrevitalizingit. "Weoperateditasamobilehomeparkbeforewecouldfindaredevelopmentpaththatmadeanysense,"saysBetseyMartens,BHP'sexecutivedirector. Fourteenyears,fourLIHTCapplications,anda$13millionredevelopmentlater,thefirsttenantsmovedintothecommunity's59duplexes,triplexes,andsingle-familyhomesthattooktheplaceofthetrailers.Thecityprovidedabout20percentoftheproject'sfunding,andthemajorityoftheequitystemmedfrom9percentfederalLIHTCs. Rentsarebasedontheincomeofthetenantswhoareallinthe30to50percentAMIrange,andtopoutathalfofBoulder'smarketrates. Onekeywasmaintainingthekeyassetof"verycompactsingle-familyhomes,whichiswhatpeoplelikeaboutit,"saysMartens."Wereallywantedtopreservethecohesionofthecommunity." RedOakParkisnotablyenergy-efficient,incorporatingrooftopsolarpanels,EnergyStar-ratedappliances,andothersustainablefeatures.Someresidents'monthlyenergybillsaveragelessthan$10amonth. There'salsoacommunitycenter,afreewirelessnetwork,andacurriculumofeducationalclassesandworkshopsofferedonsite. Martenssaystheprimedisappointmentwasaretentionrateofonly33percentoftheresidents,aresultoftheincreasinglycompetitivemarketfor9percentLIHTCs.Becauseofthelagthatthecompetitionaddedtotheconstructiontimeline,manytenantshadtofindotherhousingbeforetheprojectwascompleted. "Attheendoftheday,wewereabletocreateabeautiful,sustainable,community-centeredneighborhoodthateverybody'sveryproudof,"shesays.ULIagrees,andawardedRedOakParkitsGlobalAwardforExcellencein2012.

Case Study: Red Oak Park, Boulder

ULI Colorado members tour Red Oak Park before its opening in 2011.

Colorado

homesinAspenandBoulder,Denver'sIHOhasproducedfewunitsandmaybeshelvedunderfutureplans.

Anareaforfurtherstudyistheconceptof"gentle infill"–theideaofstrategicallyaddingduplexesandsmallapartmenthousestoincreasethediversityofhousingsupplywithinsingle-familyneighborhoods.Housingadvocatespointtocomfortable,traditional,andhighlylivableneighborhoodslikeDenver'sCongressParkthatblendsingle-familyhomeswithbackyardswithapartmentsandotherhousingtypes.

Onesuchstrategyinvolvesaccessorydwellingunits,orADUs–betterknownas carriage houses,or"grannyflats"–holdpromiseofincreasingdensityandthesupplyofaffordablehousing.WhileDurango,Arvada,andDenverhavelegitimizedtheforminrecentcodeupdates,newconstructionhasbeenminimalinallthreecities.

InDenver,BlueprintDenverlegalizednewADUsinabout20percentofthecityin2010,buthalfofthattallyisintheCentralBusinessDistrictwhereADUdevelopmentisinfeasible.Theendresultisthatonlyabout80permitshadbeenissuedinthesixyearssince.Conversely,thecontinent'sADUstandoutVancouver,BritishColumbia,allowsthemin94percentofthecityandtypicallyissuesmorethan350permitsannually.

"IfDenver'sseriousaboutclosingthehousinggap,thisneedstobeengaged,"saysJesseAdkins,principalofShearsAdkins+RockmoreArchitectsinDenver.

WhileLIHTCsaregoodfor75-unitprojects,theADU'sbackyardscaleoffersadifferenttact;ADUscouldcontributetoaffordabilityformiddle-incomeworkingpeopleandstudents."Lookingatitthroughanurbandesignstrategy,there'salotofopportunitythroughoutDenverforsmaller-scaledevelopment,"saysAdkins,notingthata500-square-footADUisinherentlyaffordable."Itcouldhaveasignificantimpactondevelopmentofaffordablehomes."

Inaddition,theopportunityforaprimaryhomeownertoleaseagrannyflatalsomakestheirhomemoreaffordable.

Yetthepublicoftenpushesbackagainstsuchneighborhood"infill"initiatives.BruceO'Donnell,presidentofStarboardRealtyGroupinDenver,sayshisrezoningworkhasledtobrusheswithNIMBYism–shortforthephilosophyespousedbythephrase,"notinmybackyard."

Affordablehousing"iskindofacatchallphrase,"saysO'Donnell."Becauseofthatuncertainty,there'sfear–'Idon'twantthosepeoplelivingbyme'–wheninfactitcouldbeteachersandfirefighters."Herecommendsusingavocabularythatincludes"workforcehousing"and"mixeduse"tocombatnegativeconnotations.

“Because of uncertainty there is fear—‘I don’t’ want those people living by me’—when in fact that includes teachers and firefighters.”

