Denver Development

Inside the Affordable Housing Plan Hancock's New Department Will Implement

Mayor Michael Hancock announces the official creation of the new Department of Housing Stability.
Mayor Michael Hancock announces the official creation of the new Department of Housing Stability. Sara Fleming
On October 23, Mayor Michael Hancock stood at the Delores Project homeless shelter and Arroyo affordable housing project, in front of a crowd of public officials and nonprofit and private sector leaders, to sign the executive order that officially created the new Department of Housing Stability.

"We're going to do everything we can in our power to change the course of time and experience for those who experience housing insecurity today," Hancock said.

Hancock announced the creation of the new department a few weeks before the mayoral election, while facing a wave of criticism from his opponents about the affordable housing and homelessness crisis in the city. The department, dubbed HOST, will combine personnel and programs that were previously housed mostly in the Department of Human Services and the Department of Economic Development and Opportunity. Britta Fisher, previously the city’s Chief Housing Officer, will be its executive director.

While the new department is mostly a bureaucratic shift, housing advocates are hopeful that it will help them hold Hancock accountable to his campaign promises, and double down on a new approach to ensuring that everyone can afford to live in Denver.

Cathy Alderman, policy and communications director for Colorado Coalition for the Homeless, helped push for the new department as a member of the Housing Advisory Committee, a group of government officials and non-profit sector leaders that advises the city on housing policy. “We’re in an affordable housing crisis across the spectrum," she says. "We’ve made some progress in housing development, just not enough."

One gap she sees is the lack of a clearly articulated vision for ensuring everyone can afford housing in Denver. The city has been criticized on this point not only from housing and homeless-community advocates, but by auditor Timothy O'Brien, who faulted a “fragmented and understaffed” approach to homelessness in an April report, and in December of 2018 found problems in the city's oversight of some of its affordable housing programs.

"When it came to affordable housing, there used to be a lot more negativity and this feeling that 'it's your problem, not my problem.' Amongst our elected officials, at least in Denver, people no longer seem to feel that way. As a result, the city's doing a lot more than it used to," says Jonathan Cappelli. He’s an affordable housing consultant and executive director of the Neighborhood Development Collaborative, which is a coalition of fifteen nonprofit affordable housing developers and service providers that originally came together during the 2009 foreclosure crisis.

Hancock has called HOST "Denver's first great step in the continuation of a journey to be that city that says we believe in compassion and inclusiveness in welcoming all people on the economic scale." Part of that journey jump-started in 2016, when Hancock created a ten-year dedicated affordable housing fund. The document that outlined a vision for using that fund is called “Housing an Inclusive Denver," the city's five-year guide to locking down more affordable housing in Denver. It will be a guiding document for housing investments for HOST, which will launch the plan into its third year.

HOST will navigate the affordable housing crisis using the 2020 Housing Plan (the Housing Advisory Committee will consider edits to the plan in November). The 61-page document gives a picture of what the city will do to fulfill the goals outlined in the 159-page Housing an Inclusive Denver Plan. With the help of some of Denver's prominent affordable housing advocates, we're breaking down how the Housing Plan seeks to address the massive, complicated situation of affordable housing.

The Housing Plan defines housing affordability and who doesn't have it.

One of the most important parts of the Housing an Inclusive Denver plan is that it details where the city should direct its resources depending on the income levels most in need. Housing is considered affordable when a household spends no more than 30 percent of its monthly income on rent, a mortgage or other housing expenses. Those who spend more are considered “cost-burdened.” Over 35 percent of Denver households are cost-burdened, with 16 percent being "severely" cost-burdened, paying over 50 percent of their income on housing. 

Predictably, a greater percentage of lower-income people are cost-burdened, so the plan focuses on those at the lower end of the income spectrum. Area Median Income (AMI) in Denver is $65,000 for a single person. Housing an Inclusive Denver directs the city to spend the majority of housing resources, 40 to 50 percent, on those experiencing homelessness or making below 30 percent of AMI. Twenty to 30 percent is directed to serving residents between 31 and 80 percent AMI, and another 20 to 30 percent is directed toward residents looking to buy a home.

It (briefly) considers the daunting shortage of affordable housing.

Denver's median rent has been on the rise for the past four years, hovering around $1,500 this year. There are 106,000 cost-burdened households in Denver (those paying over 30 percent of their income) and at least 3,943 homeless individuals, as counted in one night in January 2019. And it's difficult to know how many people have been driven out of Denver by rising prices.

Using reports of income levels of current Denver residents, Colorado Division of Housing estimates that the city would need 26,735 additional rental units that are affordable for people with “extremely low income” (at 0-30 percent AMI, or below $19,500 for one person), including people who are currently homeless and people who are currently rent-burdened. It would need another 11,900 units for the "very low income" bracket, and another 3,340 for the low-income bracket.

