Mayor Hancock has said affordable housing is a crisis for Denver—and it is his number one priority. In Stapleton, Denver has a neighborhood where vacant land previously owned by the city is available to build on—and the land sale includes a legal obligation to build 10 percent of for-sale units as affordable housing reasonably on pace with market rate homes. Further, Stapleton is a place where homeowners, if they do their due diligence, know they’re moving into a neighborhood where a requirement for affordable homes preceded them.
With these major obstacles out of the way, why has the developer, Forest City, built only half of the affordable for-sale homes required by their contract with the city? They have not even given the Citizens Advisory Committee (CAB) a long-requested list and map of where the required units will be built.
When Forest City signed the contract to develop Stapleton, much of the land contained fuel, de-icer and other contaminants. Further, it was perceived to be in an area usable primarily for industrial purposes. And, there were those who argued the land actually had a negative value. Voters did not want the city to put their tax money into the project—they wanted someone else to take the risk.
Forest City stepped in and took the risk, including upfront loans to start infrastructure construction. The circumstances allowed them to negotiate a contract with the potential for a hefty profit based on increasing land values—if their project was a success. To their credit, they have been amazingly successful, holding on through the recession when many developers and builders went out of business.
Forest City’s contract with the city requires it to purchase 2,935 developable acres of the former Stapleton Airport. Forest City buys the land after it is environmentally remediated as needed for development. A 1999 appraisal set the land value at approximately $79.34 million for an average per acre price of $27,000. By contract, the price escalates with inflation based on the consumer price index (CPI). Based on the CPI since 2000, Forest City’s purchase cost per acre today would be approximately $37,000. Forest City contracted for the creation of the master plan and marketed it, works with the city on permitting, oversees construction of infrastructure (which is built with tax increment financing [TIF] and special district tax revenue) and sells land to the builders. To date, 82 percent of the land (2,399 acres) has been purchased. Based on recent Stapleton land sale records, the Front Porch calculated the cost of Stapleton land now being sold to residential builders is approximately $1 million per acre. (Forest City did not respond to this calculation with other information.)
These skyrocketing land values and resulting profit margins surely provide the funds for Forest City to fulfill its contractual obligation to build 10 percent affordable homes.
Build-out is fast approaching. As of Dec. 31, 2016, 6,961 for-sale units had been built in Stapleton—that’s 87 percent of the 8,000 originally forecast. More than 8,800 are now anticipated at full build-out. (Approximately 4,000 total rental units are anticipated—but only 40 percent have been built so far.)
Forest City has not kept up with the 10 percent obligation while they have been generating a hefty profit on land sales. Tom Gleason of Forest City has said it is unlikely they will meet the 10 percent goal by the time market-rate units are completed. What incentive will Forest City have to stick around and build affordable homes that don’t bring in a profit after their most profitable work is done?
The city’s affordable housing contract with Forest City did not require that the affordable homes be built on pace with the market rate homes. The contract merely says they should reasonably keep pace with construction. What’s “reasonable”? It may be reasonable to slow the pace during a recession. But if it’s reasonable to slow down during a recession, isn’t it reasonable to catch up during a boom?
Stapleton’s CAB has repeatedly given reports to the Stapleton Development Corporation (SDC) and the city that construction of affordable housing has fallen behind. And SDC has a big tool at its disposal—the power to withhold land sales. It has refrained from using that tool because stopping construction would slow the amount of development that could be done with support from TIF. By law, TIF is available only for a limited time period (through 2025).
The Front Porch has written repeatedly about SDC’s talk of making an action plan but as yet, we have seen no such plan and we did not see that they pushed the city to act when Forest City clearly had the resources to do so. Forest City’s contract with the city acknowledges that “public subsidies” are required to make affordable rental housing projects feasible; but Forest City alone is responsible for building the 10 percent for-sale affordable homes—no waiting for public money is involved. Now, 15 years into Stapleton’s redevelopment, it is time to move away from reliance on citizen volunteers such as CAB and SDC. That didn’t work. It is time for the city to push Forest City to do what’s reasonable during boom times—to use their profits to catch up on their affordable housing obligation. During those 15 years, the vision of Stapleton as an economically diverse community that reflects the city as a whole has been slipping away—and a different image is taking its place.
The city now says it is reviewing the land Forest City has set aside to determine how many affordable units it might be able to accommodate. But the contract is to provide housing units, not just establish a land bank. The city says Forest City is not officially in breach of their contract at this time. Councilperson Robin Kniech has told the Front Porch she believes the development agreement absolutely is enforceable and that the city is studying its legal options. Mayor Hancock, at the March Stapleton United Neighbors meeting, said the city doesn’t have many tools and puts his hope in collaboration.
It is time for the city to come to grips with Forest City’s failure to keep pace with its affordable housing obligation and to generate a plan of action that will cure the deficit before Forest City completes its build-out of market rate units. After all, if modest affordable housing goals cannot be met at Stapleton, a massive piece of city-owned land, what are the chances elsewhere in the city?