Denver’s Approach to Building More Affordable Housing is On Solid Ground
Colorado is facing a housing crisis — there is just not enough of it to go around. As any economics textbook will tell you, when demand is high and supply is low, prices will inevitably rise. Across the state, that is exactly what is happening. The average price for a single-family, detached home in metro Denver rose from $700,000 last year (a then-record high), to $920,000 in February and is projected to top a million dollars by the end of this month. This spring, there were no market-rate homes for sale in the city for $300,000 or less. None.
The shortfall isn’t limited to Denver alone — home prices in Colorado Springs are also at record highs, and the Springs is home to the most popular zip code in the nation based on listing views and how quickly houses are sold. Colorado is home to two of the ten least affordable metropolitan housing markets in the nation. Statewide, median home prices reached an all-time high of $600,000 in April, only slightly behind metro Denver. From Aspen to Gunnison to Cortez, there simply aren’t enough houses for sale to meet demand, driving prices higher than a Colorado Fourteener.
Renters in Colorado are feeling the pinch as well, with half classified as “cost-burdened,” meaning that more than 30% of their income goes toward housing. In Denver, average rents are 14.4% higher than they were a year ago and the vacancy rate hovers around 5%. Following the Marshall fire, available rental stock in Boulder Country fell to just five units. Five. Across a county with a population of 325,000. The National Low Income Housing Coalition estimates that our state needs at least 100,000 more affordable rental homes just to meet current demand. As more and more people decide to make Colorado their home, that shortfall will only get worse without a substantial increase in the housing supply.
In light of this housing crisis, the state legislature passed, and Governor Jared Polis signed into law, HB 21–1117 which expands local governments’ ability to promote the development of affordable housing. Denver is one of the first municipalities to avail itself of this newfound power. The city’s Expanded Housing Affordability requires developers offer affordable units or pay additional fees when building new market-rate projects.
“The new policy would mandate that developers building new residential developments of 10 units or more make between 8% and 12% of their projects income-restricted. In some higher-cost parts of the city, they would need to provide 2% to 3% more income-restricted units. . . . In addition to these requirements and fees, the city would incentivize developers to create even more income-restricted housing than they must. Those incentives might include flexible parking requirements, increased height allowances and permit-fee reductions to allow the developers to build more housing units and increase supply.” (Denverite)
The plan, which has been criticized for both going too far and not going far enough, will go to the Denver City Council early next month for approval.
As Denver leaders debate the proposal, municipalities across the state are considering their own efforts to lower the cost of housing in their communities. Unless a city wants to build hundreds or even thousands of new affordable homes using taxpayer money, private developers will play a central role in creating new affordable housing. Lowering the cost to build is, therefore, crucial to any solution to the state’s housing crisis. Easing parking mandates and allowing taller, denser housing, as Denver is proposing, must be core components of any plan to provide more affordable housing from the Front Range to the Western Slope.
Across the country, a huge amount of land is wasted on paved parking lots or multi-level parking garages. Houston, Texas, for example, requires multifamily housing units to provide 1.25 parking spots per studio apartment and 1.33 spots for each one-bedroom apartment. Jacksonville, Florida, goes even further, mandating 1.75 parking spots for every one-bedroom apartment in a complex, even though 16% of the city’s households do not own a vehicle.
“If a landlord has 80,000 square feet of land, and uses all of it for housing, it can build 100 (80,000/800) 800-square foot apartments. But if the same landlord has to build 1.25 parking spaces for every one-story unit, it may not be able to build 100 apartments. Because the average parking space includes 350 square feet of space, the landlord must either purchase additional land, build smaller apartments, or build only about 64 apartments. Thus, a 1.25-space-per-unit rule reduces density by 36% (from 100 apartments to 64 apartments on the same land).” (Michael Lewyn, Sprawl in Canada and the United States in The Urban Lawyer (2012))
In most cities, if a builder wanted to increase the number of units in a development by adding additional stories (assuming they were allowed to), they would rapidly run out of land or be forced to use expensive, multistory parking decks to abide by these minimum parking requirements.
The problem isn’t limited to only residential development. In most American cities, commercial landowners are required to provide four off-street parking spaces per thousand square feet of office space. “Because four parking spaces generally occupy at least 1200 square feet, commercial landowners must often provide more space for parking than for offices.” This further limits the amount of land available for housing, especially near commercial areas.
Allowing smaller units and taller buildings is also key to addressing housing affordability. As I’ve written about elsewhere, permitting denser housing has been shown to expand supply and lower cost. Denver has already become a leader in authorizing “Accessory Dwelling Units” (ADUs), sometimes known as Carriage Houses or Granny Flats. These additional residential units on existing lots offer a small, but important, tool to quickly create additional housing units without disrupting the character of a neighborhood.
Height restrictions too have limited the growth of housing stock across not just the state, but the entire country as well.
“Height controls can be expressed in a variety of ways. A simple prophylactic rule may set a maximum footage or number of stories, or the zoning code may provide complex formulas involving ratios between building height and street width. . . . In California, maximum city- or neighborhood-wide height restrictions have been popular tools for those seeking to restrict or control growth and retain a more aesthetically pleasing urban or suburban environment. In San Francisco, for example, a zoning ordinance was legislatively amended in the mid-1960s to place a cap on all new development in a large part of the city at 105 feet, a rather low height for a major metropolitan area.” (7 Zoning and Land Use Controls § 42.02)
These restrictions, along with minimum numbers of bedrooms and lot size requirements have been found by courts to have a discriminatory effect on minority and low-income potential residents by limiting the supply of new homes and rental units. Regardless of the reason why a city enacts height restrictions, their effect is undeniable: shorter buildings and fewer potential residences.
In 1971, the city of Boulder Colorado imposed a height maximum of 55 feet after a nine-story “skyscraper” opened in the central business district. Today, in most of the city, buildings are restricted to 35 feet. Record low inventory this spring there has, predictably, driven home prices to record highs. Boulder, Denver, and other Colorado cities must loosen their height regulations to promote more affordable housing. While this is often criticized for harming the “character” of traditionally low-rise neighborhoods, planners could achieve a happy medium by phasing in higher construction or limiting taller buildings to specific areas of a city, much as Denver has proposed.
To ensure that Colorado remains a viable place for young, minority, low-income, and even moderate-income families, cities must do more to promote the development of new homes and rental units with an emphasis on affordable housing. Denver’s Expanded Housing Affordability plan is a good starting point that offers a model that municipalities across the state could tailor to fit their specific needs. Modifying zoning rules to authorize ADUs offers a short-term solution and can be readily implemented from Estes Park to Durango. Long-term, permanent solutions will require working with private developers on new, denser, housing developments. Creating walkable and public transit-oriented communities will require buy-in from the federal, state, and local government. Without innovative solutions, the laws of supply and demand guarantee that Colorado housing prices will only get more unaffordable.
Nicholas Monck is a graduate of the University of Colorado Law School. He also received an Energy, Environmental, and Natural Resources Law and Policy Certificate and a Graduate Renewable Energy Certificate from the University of Colorado. He has previously written about urban planning in the University of Colorado Law Review. Opinions expressed are his own and do not represent the views of his employer.
