Lawmakers Could Lift Court Ban on Affordable-Housing Requirements

For the fourth time in five years, Colorado lawmakers will try to lift the prohibition on municipalities requiring developers to contribute to affordable-housing stock.

"We’re hearing from more and more folks that finding affordable housing is still a struggle, and this is strictly to address for-rent affordable housing," explains Representative Susan Lontine, one of four Denver lawmakers who are prime sponsors of House Bill 1117.

That proposal would give municipalities the power to require a developer to include affordable-housing units in a new rental development. At the same time, HB-1117 would offer the developer as-yet-unspecified ways to opt out, which could include paying money in lieu of constructing affordable units, or even donating land.

Local-control advocates have wanted to repeal the prohibition on what's known as "inclusionary zoning" ever since a 2000 Colorado Supreme Court decision regarding a Telluride rent-control issue wound up affecting the entire state.

The lead-up to that decision began in 1981, when Boulder residents pushed an initiative seeking to institute rent control on existing buildings. In response, the Colorado Legislature passed a bill that "local governments cannot institute any ordinance that controls rent," explains Megan Dollar, legislative advocacy manager at the Colorado Municipal League, a major proponent of HB-1117. As a result, she says, from 1981 to 2000, "local governments acted in the same way they would have without the rent-control statute, in that when talking about new developments, they'd ask for set-asides in the development of affordable-housing units."

But then came the 2000 Telluride Decision from the Colorado Supreme Court, essentially a statewide prohibition on inclusionary zoning policies.

In the intervening years, Colorado, especially the Denver metro area, has become less and less affordable.

"Denver has tried growth. There’s this theory if you just let us build it, we’re going to make it affordable," says Robin Kniech, an at-large member of Denver City Council and supporter of HB-1117, who notes that rents in Denver have grown 77 percent over the past ten years.

"Supply hasn’t created affordability in Denver," Kniech says. "For Denver, it would be important to give us more flexibility and more options." While some Colorado municipalities have developed workarounds to the Telluride Decision, such as fees, she explains that these are not fully effective, as land is limited and fees don't ensure that developers build mixed-income housing.

The City of Denver currently has a linkage fee that requires a developer to pay a small amount to compensate for the impact that a project has on overall affordability. "Ours is a slight fee. It’s the lowest in the nation," Kniech says, pointing out that developers in Denver also have the option of including affordable-housing units in rental developments as a way around the linkage fee.

If HB-1117 were to pass, Denver City Council could enact certain requirements for rental developments, such as mandating that 20 percent of the units have to be affordable for people making 60 percent or less of the area median income (AMI). The linkage fee would remain in place.

In the meantime, over the past year, the Denver Department of Community Planning and Development has been working on a project that would establish citywide zoning incentives for affordable housing, such as ones that would allow developers to build higher in exchange for the inclusion of more affordable units. The CPD is also looking at updating the city's linkage fee and readying Denver for potential changes that might result from the passage of HB-1117.

But first, HB-1117 will move to a legislative committee, where representatives of developers and apartment complexes plan to push back hard, arguing that passing HB-1117 as currently written would stifle development in places like Denver.

"If the ask is too big, the deal won’t pencil out, and nobody will build the project at all," says Drew Hamrick of the Colorado Apartment Association. "It just becomes a de facto no-growth amendment."

As development slows, supply would slip well below demand for rental units and prices would increase across the board, thus decreasing affordability, Hamrick suggests: "What you just created is a system where the working class bears the full cost for subsidizing housing for the slightly more poor."

The Colorado Apartment Association would like to see the bill amended so that it requires no more than 20 percent of new apartment rental units to be affordable at no less than 80 percent of the average area monthly rent. Additionally, the CAA wants HB-1117 to establish financial incentives to offset affordable-housing requirements.

But proponents of the bill reject that. "The Apartment Association is coming from the assumption that a local government is going to act in a way that no housing gets built, and I just don’t agree with that," Dollar says. "If that did happen, it goes against the entire premise of the bill, which is to increase the supply [of affordable housing]."

And the bill's sponsors appear reluctant to enact such amendments.

"We’d be happy to sit down and talk with anybody. But I am concerned that if we’re looking at language that makes this a narrower bill, we will lose the flexibilities that our municipalities are asking for to address their own issues, which are not the same city to city across the state," says Lontine.

"Every city in this state is so unique. Can you imagine applying the same requirements to Basalt, Aspen, Denver, Broomfield?" asks Kniech, whom Lontine refers to as the "technical advisor" on HB-1117.

The Colorado Housing Affordability Project, a group whose mission is to enact reforms to the "state’s land use regulatory system to increase the supply of housing that is affordable for all Coloradans," also has concerns about HB-1117 in its current form.

"Some of our initial research suggests that, in other states where inclusionary housing is allowed, such policies can actually suppress the development of both affordable and market-rate units if they don’t take account of housing needs, financial offsets for developers, and compliance alternatives," says Brian Connolly, a local land- use attorney and founding member of CHAP.

Connolly says that his group is supportive of inclusionary housing generally. But CHAP plans to ask lawmakers to make changes that he thinks would strengthen HB-1117, such as requiring more up-front work by municipalities to research housing needs before implementing any inclusionary zoning measure.

But Dollar also disagrees with this approach, arguing that giving municipalities "more tools would be more productive than putting mandates" on them. "For the Municipal League," she adds, "this is a local-control bill, and the idea is to provide local governments with a new tool. It is not the end-all-be-all solution to the affordable-housing crisis. There are a lot of different things that need to happen. But it’s one piece of that puzzle."