Why More Density and Market Rate Housing Won’t Result in Lower Cost Housing in Boulder

Sean KendallCity Council, Development, Growth

Subject: RE: Articles regarding Inclusionary Housing (This letter to the council member was publicly posted)

Dear Jan Burton:

Thanks for sharing these articles of various points of view that will certainly help us in wrestling with our Inclusionary Housing update.  It is clear from our experience and in reading the articles, that IH programs vary between communities and their impacts on affordable housing also vary. I have read through the articles and pulled out some of the themes or challenges to inclusionary zoning, with responses to how I believe this relates to the City of Boulder.

  1. Theme One: IH is not as impactful and does not create as many affordable units as Low Income Housing Tax Credits (LIHTC).  In my view this is not the right question.  They are two different approaches that accomplish slightly different outcomes, but are complimentary.  In the chart, they showed many communities that created far more units from LIHTC than from IH.  However, even in their table, in DC, these programs created the same amount in each.  One of the reasons for the disparity in many communities is that there are far more resources that come from LIHTC than from IH programs and therefore the impact represents that.  In the city of Boulder, our affordable housing program has created over 800 affordable housing homeownership homes with no assistance from LIHTCs.  For rental units it is more difficult to assign how many units came from IH and how many from LIHTC because many of rental projects combine resources of both.  However, since 54% of our affordable housing resources come from the IH program it would be fair to say that roughly half of our program has been built through cash-in lieu, acquired from the IH program, or over 2,000 units.  Therefore, the outcome is that we need both programs (IH and LIHTC) to work in concert with each other to create the biggest impact on our affordable program.
  2. Theme Two: If we didn’t charge developers for IH or cash-in-lieu, more market rate units could be built at lower cost and the market would create the affordable housing. I think I can categorically state that this would not apply to the City of Boulder.  With our growth and height restrictions as well as our surrounding open space, the development community cannot build our way to affordability.  While there are communities where this is the case, it would not be the City of Boulder.
  3. Theme Three: Increase density and reduce regulations and new development will become affordable. There is certainly some truth to this in most communities.  For our city, the issue of density may be addressed further in follow-up and in setting of priorities from the BVCP.  However, in Boulder, there are limits to what we can do through density and while this can be a tool to explore to help drive further affordability, it won’t have the same level of impact as that in larger cities.
  4. Theme Four: Affordable housing is more expensive than market housing. There is certainly agreement that the cost of developing new housing has become very high, however, we do not have evidence that affordable housing is more expensive than market housing.  Our community has also established commitments to energy efficiency, resiliency and high quality design that does not have a distinction between market and affordable housing.  It is clear that these values may be competing on the financial viability of affordable housing, they are outcomes that the community desires.
  5. Theme Five: IH programs make market housing very expensive.  It is clear that further requirements of IH will have an impact on the development community and could have impacts of the affordability of the market.  However, our consultants over the years have indicated that the market has many factors and IH is simply one of many.  An interesting comparison I could make locally.  Boulder is the only community in our region/county with an IH program.  Our IH program has a significant impact on the cash-in-lieu that developers pay when developing rental developments.  However, when you compare the median price of a 2 bedroom apartment between our communities that don’t have IH, there is little difference.  Boulder is $1,949/month, Louisville $1,941 and Boulder County is $1,790.  I am surprised that the rents vary so little for the same unit between locations.  However, the varying rents are certainly more a relationship to location then to the cost of IH.

In closing, I would whole heartedly agree that we need to be very sensitive to the impacts and unintended consequences of increasing IH.  If you recall from our last IH study session in March, the question we posed to our consultant was how high can we raise IH before having unwanted consequences?  Their analysis concluded we shouldn’t increase more than 5%.  This will have an impact on pricing and monthly rents on market units of 1 to 3%.  The council needs to decide if that is worth the benefits of additional permanently affordable housing.

I really appreciate your articles and the various perspectives that they have brought to the conversation and hope that they will help inform these discussions.  I trust the above information was helpful.

Thanks,

 

Kurt Firnhaber

Kurt Firnhaber

Deputy Director of Housing