Let's Talk About the 1% System and Affordable Housing!

CLOSED: This discussion has concluded.

How Does Affordable Housing Happen?

Local governments have 3 types of "tools" available to address housing needs in their communities:

  1. Policies that establish community goals and values
  2. Funding to support programs that assist homebuyers and renters and projects to either acquire or build affordable housing
  3. Regulations that directly support, or at least do not hinder, the acquisition or creation of affordable housing

Golden relies upon private and non-profit agencies to either build new or preserve existing affordable housing in the city, in the absence of available, local housing funds.

  • New affordable housing developments can take 2 to 5 years to receive all the necessary funding and development approvals, making it far more risky than market rate housing.
  • Local governments can either add to or mitigate that risk via local regulations or funding.
  • An unpredictable allocation schedule makes a new affordable housing development in Golden an unattractive risk to both affordable housing agencies as well as other state and local funders.

Why Do Regulations Matter?
Affordable housing developments are much more complex and risky than market rate developments. They are subject to increased public scrutiny, they have multiple sources of debt and equity financing, each with their own rules, objectives and oversight, and they do not have the margins to support unforeseen cost increases. Timeliness and predictability throughout all phases of the development process are crucial to limiting wasteful costs and delivering a viable project.

When it comes to regulations and affordable housing, there are two different strategies. One looks at regulations that can directly result in new affordable housing by requiring new development to include both market rate housing and affordable housing. This type of regulation needs to complement a funding program that acquires or preserves existing housing as affordable housing

The other strategy is to analyze existing regulations that might put an unnecessary burden on affordable housing projects unrelated to the qualitative review process. The industry term is "Removing regulatory barriers" and is something that state and federal grant funders expect local governments to inventory and address. A typical regulatory barrier is the length of time it takes to process a development review application. Some communities provide faster application review times for developments that meet important community objectives. The City of Golden has very efficient development review application times.

Golden's does have residential growth limitations - the 1% system that limits the number of new residential units permitted each year to about 75 currently. Other communities with residential growth limits include some type of priority for housing that meets important community objectives, such as affordable housing or mixed use developments. The concept is to create an incentive, within a restrictive system, for the types of housing that meet adopted community objectives.

Role of the 1% System
Since the adoption of the 1% System in 1996, there has been flexibility included to favor certain types of projects, either by setting aside allocations, exempting them from the 1% system total or allowing borrowing from future years. Currently, the only priority in the 1% system is for housing built near a transit station. These developments are able to request borrowing allocations from future years in order to construct the housing units sooner than would be possible by waiting to accumulate enough allocations to proceed.

Past & Current 1% System Preferences

Potential Options for Affordable Housing

1. Set Asides from 1% Total:
  • Pipeline allocations, 282 units (1996-2003)

1. Set Aside previously unused allocations in a dedicated pool

  • Hardship, 4 units (1997-2001)

  • Moderate Income, first allocation period only, 0 units

2. Exempt from 1% total

2. Exempt from 1% Total:

  • GURA Project, 72 units (1997-2002)

3. Early Start or Borrow from Future Years

  • Senior Housing, 36 units + 80 beds(1996-2014)

3. Early Start or Borrow from Next 4 Years for Transit Station Housing, 100 units (2013-2016)

Multifamily developments are allowed to "bank" or save up however many allocations they receive each year until enough have been received to begin construction. From an outside perspective, having an approved development project that has successfully undergone the review process but then has to wait an indeterminate period of time to begin construction is an example of a regulation that adds costs unrelated to improving the quality of the development.

Golden's greatest opportunity to achieve its affordable housing goals lies in preserving its existing affordable housing stock. Given the 1% system, there will always be very limited opportunities for anyone to build new affordable housing. However, if a future affordable housing development were to be proposed, the competition with market rate allocations would make it difficult, if not impossible, for a new affordable housing project to happen in Golden given the uncertainty involved with an unpredictable construction start. For this reason, looking for options to create a priority within the existing system would enable us to effectively support a future new, approved and financed affordable housing opportunity.

Options For Consideration
Staff has identified two options that could support future affordable housing development without violating the 1%, now 0.9%, annual residential growth limitation and a third option that could have the potential to exceed the overall 1% limitation. It is important to note that allowing affordable housing units to have a priority within the 1% system is not sufficient to enable an affordable housing development, it would only remove a critical barrier to a development that would be subject to a lengthy review and approval process.

  • Option 1 - Allow borrowing from future year's allocations, similar to transit developments. This would reduce the total number of allocations available to individuals wanting to build single homes, Accessory Dwelling Units (ADU's) or mult-family market rate developments.
  • Option 2 - Create a dedicated pool for affordable housing units out of previously unused allocations. This would not reduce the number of future, market rate allocations.
  • Option 3 - Exempt affordable housing units from the allocation process. This has the potential to eventually exceed the overall 1% limitation, but given the large number of previously unused allocations, the limited affordable vacant or redevelopable sites, and the difficulty of assembling the financing necessary for affordable housing development, it is highly unlikely that an exemption alone would be sufficient for a significant amount of affordable housing development. It could also create an incentive for affordable Accessory Dwelling Units (ADU's.)

* Because attached units cannot be reasonably built in partial buildings, the actual number of newly constructed homes each year can vary from the annual number of allocations assigned.

Share Let's Talk About the 1% System and Affordable Housing! on Facebook Share Let's Talk About the 1% System and Affordable Housing! on Twitter Share Let's Talk About the 1% System and Affordable Housing! on Linkedin Email Let's Talk About the 1% System and Affordable Housing! link

Consultation has concluded

<span class="translation_missing" title="translation missing: en-US.projects.blog_posts.show.load_comment_text">Load Comment Text</span>