Denver housing ordinance is limiting building permits, CSI study says

A Denver housing ordinance dubbed Expanding Housing Affordability is actually limiting new permits by one-third, equating to 2,890 to 3,180 fewer units a year, according to a study by the Common Sense Institute.

Authored by CSI Housing Fellow Peter LiFari and CSI Vice President of Policy and Research Chris Brown, the study, Unlocking Housing Affordability in Denver, examines the city’s housing ordinance enacted in 2022.

The effect of the ordinance, the CSI study concludes, is pushing Denver below the number of units needed to close its supply gap and meet projected population growth. “This policy requires a portion of new housing developments to include a share of below market affordable units or pay a fee,” LiFari said. “The bottom line, despite best intentions, this policy is having deleterious impacts on new housing supply creation.”

According to the study, Denver’s inclusionary housing ordinance significantly changes the financial viability of new development projects. Brown pointed to a 250-unit multifamily property looking to develop in Denver or Aurora as an example. “This project would need to increase rents by $80 a month or $964 a year per unit in Denver, to achieve the same return. For the few projects that do move forward, this acts as a hidden tax on renters.”

LiFari also noted that “while Denver taxpayers have been charitable in dedicating tax dollars to affordable housing, with another $100 million on this ballot this fall, these investments struggle to meet their full potential as Denver continues to restrict where the most affordable housing types can be built to just 23% of residentially zoned land. Compounding the issue, Denver struggles with its permitting review timelines — averaging six to 10 months for major multifamily projects — causing further delays which increases costs, stalling much-needed housing development.

To address the need for affordable housing, LiFari recommends that Denver revisit its current policy approach emphasizing inclusionary housing requirements and tax increases alone, and instead, reform zoning regulations to increase capacity for more affordable housing and implement fast-track permitting processes.

“Other cities that have successfully adopted these measures significantly sped up housing development and reduced costs without broader drawbacks to housing supply,” he said.

Read the full report on Unlocking Housing Affordability in Denver.