As Denver pushes for more "affordable" housing, experts wonder if the city's approach is sustainable and question whether it aligns with today's market needs.

Denver Mayor Mike Johnston's goal for 2025 to "preserve" or help in the development of more than 3,000 such units.

Denver worked with developers last year to build 1,695 new units, preserve 649 existing ones and create 678 others through rental subsidies “to ensure affordability,” according to Department of Housing Stability (HOST) spokesperson Julia Marvin.

“The challenge this year,” Marvin said, “lies in being creative with the funding we have. It’s important that we get creative in our solutions, both for funding and for execution.”

All told, the city wants to create 44,000 affordable units in the next decade using a variety of strategies, including using funding from public-private partnerships, utilizing public land and offering rental subsidies.

But some experts view Denver’s affordable housing approach as slow-moving and its regulatory framework as "problematic."

“The regulatory framework and ecosystem associated with that in Denver is very problematic and remains so today,” said Peter LiFari, a Common Sense Institute affordable housing fellow and executive director of Maiker Housing Partners, the Adams County-based housing authority.

“We should have started this conversation right when the mayor was elected and, frankly, in the administration that preceded him, because that hasn't happened," LiFari said. "We are significantly farther behind our competitors, like Austin, like Minneapolis, like San Diego and others.”

Denver ‘under zoned’ for affordable housing

LiFari argued Denver is “under zoned” for affordable housing. He supports more "density," such as multi-family duplexes.

"Affordable housing" is, broadly speaking, a unit that requires no more than 30% of the occupant's income for gross housing costs. That includes payment for utilities.

Landowners, LiFari said, must be given the “opportunity to produce the product that is greatest in alignment with the prevailing mortgage capacity for constituents.”

In a June 2024 CSI report titled "Housing Mismatch: Mortgage Capacity vs Home Prices," experts said the median value of owner-occupied housing in Colorado has increased 132.4% since 2010, while the median household income has increased 65.2%.

"The difference between the change in the value of owner-occupied homes and households’ median income has produced a massive increase in the mismatch between the mortgage capacity of households and the value of owner-occupied housing," the study said.

The study said that, in 2010, the mismatch stood at 46.8%, but in 2022, it grew to 60.2% — "meaning the share of households unable to affordably purchase the existing housing stock is rising."

What the CSI study demonstrated, LiFari said, is "Coloradans can afford mortgages for homes at prices that align with missing middle types, such as duplexes, quads. But our zoning conditions are single-family dominated." 

LiFari added: “It's very clear that Denver is prioritizing the product side based on its zoning conditions that is out of reach for the vast majority of Denverites. You can't do that unless you start to get greater density.”

Some quarters have long argued that greater "density" is the solution for many of Denver’s urban problems. At times, that reasoning is encompassed in the “15-minute city” idea, envisioning a community where employers, shops, schools, medical care and recreation all lie within a 15-minute walk, bike or bus ride from where residents live.

Often, that idea is tied to transit. At the state Capitol, for example, legislators have pushed for requirements that housing constructed adjacent to transit to be affordable through public subsidies, "inclusionary" zoning ordinances and deed restrictions. One bill pushed for restrictions or limits on maximum rental or sale prices and requirements for a specified period when only low- or moderate-income households could qualify.

Opponents are widely skeptical about "density" as a cure-all and about rapid transit as a means to enable that. Several have cited a kind of circular logic embedded in the idea, along the lines of “we need more residents to serve buses,” and then “we need more buses to serve residents.” 

Others have argued that "density" might work for Denver's urban core — but not in the suburbs, and that residents should be able to maintain their neighborhood's single-family character.   

"I do believe that housing is a better statewide concern, and we need to have consistency in our markets so that great builders can go to market with confidence," LiFari said.

"But at the end of the day," he added, "this isn't going to be some sort of, you know, kind of government takeover of land. This is really going to empower Coloradans to make their own decisions as to how they want to utilize their land, and so if they want to build one home, that's wonderful. If they want to build ADUs, that's wonderful, too."

The regulatory framework 

Denver’s “Expanding Affordable Housing” ordinance requires new residential developments of more than 10 units to designate 8 to 12 percent of units as "affordable," no matter the market-rate capacity, or to pay the city a fee in lieu of building affordable housing units that goes into an affordable housing fund.

