City unveils income-restricted housing mandate, much higher linkage fees

The Barth Hotel received nearly $162,000 from Denver’s affordable housing fund to preserve 61 income-restricted residential units, according to city records. (Eric Heinz photo)

Developers building large residential projects in Denver may soon be required to reserve units for those making less than the median income.

And developers building non-residential projects — say, a large office building — may soon have to pay far more to the city’s affordable housing fund than they already do.

On Wednesday, the city unveiled a proposal that takes advantage of a recent change in state law that allows municipalities to mandate income-restricted housing — often referred to as “affordable housing” — in new developments as they’re built.

The city’s proposal, which has been in the works for months, would mandate income-restricted units in all new housing projects with eight or more units, whether they’re for sale or rent.

Developers of those projects would no longer have to pay the city’s affordable housing linkage fee, as they typically do now. The city uses that money to fund income-restricted housing.

Developers of non-residential projects or smaller residential projects in the city would continue to pay the linkage fee under the proposal, but would see that fee at least quadruple.

Depending on the type of development, the current linkage fee for development varies between 44 cents per square foot to $1.86. The proposal is to raise those fees to between $4 per square foot and $8.

The details of the proposal could change, and will ultimately need to be approved by the Denver City Council, which is likely to consider them in the spring. A meeting about the proposed changes will be held Nov. 4.

Residential development

In most cases, developers building eight or more rental units would be required to make 8 to 12 percent of the units income-restricted.

Developers building eight or more for-sale units would need to set aside between 10 and 15 percent of them, according to the proposal.

In higher-cost areas of the city, such as downtown, developers would need to provide an additional 2 percent to 3 percent more income-restricted units.

The restrictions would be in place for 99 years. The exact percentage for a specific project would depend on the “level of affordability” offered, according to the city — whether the units are reserved for those making up to 60 percent of the area median income or 80 percent, for example.

Developers could also satisfy the requirement by dedicating land that could be used to build income-restricted housing, according to the proposal.

Linkage fee

The linkage fees are proposed to increase to $4 per square foot for projects with less than eight units, $6 for single or multi-unit projects that are more than 1,400 square feet on average, $4 for industrial projects and between $6 and $8 for other commercial projects.

Smaller developments of less than eight residential units that are on average less than 1,400 square feet would have to pay the smallest amount of the linkage fee, said Laura Swartz, a spokeswoman for the city’s Community Planning and Development Department.

The proposed fee increases drew some skepticism from attendees at a meeting last Thursday held online, which included city staff members and representatives of the development industry.

Kirsty Greer of McWhinney said commercial and retail industries were affected by the COVID-19 pandemic, and it may be difficult to impose the fees in the face of an economic recovery.

“(To say) office, commercial and retail were negatively impacted by the pandemic is a real understatement,” Greer said. “It was solidly decimated by the pandemic, so what I would suggest is that we be really careful to not create a situation where already people are having a hard time building new office space and building retail for our ground floors.”

Background

The linkage fee and a portion of Denver property taxes flow into the “affordable housing fund,” which has gathered tens of millions of dollars since it was enacted in 2017.

The linkage fee garnered about $1.1 million in 2017, $4.3 million in 2018 and about $10 million in 2019.

Derek Woodbury, a spokesman for the Housing Stability Department, said in 2020 the linkage fee contributed $9.5 million to income-restricted housing for several projects.

Funding was given in the amounts of $2.6 million for the Central Park Urban Living Flats, $700,000 for Kappa Tower in North Field, $2 million for the GES Land Trust Initiative, about $1.5 million for Capitol Square apartments in Jefferson Park and about $2.6 million for the Vina Apartments near Cheesman Park.

“Thus far in 2021, the only loan supported by the linkage fee that HOST has closed was The Reserves at Green Valley Ranch with $2.1 million,” Woodbury said.

Homelessness has been the forefront issue for Denver over the last few years, and the city stated the increased linkage fees would help curb it.

According to Denver’s draft five-year strategic plan on housing stability, the shortage of “affordable” rental units in Denver is about 19,000 rental units at or below 30 percent of the average median income, 20,000 at 50 percent and more than 11,000 rental units at or below 60 percent.

Correction: The amount of money paid into the linkage fee each year has been corrected.

The Barth Hotel received nearly $162,000 from Denver’s affordable housing fund…

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