Denver Planners Taking Inclusionary Zoning Proposal to Council

After collecting feedback from developers and affordable housing advocates, Denver planners have tweaked a proposal that would require developers to build affordable housing units in many new residential projects.

"This is going to be a really powerful tool for the city to deliver on its commitment to meeting our affordable housing needs," says Analiese Hock, who has been leading the Expanding Housing Affordability project for the Denver Department of Community Planning and Development.

According to the latest version of the proposal for establishing inclusionary zoning — another term for requiring affordable housing in developments — new residential developments that involve ten or more units will be required to meet certain requirements for creating affordable units. For developments with fewer than ten units, the proposal includes significant increases in the linkage fee, which is a per-square-foot fee that all developers now pay for new construction that goes into an affordable-housing fund. By 2025, developers of smaller projects will have to pay $6 per square foot in a typical market and $8 per square foot in a high-cost market; the current fee is just $1.86 per square foot.

After Hock and other planners presented an initial version of the policy to Denver City Council in October, the city's planning staff considered feedback from stakeholders to craft this latest version. Some of the largest changes include giving developers more flexibility in how they achieve the desired area median income affordability for the required affordable aspects of a project. "It’s a way of being responsive and adding more flexibility, serving more households and income type through this policy change," Hock says.

The latest proposal also includes more incentives for developers to opt in to the affordable housing requirements since under state law, municipalities must provide developers with opt-outs, such as allowing them to pay a fee in lieu of building the required affordable units.

Additionally, CPD added a linkage-fee exemption for the ground floors of mixed-use projects — which often feature commercial entities — that are abiding by the affordable-housing requirements.

One other major change: office, industrial and retail developments will get a three-year phased increase for the linkage fee that will start in 2022 and run through 2024 "in consideration to the COVID impacts to these industries," according to Hock.

Despite receiving pushback from the development community, CPD refused to remove the planned stronger affordability requirements for high-cost markets as compared to typical markets.

"We really wanted to make changes that we felt still maintained the integrity of the policy, that were maintaining our primary purpose and housing needs, but also taking into insights that our stakeholders have and be responsive to that," Hock says, noting that peer cities like Seattle have implemented these multi-tiered systems for inclusionary zoning.

What CPD instead added was a "slightly increased permit reduction in those areas," Hock says in reference to the high-cost markets.

For many affordable housing proponents, the inclusionary zoning proposal is long overdue. According to CPD officials, the vast majority of rental units built over the past few years in Denver have been affordable only for people making 80 percent or more of the area median income; the AMI is now a little over $67,000.

The City of Denver has actually been working on this inclusionary zoning policy since early 2020. But municipalities in the state had been waiting for the Colorado Legislature to pass a law that would remove a statewide ban on inclusionary zoning, put into effect by a 2000 Colorado Supreme Court ruling known as the Telluride Decision. In 2021, Colorado lawmakers finally passed a measure that repealed the prohibition on inclusionary zoning; after last-minute negotiations with Governor Jared Polis, lawmakers added the opt-out options,

With alternating requirements based on whether a development is for sale or rent, whether it's in a high-cost or typical market, and at which income level the unit is affordable, the proposal offers various ways for developers to satisfy affordable housing requirements.

For example, developers building a project with ten units or more of rental housing in a high-cost market could either build 10 percent of the total units at 60 percent of the AMI or 15 percent of the units at an average 70 percent of the AMI.

"We feel that we will be able to ensure that as new homes are built, more affordable homes are being built, too," Hock says.

The proposal comes with a grandfather clause that ensures projects with site-development plans submitted before June 30 that receive approval for the plan within fourteen months of submission will not be subject to the new policy.

CPD is accepting public comment on the latest version of the proposal through March 14 (read it here). The department will then make final revisions before presenting the proposal to the Denver Planning Board in April; it's slated to head to Denver City Council in May, with a final vote possible in June.