Denver, Housing, Joshua Sharf, Land Use, Local, Transit, Transportation, Zoning

Sharf: Denver moves into real estate biz, doubles down on central planning follies

In its never-ending quest to manage the human costs created by its own central planning, the City of Denver has upped the ante – with more central planning.

File photo – Todd Shepherd

The city has deliberately emphasized density over housing affordability, driven out manufacturing in order to attract white-collar jobs, promoted an anti-car agenda, and lobbied for policies making residential gas and electricity more expensive.

So naturally, when the chickens come home to roost, its answer is yet more interference, rather than backing up and looking at what caused the problems in the first place.

On December 10, the City Council unanimously approved a $6 million purchase of 4995 N. Washington St., a used car lot in the Globeville neighborhood north of Five Points. They intend to re-zone the land as mixed-use, to attract startup manufacturing and residential development.

This is the third such purchase Denver has made in the last two years. In 2017, it bought 7900 E. Colfax for $650,000, and 8315 E. Colfax for $1.3 million. Both are old, typical East Colfax hotels that are being rezoned for higher-density housing.

The city bought each property at market value. A Colorado state law passed in the wake of the US Supreme Court’s Kelo decision prevents the use of eminent domain for the purpose of private development.

The city intends each property to catalyze broader neighborhood development. The Zoning Commission could rezone the property, but that would be radical and unfair to the existing property owners. That would be exactly the type of abuse that the recent Amendment 74, which voters rejected in the November election, had been intended to prevent. Instead, the city buys the properties, and then applies to the commission for the zoning change, as the property owner.

The purchases are also intended to address the city’s growing homelessness and housing affordability issues. The Requests for Proposal (RFPs) for both the Colfax properties mention that, and specifically plan for housing for people at risk of slipping back into homelessness. While all of the properties contemplate for commercial development that will serve both those living there and the surrounding communities, the Globeville purchase is aimed at startup and small-scale manufacturing, with 51% of the jobs created being low-or moderate-income.

What’s more, the purchase price of the property, the cost of soliciting proposals, administering the competition, and temporarily managing the properties don’t capture the full cost of the city’s proposed cost to taxpayers. The city isn’t sure if it wants to lease or re-sell the Globeville property, and it’s not even sure if it could continue to collect property tax on a leased property.

The RFP for 7900 E. Colfax includes Project Based Vouchers, and mentions the possibility of the area becoming part of an urban development zone eligible for Tax Increment Financing (TIF). TIF allows the developer to keep some or all of the sales tax generated by a development for a specified period of time. TIFs were originally intended to help eliminate “slum and blight” as part of urban renewal, but are now misused and abused as an economic development “incentive.”

The Office of Economic Development’s (OED) proposal says that the OED may eat some of the final purchase price on behalf of the city – i.e., sell the property at a discount to attract a buyer. And it, too, may come with Project Based Vouchers, or other subsidies for the commercial part of the development.

The Colfax developments in particular look like throwing good money after bad. Most research shows that so-called catalytic development works better at larger scale, including infrastructure investment. In this case, the city is pitching the expected Colfax high-speed bus, which will move few people while actually adding to congestion by removing a lane for cars on one of the city’s most-used commuter streets.

Rather than try piecemeal fixes to housing affordability, the related problem of growing homelessness, and the loss of manufacturing, the city and state governments would be better advised to take a hard look at the policies that have driven up housing costs in the first place.

It’s easy to name a number of these policies.

  • The state rewards businesses that move here on the basis on average salary, and so attracts white-collar jobs at the expense of blue-collar jobs we’re now missing.
  • Through its membership on the Denver Regional Council of Governments (DRCOG), Denver has enacted regional policies that compress development along existing corridors, artificially increasing density above and beyond what normal in-migration would dictate. The city has decided that it dislikes the aesthetics of sprawl more than it dislikes inflicting homelessness and housing unaffordability on its citizens.
  • It has strongly supported RTD’s decision to spend transit money on light rail rather than buses. Heavily subsidized though it is, light rail is still expensive to ride, and caters mostly to upper-middle class commuters. Lower income workers, priced into outer-lying areas, prefer buses, and buses can more easily be re-routed to cross-county commutes as opposed to going into and out of the central business district.
  • The city has decided not to improve the commutes of drivers by relieving bottlenecks or buying frontage for bus pull-outs. Heavier traffic raises the cost and unpredictability of driving, affecting not only commuters but also the efficiency of blue-collar entrepreneurs
  • It has actively lobbied the Public Utilities Commission to adopt more renewable energy mandates, hurting those at the bottom of the housing scale the most.

Desiring the revival of Colfax and such distressed neighborhoods as Globeville is laudable. It would be more laudable yet if it inspired the city to seek less control, rather than more, over the lives of its citizens.

Joshua Sharf is a Denver resident and a fiscal policy analyst at the Independence Institute, a free market think tank in Colorado. 

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