Denver Planning Department Unveils Proposed Affordable-Housing Requirements

On October 13, the Denver Department of Community Planning and Development unveiled a policy proposal that would require developers to build affordable-housing units in many new residential projects.

"We all benefit economically and socially when there is more affordable housing and more mixed-income communities in Denver. This policy proposal improves our ability to make that a reality for Denver residents here today and for residents in the future," Mayor Michael Hancock says in a statement announcing the proposal.

Under the proposal, new residential developments that involve eight or more units will be required to meet certain requirements for creating affordable units. For developments with fewer than eight units, the proposal includes major increases in a per-square-foot fee that all developers now pay for new construction that goes into an affordable-housing fund. In the future, developers of smaller projects would have to pay $6 per square foot in a typical market and $8 per square foot in a high-cost market; the current fee is just $1.86 per square foot.

A recent legislative action made it possible for Denver to create this policy.

Cities across the state, where housing has become far less affordable in recent decades, had been waiting for the Colorado Legislature to pass a law that would remove the statewide ban on inclusionary zoning, which prohibited a municipality from requiring an affordable-housing component in new developments. A 2000 Colorado Supreme Court ruling known as the Telluride Decision put this prohibition into effect.

This past session, Colorado lawmakers finally passed a measure that repealed the prohibition on inclusionary zoning.

The City of Denver has been exploring inclusionary-zoning policies since early 2020, when Community Planning and Development began meeting with an advisory committee that includes for-profit developers; the group's goal was to help craft a proposal that Denver could present once the state legislation took effect.

"I'm a proponent of the inclusionary housing ordinance. I think it provides certainty. Right now, every deal negotiated on a rezoning basis is different. I don't know that that's the best way of implementing public policy," says Susan Powers, a for-profit affordable-housing developer who's president of Urban Ventures and a member of the committee.

Powers doesn't believe that an inclusionary zoning ordinance will discourage the construction of housing. "We're still a growing community, so it'll be effective," she says. "And to me, more effective than paying into a fund. I just think that doesn't get us as much."

According to CPD officials, the vast majority of rental units that have been built over the past few years in Denver have been affordable only for people making 80 percent or more of the area median income; the AMI is now a little over $67,000.

The proposal has varying affordable-housing requirement levels depending on whether the development offers units for sale or rent, whether it's being built in what Denver classifies as a high-cost or a typical market, and at which income level the unit is affordable.

In one instance, developers building a project with eight units or more of rental housing in a high-cost market could either build 10 percent of the total units at 60 percent of the AMI or 8 percent of the units at 60 percent of the AMI, with another 7 percent of the units at 80 percent of the AMI.

The legislation signed into law by Governor Jared Polis this year does include some "alternative compliance options," such as allowing developers to pay a fee in lieu of building the required affordable-housing units.

And there are some cost offsets for developers, including permit-fee reduction and reduced parking requirements. Developers that build more affordable units than required are potentially eligible for height increases and parking exemptions, as well.

Community Planning and Development is seeking public comment on the proposal before it is officially introduced in early 2022. CPD expects the Denver Planning Board and Denver City Council to consider adoption of the final policy in spring 2022. In the meantime, read the policy and submit comments here; there will also be a meeting November 4.