Boulder: City Planning Amendments to Inclusionary Housing

Recently City of Boulder staff provided the City Council with an assessment of the City’s Inclusionary Housing Program, which has been in existence since 2000. At that time the share of permanently affordable (deed-restricted) housing was 3.1 percent (1,270 units). Now it is 7.3 percent (3,319 units). The City’s goal is to make 10 percent of the City’s housing stock affordable.

Although the City hasn’t yet met this goal, staff described inclusionary zoning as a “bold idea” that has exceeded expectations because 24 percent of all new units are permanently affordable. The City has done this by leveraging cash-in-lieu payments from developers, who generally prefer paying cash to building deed-restricted units on or off-site.

Since the 2009 recession, the market for rental projects is more robust than for for-sale units. The shift towards rental projects is a result of tighter mortgage lending practices and additional liability and insurance costs stemming from state construction defect laws. State law prohibits rent control; therefore, the City can’t require on-site affordable housing for rental projects.

Staff argues the state law is the single greatest barrier to getting rental affordable units on-site. One exception to the statute is for a developer to partner with a housing authority or a similar agency. This mixed ownership approach is undesirable to developers for numerous reasons. First, it requires a partnership in perpetuity for the affordable units. This limits access to project financing and complicates the future resale of the project. Second, it requires ongoing government monitoring for compliance and record keeping. These complications present unacceptable risks to most developers.

In addition, Boulder has become steadily more expensive with 6 percent less housing now for middle-income earners. The City will likely add a new requirement for developers to dedicate some percentage of new for-sale units (either land or money equivalent) for middle-income residents in keeping with its Middle Income Housing Strategy which has a goal of building or preserving 3,500 middle-income units by 2030.

In addition, the City will likely consider an amendment to encourage more developers to satisfy their requirement by building affordable units on-site, instead of paying cash-in-lieu. The ordinance’s update will include discussions of how to improve incentives, potentially through fee waivers. The next study session is scheduled for March 21, at which time the Council will review preliminary options for amendments. A public review of the draft proposal is tentatively planned later this spring with a goal of adopting the amendments this summer or fall.

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