CREJ

Page 20 — Multifamily Properties Quarterly — May 2021 www.crej.com A ffordable housing” seems to be a buzz term that ignites reac- tion from various sides of the political aisle, and with good reason. Most everyone agrees that Colorado has an affordable hous- ing crisis. From 2010 through 2019, Colorado’s population increased by more than 700,000 people, according to the U.S. Census. In 2019, it was estimated 705,576 people lived in the city of Den- ver alone, thus in one decade the state gained a metropolis-sized popula- tion – without increasing the housing supply to match.This led to a housing shortage, increased rents and higher homebuying costs. It’s important that our communities remain focused on providing additional housing options and encouraging new development to alleviate Colorado’s housing crunch. We should all be seeking policies and ideas that will collectively reduce the cost of housing and improve diversity of residential housing options. Too often elected officials introduce regulations that superficially sound like a way to improve options but, unfortunately, only exacerbate the problem they were trying to solve. Many of the solutions being proposed or forcibly implemented through our local governments are expensive, time- consuming and counterproductive. These ordinances, such as inclusion- ary zoning, often reduce the availabil- ity of affordable housing and increase the cost of building new housing. Inclusionary zoning policies limit the ability to meet the demand for housing by restricting rent rates to a level that makes building rental units economi- cally unfeasible. Further, inclusionary zoning policies shift the rent cost from low-income Colora- dans to other resi- dents in the prop- erty who often make only slightly more, such as teachers, nurses, paramedics and others. The middle population – those who make slightly too much for low- income options and don’t make enough to avoid being “cost burdened” – repre- sents much of the Colorado majority struggling to make ends meet. Affordable solutions must work for the entire community, not just a targeted portion of the population. As such, they must be paid for by the entire community, not just one part of the population. n Fee reductions, tax breaks and incentives. At the end of the day, to reduce the cost of housing, we must build more supply. Currently, approxi- mately one-third of the cost to build an apartment building or a single-family home is composed of regulations or direct government costs. If Colorado wants to encourage new housing development, reducing the cost to build is a great first step. Some ways to make building less expensive include reducing building or inspection fees and offering property tax incentives to encourage rental housing provid- ers and developers to build affordable homes. How do property tax abatements benefit renters? By adopting a formula (similar to other cities where this is working, like Seattle) that will encour- age developers to voluntarily build affordable housing in exchange for property tax abatement on the value of the reduced rent.This would mean the entire community would subsidize these restricted rents and those who cannot afford the market rents would benefit from lower, restricted rents. Another way to fairly lower rent costs is to increase state income tax credits for low-income housing tax credit projects. Other incentives could include: • Contributing land to developers in exchange for long-term restrictions on rents or sales prices; • Reducing building permit fees or tap fees in exchange for long-term restriction on rents or sales prices; • Mandating reduced or no water tap fees for affordable housing develop- ments; • Reducing parking requirements for all types of housing; and • Expanding tax-exempt bond financing for affordable housing. n Increase housing vouchers. While some see forcing rental housing providers to accept vouchers for rent as a solution, the real bottleneck for rental assistance programs occurs at the point of the distribution of vouch- ers, not the number of rental housing managers that accept them. There are nearly 20 applicants to each voucher, or one in four eligible families actually receive assistance due to inadequate funding. Addition- ally, administrative hoops and funding delays can make rental housing more expensive and can result in higher housing costs. Streamlining the pro- cess and adding vouchers will make subsidized housing more attainable. n Relax zoning regulations. As the housing demand increased, so did the call for low-income housing and its “need” for zoning regulations. Zon- ing rules often impede rental hous- ing supply and increase construction costs, making building affordable housing uneconomical for develop- ers. This can be averted by more per- missive zoning and regulations such as: • Encouraging greater density in zoning and encouraging accessory dwelling units or paired home enti- tlements. • Encouraging zoning by local gov- ernments to expand future manufac- tured housing communities. • Encouraging co-living and single- room occupancy zoning. • Increasing height or density for residential projects near transit stops. • Fixing our construction liability laws and allowing the developers and contractors to repair issues before lawsuits are filed. • Expediting the entitlement and building permit process to encourage the construction of affordable condo- miniums and apartments. Attainable housing for our state’s workforce is a goal we all share. The key to achieving this goal is to do what Colorado does so well – unit- ing as a community, rolling up our sleeves and collaboratively exam- ining solutions to result in greater housing supply and diversity with lower rents or sales prices. Unfortu- nately, there isn’t one silver bullet that will fix the housing affordability crisis, but we must employ a blend of many unique Colorado solutions to ensure the housing market remains healthy for Colorado’s employers and workers. s Focus on advancing existing affordable solutions Mike Zoellner Managing partner, ZF Capital Market Trends “