December 15, 2017
PART I INTRODUCTION
Boulder is the most expensive city in the region. With average single-family home prices near one million dollars, and many apartments renting for thousands of dollars a month, it is not affordable for most middle-, moderate- and low-income households. The City of Boulder has implemented a variety of affordable housing policies to address the issue, yet we continue to lose ground. Job growth continues to outpace residential growth causing upward pressure on housing prices, the local real estate market continues to skyrocket, and existing housing that is still relatively affordable is being redeveloped as high-end housing. If the current development trends continue, Boulder will be a place for mostly the very wealthy and a few lower income people in subsidized units.
In Boulder, income diversity, and its preservation is critical to also preserving social, racial, ethnic and political diversity. Political diversity is critical to a well-functioning democracy. Boulder must broaden and strengthen its affordable housing approach to, at a minimum, retain the economic spectrum of the population that currently lives here and ideally, broaden that spectrum.
We see three essential criteria that must be satisfied in order to achieve the overall goal:
- Any affordable housing program the city adopts must at a minimum maintain the absolute number and percentage of housing units that are affordable to households with incomes ranging from low- to middle-income, and match the economic distribution of the population, so that we can preserve our socio-economic diversity;
- The costs for maintaining or improving upon that income distribution must be appropriately assessed to the drivers of housing unaffordability; and,
- Existing market-rate affordable housing must be preserved.
Some Critical Considerations:
Maintain desirable community characteristics. We must update existing policies but do so in such a way that changes do not diminish the community characteristics that make Boulder unique.
Balance commercial versus residential growth. We will not be able to maintain affordability if we continually and disproportionately grow commercially and thus continually increase pressure on housing prices.
There is no free solution. We need to recognize that attempting to preserve the affordability of some existing housing could be costly and solutions must address this issue.
Avoid zero-sum policies. Financial resources should not be redirected to middle-income households at the expense of those that need assistance the most (low- and moderate-income households).
Maximize “bang for the buck”. In order to leverage public funding of affordability programs, the focus of programs should be on affordability gap reduction.
The recommendations that follow, provide a pragmatic framework for Boulder to meet the challenge of improving housing affordability:
- Subcommunity Plans, Area Plans and Neighborhood Plans must be developed and should address affordability needs and also result in the preservation of Boulder’s community characteristics, its neighborhoods and quality of life. The Plans should serve as the foundation for affordable housing strategies that affect these areas, and must include significant citizen direction in their development.
- Most new housing should be permanently affordable. This will require changes in the Inclusionary Housing (IH) ordinance, as well as other policies.
- Preserve existing affordable housing with a focus on multi-unit communities such as mobile home and apartment communities. This will require significant new funding sources as well as creative financing solutions.
- Assign the costs of housing affordability to the drivers of demand for housing. This means increasing the financial contribution from new commercial development.
- Balance potential job growth with affordable housing demand by converting commercial and industrial zoned areas to mixed uses, including permanently affordable housing. This will both increase the housing supply and decrease a significant root-cause of demand for housing.
- Seek solutions for housing affordability on a regional basis. While Boulder can and should carve out a protected portion of the housing market to provide housing affordability, it isn’t realistic to seek to house in Boulder, all the people in the region that are dependent on Boulder employment. The region has a role too. Improved public transportation networks are critical to regional solutions.
PART II RECOMMENDED AFFORDABLE HOUSING POLICIES
- Subcommunity Plans, Area Plans and Neighborhood Plans Should Protect Existing Values
Subcommunity Plans, Area Plans and Neighborhood Plans should be the foundation for implementing affordable housing strategies. Developing these Plans should employ an inclusive process and protect our natural and built environment to serve the needs of all citizens and future generations.
Changes that promote greater intensity of development in neighborhoods or at their edges must be preceded by effective neighborhood planning. As Boulder seeks to address housing affordability, it needs to carefully consider the impacts on different populations and community attributes resulting from amended policies and regulations. Changes made for the purpose of increasing affordable housing options must result in permanent affordability.
Neighborhood planning should be community driven. A grassroots approach is preferred because it has greater potential to foster creative solutions that are specific to each neighborhood’s context, will cultivate greater agreement around those solutions and will build trust within the community and between the community and its government.
The City government’s involvement in neighborhood planning should focus on support of the community driven effort, including facilitation, such as adopting Madison, Wisconsin’s neighborhood planning process where the plans were developed by the neighborhoods with City support. But there are also other facilitation options including utilizing CU’s Community Engagement Design and Research Center, or other third party facilitation organizations.
Evaluate allowing residential uses, with residential-supporting amenities and services, in non-residential zones. This could enable complementary uses, such as shopping housing and transit, to be reasonably near each other.
- Most New Housing Must Be Permanently Affordable
Increase the percentage of permanently affordable housing units derived from development (see Appendix A). Boulder’s Inclusionary Housing Program (IH) relies on the development of a large number of unaffordable housing units to generate a small number of affordable housing units. Meanwhile, market-rate housing prices, including market-rate affordable housing prices, are increasing at a greater rate than incomes, making market-rate housing less and less affordable over time. This is exactly the opposite outcome of what is needed – the majority of new housing must be affordable and that affordability must be permanent.
