5280 – NATASHA GARDNER – The mayor’s affordable housing plan has exceeded expectations—so far. But the future of reasonable rent remains in doubt.
It’s no secret that Denver is quickly becoming one of the country’s most expensive rental markets: The average price for a one-bedroom apartment is now $1,314 a month. If you can’t afford that (and if you make minimum wage or are a student-loan-strapped millennial, you probably can’t), the city’s affordable housing program is supposed to kick in. “Affordable housing,” in this case, refers to apartments and homes effectively subsidized by the government so that rents for one-bedrooms sit as much as $1,000 below the average monthly rate. In 2013, Mayor Michael Hancock launched the 3×5 Affordable Housing Initiative, an effort to build, preserve, or rehab 3,000 units within five years. Since then, Denver has added more than 500 newly built units, bringing the total number of affordable housing units above 21,000; another 1,637 are in the pipeline. In fact, the program has been so successful that the city has proposed spending $150 million over 10 years to create or preserve 6,000 units.
Before we start celebrating, though, there’s a problem. It comes from the preservation part of the equation. To keep affordable housing affordable, the city negotiates long-term covenants—most range from 20 to 30 years—with property owners. If landlords keep their rents low, they can access financing for construction or renovations from the city with more favorable terms than they could from a bank. While Denver has renewed covenants with landlords on more than 800 pads in the past two years, the city is worried that property owners will not continue re-upping their deals. It’s tough to blame them when landlords could make a lot more if they charged market rates or sold their properties. And if the owners of the more than 900 units due for renewal in 2016 decide to test the market, Denver could lose as much affordable housing as it’s building.
So how does the city entice owners to renew their covenants? Play upon their goodwill, of course. Beyond betting on benevolence—always a dicey proposition—the Mile High City is also implementing new strategies to hang onto expiring covenants. Last fall the Denver City Council extended the notice landlords are required to provide if they choose not to renew from seven months to a year. Denver also gets first right of refusal if an owner decides to sell her property before a covenant expires, which allows the city to ensure the building remains in affordable housing stock. Modest weapons, for sure. But at least Denverites now have something in their arsenal in the fight for affordable housing.