—BruceO’DonnellPresident,StarboardRealtyGroup

IntheboomingTexascapital,there'sagapofabout48,000homesneededbyhouseholdsearning$25,000orless."It'sahugenumberandwe'rechippingawayatit,"saysMandyDeMayo,executivedirectorofHousingWorks,anonprofitfocusedonaffordablehousinginAustinandcentralTexas.

ButAustin'saffordablehousingcommunityhassuccessfullynavigatedstatelaw--namely,thenation'sonlyremainingbanoninclusionaryzoning--togeneratelocalresources."That'sonethingwe'redoingright,"saysDeMayo.

In2006,votersapprovedageneralobligationbondof$55million,followedbya$65millionbondin2013.Bothwerefundedbypropertytaxhikes,withthecityawardingfundsthroughacompetitiveprocess.

The2006bond"preservedorcreated3,400unitsofdeeplyaffordablehousing,"saysDeMayo."It'sessentiallygapfundingforthedevelopmentofmulti-familyhousingandsingle-familyhomes."

Anotherlocalfundingsourceispropertytaxfromdevelopmentsbuiltoncity-ownedland."Citycounciljustincreased[thepropertytax]from40percentto100percentandbroadenedittoincludestate-ownedland,"saysDeMayo."We'reanticipatinginthenext20yearsthatwillbe$20millionayear.It'sasignificantandstablesourceoffunding."

DensitybonusesforinclusivedevelopmentshasalsoproveneffectiveinAustin."We'vecreatedanalphabetsoupofdensitybonuses,"saysDeMayo."Astheonlystatethatprohibitsinclusionaryzoning,wehavetobecreative."

LikeDenver,for-salehomesinthe$250,000ballparkare"thehousingstockwe'remissing,"sheadds.Andthat'snottheonlysimilaritybetweenAustinandDenver.DeMayopointstotheredevelopmentatMueller,themunicipalairportshutteredin1999,asasmaller-scaleStapleton.AustinofficialsrequiredmasterdeveloperCatellusbuild25percentofthehomesasaffordableonthe700-acresite,comparedto10percentatStapleton.

AnothersimilarityistheongoingupdateofAustin'slandusecode,dubbedCodeNEXT,asDenverreworksBlueprintDenverwithDenveright."ThisisahugeopportunityIdon'twanttomisstoembedaffordabilityintothedensitybonusprogramthroughourlandusecode,"saysDeMayo.Theongoing,simultaneousupdateofferpossiblesoundingboardsforoneanother;there'sawindowwhereDenverleaderscancomparenoteswithcounterpartsinAustin.

Peer City # 2: Austin, Texas

Located at the former Mueller Airport (Austin’s version of Stapleton redevelopment),

Aldrich 51 is a 240-unit apartment community mainly

serving working families and individuals, with rents at 204 homes pegged from 30 to 60

percent AMI and 36 at market rate. A private developer

financed the project using housing tax credits and other

incentives.


Preservation: Fighting the loss of 1,200 affordable homes each year "Preservationisanextremelyimportantpartoftheaffordablehousingpuzzle,"saysJamieGomez,CHFA’schiefoperatingofficer."There'snotenoughnewhousing,soit'scriticaltonotloseanyofourexistingaffordablehousingstock."

Yet"inColorado,we'relosing3,000affordablehomescomingoffdeedrestrictionseveryyear,"saysDickTaft,presidentandCEOofRockyMountainCommunities."We'rebuildingatarateof1,800homesayear."

Tothisend,CHFAhiredBethTrubyinApril2016asthefirst preservation managerinits40-yearhistory.Trubyisguidingastatewidestrategytoinventoryaffordablehousing,andbuildacomprehensivedatabasespanning80,000homes."We'venowbeenabletomapeverysingleunitofaffordablehousingrentalpropertiesinthestate,"saysGomez.

CHFAisalsoassemblinga "financing toolbox"toallowownerstorenovate,refinance,andotherwisereworktheirstrategiestokeeppropertiesaffordable,Gomezsays."Thekeytoitisgettingtothemyearsinadvance–two,three,fouryearsinadvance,"heexplains."Attheendoftheday,itbecomesabusinessdecision.Wewanttomakeitagoodbusinessdecisiontokeepthepropertiesaffordable."

preservation

In Colorado, we're losing 3,000 affordable homes coming off deed restrictions every year," says Dick Taft, president and CEO of the nonprofit homebuilder Rocky Mountain Communities. "We're [only] building at a rate of 1,800 homes a year."

"When we have larger infill sites that can accommodate market-rate and for-sale housing, the way to get diverse communities is to have an affordable component."

–ChuckPerry,managingpartner,Perry Rose Company

Bon Secours of Baltimore Health System started developing affordable housing for seniors in the 1980s and now manages more than 700 homes

through a subsidiary foundation.

The Denver-based nonprofit Urban Peak has preserved three apartment buildings with 120 units serving at-risk and homeless youth and providing services, job training and employment.