Maximize Housing Affordability From Annexations. The requirements for annexations of County land into the City are negotiated between the City and property owners. Annexations represent a rare circumstance where the city has considerable leverage to derive the maximum community benefit. Current City policy seeks that 40% to 60% of new housing units created on annexed land are permanently affordable housing. The City policy should require that 100% of the housing approved through annexations is permanently affordable, with 50% affordable to low- and moderate-income households and 50% affordable to middle-income households. This 50/50 split will create a diverse range of income diversity in annexation developments.
Modify the city of Boulder’s code to incentivize greater affordability. Remove incentives to build fewer, larger, more expensive housing units. For the same amount of built floor area, greater numbers of smaller and more affordable units could be created. Because this will increase density of residential units, changing the development code must be part of an agreed upon area plan or neighborhood plan.
Revise the regulations regarding community benefit. When a development plan is given increased development potential through Site Review, that increased development potential must provide increased community benefit. The value related to the increased development potential a development is granted should be captured and applied toward specific community benefits, of which permanently affordable housing should have the highest priority.
- Preserve Existing Housing Affordability
Boulder’s existing market-rate affordable housing stock should be preserved (see Appendix A). The affordability of existing housing stock is rapidly eroding due to redevelopment, gentrification and cost escalation in our local real estate market. Boulder should preserve and over time, enhance the affordability of current market-rate affordable units by decoupling them from the local hyper-inflated real estate market. This will be the most cost-effective, least impactful means of maintaining affordability.
For example, a new program could buy or facilitate the purchase by residents of multifamily housing complexes and mobile home parks, place those units in a rent-restricted or deed-restricted permanently affordable housing pool, then link rents and deed restrictions on re-purchase prices to the national inflation rate. This would cause the restricted housing to become increasingly affordable over time, as the local real estate market and the national inflation rates diverge.
Land trusts and other options. One option that is currently being examined by the University of Colorado to preserve affordable, market-rate housing is a community land trust (CLT) program. In a CLT program, a non-profit would buy or facilitate the purchase of a property by its residents, separate the land ownership from the building, and put the land in a trust managed by the City or a non-profit partner. The entity would then enter into a long-term renewable lease for the land.
Conduct economic analysis to make the case for market interventions. Market interventions will require public funding. This could be realized through a bond issue and a related tax that would exist until funds from rents and resales exceed debt service on public funds and allow the tax to be retired. An economic analysis should be undertaken to determine the costs, impacts and efficacy of such public investment programs. The analysis can establish scenarios which the electorate might be willing to approve once the benefits, costs and cost durations are illustrated.
Inclusionary Housing (IH) policy is inadequate to counter ongoing losses of market-rate affordable housing (see Appendix A). Using the IH program (as currently structured) as the primary generator of affordable housing will not create enough new affordable housing to offset erosion of market-rate affordable housing and will result in a huge increase in population; a situation that has been neither presented to nor agreed to by Boulder citizens.
Protect households with limited means from the impact of gentrification. When relatively affordable housing is redeveloped into more expensive housing, tax assessments of nearby properties increase. If incomes of nearby property owners do not keep pace with the inflation of their property values, they may not be able to afford property taxes increases and may be significantly financially burdened or even displaced. Boulder should mitigate these impacts by working with county and state partners to defer until sale, large property tax increases on the primary dwellings of long-term residents who are vulnerable to the impacts of gentrification.
- Equitably Assign the Costs of Meeting Demand for Affordable Housing To The Source Creating That Demand
The cost of meeting affordable housing demand should be assigned to the source creating that demand. The imbalance between the large potential amount of commercial development in Boulder relative to the potential amount of housing development is the one of the key drivers of housing unaffordability. Even though non-residential development and related job growth are a significant cause of increased affordable housing demand, the cost burden of providing affordable housing is carried almost entirely by residential development, which is effectively a subsidy for the commercial development profits paid by the citizens – a defacto tax on the citizens.
Recently adopted Affordable Housing Commercial Linkage Fees are only a small fraction of the amount established as legally and economically justified by the City-commissioned “Nexus Study.” Affordable Housing Commercial Linkage Fees must be increased to reflect the cost burden that commercial development places on housing affordability.
- Balance Commercial Development Relative to Housing
Evaluate the options for limiting the amount of new commercial development potential relative to residential development potential. Commercial development growth and its consequent job and population growth puts enormous pressure on housing demand and costs.
Conversion of some portions of commercial and industrial zones to residential and mixed uses would bring commercial and residential development potential into greater equilibrium and mitigate demand and price pressure on housing.
- Regional Solutions
Recognize that affordability is a regional issue. Boulder is a regional employment center by design. Boulder is also the most expensive municipality in the larger regional community. Everyone in the region cannot expect to occupy Boulder’s expensive real estate and also expect it to be affordable. There is greater competition and thus cost to live in the employment center where services and amenities are concentrated.
