Most major U.S. cities are experiencing housing shortages, which are driving up rents and forcing residents out of their homes. But few have tackled their housing challenges as voraciously as Denver, which has built a record-breaking number of units over the last year.
Now the city is trying a new approach to make its existing housing more accessible: a pilot program that would rent 400 vacant apartments to people who could otherwise not afford them.
In his state of the city address earlier this week, Denver Mayor Michael Hancock announced a rent “buy-down” program that will take empty high-end apartments and subsidize their rents so families that make 40 to 80 percent of the city’s median income can move in. The difference in rent will be covered by the city’s affordable housing fund as well as donations from local corporations and foundations. Although the local housing authority will manage the program, it will be separate from the Section 8 housing process, which requires a federal application.
The goal is to help correct what has become an unbalanced real estate market in terms of demand. "Denver has some of the highest inventories for apartments for families with the highest incomes and some of the lowest inventories for families with some of the lowest incomes,” said Erik Solivan, executive director of the mayor's Office of Housing and Opportunities for People Everywhere (HOPE), in an interview with Denver7. Traditionally, the high-end housing built today becomes tomorrow’s affordable housing—a process called “filtering”—but that depends if cities built enough housing decades ago, which many cities did not.
The glut of so-called “luxury housing” is also an issue that many cities are facing. Affordability advocates claim developers are trying to maximize their profits by building too many of these high-end units, and selling them to foreign or anonymous buyers that leverage them as investments but may not fill them with residents. The New York Times recently tracked the acquisitions of these “shell companies” which led to some legislative reform and a Treasury Department investigation of all-cash purchases in Manhattan and Miami.
That may be happening to a certain extent in Denver, but the truth is that many cities don’t collect comprehensive data on their housing units and whether they are actually occupied. Real estate experts will often cite a city’s “vacancy rate,” which can be an indicator of affordability (the sweet spot for renters is about 6 percent), but this is more a market estimate than a door-to-door assessment of the status of apartments across the city. Buy-down programs would force cities to both gather the information and make a plan to address the number of vacancies.
Just the fact that Denver is building enough housing to satisfy demand has kept rents from climbing over the last year, but this goes a step further towards making sure what’s being built actually serves the needs of those who need homes.
Hancock is also being commended for his success in accelerating the development of affordable housing in the city—for example, his “3x5” initiative aimed to build or renovate 3,000 units of affordable housing in five years. He did it in four.