Developers in Denver have long faced zoning and project approval delays.

LiFari argued that the city's underlying challenges are land availability and how long it takes to get a housing project completed. What's needed, he said, is "expedited decision making.” 

To create a healthy supply of affordable housing — especially for new homebuyers — 20 to 25 percent of all multifamily starters, notably condos and townhomes, must be available for purchase, according to the housing expert.

“We are woefully off of that kind of metric we use as an indicator of our overall continuum,” LiFari said, adding Denver’s number of available starter homes sits around 5 percent.

Efforts are afoot at the state Capitol to tackle what Gov. Jared Polis and others have described as a condo construction industry that has practically crawled to a halt. The only condos being built are at the high end of the market. In 2008, 20 percent of new housing was condos. But that number is down to 5 percent now.

Many have blamed liability as among the biggest culprits. A report last September from the Common Sense Institute said that "insurance costs for condominiums surged to 5.5% of a project’s hard costs, more than 233% higher than multifamily rental home projects, which had insurance costs as low as 1.1% to 1.65% of project hard costs." Insurance costs are tied to lawsuits over construction defects, supporters of changing the law have argued. 

Housing developer emphasizes preservation

Susan Powers, a former interim director at HOST and president of Urban Ventures, said she strongly prefers “preserving” affordable units, instead of developing, which the city had heavily emphasized in 2024.

“We need to make sure that we focus on preservation because it's a lot less expensive to preserve a unit that would otherwise become open in the market than it is to build one,” Powers said.

Urban Ventures redevelops urban properties into communities. The company mixes market rate and affordable units. One of its larger developments, "Aria Denver," consists of 191 affordable housing units.

Powers said the solution is preserving affordable units through existing market rate units.

“It's a combination of let's preserve them, and let's build as many as possible. The third was existing apartment buildings that are market rate,” Powers said of acquiring new units.

Powers compared the affordable housing issue to the city’s increased homeless population. Johnston’s “housing first approach” focuses on moving people off the streets and into temporary housing, then helping them explore permanent housing solutions.

Preserving is a much cheaper option than developing new affordable units, Powers said.

Among 29 different affordable housing developments throughout Colorado, the average price to develop a unit is $432,835, according to the Colorado Housing and Finance Authority.

Over the past six years, the seven-county metro Denver area is averaging a cost of $383,440 per unit. Statewide, the average cost for new development is $370,962, while acquired or rehabilitated developments average $326,459 per unit, according to the CHFA.

The majority of new affordable housing units has benefitted those earning 60 percent of the area median income, the CHFA study shows.

“It has to be a combination of using vouchers on existing projects. You have a flow of projects that are new construction, going out and working to preserve units,” Powers said.

She added: "There are plenty of smaller, maybe apartment buildings that have 50 units, or even up to 100 that are older, that could be that their rents right now are not as high as the market is."

"Maybe those owners would be willing to develop some relationship with the city," she suggested.

Powers noted affordable housing offers more options for homeless people moving off the streets.

“I think all of those categories are part of it, and we all should do everything we can to get to that 3,000 units to support that so that there's continually a flow of opportunities for people to get off the street," she said.

The Colorado Coalition for the Homeless gauges how many housing vouchers are available for people exiting homelessness.

“Denver, with the resources it needs to make a major investment in housing for lower income households and those exiting the cycle of homelessness, I think we could have seen transformational change with that type of funding," Cathy Alderman, a CCH spokesperson, said when talking about preventing homelessness.

Denver expects $3 million in developer 'in-lieu' fees

In 2016, the Denver City Council passed two initiatives to fund development and preservation of affordable housing.

The Affordable Housing Fund began in 2018 and is backed by a sales tax on recreational marijuana, annually generating $30 million to serve homeless people, renters and individuals who seek to gain or maintain homeownership.

The 2022 city ordinance requiring a portion of new developments to be "affordable" also adds to the annual revenue.

Denver’s Affordable Housing Fund revenue is expected to reach $59.9 million in 2025, while $3 million will come from developer in-lieu fees, according to Marvin, the HOST spokesperson.

“While several developers have indicated an intent to pay a fee-in-lieu, no developer has yet received a building permit — which is the point at which they would be required to pay the fee,” Marvin said.