By Emilie Rusch
Affordable housing is disappearing across the Front Range, but perhaps nowhere more dramatically than in Boulder. According to a 2014 study by the city’s housing authority, Boulder is losing about 1,000 units of market affordable for-sale and rental housing every year and adding back an average of 123 units of permanently affordable housing.
At that rate, the study warned, the city could cease to have any market affordable, or naturally affordable, apartments by 2018 and for-sale housing by 2020.
“The market is very, very difficult,” said Betsey Martens, executive director of Boulder Housing Partners. “Unless we are doing something intentionally, we’re only going to be losing affordable units over time.”
Today, the going rate for a two-bedroom, two-bath apartment in Boulder is $2,400 a month, said former Boulder Mayor Leslie Durgin, now the Boulder Chamber’s nonprofit liaison and adviser.
Doing the math, that means to spend less than 30 percent of income on housing — the standard definition of affordability — a single head of household would need to earn upwards of $50 per hour. At $15 an hour, a “living wage” that workers have been rallying for nationwide, that pencils out to 3.3 full-time earners, Durgin said.
“If you earn less than $100,000 in Boulder, you’re eligible to have an affordable housing problem,” Martens said.
And while Boulder has always been pricey compared to its neighbors, housing experts say a similar narrative is playing out in communities across the Front Range.
In Denver and its suburbs, market-affordable housing is disappearing faster than it can be replaced, increasingly leaving not just the lowest income earners struggling, but middle income earners as well.
“Especially in Denver, with the economy doing so well and the average price of houses going up and rents going up and incomes not going up at the same rate, there’s a real shortage of housing at the workforce level,” Colorado Housing and Finance Authority CEO Cris A. White said.
“Communities are strengthened through their diversity,” White said. “Teachers and tradespeople, electricians, plumbers, firefighters, police officers, communities are better when those folks can afford to live in the neighborhoods in which they work.”
Addressing the crunch
Communities are taking varied approaches to addressing the workforce housing crunch.
Denver has its 3×5 Initiative, launched by Mayor Michael Hancock in 2013 with the goal of producing 3,000 affordable housing units in five years, or at least 600 units per year on average.
In his inaugural speech last year, Hancock also laid the foundation for an even more ambitious plan — a new development impact fee and property tax increase that could provide $150 million in city funding for income-qualified housing over 10 years
Between July 2013 and June 2015, a total of 1,458 affordable units were built, rehabbed or preserved in Denver, according to the Office of Economic Development.
That just scratches the surface of the need in the metro area, says Aaron Miripol, chief executive of Urban Land Conservancy.
“We’ve got a 60,000-unit shortfall and it’s probably even more,” Miripol said. “We don’t have dedicated resources to really make the kind of impact that needs to happen.”
The conservancy, which makes strategic land purchases for affordable housing development, is wrapping up its latest project, a 156-unit, income-restricted apartment community near the soon-to-open commuter rail station at East 40th Avenue and Colorado Boulevard.
Built by private developer Delwest, who also developed a nearby luxury apartment complex, Park Hill Station will welcome its first families by the end of the month. Residents making up to 60 percent of area median income — $33,600 for one person or $47,940 for a family of four — are eligible to rent the majority of the one-, two- and three-bedroom units.
Miripol said the state, local governments and regional entities, such as the Denver Regional Council of Governments, need to follow the lead of cities like Denver and Boulder and find ways to help finance rental and for-sale affordable housing development.
“About half of the affordable rental housing stock is here in Denver, even though it only makes up a fifth of the population,” Miripol said. “It’s really a regional issue. We need cities like Aurora and Lakewood to step up and put up resources.”
In Westminster, city officials are in the early stages of talks about what could and should be done to incentivize affordable housing development in the city, economic development director John Hall said.
In the new Downtown Westminster, the long-anticipated city-led redevelopment of the Westminster Mall, 20 percent of all residential units are targeted to be workforce housing, or housing for households earning up to 80 percent of area median income, co-project manager Sarah Nurmela said.
That’s $63,900 for a family of four, according to 2015 numbers.
