As a part of the city’s effort to spur development of affordable housing, which would drastically increase density in Denver, lawmakers are developing a pilot project to financially incentivize developers who build affordable and mixed-income units in Denver’s high-cost submarkets like Capitol Hill and Cheesman Park.
Linkage Fee: Developers are not always required to pay a linkage fee (linkage fees are typically charged to developers and then spent on affordable housing preservation or production through existing housing programs), causing the fund’s revenue to vary greatly year-over-year.
The pilot was developed by Community Planning and Development (CPD) and the Office of Housing Stability (HOST) to test the feasibility of offering incentives, like reductions in permitting fees, to support affordable housing projects that align with Denver’s Comprehensive Plan 2040 and Blueprint Denver, both of which provide recommendations to create a more expensive zoning code.
“Our goal with this pilot program is to identify ways we can help support critical projects that share our priorities of providing deep affordability as well as taking action to address climate change,” Laura E. Aldrete, executive director of CPD said in a press release.
However, some developers are unconvinced the plan would align supply-side and demand-side economic goals, especially when it comes to developing affordable multifamily units.
“It seems backwards,” said Jim Welland, a developer with Pallisade Partners, which sits on the city’s advisory committee for the plan. “The development costs in ‘high-cost’ submarkets are higher, which makes it difficult to develop more affordable housing. The goal could be met, but the incentive needs to be higher to match the costs.”
The plan is designed to work alongside other efforts such as the Group Living Proposal and including racially-sensitive language in the city zoning code. However, Annaliese Hock, the city planner in charge of developing the plan, said Denver residents should tamper their expectations because the plan is just one tool in Community Planning and Development’s (CPD) toolbox.
“We understand there are a lot of issues with the city’s zoning code that CPD is working to address. But, this plan shouldn’t be thought of as a one-size-fits-all solution. It’s just one tool we can use,” Hock said.
Incentives
Denver utilizes several zoning incentives to attempt to bolster its affordable housing stock. One example is allowing developers to add additional height to their buildings in exchange for affordable units in the development. The goal is to cross-subsidize the affordable units with the added square-footage.
Partnership: Denver Community Planning and Development is partnering with the Office of Housing Stability (HOST) to find ways to encourage construction of affordable and mixed-income housing, particularly in transit-rich areas.
Two others include inclusionary zoning ordinances and linkage fees.
But, these efforts have not produced the effect the city intended. Denver replaced its inclusionary housing ordinances (IHO) in 2016 with the Affordable Housing Fund. According to CPD, IHOs were the city’s “primary tool to facilitate home ownership opportunities of workforce housing” for people earning between 50 and 90% percent of average median income.
However, its new tool has proven to be far less effective in incentivizing the development of affordable units. The fund partially consists of linkage fees, a mechanism that “links” market-rate development with affordable and mixed-income housing. For example, developers may pay up to $1.61 per square-foot for a multi-unit commercial building versus just $.65 for a multi-unit residential complex based on the project’s building type. These fees are adjusted for inflation in an amount equal to the percentage change from the previous year in the national Consumer Price Index for All Urban Consumers.
The fund is designed to provide supplementary capital for affordable housing development projects that serve families earning 80 percent or less of the area median income (AMI) in 2016. According to the City’s website, “the fund is estimated to raise $150 million over the next 10 years to create or preserve 6,000 affordable homes for low- to moderate-income families.”
But, developers are not always required to pay the linkage fee, causing the fund’s revenue to vary greatly year-over-year. Single-family or duplex additions of 400 gross square feet or less, accessory dwelling units (ADUs), affordable housing, and rebuilding due to catastrophic events are exempt. Developers who build affordable units within a quarter-mile of a development without affordable units may be exempt as well.
As a result, the Affordable Housing Fund exempted “far more projects than originally anticipated,” according to a CPD study. In 2017, linkage fees generated just over $6 million for the fund. This sum grew to over $20 million in 2018. CPD currently projects the city to accrue $10 million from linkage fees in 2020.
Supply And Demand
Even with these incentives on the books, Denver has a hard time getting developers to build affordable multifamily units, primarily because the ratio of building costs to a project’s potential return don’t add up.
For example, granting developers height waivers to build above a maximum zoning height in exchange for affordable units often discourages development because of the extra associated construction costs.
According to the International Building Code, buildings taller than five stories must be built with steel frames. Since mid-March, the price of lumber has doubled and the price of steel has increased 10 percent.
On top of that, Denver’s increasing minimum wage and land values increase the risk for investors who back affordable housing projects. According to research by Realtor.com, the average land value in Denver is over $489,000. Coupled with increasing material and labor costs, developers say building multifamily affordable housing units is not a good investment.
