Will State Lift Ban on Affordability Requirements for New Developments?

Colorado lawmakers are preparing to introduce a bill that would allow local governments to require developers to contribute to affordable-housing stock.

"There isn’t a part of the state that isn’t impacted by the high cost of housing. It’s especially rough in the resort communities," says Representative Susan Lontine, a Denver Democrat who is co-sponsoring the bill.

The proposal would allow municipalities to do something they currently cannot do: require developers to build affordable-housing units within a new development. But the bill would also give developers ways to opt out, including paying money in lieu of constructing affordable units, or even donating land.

Local-control advocates have wanted such a measure since a 2000 Colorado Supreme Court decision regarding the city of Telluride and rent control affected the entire state.

"Telluride adopted a housing impact ordinance that said if you build new stuff in Telluride, then you have to help us accommodate the new employment that’ll be driven by the development," explains David Broadwell of the Colorado Municipal League, which is advocating for this new bill. And that meant help with housing.

After adopting that ordinance in the 1990s, Telluride had presented developers with a menu of options for how they could chip in, including building rent-controlled units. But then a developer sued, saying that violated the state's prohibition on rent control.

In the Colorado Supreme Court ruling, known as the Telluride Decision, a majority of justices agreed that requiring a developer to build rent-controlled units was a violation of the state prohibition on rent control. But the decision went further, with the justices arguing that providing a menu of different ways to contribute to affordable housing was illegal.

"Simply because the Telluride ordinance had options that might have implicated a cap on rent, the whole ordinance got blown away," says Broadwell. "This was one of the more devastating losses for home rule and the ability of individual communities to define their own land-use policy."

Since then, various municipalities throughout Colorado have developed workarounds to the Telluride Decision.

Denver, for example, requires all developers to pay a linkage fee, or money per square foot, that goes into an affordable-housing fund. The linkage fee is similar to an infrastructure impact fee, which developers pay for the inevitable use of roads by people going to and from a development. In 2019, the city pulled in $10.3 million from the linkage fee.

But while municipalities have so far avoided any legal challenges to their workarounds, simply requiring a developer to build affordable housing into a new development have remained prohibited.

An attempt last year to completely repeal the state's ban on rent control failed in the legislature. This year's proposal won't even attempt that; instead, it seeks to cede more control to municipalities regarding affordable-housing requirements for developers.

But lawmakers still expect opposition.

Westword reached out to the Colorado Apartment Association and Colorado Association of Homebuilders, two potential opponents of the bill; they have not responded to requests for comment. But developers often speak of a math problem when discussing affordable-housing requirements: Such requirements could make new developments financially unfeasible, they say, and the developments, whether affordable or luxury, would dry up as a result.

Denver City Councilwoman Robin Kniech, a supporter of the bill, believes that municipalities can strike a balance, however. "It’s a math challenge, but it’s not a math obstacle," she says. "The evidence is pretty clear that nationally, these policies have resulted in ongoing development and large outcomes in terms of affordable housing."

Last year, Kniech testified in favor of the bill that would have ended rent control, noting that having even a 10 percent affordable-housing requirement for new developments in Denver could chip away at the rental needs of the moderate-income workforce — people who make about $45,000 per year — and reduce the problem by 20 percent in seven years.

Beyond the linkage fee, Denver has a few other tools designed to get developers to contribute to the city's affordable-housing stock, including height incentives, which allow developers to build above a base height in exchange for either paying a fee, adding affordable units or contributing to the city in another way.

And some new area plans the city is working on as part of its Neighborhood Planning Initiative include affordability incentives.

The Denver Department of Community Planning and Development is also looking at how the city's zoning code can be changed to create more affordable housing incentives for developers. The head of that project, which will likely result in zoning changes by early 2021, is eagerly monitoring what's happening at the state. "We have certainly prepared to modify this from an incentive-only project to a requirement and incentive project," explains Analiese Hock, the principal city planner leading the project.