A divided Denver City Council voted 9 to 4 Monday to approve the major elements of Mayor Michael Hancock’s affordable housing proposal: a half-mill property tax increase and a per-square foot fee on new construction to create the first city-supported fund for housing.
Denver City Council members had two competing proposals in front of them, as well as several amendments.
Councilman Chris Herndon wanted to delay the implementation of the fees and taxes to give more time to debate the funding and use city reserves in the meantime. While some of its supporters on council, particularly Councilman Rafael Espinoza, want developers to pay more, all the speakers from the public who supported Herndon’s proposal also opposed the linkage fee.
Councilwoman At-large Robin Kniech, who with Council President Albus Brooks shepherded the mayor’s proposal through a sometimes skeptical council, said the ordinance before the council isn’t enough and it isn’t perfect, but it’s the only proposal that has survived a grueling political process.
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“It’s worth it to the hundreds of seniors on Social Security who can age in place,” she said. “It’s worth it to thousands of students who can stay in their schools because their parents don’t have to move. It’s worth it to hundreds of homeless people who will have an opportunity for supportive housing. It’s worth it to the people who serve us. … To say that it’s not worth it to those people because we can’t help everyone is to say that it’s worth it to do nothing.”
Council members Kniech, Brooks, Paul Lopez, Debbie Ortega, Kevin Flynn, Paul Kashmann, Jolon Clark, Mary Beth Susman and Stacie Gilmore voted yes.
Council members Herndon, Espinoza, Wayne New and Kendra Black voted no.
Herndon said he still believed his bill would have been better, but the debate created the leverage for changes that improved the mayor’s proposal.
The council majority that supported the affordable housing fund said the linkage fee was a critical part of the proposal. It makes sure those making money off the city’s boom pay to offset the rising housing costs that have come with it.
“This is a value that we all recognize, and we need to all be on board,” Lopez said. He called the linkage fee a “grownup rule” for a “grownup city.”
At the same time, he said the problem won’t fully be solved until wages increase and the city has the ability to do rent control in some form.
Ortega said Denver is at risk of turning into Manhattan.
“I don’t want Denver to be that kind of city,” she said. “I want this to be a city where everyone can afford to live.”
In the amendments, the City Council both made it easier to raise the linkage fee sooner and put in a sunset clause that would require a future council to reauthorize the program for it to continue.
The City Council voted 7-6 to approve an amendment from Kashmann that would allow the linkage fees to be raised in three years. That’s sooner than the five-year protection from increases that had been in the ordinance.
The City Council voted unanimously to approve an amendment from Ortega to have a comprehensive housing plan come back to council for approval next year. The amendment creates a lot more specificity around how the money will be used and requires an annual public hearing on progress or the lack thereof.
“This is really important to the city because it doesn’t leave anything to question,” Ortega said of the plan. “It will bring this plan back on an annual basis to look at the accomplishments of the plan.”
The City Council also voted 7-6 to approve an amendment from Black to have the taxes and fees expire in 10 years unless they were reauthorized.
Kniech said the sunset clause would make the fund not permanent and make it harder for developers in the latter years of the fund to get other financing or invest in land.
But Espinoza said the plan has always been presented as a 10-year plan.
“Are we saying this is a perpetual condition?” he said. “Then our solution isn’t strong enough.”
The ordinance expects to generate around $15 million a year over the next 10 years. The city has a goal of creating or preserving 6,000 units of affordable housing in that time period. The city estimates there are 87,000 households that are “cost-burdened,” paying more than 30 percent of their income for housing.
Before the meeting, community activists stood on the steps of the City and County Building and called for the passage of the affordable housing ordinance but also for the city to put that money into helping poor residents of Denver stay in their homes and their neighborhoods.
Raymunda Carreón, who told me her story earlier this year, saw her rent go from $600 a month to $1,000 for a two-bedroom unit in one half of a duplex. The other half has been remodeled and now rents for $1,600 a month. Her family of six is month-to-month, and her grandchildren cry because they might have to leave their school and their friends.
“My fear is that as we don’t have a lease, they’ll say they want to remodel and raise the rent or just sell the house,” she said in an interview.
Maria Campos, a 29-year resident of Globeville, said displacement is rampant in a community where more than half of households earn $25,000 a year or less and almost 90 percent of the households cannot afford Denver’s average rent of $1,500 a month.
“We want to bring light to what is happening now so we can find a solution,” she said. “It’s not acceptable that our taxes are paying for projects that are helping to displace us. It is important for them to feel what we feel when they tell us, ‘This house is for sale. You have 10 days to move.'”
At the public hearing, representatives of real estate interests largely supported Herndon’s alternative bill and said the linkage fee would be a mistake. They said both that the fee would get passed on to renters because developers would have to recoup their costs and that the increased costs would cause them not to build.
They also supported Black’s amendment to have the ordinance expire in 10 years unless the City Council renews it.
Kathie Barstnar, executive director of the Colorado chapter of NAIOP, the Commercial Real Estate Development Association, said the built environment is part of the infrastructure of the city, not just a funding source, and said it was notable that owners of commercial real estate were willing to pay higher taxes over the long-term to pay for affordable housing.
“They just don’t want you to ask us to pay twice,” she said.
But a few developers said Denver has much lower development costs than other cities along the Front Range, and the fees proposed by the city shouldn’t deter development.
Lynn Crist of the Morrison Group said she has 25 years of experience doing for-profit and affordable housing projects in Denver, and the fees are not enough to stop development.
“I’ve heard developers, larger developers, say these fees will make it harder for them to build affordable housing. I have to say respectfully that they’re already not providing affordable housing,” she said to laughter in the crowd. “… I just don’t see the connection.”
Brad Segal, executive director of Progressive Urban Management Associates, said construction costs run around $200 a square foot, while the fees proposed by the city are between 60 cents and $1.70 per square foot.
“I suspect that many opponents are more concerned about the precedent of establishing a linkage fee,” he said. “That’s a political consideration, not an economic consideration.”
Black said she knows affordable housing is a crisis, but she supported Herndon’s proposal to wait because she worries the fees will make housing more expensive.
Kashmann said developers don’t have to pass on the cost of the fees, and they have a role to play in keeping Denver a good place to live.
“I ran a business for 40 years,” he said. “You look at the market, and some costs I passed on and some costs I ate. Passing it on is not something that has to happen. … Developers have a responsibility to remember their place in this community.”
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