Colorado

RickPederson,partneratBowRiverCapitalinDenverandadvisertofundsmanagedbyThePaulsCorporation,believesaprivatesectorsolutioncanattractinvestorstothenation'slargeinventoryofClassBandCapartmentcomplexes.Thesearegenerallyun-sexybutsteadyinvestmentsinstableneighborhoods.

Pedersonlaysoutastrategyofestablishingprivatefundstoacquireandrehabportfoliosofapartmentswithagoalto"tokeeptherentslowerforthisbroadswathofworkforcehousing."Thiscategoryofapartmentsfeaturesrelativelyaffordablerentsandverylowvacancyrates,thussecuringasteadycashflowforinvestors.

Hecautionsthatanincentiveisneededtokeeppricesaffordable.Apropertytaxfreezeisonepossibility,orlow-interestfinancingforpreservationofmarginalhomes.

"Theprivatesectorhastoparticipateinthis,"Pedersonsays."Wehavetogetthefreemarketinvolvedorwe'renevergoingtogettotheheartoftheproblem."

Inasimilarvein,theApartmentAssociationofMetroDenver(AAMD)ispreparingaproposalforavoluntaryprogramforownerstocommitapercentageofhomesinmarket-ratebuildingstoanaffordable pool inexchangeforcitysubsidies."Thiscanhaveanimmediateimpact,"advocatesMikeZoellner,CEOofRedPeakProperties."Thiscanhappennextmonth."

Intheproposal'spreliminaryframework,therearegradientsbasedontenantincome,apartmentsize,andbuildingquality.Thecitywouldpayroughly$34,000to$110,000for10yearsofaffordabilityonaone-bedroomapartment.Bythismath,$15millioncouldsubsidizeabout1,500to4,000homesannually.

"Thebestsiteshavealreadybeenbuilt,solet'sputaffordablehomesinthereimmediately,"saysZoellner."Let'susetheseresourceswealreadyhave."

"The best sites have already been built,” says RedPeak’s Mike Zoellner of a proposed affordable housing pool program. “So let's put affordable homes in there immediately. Let's use these resources we already have."

At Aria Denver, Chuck Perry describes a "community-building" strategy, that encompasses local food, healthcare, and pedestrian networks. The resulting impact on residents' household budgets "can dramatically help to improve the quality of people's lives because they don't have to decide between paying rent or paying for food, or paying rent or paying for medicine."

Built on land acquired and banked by Urban Land Conservancy using Denver’s TOD Fund, the $12 million Evans Station lofts provides 50 affordable homes with rents starting at $385 a month.

“These days Boulder isn’t alone in its quest to figure out how to create homes in the $300,000 to $500,000 range when the going price on the free market is closer to $1 million.”

—“InpursuitoftheaffordablehouseinBoulder,”DailyCamera,August22,2016

Red Oak Park in Boulder redeveloped a poor-quality mobile home park with the same number of attractive, energy-efficient homes serving people at the same income.


Challenge # 1: Demand is Crushing Supply It'sEconomics101.Supplyanddemand.Insomeindustries,justaddasecondshiftinresponsetoincreasedordersandvoilà:You'vegothigherproduction.

Inaffordablehousing,wherethere'ssometimesapainstakingfive-yearprocessbeforeshovelmeetsdirt,marketdynamicscanshiftandshiftagainbeforethefirsttenantsmoveintotheirnewhomes.Demandissky-high,butthere'snoproductionmechanismtomeetit.

Theimpactripplesthroughouttheeconomy.EstimatesholdthatColoradolosesabout$2 billion in annual economic activity duetotheincreasinglyhighcostofhousing.OneinfourColoradorentersspendsmorethan50percentoftheirincomeonhousing.Afull40percentofColorado'srentersnowspendmorethanathirdoftheirincomeonhousing.

We'veseenaperfectstormrollintothestateinthewakeoftheforeclosurecrisis.Thepopulationhasgrownastheeconomyboomed,butwageshaven'tkeptupwithhousingcosts.Theprecedinglaginconstructionforcedhousingdeveloperstoplaycatch-up,whilepoliticsandpolicymaketax-fundedaffordablehousingespeciallytricky.

AccordingtoU.S.Censusestimates,morethan100,000peoplemovedtoColoradoin2015whilebuildersaddedonly25,000homestothehousingstock.

"As moderate to middle-income households buy and rent that existing housing stock, the people who get pushed out and left behind are the lower-income working families who can't afford to compete."