The result is that over 75 percent of Denver’s affordable housing development goes toward building studio and one-bedroom units, according to data from CPD.
While the current pilot also includes incentives for developers based on the value of the land being developed, CPD says it does not have the ability to accurately track land value fluctuations in real time, making it nearly impossible for the incentive to have any real-world application.
“We need to consider that in the high-cost areas the different market rate and affordable thresholds is higher. Therefore, the incentive needs to be higher to account for the difference,” Welland said.
A Success Story?
As CPD and HOST continue to refine the pilot, they point to the 38th and Blake Overlay project as evidence of the plan’s success.
The project began in 2018 and provided developers height incentives that allowed buildings to stretch up to 16 stories in some areas of the Five Points, Globeville and Cole neighborhoods near the RTD A Line in District 9.
It brought 36 affordable units to the area, but spurred the growth of several office buildings, further increasing property values and tax assessments in the neighborhood. This led some to contend the project accelerated displacement and gentrification in the area.
“The affordability ‘incentive’ is unlikely to be utilized as the up-zone is substantial enough without the height incentives, and the most we can expect of the entire rezone is less than 100 affordable units,” District 9 representative Candi CdeBaca told Denverite at the time.
Since being elected in 2019, CdeBaca has committed herself to undoing Denver’s strategy to build its way out of its housing crisis. CdeBaca supports moving away from linkage fees toward the inclusionary housing ordinances of yesteryear. She also supports charging developers fees upwards of 10 percent to support affordable housing and restricting property tax increases for a given cycle.
“I think right now is the best time to tax the big builders, tax the corporations in a way that creates the padding for us to execute the plans,” she said.
On the corner of Emerson and the 900 block of E. 1st Ave. in Denver’s Speer neighborhood sits Carmen Court — a 95-year-old piece of Denver history that is figuratively torn apart, a notion that could soon take place in the literal sense.
The forces at work here are three-fold, involving the will of the owner occupants, the wishes of the surrounding neighborhood and the financial leverage of an international real-estate development company.
From The Inside Out
The owners of the six condominium units at Carmen Court — a Pueblo Revival Style multi-family complex built in 1925 are looking at a financial windfall. According to an article by BusinessDen.com, the entire property has a list value of $5.5 million, indicating that the owners of each unit could anticipate an average payout of $916,000.
1925: Carmen Court as it appeared after its 1925 completion by builder Burt Rhoads, an engineer for the Gates Rubber Company.
The owner-occupants of Carmen Court recently aligned with the property owners of the three residential lots to the south in order to broker a deal to sell the dirt beneath the buildings to Hines, a Texas-based real estate investment, development and management firm that plans to erect a five+ story assisted living facility. One of the terms of this deal is that the owners will arrange to have the properties demolished before Hines will close on the contract. Upon applying for a permit to do so and then posting said permit as required by law, there was significant outcry among the area residents. This prompted neighbors to seek a preservation-minded approach by filing for Carmen Court to bear a landmark designation status.
The numerous “No Trespassing” signs made it apparent that knocking on doors for an interview was ill advised. Yet, numerous stories from other news sources confirm that Carmen Court residents are not interested in the preservation approach, citing a unanimous desire to sell rather than incurring the increasingly costly expense of upkeep on a century-old building.
From The Outside In
Neighbors, members of the West Washington Park Neighborhood Association, and an amalgam of Denver-based architects and preservationists, have come together to form Friends of Carmen Court (FoCC). Contrary to what the name suggests, members of FoCC do not share the same vision as the current owner occupants. From the FoCC’s perspective, however, the proposed nine-lot development plan represents a potential monstrosity that will further erase the heritage and identity of their community.
Vying For Historical Landmark: Proponents of historical landmark designation claim Carmen Court was built in the Pueblo Revival Style. Yet, it bears resemblance to Mediterranean villas and lacks the style’s signature round roof beams known as “vigas.”
While the residents of Carmen Court are obviously interested in selling and moving on, the FoCC have other motivations. Mark Harris, a group member and one of the three neighbors required for the filing of the landmark designation states via email: “We, the three near neighbors, have been in discussions with the owners and Hines on how the building can have an adaptive re-use within the new development. We are also trying to find another buyer to step in and develop the site while preserving the building. We are not trying to prevent density or new development in our neighborhood; we’re just trying to save an important building from ending up in the landfill. While some have painted the picture as an either-or, we see it as both-and. Hines can buy the building from the owners at their asking price, and still save the building by incorporating it into their new development. We have just all agreed on a 45-day extension to allow for time to reach an agreement before the issue is in front of City Council on Nov 2nd.”
Meanwhile, FoCC member Sarah McCarthy voices a community-wide aesthetic concern about the idea of losing Carmen Court, stating: “It’s really part of the neighborhood. It is truly unique in its landscaping and design. The owners may not be interested in (historical) designation, but we see the building as having a larger architectural and historical significance.”
