🏛️ July Policy Update ⚖️

✨ Happy Sunday Sunshines, ✨

July is officially in the books, and with it, the one year anniversary of my Inauguration. Hard to believe how quickly this year has raced by.

It was one of our busiest months yet, and included the passage of a ballot measure to amend the Denver City Charter to allow for Denver City workers to form or join unions and to collectively bargain for their rights on the job. This measure will be placed on the ballot for approval (or disapproval) by Denver residents in the November Election. Because the ballot language has been finalized, that’s about all I can say about it for now. Stay Tuned!

Turning towards matters I CAN discuss, it’s time to have a frank conversation about the state of housing (affordable and otherwise) in Denver, before turning, as always, to some of the other happenings around City Council.

AFFORDABLE HOUSING IN DENVER

First, the bad news, which may sound very familiar to our Denver readers: Denver housing needs far outstrip the supply of available housing, especially with regards to lower income residents. Unfortunately, that means that our existing supply now costs more than ever. Not great, Bob!

Those are the broad strokes. Here are the details, provided by the good folks over at the Denver Regional Council of Governments (DRCOG) in their handy dandy Regional Housing Needs Assessment, which studied Denver and the outlying regions in the years since the pandemic.

The assessment finds that as a region, the area will need 216,000 total units by 2032. 137,000 of those units—63% of the total--of those units are needed at 0-60% Area Median Income (AMI). The direst need is at the lowest income level: 85,000 units at 0-30% AMI are needed by 2032.

For our part, Denver will need 70,000 units of housing to meet its ten year needs. 44,000 units of that total must be from 0-60% of AMI, with 27,000 units needed at 0-30% AMI and an additional 17,000 units at 30-60% AMI. Reflecting this in the present moment, Denver currently has relatively high amounts of units at the 60-80% AMI level, but is overbuilt at the 120% AMI level.

What is most striking about this number is that the gap exists despite the large increase in housing production in Denver, and despite that increase in housing production largely coming in the form of large multifamily developments: In 2022, Denver added over 9,200 units of housing. This gap can be explained in a few ways. First, the Denver market is still working from a historic underproduction of housing models. Second, the added units do not actually correspond to the needs of the households in Denver. For example, a developer that has added four bedroom townhomes at 120% AMI has not actually addressed the needs of a newly married couple, and the extra floor space of that unit has priced that unit out of that household’s price range. This situation is also true of a senior on a fixed income. On the other side, single unit studio apartments will not work for a family of four that must live out of an affordable unit. The DRCOG report concludes that this has created a mismatch in household income and housing costs, where that married couple is forced into lower income units, exerting downward pressure on everyone at a lower income level. This downward impact in the Denver region has had an especially acute impact on Black renters in the Denver region since 2000.

The assessment concludes that the market mismatches and the resulting gap in housing cannot be overcome by the market alone, because market incentives do not align with lower income housing. More importantly, the report stresses that even as government regulated units are necessary, the existing tools for those units, such as vouchers and Low Income Housing Tax Credits (LIHTC) are insufficient and may even acts as barriers on further development because the demand for those tools is so competitive and funding so limited that it results in long waiting lists for qualifying households. Moreover, existing funding programs favor large scale projects, at the disadvantage of smaller communities.

Beyond the mismatches in the existing market’s needs and supply, there are other issues with voucher and LIHTC programs. For example, state and federal laws allow for rents on affordable housing to increase every year, with recent raises ranging from five to a shocking fifteen percent. This presents difficulties for seniors on fixed incomes. This is creating what I fear to be an untenable position for those that already have affordable housing.

The effects on Denver and its citizens go beyond rising evictions and homelessness, though those are both plenty serious on their own. Rising costs of housing were recently reported as the number one concern of Denver residents, causing undue stress and hardship on a monthly, weekly, or even daily basis. People who must pay more of their monthly budget for housing have less money left over to buy other goods. This means that less sales tax is collected on purchases, meaning there is less money in the city budget to work with. If left unchecked that could lead to cuts to services in the city’s budget.

So, that’s the bad news. What’s the good news?

The good news is that there are alternative housing models that the city can pursue, independent of existing models and without need to rely on state or federal intervention. Last May, a bill was passed by the legislature and signed into law by Governor Polis that authorized municipal governments to directly own and operate housing projects.

This allows for the creation of multigenerational housing, which is being tried or explored across the country in places like Seattle, Atlanta, New York, and others. Multigenerational housing is publicly developed and comprises buildings that are mixed income. That means that some of the units are priced at market rate and above, and some well below. The mix of incomes can vary, but the important thing is that the number of market rate units covers the costs of the lower income units. This is known as “Cross subsidization.”  Because the public developer is only seeking to fill units and cover the costs of maintenance instead of seeking a profit from development, the rates of lower income housing units can be set higher than public development.  