–IsmaelGuerrero,executivedirector,

DenverHousingAuthority

demand

NearRegisUniversity,Denver'sChaffeeParkneighborhoodremainsfairlyaffordablebutstandsinthepathofgentrificationspillingoverfromBerkeley,Highlands,andSunnyside.AriaDenverisanewmixed-incomedevelopmentseekingtogetaheadofthiscurvewhileprovidingthetypeofhealthy,walkable,healthycommunitynotpreviouslyavailableinnorthwestDenver. FormerlythesiteoftheSistersofSt.Mary'sMarycrestconvent,AriaDenverisa17-acremaster-planneddevelopmentfromPerryRoseandUrbanVenturesadjacenttoRegisUniversityinnorthwestDenver. AriaApartments,with72affordablehomesfortenantswith30to60percentAMI,openedin2013,anda65-unitbuilding,AriaFamilyApartmentsisnextontheschedule.Additionally,27of263for-saletownhomeswillbepricedaffordabletobuyersof80percentAMI. "AriaApartmentswasthecatalyticprojectthatresultedinthedevelopmentofAriaDenver,"saysPerry."Haditnotgottenapprovedin2011,AriaDenverwouldhavedied.TherewouldhavebeennoAriaDenver." Whywasitsocritical?"Becauseofthenatureofmarketsintransitionalneighborhoods,thefirstprojectincan'tgeneratemarket-raterents,"answersPerry."Oncepeopleseenewconstructionhappeningandbelievethesesitesaregoingtochangeforthebetter,itspursrevitalizationinotherareas." AtAriaDenver,Perrydescribesa"community-building"strategy,thatencompasseslocalfood,healthcare,andpedestriannetworks.Theresultingimpactonresidents'householdbudgets,hesays,"candramaticallyhelptoimprovethequalityofpeople'slivesbecausetheydon'thavetodecidebetweenpayingrentorpayingforfood,orpayingrentorpayingformedicine." BesidesLIHTCfinancing,the$80millionprojectbenefitsfromrock-bottomlandcostsof$2.58millionfor17.5acres.TheSistersofSt.Mary'ssoldthepropertyatadiscountbecauseofAria'sinclusiveandaffordableaspects. Thetargetforfullbuildoutis2018,butfierceLIHTCcompetitioncouldpushthatdateback.Caseinpoint:PerryRosehassubmittedfiveapplicationsfor9percentfederalLIHTCstoCHFAtofinanceAriaFamilyApartmentswithoutsuccess.

Case Study: Aria Denver, Denver

Aria Apartments offer residents access to walking trails, an urban farm, and this esplanade as shared open space.

Colorado

Challenge # 2: Funding and Finance MostobserversagreethatboththestateandDenverneedpermanentdedicatedaffordablehousingfunds.Colorado'suniquedifficultywithfundingstemsfromthestateconstitution:TheGallagherandTABORamendmentsarebighurdles.

"AnyprototypehastonavigatethroughtheTABORandGallagherfilters,sothere'snoperfectmodel,"saysWeinigofEnterpriseCommunityPartners.

TABORexplicitlybansnewrealestatetransfertaxes,butmanymunicipalitieshavepre-TABORtransfertaxesthatareusedtogreateffecttosupportaffordablehousingfunds.

Somecitiesandstatesgeneratemillions–evenbillions–inannualrevenuewith transfer taxesthatgeneratefundswhenpropertieschangehands."Arealestatetransferfeehasalwaysbeenasilverbulletorholygrailofthesefundingoptions,"saysTroyGladwell,founderandprincipalofDenver-basedMediciCommunities."Itcreatesareadyandsteadysourcethatcanbeimplementedstatewide."

Denver'snew"two-prongedstrategy"includesamilllevy(dedicatedpropertytax)alongsidewhatMayorMichaelHancockcalls"reasonableandmodest" new “impact” fees on commercial and residential development. Thetargetistogenerateabout$150millionforaffordablehousingin10years,halfofthatfromfeesonnewdevelopment.Asthiswenttopress,Boulderwasconsideringtriplingitsimpactfeesoncommercialdevelopmenttoalmost$30asquarefoot,potentiallyincreasingtheoverheadcostonnewdevelopmentbymorethan10percent.

YetDenver'sfundmayhavearelativelymodestimpactofcreatingandpreserving6,000homesover10years.WilliamsoftheULITerwilligerCenterforHousingsaysadedicatedDenverfundneedstobecomeahugefinanciallevertomakeabigdent.A$15millionfund"isjustnotgoingtobuyyoumuchnewdevelopment,"hesays."Alotofthesestrategiesarejustgoingtoholdtheline."

Whiledevelopmentfeesarecontroversial,manyfor-profitdevelopersarebullishacityfundcouldmakeanimpactbyleveragingmorefederalandstatelow-incomehousingtaxcredits(LIHTC)."Itcouldhelpfillthegapintermsofmore4percentdeals,"saysCarlKoelbel.

Ifthecitycantreatmoniesas"grantorgrantequivalent,"itsfundwouldmakethebiggestimpact,saysMedici'sGladwell."Youneedadditionalmoneytogettolowerlevelsthatrequirenomortgage,"headds."It'sahugestepintherightdirection,[but]thestatecreditisprobablymoreegalitarianbecauseit'sastatewideprogram."

Peer City # 3: Boston

BostonfacesasupplydisconnectlikeDenver.From2010to2014,some172,000peoplemovedintotheregionasdevelopersbuiltonly15,000newhomes.ThetypicalcostofaBoston-areaapartmentis$2,400amonth,affordableonlytohouseholdswithincomesofatleast$100,000.

