The Boulder City Council on Thursday rejected a proposal by city officials to encourage developers to build more for-sale housing for middle-income residents.
Under current city code, developers building condos, townhomes and other multi-family housing are required to make at least 25% of their housing units affordable to lower-income residents.
But for many developers, this requirement is not financially practical, according to a recent city staff memo. So rather than building new affordable housing, developers have almost always opted to make “cash-in-lieu” payments. This payment option is among several the city provides to developers to meet its “inclusionary housing” requirements.
This money subsidizes new affordable housing elsewhere in the city, though primarily rental properties. And this means the city isn’t adding the for-sale affordable homes it hoped to with the 25% requirement. Since 2020, developers have proposed only two projects that intend to build new affordable housing on-site, according to Michelle Allen, the city’s inclusionary housing program manager.
To get more for-sale affordable homes built, city officials proposed relaxing its requirements. Rather than mandating that 25% of housing units be affordable, officials suggested dropping the requirement to 15%. The goal was to make it more financially feasible for developers to actually build affordable housing on-site.
“With the requirement of 25%, we literally get nothing because it’s not a feasible number,” Allen told Boulder Reporting Lab before Thursday’s meeting.
This proposed tweak to the city’s inclusionary housing program came at the request of the Boulder City Council, which has made it a priority ahead of the 2023 election to adopt policies that increase the city’s supply and affordability of housing.
Councilmembers have already made it easier to build accessory dwelling units, or ADUs. They’ve raised occupancy limits on how many unrelated people can live together, and directed city staff to begin drafting an ordinance that would allow duplexes and triplexes on larger lots in single-family neighborhoods, where they are currently prohibited.
But a majority councilmembers said on Thursday they did not support the latest proposal from city staff. One reason, they said, is that the changes intended to get more middle-income housing built could have the effect of slowing down the creation of affordable rentals for lower-income residents.
Currently, when developers opt for cash-in-lieu, the city and developers can leverage the funds to build nearly twice as many affordable rental units off-site compared to for-sale units on-site, Allen noted.
“There’s a trade-off here in terms of how many and what kinds of units you’re getting,” Mayor Aaron Brockett said during the meeting. “We need more middle income [housing units]. But I’m not willing to trade this much to get it.”
Councilmember Mark Wallach, who has long advocated for the creation of more middle-income affordable housing, agreed.
“When you look at the number of people who are waiting in line for Boulder Housing Partners’ affordable units, it’s not a good trade-off anymore,” Wallach said. “That’s a market that is in greater need.”
Three councilmembers said they supported dropping the 25% requirement to 15% to get more for-sale affordable housing built: Matt Benjamin, Rachel Friend and Tara Winer.
“I think it’s going to be a not great community when teachers and nurses and police officers and baristas cannot live in this community,” Friend said.
Separately, the city council approved a change for how cash-in-lieu payments are calculated. Currently, the figure is primarily assessed on a per-unit basis. Officials are proposing to base it on the overall square footage of the property. The goal is to simplify the calculation and ensure projects with larger housing units pay more.
The cash-in-lieu payments go into the city’s Affordable Housing Fund. The city uses the fund to subsidize deed-restricted affordable housing across the city, mostly by giving the money to Boulder Housing Partners, the city’s largest nonprofit manager of affordable housing. In 2022, the city generated about $9.8 million from cash-in-lieu payments, according to an October 2022 city staff memo. In 2022, the city used money from the Affordable Housing Fund — combined with other funding sources — to add 127 new deed-restricted affordable housing units to its portfolio, according to city data.
Nearly all these units are apartments rather than for-sale homes. That’s because the city usually leverages the money with federal Low-Income Housing Tax Credits, which can only be used for rentals, Allen said.
Another proposed change would charge a fee to property owners who demolish homes and build new, larger and presumably more expensive ones in their place.
The city reviews permits for about 30 such rebuilds every year, according to Allen. Currently, if a single-family home is replaced with a single-family mansion, the property owner is not required to pay anything into the city’s Affordable Housing Fund. By contrast, under city code, property owners who replace a single-family home with a multi-unit home, such as a duplex or triplex, are required to pay cash-in-lieu for each additional unit.
The details of such a fee are still in the works. City officials are proposing to conduct a study to determine whether larger rebuilds exacerbate the city’s need for affordable housing.
A public hearing and final vote on the changes is scheduled for Nov. 2.
Stop looking to the market to build the housing Boulder wants. The city has to mandate developers to build the kind of housing it wants, the market will never ever take care of it. If the city wants housing for teachers, nurses, police officers, and baristas they have to build it. And families do not want apartments. They want houses, maybe row houses, but not apartments. So mandate that middle-income houses be built and stop complaining.
Agreed. We are letting developers call the shots and as a result, we’re not developing more good housing. As a middle-income earner looking toward my future, it seems more and more apparent that I will not be able to establish long-term residency here because of policy choices like the ones described above. What a shame it will be to have to leave Boulder some day.