Part of the housing crisis is due to a housing shortage. But something the plan fails to mention, according to  Alderman, is that Denver can't simply build its way out. According to the Apartment Association of Metro Denver, the average apartment vacancy rate in Denver County was 5.2 percent in the third quarter of 2019. “We could literally house the entire population of people experiencing homelessness in Denver alone with the vacant rate and market luxury apartments. It's like a gut punch every time I say it out loud,” Alderman says.

About 4 percent of that overall vacancy rate can be chalked up to the downtime that naturally occurs from people moving in and out of apartments, according to the Apartment Association, "while the vast majority of vacant units are in the process of being turned and therefore unleased, immediately available apartments are still scarce.”

Stilll, just as new luxury apartment complexes are going up constantly and are left vacant, people may be driven out of the city, become cost-burdened, or become homeless.

It outlines funds for new publicly subsidized affordable housing units.

Subsidized affordable housing takes many different forms. The Denver Housing Authority, a quasi-governmental agency, owns and operates over 3,900 conventional public housing units across the city. It also administers over 6,000 federal housing choice vouchers, which low-income renters who qualify can use to help pay for private housing. The DHA is mostly funded with federal dollars.

The city is more directly involved in aiding the creation of privately owned affordable housing units. For the most part, private developers aren’t going to make units that rent or sell for below market rate even if they wanted to, because it’s extremely difficult to get a loan that will make the full cost of acquiring land and construction worth it. "It’s difficult to convince a banker that you’re a good bet if you’re not going to charge market rate,” Cappelli explains. "Thus, there is always a gap between what a bank is willing to lend you and what the actual cost of the project is.”

That’s where the city comes in with “gap financing.” Its investment can help provide the essential dollars to get an affordable housing developer over the edge. In 2020, the city aims to create or preserve about 1,130 new units, some of which are through a partnership with the Housing Authority. 

As the 2020 Housing Plan explains, historically the city has relied on the federal Low Income Housing Tax Credit to provide around 40 to 70 percent of an affordable housing project's capital. But, as Cappelli explains, "The way that low-income housing and other funding mechanisms are structured means that the status quo is investments at the higher income rate, unless you find ways to invest and make it easier." Historically most affordable housing units funded this way have served people with incomes above 60 percent of AMI.

That's part of what Denver's dedicated affordable housing fund is intended to address. It’s funded by a linkage fee — a per-square-foot tax on new development that isn’t designated as affordable — and a portion of a voter-approved property tax mill. In 2018, the city doubled its annual commitment to the fund from $15 million to $30 million by adding revenue from marijuana sales tax and a bond partnership with Denver Housing Authority. That money — approximately $30 million every year — allows the city to generate and spend much more of its own dollars on affordable housing.

Though the 2020 plan says that 47 percent of the dedicated fund will go toward investments for people experiencing homelessness or below 30 percent of AMI, it doesn't give an estimate on how many new units will be created for those income levels specifically. And even once funds are invested, it can take years to build the units.

So, is this enough to address the crises of housing affordability and homelessness?

The short answer is no. As advocacy group Denver Homeless Out Loud pointed out in its 100 Days of Action policy document, the 2,000 new affordable units the city aims to create by 2023 are only a tiny percentage of the over-26,000 unit shortage. The Colorado Coalition for the Homeless estimates that the city would need to invest $50 million annually just in housing and services required to meet the needs of the homeless.

As the Neighborhood Development Collaborative points out, housing everyone who is cost-burdened in newly created affordable units would cost developers (public or private) $26.5 billion. "The city needs to strike a balance between an impossible goal that can't be realized and an arbitrary goal like its current one of 1,130 units next year, which won't make a sufficient difference, by aggressively funding an affordable housing production goal that allows the landscape of all new developments in the city to be reflective of the income diversity of its actual residents," says Cappelli.

Another way the city tries to alleviate the affordable housing crunch is by investing in programs that assist low-income Denverites to stay in their current housing. These include programs such as legal assistance for eviction cases and temporary tax relief programs; according to the Housing Plan, approximately 9,710 households will be served next year through those programs. Additionally, the city will ramp up its efforts to acquire land for affordable housing in 2020, and develop more consistent standards to incentivize affordable housing in major redevelopments.

While city council is reviewing the budget and the Housing Advisory Committee is considering changes to the 2020 Housing Plan, advocates are pressing for more funding in what they say will be a crucial year, with Denver financially healthy but a potential recession looming.

“We would always advocate for more resources at a time when the solution is within grasp, before you get so much space between goal and reality that you can’t ever catch up," Alderman says. "If you're not addressing that greatest need with your local resources, nobody else is gonna do that. There's not a marketplace for low-income housing. That's really where the government has to step up."

This story has been updated to clarify the Neighborhood Development Collaborative's position and include an additional quote from Cappelli. A statement regarding vacancy from the Apartment Association of Metro Denver has also been added.
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Sara Fleming is a freelance writer and formal editorial fellow at Westword. She covers a wide variety of stories about local politics and communities. A born-and-raised Coloradan, when she's not exploring Denver, she's on a mission to visit every mountain town in the state.
Contact: Sara Fleming