Even more promising, this model has shown to be viable without the use of Low Income Housing Tax Credits (LIHTC) or housing vouchers. A municipality need start only with an upfront amount of capital, which it then runs a round of bonding on, which grows that stack of money. Private developers can also add money to this capital stack to increase the amount, on the understanding that this investment will be bought out when the projects are completed. The municipality then constructs the building, sets the cross subsidization of the rents, and collects those. The rents pay off the cost of construction on the back end, and once that construction cost is paid off, those rents become the next round of upfront capital to start on the construction of more units. Montgomery County, Maryland has used this model to put 4000 units in the pipeline.

My office refers to this model as multigenerational housing because it would allow Denver to thoughtfully design its buildings in such a way as to avoid the concentration of poverty while bringing vulnerable and (often shamefully, in my opinion) isolated communities like our elders back into communities that are diverse in age and class and weave a healthy social cloth for our citizens.  

So that’s the good news.

Here’s the rub: as you might have realized from the description above, the main barrier to this kind of model is getting a sufficient amount of upfront capital to bond against, and like too much else in this life, you get what you pay for. The larger you can make that initial pool, the more units up front you can construct. Montgomery County’s model required 3 million dollars in initial money, which became a 50 million dollar capital stack after bonding and private investment.  

Here in Denver, conversations are currently ongoing between City Councilmembers and the Mayor’s Office about a sales tax increase of .5%, which equates to an extra two dollars on every hundred dollars spent on goods, which does not include items like gas. This sales tax increase would generate an estimated 100 Million dollars a year for affordable housing. This would be distributed in a number of ways across existing models and tools in addition to covering the costs of new models like that with a sizable pool of startup capital for a multigenerational housing model.

My colleagues and I on City Council are currently engaged in work with stakeholders, the Mayor’s Office, and each other to ensure that any such measure would have the appropriate guardrails and accountability while also preserving flexibility in how those funds may be appropriated. And, because this measure would raise City revenues, ultimate approval of that measure would reside with Denver Voters—which would likely include among that number the you—who would have the choice to approve or disapprove it at the ballot in November.  

These conversations represent the best opportunity Denver has had in some time to meaningfully address housing in this City, and I am excited to participate in them. I am hopeful that City Council and the Mayor will work together to pass something that will serve the needs of our citizens.

COUNCIL ITEMS IN JULY:

Here’s a few of the major items that we voted on in Council this month:

24-0850 + 24-0851: These were a pair of related ordinances related to the Denver Urban Renewal Authority (DURA) project at the Evans School. This is a special arrangement by which goods sold at the Evans School after it is redeveloped will be assessed a specific amount of tax above and beyond the existing tax rate in order to cover the costs of that redevelopment. DURA is willing to enter into this kind of arrangement because it believes that by doing so, it will relieve “blighted areas.” While I appreciate the work that DURA does and its potential for revitalization, I am worried that often, “Blight” is a convenient and somewhat suspect cover for redevelopment, and the legal imperative of the urban authority to eliminate it at all costs means that little thought is given to conditions on the ground. When not planned properly, Blight clearing initiatives simply displace existing populations with little thought to where those people are going to go. We saw this with Five Points. With regard to the Evans School, the building is currently being used by local artists. Once that redevelopment happens, those artists will be priced out of the space. That is not conjecture: that was what I was told by representatives of DURA in committee. I find that displacement unacceptable, and so I voted no.

24-0780 + 24-0781 + 24-0782: These were three separate park designations in District 8, adding 65.69 acres in park land to the District. Adding greenspace anywhere in the city is a no-brainer for me, and I am delighted that in this instance, it was my District that benefitted.

24-0391: This was not a bill but rather a presentation on the results of a study on the Denver Basic Income Program that came through Safety Committee. I highly recommend you watch the entire presentation. The value of basic income, especially when combined with low-barrier transitional housing, is not just a stop-gap, but the support needed to allow for calm, to catch their breath, and to decide next steps. The study validates the power of broad policy programs that aim to uplift people based on trusting the individual to make responsible choices and simply providing them with the resources to effectively make those choices. While the amount we were able to commit in this year’s city budget was less than I had hoped for, I will continue to fight for this program to increase its funding. This study validates what I felt was most necessary and vital about the program, which is to say: A no-strings-attached cash infusion. I’ve found that we can’t build autonomy and trust from those who feel disenfranchised by our society if our society doesn’t first trust them to be autonomous. We’re fortunate as a city to be able to lead on this. The nation has seen Denver truly forging a path, providing people with the freedom to make decisions that are best suited to their individual needs and current circumstances. I believe that our city needs to work in partnership with the Denver Basic Income Project to ensure it continues to be invested in, with public and private dollars.

With love,

Councilwoman Shontel M. Lewis

Denver City Council, District 8