15 February 2019

Better Ways To Make Housing In Denver Affordable

Denver's Affordable Housing Strategy Is Expensive And Ineffectual

One of Denver's main ways to encourage the creation of affordable housing is to require or encourage buildings to create new owner occupied housing units that only moderate income people are eligible to buy and that can't be resold for a greatly appreciated price to the next buyer. Buyers who want to benefit from the city's affordable home program must meet income guidelines, generally between 50 and 80 percent of Denver's median income, and not exceed a monthly housing cost debt-to-income ratio of 30 percent.

Programs like this one are not a good solution. They are bureaucratically cumbersome to implement (which makes both buying and selling an affordable home harder and disqualifies people who actually still need them), they deny low income property owners the same return on their housing investment that everyone else receives, and they do little to increase the available housing stock. For what the city is spending on these programs (either directly, or indirectly by mandating that developers of large numbers of units), the city could build, and then rent or resell its own affordable housing units for less.

In the end analysis, programs like these are a very inefficient way of turning city dollars into new housing. 

Remove Regulatory Barriers To Creating Affordable Housing

Lack of affordability is fundamentally a matter of supply not keeping up with demand.

Most importantly, if Denver wants to make housing more affordable, it needs to relax zoning codes (especially those prohibiting accessory dwelling units in some zones, multifamily use of existing residents, minimum lot size and square footage, density limitations and parking requirements) and repeal building code that are aesthetic rather than legitimately designed to protect health and safety (e.g. minimum square footage requirements that effectively ban tiny homes without case by case city approval). 

As another example of deregulation that would make a difference, the city should allow shared bathroom (and kitchen) facilities (or shared baths and showers with separate toilets) in properties like tiny home communities and single occupancy hotels (f.k.a. flophouses), rather than requiring that there be a toilet, sink and shower and kitchen in each unit. This is not some radical proposal. It is routinely done in college dorms or cooperatives full of the young adult children of upper middle class families, in houses designed to be single family homes that are shared by multiple roommates, and at camp grounds and cabin complexes in state and national parks. Historically, it was the norm in single occupancy hotels (formerly known as flophouses), and in many countries (e.g. Japan) during the time period where indoor plumbing was just starting to be widely adopted. The City could, for example, modify its building code and zoning regulations to make it easier to convert heated storage unit buildings into rental properties with shared bathroom and kitchen facilities.

Along the same lines, the city could also streamline the process to use existing property for housing, such as temporary shelters, short term rentals, and long term rentals of properties originally built for use as single family homes.

Denver can also waive permit application requirements that drive up costs, like providing multiple paper copies of plans to city agencies, and automatically put lower priced new housing at the "top of the pile" for processing permits so that these projects can get to market faster than luxury projects.

Use Scarce Housing Dollars More Efficiently

There are other more efficient ways that the city can spend money (or reduce its revenues) to make housing more affordable than the status quo.

The city can waive development fees and other city charges for lower priced new housing.

The city can use it funds for programs that help people needing housing get over the hurdle of needing a security deposit or down payment, such as with zero interest loans that can be repaid over the duration of a lease or the first ten years of a mortgage, with repayment waived in the event of an eviction or foreclosure so that landlords and mortgage lenders can treat it as a gift for underwriting purposes. 

Another far more efficient way to spend limited affordable housing dollars would be to pay landlords to make their units Section 8 housing subsidy eligible, something that takes a fair amount of time and money for landlords to do while providing little reward to landlords in a hot rental market. The city could also pay participating landlords to waive application fees for prospective tenants  a small reward per unit newly rented in a given year at significantly below median rental rate. 

The city could also waive lodging taxes and eliminate ownership and number of rental unit requirements for short term rentals (and motel units) offered, for example, for under $35 a night per bedroom rented, without changing its short term rental policies targeted at higher end Air BnB type rentals.

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