Onthepositiveside,withmorethan50,000homes--orabout22percentofallhomesversus9.5percentinDenver--BostonhasthelargestpercentageofaffordablehousingofanymajorcityintheU.S.Since2000,about30percentofnewhomeshavebeenaffordable.

Thecreationofthestockhasbeenan80-yearprocess.Thecitylearneditsshareoflessonsalongtheway.Preservationhasbeenakeyelement,andthecityhasbeensuccessfulatkeepingprivatelyownedaffordablehousingaffordable:From2009to2012,only10percentofaffordablehomeswerelost.

MuchofBoston'ssuccesscanbetracedtoChapter40B,aMassachusettsstatutethatenableslocalzoningboardstoapproveaffordablehousingdevelopmentsunderflexiblerulesifatleast20percentofthehomeshavelong-termaffordabilityrestrictions.

BobEnglerisprincipalofSEB,aBoston-basedconsultingfirmspecializinginaffordabledevelopment.Hesays40BhasbeenanabsolutenecessityinmetroBoston,butit'snopanacea."40Breallyhelpswiththeworkforce,60to80percentAMI,butitdoesn'thelpwiththewholespectrum,"heexplains.

Boston'slinkagefees--atmorethan$8persquarefootforlarge-scalecommercialprojects--typicallyprovidemorethan$6millionayearanditsinclusionaryordinancehasgeneratedabout$5millionincash-in-lieumoniessinceitwasimplementedin2000.

EnglerbelievesDenver's"unbelievablegrowth"inrecentyearswassomethingofalostopportunity."Theymissedthemark,"hesays."WhenyouhaveastrongmarketlikeDenver,youshouldbeabletogetaffordabilityoutofthedeveloperifyougivethemmoredensity."

"It'sallpiecemealstuff.Theprivatehousingmarketdoesnotworkwellforhalfthepopulation,"saysEngler."Idon'thaveanybigmagicbullet.Therehastobeawillthere."

Roughly40,000homeswouldhavebeennecessarytomatchtheinfluxofnewresidentsfor2015alone.

Overtime,thathasaddeduptoashortfallof100,000homesforhouseholdswithincomesof$20,000orless,accordingtoadvocacygroupHousingColorado.Typically,developersbuildabout1,000rent-subsidizedhousinghomesinagoodyear.

Themathisstarklysimple:Atthecurrentrate,itwouldtakeacenturytobuildourselvesoutoftheproblem.

Thescaleoftheproblemisescalating.HeatherLafferty,executivedirectorofHabitatforHumanityofMetroDenver,saysherorganizationreceivedabout1,000applicationsforhomesin2015,triplethe2014total.It'sontracktogrowagainin2016.TheHabitatprogramcanonlybuildabout40newhomesayear.

"The scale of the problem is escalating."

–HeatherLafferty,ExecutiveDirector,HabitatforHumanity

ofMetroDenver


Challenge # 3: Condo Conundrum Morestarterhomesandcondominiumswouldhelpeasepressureonrents.Tothisend,saysTomClark,CEOofMetroDenverEconomicDevelopmentCorporation,thefocusis construction defects reform.

TheColoradoCourtofAppeals'2009decisioninGeneralSecurityIndemnityCompanyofArizonav.MountainStatesMutualCasualtyCompanychilledcondodevelopmentstatewidebylimitingacontractor'srightstocommercialliabilityinsurancearisingfromconstructiondefectclaims.

Sincethen,thenumberoflawsuitshasskyrocketed.Withtoomuchexposureandtoolittleinsurance,developersandbuildersshyawayfromcondoprojects,whichtheysayhavebecomeunprofitable.

Best Practices: Proven Strategies for Affordable HousingA density bonusallowsdeveloperstobuildtaller,denserhousingdevelopmentsinexchangeforbuildingagivenshareofaffordablehomesinaproject.

Deed restrictionsthatlimitannualappreciationofhomesareusedprimarilyforfor-salehomes,andoftenkeepasteadysupplyofworkforcehousinginareaswithhighhousingcosts.Anownerbuyingadeed-restrictedhomeagreestolimittheresalevaluetoestablishedpercentagedesignedtopreserveaffordabilityforthenextbuyer.

Special funds liketheTODFundcanbeusedtobankparcelsoflandprojectedtojumpinprice.

Manycreativedevelopersareworkingwith "anchor institutions" likehospitals,universities,andchurchestosecurefreeorlower-costlandandfundingfordevelopment.

Community Land Trusts (CLTs)canbufferthemarketsupsanddownsbyseparatinglandcostsfromaffordabledevelopments,asdevelopersleasethelandforthelongterminsteadofbuyingit.

Special bond issues can provide the necessarymoniestofundaffordableprojects.

Lodging taxes areagoodfundingsourceforaffordablehousingthatletstouristcontribute.

