Denver's Affordable Housing Dwindles

Colorado Real Estate Journal, November 15, 2000

On September 29, 2000, a new ordinance aimed at preserving affordable housing in Denver went into effect. Ordinance No. 757 recites that, "It is the policy of the City and County of Denver that publicly assisted rental housing affordable to low and moderate income persons and households should be preserved as a long-term resource to the maximum extent practicable; and ... tenants of such properties should receive protections to facilitate securing new housing" if their homes are converted to market rate units or the character otherwise changes.

The ordinance requires that owners of federally-subsidized low income housing who have decided to "opt out" of the program must give the City and each resident advance notice of this decision. The City and all tenants must receive notice one year in advance of the expiration of a pending HUD Section 8 contract expiration. In addition, if owners decide to "opt out" of Section 8, they must give Tenants 210 days' notice if the owner is not going to renew its long-term contract with HUD, and 150 days' notice if the owner decides not to renew a one-year extension to a long-term contract. Owners of federal preservation projects who opt out must allow inspections of the property and of any reports on the property that have been filed with HUD, the State of Colorado, or the City. These inspections are intended to permit the City to assess the property. Owners of these projects are not permitted to take any actions that would preclude the City from taking steps to preserve the project as affordable housing.

Owners of federal preservation projects who fail to comply with the ordinance are subject to imposition of a civil fine "calculated in relation to the costs and damages caused by the owner's failure to comply, up to full replacement costs of each project-based Section 8 housing unit lost." Fines would be paid into a housing replacement fund established and managed by the City. The new ordinance directs the Housing and Neighborhood Services Division of the City and County of Denver to promulgate rules and regulations to implement the ordinance. It contemplates that the agency will be able to "file a lien to enforce" the provisions of the ordinance.

Owners of projects that receive subsidies or assistance from local sources must give the City 90 days' notice of any action which will make the affordable housing no longer affordable. They must also give a 90-day notice to tenants. Future projects that obtain local subsidies must agree to maintain affordability for 20 years.

Large numbers of Section 8 rent subsidy contracts are expiring. In some cases, market pressure to redevelop the property is intense. That was the situation with the East Village project, a 168 unit project on Park Avenue West near Washington and Tremont Streets, within walking distance of downtown Denver, and a stone's throw from the St. Luke's redevelopment project in "Uptown" Denver. The Denver Housing Authority, after attempting unsuccessfully to buy the project for $6.5 million, has commenced condemnation proceedings. This is the first time powers of eminent domain have been used for this purpose in Denver. Ordinance No. 757 specifically provides that it is not to be construed as restricting the City's existing power to exercise its rights of eminent domain.

Denver's hot real estate market is creating a crisis in affordable housing. Gentrification of formerly low-rent neighborhoods, as well as conversion of rental units to for-sale units, have resulted in decreased supply, while growth in many service-sector jobs has caused increased demand. Affordable housing isn't only an issue for the very poor--elderly, disabled, and chronically ill people living on social security or public assistance, but also for the "working poor." In addition to a diminishing supply of housing for very-low income people, such as those who live at East Village, whose income is at or below 30% of the average mean income for Denver, there is a shortage of what is known as "primary housing," which is defined as what a typical working person needs.

The average rent for an un-subsidized two bedroom apartment in Denver now exceeds $800 per month. Under the rule of thumb that thirty percent of income should be spent on housing, a renter should be making $2,667 per month, or over $15 per hour, in order to afford a two bedroom apartment. Surveys along the southeast corridor of the Denver metro area show that the average wage is less than $11 per hour. Following the rule, a person earning that much can only pay $625 per month for housing. While many of these people would theoretically qualify for rent subsidies, the stock of subsidized housing is diminishing. Furthermore, many people would rather not live in subsidized housing. As one East Village resident put it, "I'd just as soon get away from all the craziness and madness," referring to the problems in the area stemming from crime and drugs.

The East Village property is one of several areas in or near downtown Denver that could become part of the exciting renaissance in the core city, helping it more fully participate in what is being called the "new urbanism." Just as the market is beginning to recognize that mixed uses and mixed housing types make middle-class neighborhoods more livable and vital, the thinking on location and design of affordable housing has been shifting. Mercantile Square at 1545 Wazee in lower downtown is an example of a newer mixed-income community. There, some of the units are reserved for people earning 50% of the average mean income for Denver, while others are rented at market rate. The East Village site covers 14 acres and houses about 600 people. It could be redeveloped at a higher density, with a mixture of affordable and market-rent units, and even some for-sale housing, commercial uses, and open space, which would serve more poor and low income people, and create a better, safer neighborhood for everyone who lives there. If it used the same density as the St. Luke's development, there could be approximately 1,260 units in the redevelopment.