Denver released the details Tuesday of how we’ll pay for the city’s first dedicated affordable housing fund. It’s a combination of property taxes and fees on new construction of all sorts, and it will raise roughly $155 million in the first 10 years.
“This is not easy,” Mayor Michael Hancock said. “You don’t like to add to the burden of the people of Denver, but I don’t think there is a more important issue to ask the people of Denver to step up to the plate.”
Here’s what the taxes and fees would look like:
- A half-mill property tax.
- A $0.60 per square foot fee on new single-family homes and duplexes.
- A $1.50 per square foot fee on apartments and condos.
- A $0.40 per square foot fee on industrial and agricultural facilities.
- A $1.70 per square foot fee on hotels, office buildings, stores and other commercial uses.
That’s $12 a year in property tax for the owner of a $300,000 home and $145 a year for the owner of a commercial property worth $1 million.
The builder of a new 2,500-square-foot home would pay fees of $1,500, and the developer of a 25,000-square-foot commercial property — think a bank branch or a Walgreen’s — would pay $42,500.
The fees and taxes — assuming they are approved by City Council — would go into effect Jan. 1, 2017. The fees would be collected when building permits are approved, while the tax would be collected every year.
The fee and tax structure does not require voter approval. Denver has sufficient tax capacity to increase the mill levy without voter approval, and fees don’t have to go to the voters.
The fee and tax structure means that the burden of paying for new affordable housing would be roughly evenly split between current property owners and new development.
It also means that the city will have both a relatively steady funding source in the form of property taxes and a funding source that realizes a windfall when there is a lot of development activity.
This is the first time commercial developers will have to pay for affordable housing, but some other cities have much higher fees.
“This is a very reasonable fee level,” Hancock said. “If in fact we are bringing new opportunities to the city in terms of jobs and employement, we have to have housing for those workers. We don’t take new fees and taxes lightly … These fees leave us in a very competitive position.”
What will the city do with the money?
The money will be allocated by a 21-member board appointed by the mayor and City Council and consisting of business representatives, housing advocates and community members.
The way this money is divvied up is sure to be a political process, as some community activists want less money for so-called “workforce housing” targeted at moderate-income housing and more money for housing for the very poor, the homeless and those on fixed incomes.
The city plans to establish funding cycles that match the state funding cycles. Money will go toward rental housing for those earning up to 80 percent of area median income ($64,100 for a family of four), for-sale housing for those earning up to 100 percent of AMI ($80,100 for a family of four) and homeownership assistance like downpayment and mortgage assistance for those earning up to 120 percent of AMI ($96,120 for a family of four).
Most of the money will go toward building new affordable housing or preserving existing affordable housing. The city has set a goal of 6,000 units over the next 10 years.
Some money could be used to help struggling households stay in their homes. The city has used — and will continue to use — federal money for that purpose, but local funds could supplement that now.
Denver has put $14 million of general fund money into affordable housing over the last three years. This would be the first time the city had a permanent and dedicated funding source for housing.
“Whether our economy is strong or our economy is weak, we will have funding for housing, and it will not have to compete with other needs,” said Councilwoman Robin Kniech, who has led the effort to develop the fees from the council side.
What happens next?
July 13: The City Council’s Safety and Well-being Committee meets at 1:30 p.m. to discuss the proposal. There will be 15 minutes of public comment. This meeting is informational. No action will be taken.
July 21: There’s a public meeting from 6 p.m. to 8 p.m. at North High School, 2960 Speer Blvd.
Aug. 2: An ordinance will be formally introduced at committee.
Aug. 22: Denver City Council holds its first meeting on the ordinance. There will be a public hearing and initial vote.
Aug. 29: Denver City Council holds its second and likely final vote on the proposal. There will not be an additional public hearing.