Boulder mulls fee for affordable housing

BOULDER — As housing prices surge along the Front Range, Boulder is close to approving a controversial fee on commercial development that would help the pricey city add more affordable housing units.

The ordinance is intended to capitalize on Boulder’s building boom and have developers whose projects create new jobs help offset the cost of providing affordable housing for those employees, often low- and middle-income wage earners.

How much revenue will be generated by the new fee has not been estimated, said Susan Richstone, the city’s deputy director of Community Planning and Sustainability.

“It’s hard to predict from year to year what projects will be submitted,” she said. Richstone added that based on analysis of building permit records, the city’s staff estimates that from November 2011 to December 2014, the city would have assessed from $7 million and $8 million in fees on approximately 1 million square feet of new nonresidential development.

The council earlier this month voted 8-0 in favor of moving forward with the ordinance following discussions on whether to implement a fee structure based on a six-year-old study, how to treat developers with projects already in the pipeline, and establishing a schedule to spread payments over time to ease the financial burden on developers.

Before the council casts a final vote on the ordinance, it will go through a third reading set for May 19, when developers will have another chance to address the council.

The council considers this to be an interim ordinance that could be revised after a new study is conducted in the future.

Most council members believe the city has missed an opportunity to fully capitalize on the building boom in Boulder. In 2010, the council chose not to enact an affordable-housing fee after a study conducted in 2009 by TischlerBise that recommended a fee schedule with varying prices depending on a building’s use.

“When you are in a boom is the right time to let some of that cash being made, the profits being made, go for the community good,” Councilman Sam Weaver said. “It is reasonable to expect our strong economy will continue, even in light of the linkage fees.”

On the other end of the spectrum, Councilman George Karakehian said, “We should do nothing until we get the study back. … This whole thing is a mistake. I think this is a rush, and we need to sit back and do it the right way.” Karakehian said he considered voting no on principle, but ultimately voted yes with the rest of the council.

Developer Andrew Bush of Morgan Creek Ventures told the council it has “the cart before the horse,” and there needs to be more discussion with developers.

“I think you’re not seeing many developers come forward because they don’t know this is going on, or they fear retaliation if they confront the council,” he said at a recent council meeting.

Councilwoman Suzanne Jones said, “Developers are going to feel some pain, but they will be helping us solve a huge problem.”

The council wants to phase in payments, possibly 25 percent every quarter starting when a building permit is issued, allowing time for projects to start generating revenue to help pay for the fee. Richstone said that would create an administrative burden for the department. “We would have to become bankers,” she said. “We aren’t set up for that.”

The city’s staff is suggesting the proposed fees become effective Sept. 7, allowing some projects already in the pipeline to acquire building permits at the previous rates and avoiding paying the linkage fee, and giving developers of future projects time to plan for the added development cost.

Developers of commercial projects in Boulder already pay several impact fees that go toward transportation, police, fire and municipal facilities. The development excise fee earmarked for transportation is $2.48 per square foot, and fees for police, fire and city buildings range from 2 cents to $1.04 per square foot. Developers also pay a housing excise tax of 51 cents per square foot, which would be credited toward the new affordable-housing fee, Richstone said.

The proposed affordable-housing fee is based on a per-square-foot payment in some instances and on number of rooms, beds or students in other cases.

Betsey Martens, executive director of Boulder Housing Partners, the city’s housing authority, said the rule of thumb is that people shouldn’t spend more than 30 percent of their income on housing.

“There are so many people having trouble affording rent in Boulder,” she said, pointing out that the average rent in Boulder is $1,089. The Boulder Area Realtors Association reported that the average price of a home in Boulder reached an all-time high of $946,000 in March.

Boulder Housing Partners either owns or operates about 30 percent of the affordable-housing inventory in the city, and the organization must apply for funds through the city’s Affordable Housing Fund like other developers.

She said the city maintains 3,391 units that are considered affordable, and all of those are occupied. “Another 40,000 people qualify for affordable housing,” she said. “We’ve gone to a lottery system to determine who gets one of our affordable units.”

Martens said Boulder Housing Partners’ board of directors has not taken a stance on the affordable-housing linkage fee.

What they do elsewhere

Developers in Aspen have been subsidizing affordable housing since 1976, said Chris Bendon, Aspen’s community development director. He said developers can include affordable housing in projects, build affordable housing elsewhere in the city or pay a cash-in-lieu fee that goes toward building affordable housing.

Bendon said the cash-in-lieu fee is $150,000 per each job that new construction creates.

“We are considering raising that to $200,000 per employee,” he said. “We still have a strong demand for affordable housing. We have, 2,800 units, but we need more.”

Fort Collins doesn’t have a commercial or residential linkage fee tied to affordable housing, said Sue Beck-Ferkiss, a social sustainability specialist with the city.

She said the city hired Economic & Planning Systems Inc. in Denver to look at the possibility of introducing commercial linkage fees, but followed the consulting firm’s recommendation not to in 2014.

“A commercial linkage fee, they said, would be counter-competitive along the Front Range,” Beck-Ferkiss said, “and conditions didn’t justify the fee.”

Right now Fort Collins’ affordable housing program receives federal funds plus the city’s Affordable Housing Capital Fund that receives money from a dedicated sales tax that is expected to generate $4 million over the next 10 years.

“It’s a drop in the bucket,” Beck-Ferkiss said, “but every drop counts.”

Doug Storum can be reached at 303-630-1959, 970-416-7369 or dstorum@bizwestmedia.com.

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