The Search for Affordable Housing in the Colorado Mortgage Market
Home buyers looking for a hard and fast definition of affordable housing in the Denver housing market - or anywhere else - won’t find one.
What’s “affordable” depends on variables such as the location of the house, townhome or condominium, the builder and whether the home is part of an affordable-housing program.
The builder of a $300,000 “affordable” condo may seem to use the term affordable as just a marketing strategy, but the unit may truly qualify in that housing category.
“What people are really saying when they say they need something affordable is they need something affordable for them,” said Gene Myers, CEO of New Town Builders LLC of Denver. “None of us wants to overpay for anything, which is why we’re willing to shop at Sam’s Club to get the best deal.”
Some builders don’t even like to call affordable housing “affordable.”
“We call our units ‘work force housing,’ because it really addresses a work force that needs to be downtown,” said Jerry Glick, a partner at residential developer Urban Ventures LLC of Denver.
Affordable housing in the city of Denver alone can range from a small, $75,000 downtown studio condo to a four-bedroom house for around $260,000.
A couple wanting to move to downtown Denver with a Colorado mortgage, after its children moved out of its suburban house, got a two-bedroom LoDo condo worth $500,000 for $291,000 because the unit was part of the city of Denver’s affordable-housing program.
“We put in an offer, knowing we were competing with another offer - a cash deal - and I had my clients write a letter about where they were in life and why they wanted to be downtown,” said Deviree Vallejo, the Colorado mortgage broker associate at Kentwood City Properties who represented the couple. “They won the unit because of the letter.”
Denver’s affordable-housing program, started in 2002, calls for 10 percent of new rental and for-sale units built on land rezoned for residential use to be affordable. There also are income restrictions, based on metro Denver’s Area Median Income (AMI).
Median income is that between the highest-paid half of a population and the lowest half.
By comparison, single-family houses offered for sale in the metro area by Richmond American Homes of Denver, one of the state’s largest home builders, range from a two-bedroom, $202,995 home in Commerce City to a four-bedroom, $779,995 home in Evergreen, according to the builder’s Web site.
Urban Ventures - whose president, Susan Powers, formerly headed the Denver Urban Renewal Authority - and New Town are among metro-area builders particularly focused on affordable housing, as well as market-rate product.
Urban Ventures specializes in residences such as lofts and condos, sometimes redeveloping old buildings into such units for prospective lower-income mortgage loan borrowers. Its projects include downtown Denver’s newly constructed Fire Clay Lofts - with affordable units priced at $175,000 and market-rate units running $200,000 to $375,000.
Among recent offerings by New Town Builders was a two-story, four bedroom Stapleton house for $558,000 and a two-bedroom, $180,000 townhome at the Belle Creek neighborhood near Commerce City. The Urban Land Institute has called Belle Creek one of this country’s top affordable neighborhoods.
“We may build identical homes in Stapleton and Commerce City, and they may have a $50,000 price spread based on location,” said Myers. “Yet, you would say both are affordable.”
The federal government defines affordable housing as dwellings where total housing costs are affordable to those living there, or generally no more than 30 percent of the household’s gross income.
“Sixty percent of AMI is low income,” said Kristine Zierk McLain, legislative and media liaison for the Colorado Housing and Finance Authority (CHFA). “Anything below that is considered very low income.”
CHFA makes home loans for affordable housing.
Metro Denver’s AMI currently ranges from $40,000 to $76,000 per year, depending on family size, according to the city of Denver. Denver-area builders that offer affordable housing generally build for families with 60 percent AMI.
The 2006 metro-area median home sales price was $250,000, according to Metrolist Inc. The average home sales price was about $319,000.
“The problem with affordable housing in Denver is there’s an insatiable appetite for it,” said Chris Parr, the Dender Housing Authority’s development director. “More and more builders are taking the middle out; $200,000 for a two-bedroom townhome is not affordable.”
To help satisfy that appetite, and keep its affordable housing affordable, the DHA offers perks. It can have a land trust buy the land under a home, for example, to alleviate that cost for the buyer.