Denver could come up with a lot more money for affordable housing much more quickly if the city borrowed to do it, and members of All in Denver want the idea of a housing bond to be included in the comprehensive housing plan the city is on the verge of finalizing.
All in Denver, an advocacy group that includes developers and community groups concerned about housing issues, has submitted a proposal to Denver City Council and Mayor Michael Hancock that estimates the city could raise $150 million without raising taxes by borrowing against the half-mill property tax the city is already collecting — or $300 million by increasing property taxes by an additional half-mill.
The affordable housing fund approved by City Council last year is expected to bring in $15 million a year over 10 years and has a goal of building or preserving 6,000 units of affordable housing in that time frame. Bonding would allow the city to spend more money on the problem in the next few years and build much more housing, then use tax revenue to pay it off at a low interest rate over 20 years, just as the city does with its general obligation bonds.
In one sample plan described in the proposal, supporters estimate the smaller $150 million bond program could produce 8,660 units, while the larger $300 million bond program could produce 17,320 units. The money could be used not only to build new affordable housing but also to buy and save land for future housing, help low-income homeowners stay in their homes, subsidize down payments for future homebuyers and develop more supportive housing for the homeless. An estimated 70,000 to 80,000 people in Denver are “housing-burdened” — that is, they’re paying more than the recommended 30 percent of their income for housing.
“Housing is a crisis,” said Brad Segal, co-founder of All in Denver. “It demands more resources and more urgency and more creativity to address it.”
Either plan would require the approval of Denver voters, and getting it on the ballot will be a lot easier if it has the endorsement of the city’s elected officials, some of whom are leery of the idea. Members of All in Denver believe the public would support this plan based on polling they did earlier this year.
All in Denver is pushing this idea now because Denver City Council is expected to adopt a comprehensive housing plan this fall that will guide city efforts over the next five years. No one — not All in Denver and not city officials — thinks Denver can just build its way out of the affordable housing crisis if only enough money is applied to the situation — and All in Denver envisions this bond program as one element of a larger plan.
A draft version of that plan is set to be released Monday, and there’s an open house for the public to give feedback on that plan Tuesday. A final recommendation will go to City Council in October.
All in Denver is not alone in saying the city needs to put more money into housing.
At a committee meeting last week, Council President Albus Brooks said the city needs substantially more money for housing — though he suggested refinancing old debt and using the savings to generate more housing money, rather than a new, dedicated debt package. One hiccup here is that when debt is voter-approved, the money can only be used for the purposes described in the ballot language, even if the debt is refinanced.
Councilwoman At-large Debbie Ortega also wants to see more money for housing. She said including the bond in the housing plan doesn’t mean the City Council needs to act on it right away, but it does provide an additional tool.
“I don’t want to exclude it as a tool,” she said. “… If we’re serious about addressing the need and the demand, we need to look at all the tools in the tool box. It doesn’t mean we have to use it now, but to not include it makes it much harder to do it later — if it’s not in our housing plan.”
But the administration of Mayor Hancock has been cautious about supporting the idea of using debt for housing.
One problem is that Denver uses debt for facilities the city will own, like recreation centers, police stations and roads, whereas the city typically doesn’t own housing. The Denver Housing Authority is an independent entity, and the city’s affordable housing dollars are usually one piece of a complex financing puzzle for private and non-profit developers who build and manage housing.
Another is that the city only has so much debt it can carry before it would affect the city’s excellent credit rating or run afoul of best practices in public finance. Debt issued for housing is debt that isn’t available for other needs. Denver will ask voters in November to approve a $937 million bond package for infrastructure, and when the City Council was debating the final number, CFO Brendan Hanlon said he would advise against borrowing any more than that at this time.
There are also concerns about whether the city has the capacity to administer a much larger housing program and whether there are the developers, builders and land available to carry it out.
Members of All in Denver think there are ways to address all of those concerns.
Kimball Crangle, an affordable housing developer and co-founder of All in Denver, said one of the easiest and most cost-effective ways the city could deploy additional housing dollars would be preserving the thousands of units of subsidized affordable housing whose covenants are expected to expire in the next few years. Unless that housing is preserved, it can be converted to market-rate units.
An ordinance adopted in 2015 requires property owners to give more notice before these covenants expire and gives the city the right of first refusal, but it still takes money to keep those units affordable.
Crangle said having more money on hand also means the city could respond quickly to grant opportunities that require matching funds.
All in Denver is proposing that the affordable housing fund be administered by a separate authority, rather than a city department. (All in Denver would not be part of that authority, Segal said.) This separate governance structure would have more capacity to administer a large program.
“We would urge the city to be as creative with the governance structure as they’ve been with the stock show or Union Station,” Segal said.
City officials aren’t ruling out the idea of borrowing money.
Erik Soliván, director of the Office of HOPE, which oversees housing policy and has been refining the comprehensive housing plan with the help of an advisory committee, responded to members of All in Denver in an email. He said city officials are considering the feasibility of borrowing against the housing fund, but it’s a complicated issue.
After describing housing is a “top priority” of the administration and listing the financial commitment the city has already made for 2018 — $15 million for the affordable housing fund, $6 million in anticipated federal funds, $1.2 million for supportive housing — Soliván sounded two notes of caution, one about the capacity of the city to take on ever-larger housing programs and one about how housing fits in the larger fiscal picture of the city.
Here’s more from the email:
(The comprehensive housing plan) represents a fiscally responsible approach to addressing this issue. It also factors in the current market conditions and the amount of production that developers and our workforce can realistically support.
Throughout the development of the new affordable housing program, it has been clearly demonstrated that the affordable housing needs of the city eclipse the resources available in the affordable housing fund. We must continue to pursue housing resources that are fiscally responsible and reflect an ability of our housing and finance markets to efficiently and effectively implement the investment.
In partnership with the Department of Finance, we are reviewing options for issuing debt against the current property tax contained in the fund. We welcome an opportunity to meet with you and our Housing Advisory Committee, to discuss the complexities of these options and ensure we share the same facts.
The proposed GO package is unable to fund all of the capital needs identified by the public as part of the GO development process and the city’s 6 year plan. Capital investment needs do come up outside of the cyclical GO process and the city evaluates a variety of fiscally responsible financing tools to meet these needs.
To make that last paragraph clearer: The city might need to use its ability to issue debt for other things besides housing.
Such as? City officials declined to name specific projects, but the winnowing process for the 2017 GO Bond left hundreds of millions of dollars in worthy projects on the cutting room floor, and the Mayor’s Office has also emphasized looming infrastructure and facility needs, such as a major redevelopment of the Denver Center for the Performing Arts, as it considers creating an office to promote public-private partnerships.
Segal said city officials should be transparent about the other uses of debt against which the housing crisis is being weighed.
“We are asking the city to use bonding capacity that has its limits. We are asking the city to say that housing is a top priority worthy of using that capacity. We don’t know what else they might be considering,” Segal said. “… Are they thinking about other competing ideas that they think are more important than the housing crisis? If they have other ideas cooking, it would be great to know what they are, so that the voters and the City Council can weigh those.”
Denver is holding an open house to discuss the comprehensive housing plan. Denver will release a draft version of the plan on Monday, with a lot more detail about the policies the city is considering.
The open house is scheduled for 6 to 8 p.m., Tuesday, Sept. 19, at Bruce Randolph School, 3955 Steele St.