Aspen's Affordable Housing Credit Program createsaninvestmentmarketforspeculativedevelopmentofaffordablehousing.

InPortland,Oregon,andothermunicipalities,tax-increment financing (TIF) hasbeenaneffectivefundingmechanismforaffordablehousinginareasofurbanrenewal.

Impact fees (paid by the developer), whileoftencontroversial,providemanyjurisdictionswithasizablesourceoffundingforaffordablehousing.

Flexible zoningcanallowformoredensity,lessparking,orotherexemptionsforaffordablehousingprojects.

AtprojectslikeRedOakParkinBoulder,energy retrofitsandrenewablegenerationcanreducethehousingcostsofresidentsinthelongterm.

HabitatforHumanity'sLaffertysayspolicychangesareneededatthestatelevel,noting,"Thechallengeisfindingthefundstobeacatalyticforce."

Other states "have dedicated resources for affordable housing," says MiripolofULC,whichpurchasesand"banks"keysitesneartransitforfutureaffordablehousingdevelopment."Wedon'thavethat.Ourstateissofarbehind.We'reoneofthefewstatesthatdoesn'thaveadedicatedongoingfundforaffordablehousing."

TheStateofColorado'sLIHTCprogram"scratchesthesurface,[but]it'snotpermanent,"headds.Adocumentrecordingfeeofjust$10wouldraiseasmuchas$20millionannually,saysMiripol,withoutTABORramifications.Atransfertaxonallrealestatetransactionsisanotherpossibility,headds,butTABORisabigroadblock.

condosIn Breckenridge, the Wellington Neighborhood provides extensive homeownership opportunities on a reclaimed mine only a mile from downtown. The project won the EPA’s Smart Growth Award in 2002.

Colorado

Skitownsandtheirservicecommunitiesplacetheparticularchallengeofhousingthousandsofserviceworkersincostlyhousingmarkets.Failuretoaddressthisissueresultsinlongercommutes,moretraffic,andcommunitieswherethebalancebetweensecond-homeownersandlocalsiswayoutofwhack.

Toaddressthis,Boulder-basedBrynnGreypartneredwiththeTownofFriscoandtheSummitCombinedHousingAuthoritytodevelop69"semi-custom"homeson12acresbetweenthetownandnationalforest.Constructiontookplaceinfivephasesfrom2011to2015.

BuyersinPeakOnewererequiredtobeinthe80to160percentAMIrange,andmanyofthemthoughttheirhouseholdincomeofabout$150,000woulddisqualifythemfromthedeed-restrictedhomes.About10percentofthehomesweremarket-rate.

Thedeed-restrictedhomesinitiallysoldforabout$250,000to$450,000,withthemarket-ratehomesgoingforabout$550,000to$700,000.Appreciationforthedeed-restrictedhomesispeggedtothechangeinAMI,andcappedat3percentayear.

PeakOneresidentsincludeemployeesofthelocalhospital,schools,andskiresorts,sokeepingappreciationincheckiscritical,saysKateClement,directorofmarketing

andoperationsatBrynnGrey."We'rereallytryingtofocusonthelocalfolkswholiveandworkhere,"sheexplains."Ifitweren'tforthelocals,SummitCountywouldn'tshinelikeitdoesnow."

AddsClement:"IliveinPeakOne.We'vegot22kidsononeblock.Theenergyjustcomesoutintheevening."

Case Study: Peak One, Frisco

Asof2009,condosrepresentedmorethan20percentofnewhomesinColorado."That'salongwayfrom[today's]2.7percent,"saysClark,citingcondos'currentsliverofthemarket.

Clarkpointstocondominiumsalesdataasevidenceofstrongdemand:In2015,morethan11,000existingcondosweresoldinmetroDenver,butonly187newhomescametomarket."6,000to8,000newcondosonthemarketinthenexttwoyearswouldbewelcomerelief,"hesays.

Fewercondos(whichtendtobebuiltinareasofurbaninfill)meansmoresprawl,headds.Ifyouwanttobuyastarterhome,"Youdon'thaveanyoptionbuttodriveuntilyouqualify."

EffortstointroduceconstructiondefectsreformintheColoradoStatehousehavefailedforseveralsessionsrunning.Inpursuingreform,theMetroDenverEDChasshifteditsfocustolocalgovernments."Wewillprovidemoneytocountiesandcitiestocoverlegalexpenses[tofightconstructiondefectslawsuits],"saysClark."Wehaven'thadanytakersyet."

Fewer condos means more sprawl, says Tom Clark of Metro EDC. If you want to buy a starter home, “you don’t have any option but to drive until you qualify.”

"It's not a ghost town with condos that aren't occupied 50 percent of the year. It's real people, it's a real place, it's a real neighborhood."

–KateClement,directorofmarketingandoperations,BrynnGrey,onPeakOneinFrisco


"Density is the key. It's the key to the viability of local economies and it allows for inclusionary components."