A regional approach bolstered by strong transit links between regional housing and Boulder jobs is critical. Even if the demand for housing in Boulder could be met and the number of jobs in Boulder matched to number of households, the range of types of housing that are desired at an affordable price cannot be provided due to the limited amount of land remaining for development. The larger region provides many more housing options than Boulder does. Some households will choose to live in other communities because the housing options elsewhere are more desirable, even when considering the housing locations. While many affordability metrics only consider the percent of income spent on housing, commuting creates additional costs that need to be factored when considering affordability.
The regional municipalities should work with elected representatives in the Colorado Statehouse to increase housing affordability. Revising one aspect of TABOR to allow a Real Estate Transfer Tax would have a huge impact on funding housing affordability. Changing the state’s prohibition on rent control would also create opportunities for preserving affordability of housing over time.
Other Supporting Actions That Could Benefit Affordability
City-owned land zoned as residential should remain under City control. This could ensure that If It Is developed, it is developed as permanently affordable housing. This is particularly important where the development has a rental component. If the City controls the project, it can impose limitations on rents, which is otherwise precluded by Colorado law.
The City should create a housing board comprised of members with knowledge of housing issues. Creating a citizen brain-trust that can apply focus and expertise in the areas of residential financing, housing programs and partnerships, grant opportunities, lending, transportation and real estate, will help the city develop and implement effective housing affordability strategies.
Prioritize development reviews for projects that provide permanently affordable housing.
Projects that meet certain prescribed requirements for predominantly permanently affordable housing could receive expedited consideration in the approval process. However, current opportunities for public participation through public hearings should not be diminished. The same review processes should apply to permanently affordable housing projects as to all others.
Modify the Cash-in-Lieu (CiL) policy on conversions of rental properties to condos. Under current CiL policy, when a rental development converts to condos within 5 years of the development’s construction, the developer is required to meet the CiL requirement retroactively as though the development had originally been constructed for unit ownership. The City should increase the 5-year term to 15 years so that it can capture the full CiL potential regardless of changes in the rental and ownership markets.
Establish the following Boulder Valley Comprehensive Plan policies as priorities:
- Increase affordable housing as a percentage of overall housing. The city should develop regulations and policies to ensure that: 1) development and redevelopment does not result in a net percentage (of overall housing) loss of housing units or numerical loss of housing units affordable to 150% AMI households and lower; and 2) new residential development is predominantly permanently affordable to 150% AMI households and lower.
- Prioritize affordable housing as a community benefit. The City will ensure that significant additional community benefits are derived when development potential is increased beyond that which is allowed by right according to zoning. These benefits should be durable and prioritize permanently affordable mixed income housing.
- Increase permanently affordable housing for additional residential development potential. Regulations and policies should be developed to ensure that when additional density is provided through changes to zoning or discretionary review processes, the additional development potential for the residential use will be predominantly permanently affordable housing for low, moderate, and middle-income households.
Annexations should have the result that newly created housing on annexed land is 100% Permanently Affordable: The city will develop regulations and policies to ensure that 100% of new housing units developed on land annexed into the City will be permanently affordable with 50% of those units permanently affordable to low and moderate income housing, and 50% permanently affordable middle income housing.
December 15, 2017
Why preservation of currently affordable housing units is essential and why current Inclusionary Housing (IH) policy is inadequate to counter ongoing losses of market-rate affordable housing.
Current housing affordability policy relies heavily upon Inclusionary Housing (IH), whereby large numbers of market-rate housing units must be built to generate small numbers of permanently affordable units. Revisions to the IH ordinance that expand the current requirement that 20% of newly created units must be affordable to low- to moderate- income households will go into effect in July, 2018. The revisions require an additional 5% be affordable to middle-income5 households. But this improvement is still insufficient to counter forces currently impacting Boulder’s housing market.
48.5% of Boulder’s housing stock is rental and 99% of that stock is currently affordable at market rates to middle-income households (80%-150% of Area Median Income1 (AMI)2). That means that 48% (48.5 X .99 = 48) of total existing housing is affordable to middle-income households. Most of that housing consists of rentals.
However, Boulder is losing combined rental and for-sale market-rate units that are affordable to middle-income households at a rate of 1000 per year, due to gentrification, market price escalation and redevelopment into higher-end units3.
In order for IH to create enough new affordable units to offset this unit loss rate, huge increases in population and consequent changes to the characteristics everyone loves about Boulder will result. These changes have not been sufficiently evaluated or explained to the community.
Over the next 25 years, this would mean the creation of 100,000 (25years x 4000) new units just to stay even with the current rate of unit losses. That represents a population increase of 242,000 for a total population of 349167, which is a 325% population increase over current, making Boulder larger than Pittsburgh and St Louis7.
The net loss of currently affordable units must be stopped. Preservation of these units is the most cost effective, efficient and least impactful to Boulder means of maintaining affordability.
- BBC Middle Income Housing Study 2016
- In 2015 Boulder County’s AMI is $99,400 for a household of 4
- Boulder Housing Partners 2014 Strategy. Middle income unit loss rate between 2002 and 2014.
- Boulder City 2016 Community Profile – population 107,167
- Recently revised IH ordinance to include middle income includes only up to 120% AMI whereas the 48% of housing currently affordable to middle income is at 150% AMI.