On June 6, 2022, the Denver City Council approved legislation introducing mandatory affordable housing requirements for new development, updating the City’s existing linkage fees, and increasing zoning and financial incentives for affordable housing. The legislation requires new market-rate housing developments of ten or more units to provide on-site affordable units (or pay fees in lieu thereof) and imposes increased linkage fees on new non-residential development. The legislation implements these requirements through amendments to the Denver Revised Municipal Code and Denver Zoning Code.
Please note that this Alert provides general information regarding the City’s new affordable housing requirements. We advise developers to seek legal counsel to understand how these requirements will affect their individual projects.
Mandatory Affordable Housing
Under the legislation, developers of new market-rate residential housing of ten or more units must select one of two options to provide on-site affordable housing or pay fees in lieu thereof. The mandatory affordable housing requirement applies to both rental and ownership housing, although the options differ between the two housing types. The options also differ depending on whether the new development is in a “high market” location or a “typical market” location. High market locations are the census tract areas in Denver with the highest land values compared to the citywide median land value. The City currently is developing an interactive map that identifies these areas. All options require a certain percentage of units to be provided at a set Area Median Income (“AMI”) or require a fee-in-lieu thereof.
• In high markets, provide 10% of total units at 80% AMI
• In typical markets, provide 8% of total units at 80% AMI
• In high markets, provide 15% of total units at an effective average of 90% AMI
• In typical markets, provide 12% of total units at an effective average of 90% AMI
• In high markets, provide 10% of total units at 60% AMI
• In typical markets, provide 8% of total units at 60% AMI
• In high markets, provide 15% of total units at an effective average of 70% AMI
• In typical markets, provide 12% of total units at an effective average of 70% AMI
Fees-in-lieu are calculated for each income restricted unit (IRU) that would otherwise be required for the project based on 10% of total dwelling units in high market areas and 8% of total dwelling units in typical market areas. These fees in-lieu range from $250,000 to $478,000 per required IRU depending on the development type (rental/ownership) and market area (typical/high).
In certain cases, a developer may propose an alternative manner to satisfy the affordable housing requirements. The applicant must demonstrate how the proposed negotiated alternative meets certain criteria set forth in the legislation. The negotiated alternative may include a combination of one or more of, but not be limited to, land dedication for affordable housing, a plan for fewer IRUs on site with a greater depth of affordability, a greater number of IRUs with more bedrooms, or an agreement to provide off-site IRUs. The legislation provides additional detail on each of these items.
The legislation also describes certain circumstances where projects are excepted from compliance with the new requirements. In addition, projects that are ten or more acres and/or leveraging tax increment financing (TIF) or Metro Districts are considered ‘high impact developments’ and are subject to additional requirements.
Linkage Fees for Non-Residential Developments and Smaller Residential Developments
The City will require linkage fees rather than on-site affordable housing units for non-residential developments (such as commercial, office, and industrial uses) and residential developments of nine or fewer units. The applicable fee varies depending on the project use(s) and is calculated on a square footage basis. New linkage fees will go into effect on July 1, 2022, and will increase on July 1 each year thereafter. The fees applicable on July 1, 2022, range from $0.96/sf for industrial use to $3.65/sf for commercial, office, and related uses in high market areas. Fees applicable for projects of nine or fewer units range from $1.75/sf to $2.50/sf.
Zoning and Financial Incentives
The City is expanding zoning and financial incentives to offset some of the costs of providing mandatory affordable units. Developers providing on-site affordable units in certain areas will benefit from reduced parking requirements and commercial construction permit fee reductions. Additionally, enhanced incentives are available to developers who exceed the affordable housing requirements outlined above. These incentives include height and floor area ratio (“FAR”) bonuses.
Projects subject to site development plan review that: (i) submit concept site plans to the City by June 30, 2022; (ii) have an assigned concept number for the concept site plan; and (iii) receive final SDP approval by August 30, 2023 may continue to proceed under the current affordable housing requirements. In the case of projects subject to Large Development Review, and individual site development plans within the legally described property of an active subdivision application, the final approval deadline is extended to December 31, 2023. Additionally, separate effective dates apply to projects under residential review (single/two-units). These projects may continue under the existing rules if they have: (i) a building permit submitted by June 30, 2022 and all applicable plan review fees paid; and (ii) a building permit approved and issued by December 31, 2022. Projects that do not meet these deadlines will be subject to the new affordable housing requirements.