New marijuana tax could help Denver spend $105 million more on affordable housing

Hancock described the marijuana industry as “stepping up” and asking to be part of the solution.

(Kevin J. Beaty/Denverite)

staff photo

Mayor Michael Hancock’s administration on Monday announced a proposal to double the city’s production and preservation of affordable housing in the next five years, raising up to $105 million of long-term debt while increasing annual spending.

The change could include an increase in the local sales tax on marijuana.

“We have heard the public, city council and the Housing Advisory Committee in their desire to see a greater investment in affordable housing,” said chief financial officer Brendan Hanlon.

The goal is to increase the preservation and creation of affordable housing units — from about 3,000 units to at least 6,400 over the next five years. Thousands of the units would be new construction, while others would be renovations or redevelopments of current units.

“We believe that this proposal delivers more units, faster, and responsibly,” Hanlon said. The plan will require approvals from the Denver City Council.

The proposal would increase spending through the Affordable Housing Fund from $15 million yearly to $30 million per year over the next five years. Some of that money would be used to fund the new debt package of $105 million, while others would go directly to new units.

This comes about two years after the city approved the use of property taxes and new development fees to fund affordable housing.

About half of the new debt would be for housing for people making less than 30 percent of the average median income, or about $27,000 for a family of four.

While much of the new spending would be executed through the housing authority — which is an independent agency — it would still be overseen by city officials under the five-year housing plan.

“This is a commitment to residents who are housing challenged across the spectrum,” Hancock said at a press conference. “It frees up resources for us to continue to be creative, to be bold, to be smart in how we work with developers.

The city is looking to weed sales for money.

The plan would be funded in part by an increase in the city’s marijuana sales tax from 3.5 percent to 5.5 percent of purchases, generating $8 million annually. Hancock described the marijuana industry as “stepping up” and asking to be part of the solution. City officials said they had spoken to some of the largest industry groups.

The city also would transfer $7 million from the general fund into the affordability fund each year. The plan will not increase property taxes compared to current levels, city officials said.

The city doesn’t want to increase the burden “on the very households we are working to serve,” said Office of Economic Development director Eric Hiraga.

Here’s where the money would go.

About half of the bond money would be invested into current DHA projects, including Sun Valley, Westridge and Shoshone.

The other half would fund land and property acquisition for future projects. DHA has about 25 sites in mind, ranging from 1 to 3 acres, plus some existing buildings.

In the last 10 years, the city has seen growing demand for housing assistance from DHA.

In 2008, about 8,000 people filed for housing choice vouchers. Now, it’s 21,000 people each year — and there are only about 1,000 slots available annually, according to DHA staff.

“Denver was forecasted to grow, but not to this extent,” Hancock said. “This is unprecedented growth. That’s phenomenal growth.”

Reactions are still emerging.

Councilman Chris Herndon said that the city should work on financial education, too. “I want to get people in a room, but I also want to help people better manage their finances,” he said.

And Councilwoman At-large Debbie Ortega asked whether any of the money would go to currently gentrifying areas like Montbello, Globeville and Elyria-Swansea. “What kind of priorities are being given to how we are dealing with displacement in these neighborhoods today?” she said.

Council President Albus Brooks praised the focus on lower incomes, and said that the advocacy group All In Denver had helped to drive interest. (Mayor Michael Hancock earlier said that the city has been working on this plan for about a year, before All In submitted a proposal to increase affordable housing money.)

Councilwoman At-large Robin Kniech said she was concerned about whether the city could come up with the money — especially through tax credits — that it would need to fund the new DHA projects.

“It would require an increase in the pace of development that I don’t believe we have the tax credits to do, necessarily,” she said.

Brad Segal, a founder of All In Denver, said he was surprised by the city’s “ambition” in the new announcement.

“It was fascinating to me how the whole tenor of discussion changed. There was so much … energy in the room, energy from council, energy from staff,” he said. “The notion of innovating, the notion of urgency and getting the money out. To me, it’s a game changer in affordable housing.”

And with new funding on the horizon, he said, his group may now change its attention to policies that could increase the opportunities for housing development around the city.

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