Denver, Featured, Housing, Land Use, Local, Politics, Randal O'Toole

O’Toole: Denver’s subsidized housing scheme gets it wrong on affordability

Thanks to an urban-growth boundary, Denver has a housing affordability problem. Apartment rents have increased by 65 percent in the last decade, while the nationwide cost of living in that time rose by just 18 percent and rents nationwide increased by an average of 28 percent.

One of the city’s responses was to create a housing voucher program for people who earn too much to qualify for federal housing vouchers but still can’t afford rents in the city. Last July, it allocated $1 million to the program which was supposed to help 125 families.

So far just three households have been able to use it. Out of the million dollars, $180,000 went for administrative overhead, which is a lot of money for just three renters.

Denver’s first problem was in applying an affordable housing solution to a housing affordability problem. Affordable housing is meant to help low-income people who can’t afford housing in a free-market environment, not to bring down the price of housing for everyone. Even helping 125 families is not going to make a dent in the overall housing market, which has been rendered unaffordable by government interference in the land market.

Denver’s second problem is the assumption that everyone who works in Denver ought to live in Denver. Why should that be true when there are perfectly acceptable — and lower priced — suburbs nearby? The urban-growth boundary has increased the price of all housing in the region, but (according to Zillow) apartment rentals in suburbs such as Aurora, Northglenn, and Welby are still considerably lower than in Denver.

Denver’s third problem is its promotion of high-density housing developments. The city today is littered with five-story apartment buildings that cost far more to build, per square foot, than single-family homes. Compared with building more single-family homes, this has made housing less affordable, not more affordable, for the average family.

Denver’s real problem is in not addressing the cause of unaffordable housing in the first place. As a recent op-ed in Oregon noted, housing costs reflect the cost of land, the cost of permitting, and the cost of construction. Urban-growth boundaries drive up the cost of land and, when cities realize that developers can’t go beyond the urban fringe, the cities start jacking up the cost of permits.

Most land in Denver costs around $1 million to $3 million an acre. Land in most of its suburbs is around $400,000 to $700,000 an acre. Even that is expensive compared to land in regions that don’t have urban-growth boundaries, such as Atlanta, Dallas, Houston, and San Antonio, where most urban land is around $200,000 an acre.

Abolishing the urban-growth boundary would allow developers to subdivide land that is far less expensive than the land they are limited to today, and that would bring down the cost of land within the current boundary. Cities, realizing they have to compete with unincorporated lands, would reduce permitting costs. This would make housing affordable for nearly everyone and allow Denver to concentrate its affordable housing funds on those who are truly poor.

Randal O’Toole directs the Transportation Policy Center at the Independence Institute, a free market think tank in Denver.  A version of this first appeared in his blog, The Antiplanner.

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