--ChadHoltzinger,president,

ShopworksArchitecture

Outside-the-box strategiesBeyondLIHTCsanddedicatedfunds,thereareanumberofcreativeapproachestocatalyze,preserve,andimprovethedeliveryofaffordablehousing.

Aspen'sCertificate of Affordable Housing Creditprogramoffersamarket-ratetact."It'screatingamarketwhereyougetaffordablehousingbuiltupfrontbytheprivatesector,"saysMikeKosdrosky,executivedirectoroftheAspenPitkinCountyHousingAuthority(APCHA).

Developersbuildaffordablehousingandsellthecreditstoanotherdevelopertomakemoney,insteadofbuildingonsiteoroffsiteorwritingachecktocovertheiraffordablehousingrequirement("cashinlieu").Thespeedandflexibilityoftheprivatesectorhelpcutthroughredtape,toutsKosdrosky."Ithasatonofpotential.We'vejustscratchedthesurface."

EnterpriseCommunityPartners'Weinigadvocatesfor"moreandbetterrenters'rights"onastatelevel"Comparedtootherstates,we'relandlord-favorableandtenant-unfriendly,"hesays."Itcouldhaveasmuchimpactasanyfinancingorfunds."

WeinigpointstoMileHighConnects'Access to Opportunity Platform, amulti-prongedinitiativetoshoreuprenterprotections,preserveexistingaffordablehousing,andcatalyzehomeownership,asagoodstartingpointforimprovement.

Anothercreativestrategyinvolvesanchor institutionslikehospitals,universities,andmajoremployersinvestinginaffordablehousing.VailResortsisonelocalexample:TheBroomfield-basedcompany,whichemploysabout18,000peopleinColoradoduringpeakwinterseason,recentlyannounceda$30millioncommitmenttoaffordablehousingandisworkingwithdeveloperGorman&Companyona200-homeprojectnearKeystone.

MileHighConnects'WestcallsMinneapolis-St.PaulandClevelandmodelsinthisregard,andsaysitiscurrentlyastrategyherorganizationispursuing."Therearesomeprettyactiveconversations,"saysWest."It'salittleabouttheirownworkers,butit'salsothatthey'repartofthesecommunities."

Nonprofithospitalshaveledthechargeinseveralcities.BonSecoursofBaltimoreHealthSystemstarteddevelopingaffordablehousingforseniorsinthe1980sandnowmanagesmorethan700homesthroughasubsidiaryfoundation.InDetroit,HenryFordHealthSystemhaslikewiseinvestedinaffordablehousing.

Westalsoseessocial impact investment fundsasapotentialcatalyst."We'restillalittletooearlytostatedefinitively,'Thisworks,'butIthinkthere'sappetitethere,"shesays."They'renotthinkingaboutbuiltenvironmentasaplacethatcanprovidesocialreturns."

creativeapproaches

Boulder’s Holiday Neighborhood is a 27-acre infill community blending everything from Habitat homes to deed-restricted middle-income to market rate townhomes in a walkable, transit-served setting.

Colorado

What's Next for Public Officials? Takeahardlookatregulatorychangestoincreasesupply.Thiscanincludedensitybonusesfornewdevelopmentthatincludesaffordablehousing,orevenmoresimply,allowingmorehomeownerstoconverttheirgaragesandbasementsinto"grannyflat"apartments.

Example:InDenveralone,thepotentialforaccessorydwellingunits(ADUs),or"grannyflats,"couldadd21,000homestothehousingsupply.PortlandandVancouverhavestreamlinedregulationsandprovidedincentivestoincreasethesupplyofADUs.

What's Next for Real Estate Investors? Lookforopportunitiestoinvestorcreateafundtoinvestinstableneighborhoods,suchaspurchasingfullapartmentbuildingsinareaswhererentsarenotrising.Thesearegood,solidinvestmentsthatprovidesteadycashflowforyearstocome.

What's Next for Neighborhood Activists? Beproactive!Beforedevelopmentsareevenproposed,approachpropertyowners(especiallyofvacantlots)withyourvisionfornewdevelopmentthatcouldimproveyourneighborhood.

Whendeveloperscomeknocking,engageearlytoexpressyourvision,keepingopenthepossibilityyouwillsupportcompatibledevelopment

Example:In2016,Coloradohostedthefirstnational"YesInMyBackyard"(orYIMBY)conference.Morethan140youngcommunityactivistsattendedtosupportmorehousingchoiceswheretheylive.

What's Next for Architects? Manyneighborsexpresslegitimateconcernsthatthedesignofnewdevelopmentsdoesnotcomplementtheirblocks.Studybestpracticestoproducedesignsthatsuitthescaleandfeelofexistingneighborhoods.

Examples:Denver'sMariposaneighborhoodincludesbuildingsdesignedbydifferentarchitects,indeliberatelydifferentstyles,butcomplementarytothehistoricSouthLincolnParkarea.

