Like many cities across the country, Denver has experienced soaring housing prices.
While wages in the Denver area have increased 55% over the last decade, the median home sale price has surged 180%. A majority of renters are burdened by high rents eating up 30% or more of their incomes, homelessness has increased and there’s little relief in sight. According to the draft regional needs assessment for the Denver Regional Council of Governments, the Denver area needs to come up with 511,000 units by 2050 to meet current and long-term housing needs.
The problem is clear, the deleterious consequences are clear. Everyone seems to more or less understand the solution to this problem: more housing. But there are reasonable ways and unreasonable ways of going about getting more housing. Given recent data indicating housing construction fell in Denver by 18% this year, it is imperative that the city pursue policies that will turn that around.
This Election Day, Denver voters have before them Mayor Mike Johnston’s proposal to help finance the development of housing with a sales tax increase. Ballot Measure 2R, placed on the ballot by a 9-4 vote of the City Council, would impose a 0.5% sales tax and generate upwards of $100 million per year toward a city-run “Affordable Denver Fund.”
“What we know is if we do nothing, 10 years from now, all of those Denverites will be gone,” Johnston declared. “They will have been pushed out or priced out or moved out to someplace else. And that is a future we refuse to accept.” Even setting aside the standard objections to sales taxes or tax increases in general, it seems doubtful that pouring more money into a city-managed housing scheme is the way to go.
Strong Denver notes that the city’s existing housing programs through the Department of Housing Stability, backed by a budget of about $250 million per year, only expect to yield about 695 rental units and homes for sale by 2026.
“If we increase their budget by an additional $100 million, then simple math indicates that they will build less than 300 more homes,” they reason. “We have a massive shortfall of new homes at all price ranges, and HOST will likely deliver in total less than a thousand units targeted at low-income earners in the next couple of years.”
Compared to the city’s current and ongoing housing needs, that’s not going to make any significant difference in the city’s housing market. The net result of Measure 2R, then, is the higher cost of goods sold in Denver, some additional city bureaucrats to administer housing programs and a tiny fraction of new housing units every so often.
If Denver really wants to get serious, the city needs to think outside of programs and schemes in City Hall and make more types of housing legal in more parts of the city. According to the Common Sense Institute, upward of 77% of Denver’s residential areas are zoned for single-family homes only. Off the bat, that undermines the ability of the market to generate more housing units.
In the few areas where Denver does allow multifamily housing, the permitting process alone for major projects can take upwards of 305 days. On top of that, developers who pursue such projects face yet another hurdle. Since 2022 housing projects with 10 or more units in Denver are required to comply with the city’s “Expanding Housing Affordability” ordinance which requires builders to either set aside portions of their projects to below-market rate housing or pay an in-lieu fee.
The results of that policy are not surprising: housing permitting in Denver has only fallen since it was implemented. In addition, such policies inevitably result in higher rents (which obviously cuts against the ostensible goal of expanding housing affordability).
“A representative 250-unit multifamily property looking to develop in Denver or Aurora, would need to increase rents by $80 a month or $964 a year per unit in Denver, to achieve the same return,” notes the Common Sense Institute. “For projects that do move forward, this acts as a hidden tax on renters.”
To turn this around, the city needs to ease up on zoning restrictions. Duplexes, triplexes, accessory dwelling units and apartments should be legal and easier to build in more than 23% of the city. To the city’s credit, it is currently planning to allow the construction of ADUs across the city pending a Nov. 18 meeting. To get the volume of housing needed to meet current and ongoing needs, one needs to broaden the possibility of where those units can get built.
Second, the city needs to speed up the review process for housing. As Common Sense Institute fellow Peter Lifari noted in a commentary for the Colorado Springs Gazette, delayed reviews add “about 1% in cost per home for every month of stagnation.”
As I have previously written about, Los Angeles has actually shown how this can be done. Los Angeles Mayor Karen Bass’ Executive Order 1 saw affordable housing projects reviewed within 60 days as part of a deliberate simplification of the review process. The only note of caution is that Bass has gradually succumbed to political pressure to make her own successful review process less successful.
Third, the city should seriously consider scrapping the “Expanding Housing Affordability” ordinance since it’s obviously not achieving what it’s supposed to be achieving. Adding on costs to development is a way to deter more development and make development more costly. A similar scheme in Seattle, the Mandatory Housing Affordability program, has been described by New York University’s Furman Center as “a tax on some additional development.”
Finally, Strong Denver has offered some good ideas, including: “repealing parking mandates,” “reducing minimum lot sizes and setbacks,” “enabling the construction of ADUs throughout the city,” “allowing smaller scale, single-stair apartment buildings” and “offering pre-approved plans so homeowners can start construction immediately.”
These will do a lot more than a sales-tax-funded city housing scheme. Pouring more public funds into the housing market might make politicians feel like they’re doing something, but if those politicians really want to help they should look to make it easier for the housing market to operate.
Sal Rodriguez is opinion editor for the Southern California News Group and a senior fellow with the Pacific Research Institute. He is the author of Dynamism or Decay? Getting City Hall Out of the Way, published by the Pacific Research Institute.
