RENTAL HOUSING IN LEADERS’ FOCUS

Proposal would increase provision to 60 years of Denver rental affordability

City looks to fix “mistake” of forcing projects to only stay “affordable” for 20 years.

Denver’s program for affordable rental housing has a leak, and the city’s leaders haven’t agreed how to fix it.

Even as the city spends millions more dollars to create incomerestricted housing, it faces the threat that up to 8 percent of its existing “affordable” units will convert to full market prices over the next five years.

The problem is simple, but the debate is not: When developers build affordable rental units, they don’t have to stay affordable forever. Right now, projects have to stay “affordable” for at least 20 years after they receive city money, though the city sometimes negotiates longer terms.

“Early on, 20 years seemed like a really long time,” said Andrew Romero, a vice president at Regions Bank with extensive experience in affordable housing.

“That was a mistake. Everybody’s figured out, we don’t want to keep having this problem where lots and lots of resources go to creating the programs and the projects, and then it’s lost.”

The problem is already surfacing: The affordability restrictions on about 1,700 rentals will expire over the next five years. About 40 percent of those expiring units were built with city funding. Statewide, the total is about 6,100 units over five years.

A new city proposal would boost the requirement to 60 years of affordability for each citysubsidized project. The change could make Denver’s investments last longer, but some nonprofit leaders warn that it would disrupt the complex affordablehousing market.

Nonprofit concerns

“The folks it’s going to hurt the most is going to be our nonprofit partners, not the forprofit world,” said Councilwoman Atlarge Debbie Ortega said at a committee meeting last week, citing complaints she had received from a group of nonprofits.

One nonprofit leader, Marvin Kelly of Del Norte Neighborhood Development Corporation, warned that longer restrictions would hurt property values, with ripple effects. In an email to council members, he said the change would hurt nonprofits when they try to secure new rounds of state financing to fix up older affordable buildings.

“In the long term this will mean less private funds invested in (low and medianincome) developments,” he wrote. Instead, he suggested a 40year period.

City staffers, however, said that their research “confirmed” that the change would not reduce developers’ ability to get loans and tax credits.

Councilwoman Atlarge Robin Kniech said that other cities’ efforts have proved that longer requirements work. Boulder, for example, requires projects to keep income restrictions forever if they want city funding.

“Boulder already has perpetual affordability. They are competing for state tax credits,” she said at Wednesday’s meeting. “You can still get tax credits, you can resyndicate.”

In a separate interview, banker Romero said that the change should not negatively impact projects. “This is all very good stuff,” he said.

But Kelly, the nonprofit leader, said that Denver hadn’t shown a strong enough commitment to affordable housing builders to justify the new requirement.

“The City of Denver has not even had two full years of fund availability let alone the appropriate mechanisms, terms and management capability to make these changes now,” he wrote.

Rodger Hara, a veteran affordable housing consultant, said affordable housing requires a careful balance of scores of variables.

“It sets up a question of why, and what do they hope to get out of it, and what are they going to give in return,” he said in an interview.

What’s next?

Meanwhile, Kniech and Councilman Albus Brooks are worried that the change still leaves some holes in Denver’s program.

For example, the 60year rule wouldn’t apply to affordable units built in the 38th and Blake area, where the city requires developers to build affordable units but doesn’t give funding for them.

The full council will debate the potential change in the weeks ahead.

The city already has taken some steps. Under a 2015 law, landlords have to give a year of notice to the city before converting or selling an affordable property. The city also can purchase units as their covenants expire.