From The Top Looking Down
The proposed compromise would require Hines to preserve the exterior integrity of Carmen Court, and perhaps repurpose the condos for reception areas, dining facilities or street-level storage while somehow erecting a multi-story assisted living facility around the existing structure. While this sort of a compromise sounds a bit farfetched, it is not unheard of in other redeveloping parts of Denver. Recently, similar historical landmark designations have been passed for places like Tom’s Diner on Colfax and the Howard Berkeley Park Chapel of Tennyson St. While both involved some level of compromise, neither included building a high-rise residential behemoth atop a century-old structure.
Signs: In addition to the red signs, Carmen Court is replete with “No Trespassing” signs to ward off nosy journalists.
Hines Managing Director Chris Crawford, while unavailable for comment, was recently quoted on the matter at Business Den.com. He indicated that Hines would consider walking away if another developer would agree to taking over the existing contract with the Carmen Court owners. This new developer, in the event of a historical designation being assigned to the property, would have to build around the existing structure while assuring that Hines be reimbursed for their out-of-pocket expenses incurred thus far.
While a land swap with another developer was discussed, the deal was turned down by Hines due to the location of the other property. At any rate, whether an historical designation is assigned to the property is up to what the Denver City Council decides when the 45-day extension is up in mid-October. If so, the next step is up to the willingness of the Development Industrial Complex to settle for a compromise. If there is no historical designation, you can bet there will soon likely be no Carmen Court.
At any rate, the fate of Carmen Court is yet unknown, but currently it appears to be in the hands of those who have the least to lose.
Multiple Sites Finishing Up But Only A Couple Commencing; Stunning Newly Built Structures Opening In The District For Fall
by Glen Richardson
Reshaping Cherry Creek: Holiday shoppers-visitors in the district will be greeted by this new mixed-use retail-office building on the corner of 3rd. Ave. & Josephine. The structure is a standout as most new buildings are far from futuristic.
The pandemic and a weakening economy find Cherry Creek’s construction sites still turning shovels and swinging hammers, but the pace has slowed and few new projects are expected to sprout up. Following eight straight years of new construction, owners, developers, contractors, subcontractors and the supply chain are feeling the shock.
Normally it’s rare for district developers-builders to slow down construction activity. But these aren’t normal times, and the pandemic economy has given rise to a noticeable work cutback. The structure of demand is changing: Fewer hotels are being proposed due to less business-leisure travel. Online shopping is shrinking the demand for retail space and the need for offices is slowing because of remote working.
Multiple projects are finishing up in Cherry Creek plus a couple have commenced construction. Residents and district shoppers can expect those projects to be completed. It is new projects that have been proposed in the district that are likely to see terminations of parties or entire projects. Given the hotel outlook, the AC Marriott in Cherry Creek is likely to be delayed or the site could go up for resale. The Sunridge Hotel Group project is proposed for seven-stories, 150-rooms.
Westside Wait
Redevelopment of Cherry Creek’s west end has been the slowest to take off. Completion of the 260 North office-retail project at Josephine St. and East 3rd Ave. and makeover of the former Inn at Cherry Creek opening as The Clayton at 233 Clayton St. in March of 2021 are notable exceptions.
New Excavation: Despite Cherry Creek’s construction cutback, dirt work is underway at this 240 Saint Paul site. Building will be anchored across the first three floors by an Equinox Fitness Club.
Broe Real Estate Group which owns the bulk of the east side of Clayton St. announced a year ago it would demolish several structures to make way for two new office buildings. Existing two-story structures at 200 and 210 Clayton are to be replaced with an eight-story office building with ground-floor retail. The adjacent four-story building it owns at 216 Clayton would remain but the two-story parking garage to the north would be replaced with a seven-story office building and ground-floor retail. Broe’s headquarters is at 252 Clayton and the firm has deep pockets. Thus the massive project will likely come to fruition but demolition isn’t expected to begin until next year with completion two-five years away.
The promised Clayton Lane Investors redevelopment of the west end of Cherry Creek between 1st and 2nd Ave. from Josephine to Detroit St. is in limbo again. The Invesco Real Estate-Broomfield partnership project isn’t likely to break ground in the next 12-14 month. Completion that would include demolishing the former Sears store that has been vacant since 2015 isn’t likely in the next several years. Should the venture be terminated look for the Nichols Partnership — Clayton Lane’s original developer — who just bought back a portion of the Whole Foods Garage for $6 million — to take over the project.
Boundary-Pushing: The just completed UC Health Cherry Creek has opened along East 1st Ave. Sleek all-glass structure creates a new footprint on the eastside as the surrounding buildings are heavy with earth tones and masonry.
