This Old Housing Project

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The 16.5-acre site was cleared in the early '70s by the Denver Urban Renewal Authority at a cost of $6.9 million. East Village was initially built to house journalists covering the 1976 Winter Olympics; afterward, the complex was to be turned over to a variety of housing uses. The Denver Housing Authority designated Arrowhead and the neighboring Thomas Bean Towers for seniors as low-income housing. East Village itself was designed for low-to-moderate incomes. (The rooms range from 875-square-foot, one-bedroom flats to 1,986-square-foot, four-bedroom townhouses.) The picture was to be completed with a high-income high-rise, to be built on the wedge-shaped parcel at the corner of Park Avenue West and 20th Avenue.

Although the Park Avenue Tower was built there in 1976, Urban Inc.'s Jim Murphy says no one could find "a developer to put in a high-income development in that location at that time," and instead the tower became a rental retirement community. The DHA projects moved forward as planned, as did East Village, even after voters passed on the Olympics. Today, despite the desire for mixed-income residents, the area has one of the higher concentrations of low-income housing in the city.

Urban Inc. built East Village with the help of $5 million from a federally insured program called 236. By providing an interest subsidy that reduced the monthly debt service on a building, 236 enabled landlords to charge lower-than-market rents. It was an indirect subsidy to low-income tenants, but Murphy says funding was cut soon after. "The way it was initially designed was not very workable. It did not cope well with periods of high inflation," he says.

The program was superseded by Section 8, which began in 1974 with the passage of the Housing and Community Development Act. The new legislation reflected a policy shift away from huge multi-family housing projects as officials realized they were "isolating people into environments where they didn't have a lot of opportunity to mix with other people," says Joe Garcia, head of HUD's Rocky Mountain regional office.

The solution, through Section 8, was to offer incentives for private developers to build more dispersed affordable housing. The government promised to enter into twenty-year contracts with these developers. Residents would pay 30 percent of their income as rent, and HUD would pay the rest. HUD also would set the maximum rent property owners could charge. As tenants' incomes rose, so would their rent payments, and Uncle Sam would always cover the difference. Landlords were "pretty much guaranteed a revenue stream," says Garcia. Later, Section 8 vouchers were developed that allowed families to rent from a wider range of apartments in the private sector, including those that would accommodate larger families. Today, 167 out of 199 apartments at East Village are Section 8. The rest are still considered 236; those residents pay a flat rate each month, regardless of changes in their income, and the government covers the rest.

Urban Inc. was brought in to help develop East Village and eventually became the primary owner. But from the start, an investment group called 76 HIPL, an investor in low-income projects across the country, had an interest in East Village. Murphy says that Casden Properties was one of the principals of the group that oversaw HIPL. In December 1988, Casden bought Urban's general partnership and took over the complex. Murphy won't say how much the deal was worth, only that "it was a reasonable offer." Casden officials decline to comment for this story.

By the mid-'90s, the twenty-year Section 8 contracts started expiring. Many of the original Section 8 properties were built with forty-year mortgages, and with a booming economy, Garcia says that "some landlords wanted to get out of the program, if they thought their project was economically viable at fair market rates."

In 1999 there were about 6,000 Section 8 units in Colorado set to expire out of 18,000 total. Of 114 buildings up for renewal, only three opted out. So far, Garcia reports, the "overwhelming majority" of landlords have opted to stay in -- but as the contracts began to expire four or five years ago, congressional appropriations for HUD subsidies diminished substantially, and contracts could be renewed for no more than one year at a time. "So each year, the number of units covered by expiring contracts seems to increase," Garcia says. Last year Congress did approve five-year Section 8 contracts, but those contracts remain contingent on the level of federal subsidies.

The squeeze on affordable housing helps explain why many residents and the Denver Housing Authority were skeptical of Post's pledges to provide it. After all, even if Post purchases East Village, it would not be required to provide low-income housing. As it stands, Casden's subsidized contract runs out at the end of September, the condemnation hearing isn't set until the following week -- and Post just officially pulled out of the deal.

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T.R. Witcher