As of July 1, developers in Denver will have to offer between 8 and 15 percent of the homes they build in developments of 10 or more units at below-market rates or otherwise pay into an affordable housing fund.
In exchange for taking a haircut on those units, developers would be rewarded with reduced fees and minimum parking requirements.
These kinds of “inclusionary zoning” ordinances are common across the United States. Nearly 1,000 jurisdictions have adopted some of form of them. The Colorado legislature passed a bill earlier this year authorizing local governments to implement such schemes as a workaround to the state’s longstanding ban on rent control.
Research has shown that they raise overall housing costs, as developers try to recuperate the cost of the mandated affordable units by raising rents on the market-rate ones. Portland, Oregon, and Portland, Maine’s inclusionary zoning ordinances are so strict that builders have largely stopped constructing regulated projects. Pittsburgh is being sued over its inclusionary zoning ordinance, with plaintiffs arguing it’s an unconstitutional taking.
The percentage of affordable units Denver requires, and the discounted rates they’ll have to be rented/sold at, is more generous to developers than what some cities have on the books. Denver’s mandate also comes with offsetting incentives that should make construction cheaper. On the other hand, its new ordinance applies to smaller projects than is typical.
Those details will determine how destructive Denver’s policy is for housing affordability and supply. That it will have some negative impact is almost certain.
Christian Britschgi is an associate editor at Reason magazine, where a version of this article first appeared.
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