“As we talk to developers, it’s stated outright that’s what we’re looking to provide with any residential project,” Nurmela said. “We’re looking to achieve a wide range of affordablilty and types of units.
Mary Beth Jenkins, president of The Laramie Co., a Denver commercial real estate brokerage that’s involved in the Downtown Westminster project, said at a recent Urban Land Institute forum that cities need to consider underwriting the development of workforce housing just as they have traditionally underwritten the development of retail.
“Cities have to open up their checkbooks and help these developers to provide these options,” Jenkins said. “Developers cannot do it on their own.”
Proposed policy changes
At a recent city council retreat, Boulder Housing Partners proposed a suite of policy changes aimed at increasing housing in Boulder.
One was additional city funding to help the housing authority increase its output to 200 affordable units built or preserved every year, Martens said.
Another would give the housing authority the right of first refusal to purchase multifamily properties coming on the market. An affordable housing benefit ordinance would allow for expedited approval of income-restricted projects.
“The (2013) floods taught us a powerful lesson about the need for first responders to live within your community,” Martens said. “All of my maintenance staff lives outside of Boulder. For them to get here and respond to our emergency needs, they were routed more than an hour around. They just couldn’t get here.”
Durgin said the availability of workforce housing impacts everything from business recruitment to transportation issues and air quality.
“As businesses relocate and relocate here and try to retain employees, it’s a key issue in terms of whether employees can live here, what kind of commute there is, the impact on their families,” Durgin said. “It’s all tied together. You can’t isolate one from another.”
No one wants to see residents get priced out of their own communities, either, said Kevin Knapp, director of development for Element Properties, a Boulder real estate firm with experience in low-income housing development.
“What we’re seeing, especially in Boulder, is there are opportunities for market-rate investors to purchase properties, renovate them and target a higher rent market,” he said. “It’s where the market is right now, but what we’re losing is a lot of affordable housing.”
Element is part of a group that recently purchased three apartment communities in Boulder for rehabilitation and preservation as affordable housing.
Financing for the deal came from a variety of sources, including a $10.75 million loan from the city of Boulder and $19.3 million in low-income housing tax credit equity raised by private equity firm Riverside Capital.
Google and Red Stone Tax Exempt Funding also provided $41.7 million in construction and mortgage capital through the purchase of state-issued tax bonds.
At least $44,000 in improvements will be made to each of the 238 apartments, and a land restriction will require them to stay permanently affordable, Knapp said.
Holding on to tax credits
With construction costs soaring for all project types, Knapp said one of the best things Colorado can do to encourage more affordable housing development is ensure the extension of a state low-income housing tax credit set to expire at the end of 2016.
According to Colorado Housing and Finance Authority, which administers the federal and state low-income housing credits that help income-restricted housing projects pencil out, the state credit directly supported the development of 1,902 affordable rental units in 2015, generating $185 million in additional private-sector investment than likely would have occurred otherwise.
All told, the authority supported 3,925 housing units with all three kinds of tax credits available — the federal 9 percent and 4 percent credits, plus the state credit — in 2015. That’s compared to 2,031 units in 2014, when just the two federal credits were available.
“Demand is definitely going up,” White said. “In the last year especially, we allocated more 4 percent credits than we had in a very long time.”
The competitive 9 percent credits are the most popular because they are able to finance more of a project’s costs, typically 70 percent in the form of equity. The noncompetitive 4 percent credits only cover about 30 percent of costs.
Colorado Housing and Finance Authority typically receives $3 to $4 in requests for every $1 in 9 percent credits they can allocate, White said.
The state credit has helped to bridge the gap, though, providing additional equity for 4 percent tax credit projects. That, in turn, lessens the amount of debt an affordable housing developer has to take on and the cash flow required to make the loan payments, making projects more feasible.
“It allows for the owner to charge lower rents in order to make them more affordable to more people,” White said.
The authority is working with state legislators to make sure the state tax credit is renewed this legislative session, he said.
A centralized database tracking every income-restricted or naturally affordable unit in the state is also “99 percent complete,” White said.
That effort will become even more important as older projects start coming to the end of their 30- to 40-year affordability requirements soon, he said.
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