Denver, CO is among the many U.S. cities that struggle with providing affordable housing to lower-income residents. Many professionals like teachers or medical technicians are unable to find affordable housing close to work, forcing them to rent apartments outside the city limits. At the same time, Denver sits on a pile of luxury rental apartments that are currently unoccupied. Taking into consideration these two issues, the city of Denver is set on fixing them through a program that would provide lower-income residents with subsidies, helping them rent these vacant high-end apartments.
The program, called The Lower Income Voucher Equity program (LIVE Denver), was revealed in the beginning of 2018. Those contributing financially to the cause include the city, employers and charitable foundations. They will cover the difference between what the beneficiaries of the program can afford and the market rent of an apartment. In a statement to The Wall Street Journal, Denver Mayor Michael Hancock said that “instead of having these units sit vacant, if we can create opportunities to help some of our employees, our residents get into those units, that’s an immediate response”.
It has been estimated that 693,000 residents may benefit from LIVE Denver and they may be granted a 2-year period to live in the apartments. During this time, they’ll be able to add a portion of their rent into a savings account that can later be used as a down payment for a house. To qualify for the program, single residents should make between $23,500 and $47,000 a year and the household income of a family of four should be $33,500 to $67,000. The monthly amount offered by the program is about $500 per single person and almost $900 per family.
400 new or recently renovated apartments are ready to receive their new tenants, with 100 already being signed up.
However, one of the concerns is that this program might upset residents that are paying full rent in such buildings. As a response, Mike Zoellner, a local developer involved in the creation of the program explained that “this is not a welfare program or anything like that. This is people who are working at hospitals, hotels and food service. We want them in our community and we want them in our building”.
Moreover, housing experts are worried that the program might affect the natural decline of rents, since “what you would hope is that excess supply leads to lower rents. If the city is pumping subsidies in, aren’t they going to be propping up the upper end of the market?” said Chris Herbert, managing director of Harvard University’s Joint Center for Housing Studies. However, the decline of city rents might take some time. According to Erik Soliván, executive director of Denver’s office of HOPE “eventually prices will come down over a two- to three-year window, […] we need a solution to help families today.”
Data referring to 50+ unit properties from Yardi Matrix shows that Denver has added approximately 12,000 units since 2015 with 14,000 more currently under construction. Of all these, nearly 88% are luxury apartments. At the same time, it’s important to point out that 13,000 apartments are currently vacant in Denver. Since rent went up 48% during the past 5 years, it’s easy to understand how a substantial number of residents are not able to afford living in the city. To offer some perspective, the average monthly rent in Denver is $1,439, more than the national average of $1,359.
As to the future beneficiaries of the program, Jamie Smith, president of St. Joseph Hospital said that “These folks are in high demand. […] They’re driving by four or five other hospitals much closer to their home to get to us, and at some point, it becomes a problem from a recruitment and retention standpoint.” Mr Smith added that because of the affordability issue, many of his medical technicians and nurses are forced to find a place on the city’s outskirts.
Source: The Wall Street Journal