Breckenridge'sWellingtonneighborhoodandPitchforkinMountCrestedButtedrawuponthetraditionalarchitectureofmountainminingtowns.Eachprovidesamixofmarket-rateandaffordablehomes.

what's next?Take the first steps toward overcoming barriers to affordable housing

“Mixed-income developments that include affordable units for hard working individuals and families are key to building healthy, vibrant communities.”

–DenverMayorMichaelHancock


Mill levy: The tax rate that is applied to the assessed value of a property. One mill is one dollar per $1,000 dollars of assessed value.

Impact fee: A fee that is imposed by a local government on a new or proposed development project to pay for all or a portion of the costs of providing public services to the new development; or to pay directly into an affordable housing fund.

Community Land Trust (CLT): A nonprofit organization created to acquire and hold land to provide affordable access to land and housing for community residents.

Area Median Income (AMI): Eligibility for subsidized housing programs are often determined by area median income (AMI). Many programs target 60 percent AMI and lower, and workforce projects are often 80 percent AMI.

Construction defects: A deficiency in the design or construction of a building resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with buyers' reasonable expectations. Many observers say Colorado needs state-level reform to catalyze the development of condominiums.

Taxpayer Bill of Rights (TABOR) Amendment: The 1992 amendment of the Colorado Constitution that restricts revenues for all levels of government. Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates without voter approval if revenues grow faster than the rate of inflation and population growth. Revenue in excess of the TABOR limit must be refunded to taxpayers, unless voters approve a revenue change as an offset in a referendum.

Low-income housing tax credits (LIHTCs): The federal government's primary program for encouraging investment in affordable rental housing for low-income households. The state of Colorado also has a LIHTC program.

Inclusionary housing ordinance (IHO): A municipal or county ordinances requiring a given share of new construction to be affordable by people with low to moderate incomes.

Cash in lieu: Instead of building affordable homes on-site, many IHOs allow developers to pay cash to the municipality to fund development of affordable housing elsewhere in the jurisdiction.

Affordable Housing Report Glossary Terms

What's Next for Environmentalists? Recognizethattheoppositeofdensityissprawl.Supportcompact,transit-oriented,mixed-incomeinfilldevelopmentasabestpracticetoprotecttheenvironment.

Example:TheSierraClubsupportssmartgrowthnationally,including"buildingmoreaffordablehousingclosetotransitandjobs."

What's Next for Public Agencies and Institutions?Youmaybesittingonanaffordablehousinggoldmine.Publicagencies,schooldistricts,hospitals,universities,andreligiousorganizationscanassesstheirsurpluspropertiesandinsomecasesjointventurewithfor-profitandnonprofitdeveloperstocreateaffordablehousing.Propertiesthatdrainbudgetscanbeturnedintotruecommunityassets.

Examples:IndowntownBoulder,severalchurchesaremakingtheirparkinglotsavailabletobuildaffordableseniorhousingandtransitionalhousingforhomelessteens.

InArlingtonCounty,Va.,thecountygovernmentdonatedlandworth$8.5milliontoanonprofitcorporationthatbuilt122affordableapartments.Thedonationdecreasedthecosttobuildeachhomeby$60,000.

Private developers and public officials celebrate the dedication of new affordable housing at Yale Station in Denver’s 119-mile FasTracks transit system.

Colorado

1536 Wynkoop St, Suite 211Denver, Colorado 80202

(p) 303.893.1760(e) [email protected]://colorado.uli.org

ULI Colorado Leadership in Responsible Land Use ULIColoradoisthe1,258-memberDistrictCounciloftheglobalUrbanLandInstitute.ULIColoradoconsistsofafour-personstaff,25-memberexecutivecommittee,and15committeeswithmorethan250volunteers.Morethan40programsayearincludeadvisorypanels,leadershipandmentoringprograms,panels,projecttours,publications,andcommunityservice.ULIisanon-lobbyingeducationalandresearchinstitutesupportedbyitsmembers,sponsors,andfoundations.Keyissuesincludeaffordablehousing,healthycommunities,transit-orienteddevelopment,andsustainabledesignandplanning.

ExecutiveDirector:MichaelLecceseDirector:EricSwanProgramManager:SarahFranklinAssociate:CharlesAllison-GodfreyReportDesign:KellyAnnis

Chair(2015-17):AmyCara,Partner,EastWestDenverVicechair:TracyHuggins,ExecutiveDirector,DenverUrbanRenewalAuthorityTreasurer:BruceO’Donnell,StarboardRealtyChairsemeriti:KirkMonroe,ChrisAchenbach,BillMosher,V.MichaelKomppa,MarileeUtter,JulieUnderdahl,JamesDeFrancia,BuzKoelbel,ByronKosteHousingcommitteechairs:LynnCrist,TheMorrisonGroup,andChadHoltzinger,ShopworksHousingcommitteeprojectlead:JamesMcMurray,HB&AArchitectureandPlanning

This report was generously supported by

overcoming barriers to affordable housing in colorado · other costs are rising across the board...

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