New For Fall
Newly completed projects scattered through the fashionable neighborhood are beginning to open for fall. The project known as 260 North has finally opened, creating the west end’s first high-end, mixed-use space. Situated adjacent to the BMC built MOXY and Halcyon Hotels — the only other new westside structures — it is a compelling building with a stepped-up design. Located on the corner of 3rd and Josephine streets, it adds office, retail and parking space while allowing daylight into the streetscape.
On the east end, the just completed modernistic 88,000-sq.-ft. UC Health Cherry Creek has opened. With an all-glass façade, it stands out alone on East 1st Ave. as most of the surrounding buildings are heavy with earth tones and masonry. The health center offers primary care, state of the art imaging, a surgery center and comprehensive oncology treatment.
Over in the Cherry Creek Triangle, two major multi-family projects are also open. Between the step down, brickwork and landscaping, Gables Cherry Creek II helps reduce the harshness of East Alameda Ave. Gables Vista, rising 12-stories, is one of the tallest in the triangle. All together the three Gables projects have added 579 homes in the district.
On The Rise
Two projects, both BMC developments, are currently under construction in the district. Newest is the 240 Saint Paul project to be anchored across the first three floors by the Equinox Fitness Club. Most of the office space is pre-leased and at last report half of the 12,000-sq.-ft. of retail space had been rented. Construction is anticipated to take at least 14 months, with completion in summer-early fall of next year.
Urban Lifestyle: Gables Cherry Creek II in the Cherry Creek Triangle offers a walkable urban lifestyle with enhanced amenities. Step down brickwork and landscaping reduces the harshness of East Alameda Ave.
Renamed The Clayton, Matt Joblon signed a 99-year ground lease on the 233 Clayton St. property in the fall of 2017. Since renovation started a year ago, BMC is spending $30 million to add onto the property that’s expected to open next March.
What will make the project unique in Cherry Creek is Joblon’s goal to create a “real culture center.” In addition to 37 hotel rooms, the six-story building will feature 12,000-sq.-ft. of “hip retail” on the ground-floor plus scores of music, culinary and art venues for entertainment, exploration and enjoyment.
Projects On Horizon
Despite the district’s construction slowdown, there are several new projects on the horizon in Cherry Creek. They range from office buildings to apartment complexes, two potential hotels plus an independent living community for seniors.
More Glass: Construction could soon get underway on this proposed glass structure at 2nd Ave. & Adams. Retail-office site would extend the existing stretch of retail on East 2nd Ave further east.
Most likely to begin construction is the 2nd Ave. & Adams project where a two-story office building and a single-family home have already been cleared. Purchased by Blair Richardson, the 0.29-acre site would feature an all-glass building with ground floor retail plus four levels of office space. When it is developed it will extend the existing stretch of retail on East 2nd Ave. further east.
Due to the project’s nature, a proposed seven-story, 136-unit senior living project could also break ground next year. Named Solterra Senior Living, the site is near the intersection of Alameda Ave. and Colorado Blvd. A self-service car wash was recently demolished at the site to make way for the project. The infill site at 235 Fillmore that has set vacant for several years has been purchased by BMC, making development more likely. An office building with ground-floor retail is proposed.
Pumpkins: Pumpkins will be available for purchase from the 4MHP Pumpkin Patch.
Fall into some old-fashioned fun at Four Mile Historic Park’s annual Pumpkin Harvest Festival. The festival is set for Friday, October 2, and Saturday, October 3, from 9 a.m. to 8 p.m. and Sunday, October 4, from 9 a.m. to 6 p.m. Pumpkin Harvest will require advanced purchase, timed tickets. A ticket guarantees you a 90-minute experience in the 12 acre park.
Fun For All Ages: The annual Pumpkin Harvest Festival at Four Mile Historic Park will feature activities for all ages including craft kits, pioneer games, and pumpkin decorating. The festival is set for October 2-4 with a free preview for members on October 1, 2020.
Activities for all ages include craft kits, pioneer games, live music, photo booth, pumpkin walk, pumpkin decorating, demonstrations and more. Additional activities available for purchase include Pumpkins from the 4MHP Pumpkin Patch, Tasty Treats for Purchase from partnered Food Trucks, Fall-Inspired Beverages.
Sponsorships are still available and include a 10’x10’ tent, choice of location, access to power, listing on event collateral, and complimentary tickets to the festival. Visit FourMilePark.org for more information or to fill out a sponsorship form.
The Pumpkin Harvest Festival admission is $15 and Children 3 and under are free. Members have exclusive access to a free preview night on Thursday, October 1, 2020. There is still time to purchase a membership at www.fourmilepark.org/get-involved/membership.
