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Durango considers higher fees for developers who opt out of affordable housing requirement

Changes to Fair Share program aim to increase supply
Durango City Council will vote at its May 21 regular meeting on whether to adopt a revised Fair Share Inclusionary Zoning Program with amendments that would further incentivize developers to include affordable housing units in their projects. The Fair Share Program has been applied to developments such as the Animas City Park Overlook Townhomes near 32nd Street and East Second Avenue. (Jerry McBride/Durango Herald file)

Fair share programs are a common tool used by towns and cities to get developers on board with building affordable housing. But in Durango, developers often opt to pay a fee in lieu of constructing new affordable units.

Durango City Council is considering a rewritten Fair Share Inclusionary Zoning Program that reduces the number of affordable housing units developers are expected to build, while increasing the fees they would incur for opting out of the requirement.

The hope is that more developers will contribute to the city’s affordable housing stock. The updated program also proposes making rentals eligible for the program and would be written to be more transparent and easier to navigate for developers, in part by eliminating confusing price tiers based on various area median incomes.

City Council voted 4-1 last week to approve a first reading of the re-imagined program, with Councilor Olivier Bosmans voting against the proposed changes. Council will vote again on whether to adopt the rewritten program at its May 21 meeting.

The program changes propose raised fees in lieu for single-family homes of $434,307 and fees in lieu for multifamily housing such as rental apartments, condominiums and townhomes of $398,809, said Eva Henson, Durango housing innovation manager.

Developers would pay higher fees than they currently do if they choose not to build affordable units. But they are incentivized to go ahead and build because the rewritten program would require just 12% of units in a given project be affordable versus the 16% requirement currently in place, she said.

Additionally, the revised program proposes permit fee waivers totaling $15,000 for construction of rental units and a flat fee waiver of $18,000 per sale units. Henson said the waivers were structured to avoid rebate incentives that would still count as taxable income to developers.

Program changes would also increase the number of units a project must have before Fair Share standards are applied to it. Henson said the revised program would increase that number from four units to nine units.

She said that aligns with Gov. Jared Polis’ policy and road map through 2026 to encourage higher density housing developments in cities across the state without creating new barriers to small developers in Durango.

“We want to set the default affordability target for an average of 100% area median income. What does this do? It aligns us not only with our housing needs analysis, but it also aligns with Proposition 123,” she said.

Proposition 123 was a ballot question approved by Colorado voters in 2022 that created the State Affordable Housing Fund and dedicates funds to the Colorado Department of Local Affairs’ Affordable Housing Support Fund and the Colorado Office of Economic Development and International Trade’s Affordable Housing Financing Fund to fund housing programs.

The city of Durango, along with Bayfield, Ignacio and La Plata County, opted into Proposition 123 last year.

Henson said the city also wants to target an average area median income of 80% for rentals within the Fair Share Inclusionary Zoning Program.

“This is slightly above low-income housing tax credit projects like the Residences at Durango,” she said. “It’s also slightly above Proposition 123 as well. But it fills the gap between existing subsidies and market rate production – the missing middle that we’ve been talking about trying to meet the need for.”

The rewritten program also includes zoning incentives to developers such as reduced parking space requirements, density bonuses and prioritized review by Durango Community Development, all of which help the city keep in line with its Proposition 123 commitment by expediting project reviews, Henson added.

During a public hearing about the program revisions, Julie Cooley, director of the Neighbors in Need Alliance in Durango, said the proposed changes are a much more effective approach to a Fair Share program than the program Durango initially adopted in 2009.

“This feels like a program that will get us more housing. And I think that it’s also kind of a carrot and a stick for the developers,” she said. “I like that the rentals are included now.”

She said rental rates have soared in recent years, forcing working people out of town because it’s just too expensive to survive and thrive in Durango.

“I don’t want to see that happen,” she said. “We’ve got enough gray hairs in this town already. We need to keep the young people here.”

HomesFund Executive Director Pam Moore said during the public hearing that proceeds from fees in lieu payments contribute to down payment assistance for local homebuyers.

“We’ve created 44 new homeowners. We’ve put $1.1 million in mortgage assistance out. And that average (area median income) of the families we’ve helped with that money is at 93%,” she said. “We do support this rewrite of the fair share ordinance. It’s written right now where it’s just much easier to pay the fee to build the unit, and, of course, we need the units.”

Moore said HomesFund also supports including rentals in the city’s Fair Share Inclusionary Zoning Program.


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