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Monday January 30th 2023

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Does Dense Make Sense? Part 5. Affordable Housing


Editor’s note:  PLAN-Boulder County has issued a report entitled Does Dense Make Sense? This is the fifth part in a six part series extracted from the report.

Arete photo courtesy Roger Wolvington

The Boulder City Council has adopted an affordable housing goal of 10% of all residential units.  The Permanently Affordable Housing program is funded partially through local taxes and some government grants, but the primary means of creating new affordable units is through the Inclusionary Housing program.  Under this program, new residential development must make one out of every five residential units permanently affordable on site.  An optional “fee-in-lieu” program allows a cash payment for up to half of the affordable units to fund construction of new affordable units off site where land might be cheaper.  The Inclusionary Housing policy relies heavily on new development to meet the affordable housing goals, however to get to the 10% goal only using this approach, the City of Boulder would have to wait for tens of thousands of more housing units to be built.

The City of Boulder is currently engaged in a comprehensive review of affordable housing policies that will examine existing affordable housing stock, current programs, demographics, housing goals, and funding mechanisms.  That review will offer valuable insights to affordable housing issues.  Rather than conduct that level of evaluation in this report, we have focused on the relationship between housing affordability and dense development.

Does Density Deliver?

One of the most frequent arguments in favor of increased density in Boulder is that more dense housing means more affordable housing.  However, according to the California Planning Roundtable (1993) high density housing is often not at all affordable, finding that, “San Francisco’s Nob and Telegraph Hills, Los Angeles’ Wilshire Corridor, and high-rises in San Diego are all examples of upper-income areas where housing densities are quite high.”

They concluded that new, high density development offers the potential to be more affordable than new low density development but that, “Density is not always enough.  To ensure affordability, local governments must intervene with programs and additional concessions if the new high-density units are also to be affordable.”

In Flushing NY, similar conclusions were reached about the density/affordability paradigm and the need for government intervention to ensure that higher density achieves affordability.   The authors of Flushing’s Fortune, Will Gateway Give Way To Luxury Development? examined upzoning, concluding that “upzoning cannot guarantee mixed income housing” unless programs such as inclusionary housing are part of the equation.  They found that in “cities where inclusionary housing has been a reliable generator of affordable housing, the programs are mandatory.”

Developer Windfall

The conversion of lower intensity zoned land is linked to inclusionary housing.  When development pressure causes land to be rezoned to higher intensity use, the resulting increase in property value is a “windfall” for the property owner.  The increase in value is therefore attributed to government intervention and not to investment made by the property owner.  This raises the question, “Should the newly created value resulting from upzoning and the subsequent unearned windfall benefitting current property owners be recaptured for the public benefit?”  Affordable housing advocates say, “Yes.”

The effects of upzoning on property values and the potential to either achieve affordable housing as a result, or to create an unearned windfall for property owners that could be recaptured for the public benefit, is a widely understood paradigm, both in the U.S. and abroad.

In the British Commonwealth it is referred to as “value” or “betterment capture” and is an integral part of land use legislation.   Betterment capture is applied to property value increases not solely due to upzoning but also where a portion of the increase is conferred by the wider community through provision (subsidy) of infrastructure that will service the area, like schools, police services and health facilities.  The benefit offered by these community funded (as opposed to developer funded) services are manifested in property prices.   Properties benefitting from these services are generally valued more than those that do not.

Stay tuned for Part 6:  Recommendations

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