Denver Mayor Michael Hancock makes his State of the City address in the gymnasium at the Hiawatha Davis Jr. Recreation Center on July 10, 2017, in Denver. He focused part of the address on affordable housing programs.
When Denver Mayor Michael Hancock underlined the urgency of the city’s housing affordability crisis in a speech last summer, he declared: “Many residents need an affordable option today, not a year from now.”
But that’s how long it will end up taking to launch the potentially innovative initiative Hancock announced with those words in July 2017. The plan then was to use taxpayer money to “buy down” the rents of vacant market-rate apartments for 400 low- and middle-income households at risk of being priced out of Denver, with some employers kicking in money to help house their employees.
City housing officials said Wednesday that the program, which garnered national attention following Hancock’s announcement, is finally primed to launch in August — long after the initial target of last fall.
And when it does, the 125 households available in the pilot phase will be less than half the number first pegged by the mayor. Each would receive up to two years of subsidized rent, and the city is preparing to lay out nearly $1 million for rent subsidies and $180,000 for administrative costs to serve as seed money for a program that could grow in participants if more contributing employers sign up.
As the city staffs up its housing division and makes plans for more programs to address the affordable housing challenge, the drawn-out experience of launching the rent buy-down initiative — called the Lower Income Voucher Equity (LIVE) Program — illustrates the challenges officials face.
It turned out that creating a first-of-its-kind program was a more complex undertaking than Hancock’s administration imagined.
For employers and Hancock, the idea is to put empty apartments within financial reach for workers at risk of being priced out of Denver, including teachers, police officers, health care workers and others who can’t afford the city’s glut of gleaming new apartments. While some might join the program through employers, an undetermined number of slots likely will be available to the public via lottery.
“We wanted to make sure that when we get to launch, we have as many of the appropriate decisions and details fleshed out as possible,” said Laura Brudzynski, the Denver Office of Economic Development’s manager of housing policy and programs.
But the program still faces concerns, including from some City Council members, about the consequences of subsidizing high market rents that are leaving the apartments vacant in the first place.
City housing officials outlined plans Wednesday to evaluate the market rents set for each property to ensure they are “reasonable” for a given neighborhood, and officials also said they would place income-based limits on the type of units made available to participants. That way, the city isn’t subsidizing too much beyond what participants can afford.
With the pilot’s small scope, the program isn’t likely to have far-reaching effects on the local apartment market, said Brudzynski and Denver Housing Authority executive director Ismael Guerrero, whose agency will run the program for the city.
Some details were re-evaluated after announcement
After last fall’s initial delays in launching the program, city housing officials re-evaluated their approach early this year, coinciding with the exit of Hancock’s top housing policy adviser, Erik Soliván. Council members and housing advocates had criticized the administration for failing to consult the city’s Housing Advisory Committee on the setup of the LIVE program.
Doing so in recent months resulted in several changes. The city also decided to forgo an initial plan for mostly 1-bedroom apartments and instead include a broader mix of 2-, 3- and 4-bedroom units that can better accommodate families, Brudzynski said.
That is one factor in the reduced number of pilot phase participants from Hancock’s earlier, 400-household target.
“This program has some real challenges in how it was conceived — the lack of transparency, the lack of community input,” Councilwoman Robin Kniech said during a committee briefing Wednesday. “I want to just commend the current team for the transparency that you’ve had in the last couple months since you’ve taken this over,” she told Brudzynski.
But Soliván pushed back Thursday against criticism of his stewardship over the program’s planning, saying it was ready to go before he resigned in February.
“The LIVE Denver program was well-defined and planned, and the partners — of which the city was one of six — were ready to launch earlier this year,” he said. “The (city’s) proposed material changes to the program design are more likely the cause of continued delays in launching this innovative initiative.”
Since Hancock’s announcement, city officials have had talks with several employers, led by St. Joseph Hospital and the Colorado Health Foundation, that are considering signing on. That means they would chip in more than half the cost of the rent subsidies for employees who participate, with the city picking up a smaller portion that will amount to about 40 percent in most cases.
For employers, the program offers the hope of retaining employees who can’t otherwise afford to stay in the city as rents rise and developers focus on building higher-end housing. (Chipotle has been in talks to participate, but it’s unclear whether the company will continue discussions after announcing Wednesday that it is relocating its Denver headquarters to California.)
To qualify, applicants would have to be Denver residents with household incomes that fall between 40 and 80 percent of the metro area’s median income — a range of about $25,000 to $50,000 for an individual and $36,000 to $72,000 for a family of four.
An example given by the city shows that for a $1,500-a-month, one-bedroom apartment, a single person who earns $37,800 a year would pay an adjusted rent of $1,103 in rent, with the program picking up the rest.
Rent would cost participants no more than 35 percent of their monthly income, with the city and its partners picking up the rest. Residents would be required to be employed full-time and also would have to participate in financial coaching sessions at the start, and a small portion of the program’s contribution would be set aside in an account to help participants build savings.
The city already has collected interest in participating from the owners and managers of hundreds of vacant apartments (as well as some single-family homes) in about 40 locations across the city. Not all were built recently.
A map produced by the Denver Office of Economic Development shows the locations and sizes of housing submitted for consideration for a city rent buy-down program. Blue dots represent buildings construction within the last five years, and red dots are older.
Proposal faces final council vote in June
The council’s housing committee advanced, 5-1, a nearly $1.2 million funding agreement with the Denver Housing Authority. A final vote is expected next month.
The nonprofit Local Initiatives Support Corporation will serve as the program’s fund manager, handling money that’s anticipated to reach $1.6 million or so in coming months as the initial participating employers kick in another $75,000 to $100,000 each on top of the city’s contribution.
If the council approves the DHA agreement, officials said, the city would request firm proposals from the apartment industry and begin screening St. Joseph employees for eligibility as it ramps up the program.
The rent subsidies for landlords would function similarly to the DHA-administered federal housing-choice voucher program. Also known as Section 8, the vouchers provide rent help for people with lower incomes than those of the new program’s likely participants.
Guerrero said Seattle and Portland are working out details of similar rent buy-down programs, but he believed Denver would be the first city to launch one. An affordable-housing analyst said the idea does have overlaps with innovative homelessness programs undertaken by some cities, including Los Angeles and San Francisco.
“I like the idea of broadening the base” of contributors to affordable-housing subsidies, said Josh Leopold, a senior research associate at the Washington, D.C.-based Urban Institute. “There are a lot of local governments, employers, hospitals, health insurers — a lot of groups that are concerned about the lack of affordable housing, and they don’t necessarily feel like they’re capable on their own of doing something about the supply issue. So if you create this structure where they can (contribute), I think that’s a promising model.”
Story updated on May 24, 2018, to add a comment from Erik Soliván, the city’s former top housing policy director.
Here is the presentation given to the City Council committee:
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