Each time a property is sold in Stapleton, a “community fee” is paid to the Stapleton Foundation (“Foundation”) to support education, transportation and wellness programs that benefit the broader community. The Foundation receives upwards of a million dollars annually from this “Community Investment Fee” (CIF), which is equal to 0.25 percent of the sales price after the first $100,000.
The Foundation’s chief executive officer, Landri Taylor, told the Front Porch he will recommend to the Stapleton Foundation board that funds from the CIF be used to preserve existing affordable for-sale housing units in Stapleton. Deed restrictions place a cap on the price at which such units can be sold during a 15-year period. Next year, for the first time, affordable for-sale units will begin “timing out” of the program.
A report prepared for the Foundation by BBC Research & Consulting in September estimated that by 2031, all of the 391 existing affordable homes in Stapleton at the time of their study could reach the end of their deed restrictions. Those restrictions place a 3.5 percent per year cap on the price appreciation that the owner can gain on resale. To keep homes in the affordable program, the city has the option to purchase the home at the restricted maximum sale price in the first sale after the deed restriction expires.
Stapleton developer Forest City is obligated through its development agreement with the city to provide a minimum of 10 percent of for-sale homes as “affordable” units. According to Tom Gleason of Forest City, as of Nov. 16, 503 affordable homes, (6.8 percent) of homes currently meet that criterion. The existing deed-restricted units are targeted at households earning no more than 80 percent of the area median income (AMI). BBC concluded that without such deed-restricted units, the private sector is unlikely to produce any units affordable even for households earning 100 percent of AMI.
Taylor was not prepared to state how much of the CIF dollars would be committed to preserving affordable units. He said it at least depends on how many units will be timing out in any given year. One possible source of matching funds would be the city’s new affordable housing fund. BBC estimates that 40 percent of the existing affordable units are at risk of converting to market rate in the next five years and the remainder will expire by 2032. BBC also stated the price difference between affordable attached units and the median price for a market rate attached home in Stapleton was about $230,000 or $84 per square foot.
BBC estimates the acquisition cost of a home timing out of the program at the maximum sales price, then re-sold to an income-qualified buyer would range from $16,000 to $29,000 per unit. Acquiring all 391 affordable deed-restricted units (at the time of the study) and converting them to a land trust product would cost $5.4 million in 2017 dollars.
Taylor hinted at this new initiative in an Oct. 26 update to the Stapleton Development Corporation (SDC), saying, “We are excited about the possibility.”
Compared to the current deed-restricted model of affordable homes, the advantages of a land trust model are: It preserves affordable units in perpetuity; it benefits more households since price appreciation is permanently capped; and it takes land value out of the equation.
If the Foundation acts on Taylor’s proposal, he would anticipate asking the city if it would be willing to at least partially match the CIF funds to help preserve the affordable units. The Front Porch contacted Denver’s Office of Economic Development but did not receive a reply.
The city’s draft “Housing an Inclusive Denver” plan includes this proposed “key action”: “Explore partnerships across key nonprofit and foundation partners to preserve existing affordable homes in high-opportunity areas, such as Stapleton, to resell to qualified buyers.” It goes on to say, “The City and its nonprofit and foundation partners are already taking steps to explore long-term preservation of these homes to ensure future income-qualified homeowners can purchase homes in these high opportunity areas.” Further, Denver is said to be actively considering formation of a citywide community land trust. Taylor says he will not be recommending that the Foundation create such an entity and would rather work with an existing trust, possibly one to be formed by the city.