This ‘Innovative’ Housing Program Serves Just 3 Households

This story was originally published by Stateline, an initiative of The Pew Charitable Trusts.

DENVER — Macy Valdez works in Denver but for a long time didn’t think she could afford to live here. She earns $38,000 a year as a receptionist at the Saint Joseph Hospital cancer center, too little to afford rent in many downtown apartments.

Yet since January, Valdez, 28, has been living in a one-bedroom apartment seven blocks from her office in a building complete with a game room, a gym and a pool. She moved in thanks to a city program that blends public and private funds to subsidize rents for lower-income workers.

City leaders nationwide have been calling Denver to learn about the Lower Income Voucher Equity program—“LIVE Denver,” for short—since Democratic Mayor Michael Hancock announced the first-of-its-kind partnership in 2017. The program has been profiled in national newspapers, and Denver officials regularly tout it at housing conferences.

But nearly two years in, LIVE Denver is serving only three households and might never achieve the scale city leaders promised. Saint Joseph Hospital is the only employer to partner with the city so far. City officials now expect the program to serve about a hundred households, a quarter of the 400 households they initially estimated.

Valdez pays $1,100 a month, $100 more than she previously spent in a town 10 miles away. Still, she considers the rent a steal, given the location and the fact that she’s no longer living with a roommate. Through the program, a small portion of her rent payments are set aside in a savings account.

Asked whether she could have afforded her apartment at the market rate, Valdez laughed. “Absolutely not,” she said. One-bedroom apartments in her building start at $1,600.

Denver’s struggles might offer a lesson to other cities seeking to launch an affordable housing subsidy, particularly one aimed at middle-class residents. “What we’re seeing now is cities are on the front line of dealing with the housing affordability crisis,” said Elisha Harig-Blaine, program manager for housing at the National League of Cities.

Denver leaders say they’re rolling out the program slowly so they can get things right. “We want to make sure that, as we’re exploring and pursuing those innovative approaches, we’re doing so very thoughtfully and very intentionally,” said Laura Brudzynski, director of housing policy, programs and HOPE Initiative at the Denver Office of Economic Development and Opportunity.

But the slow progress has frustrated many of the program’s private sector supporters.

Tracey Stewart, family economic security investment director at Gary Community Investments, a philanthropic funder of LIVE Denver, said her organization is still excited about the pilot. But, she added, it will serve only a fraction of city residents struggling to pay for housing.

“Even though this is an interesting and pretty innovative project—you’re just going to hear a lot of people say, ‘So what?’”

An Innovative Idea

Denver, like other booming cities, has an affordability problem. Ten years ago, the typical apartment in the city rented for $776. By 2017, the cost was $1,286, according to the U.S. Census Bureau’s American Community Survey. The skyline is now dotted with apartment buildings designed to tempt young professionals with amenities such as dog parks, swimming pools and courtyard fire pits.

Although the average Denver household’s income also increased over that period, about half of metro area residents spent more than 30% of their income on housing, according to a 2017 study by the Joint Center for Housing Studies of Harvard University. Families that pay more than that share of their income on housing are considered “cost-burdened” by the U.S. Department of Housing and Urban Development.

A few years ago, Denver civic leaders and city officials started to brainstorm a partnership with employers and building owners that, they hoped, would bring rents in good-quality, market-rate housing within the reach of more workers.   

The result was LIVE Denver, a housing voucher funded by the city, employers and foundations. It’s focused on helping working people who earn too much to qualify for federal housing vouchers but not enough to pay typical city rents. Federal vouchers typically have long waiting lists and provide recipients with limited options.

City leaders also saw an opportunity to fill apartment vacancies.

“Many residents need an affordable option today, not a year from now,” Mayor Hancock said when he announced the plan in a 2017 speech. “I am excited to announce that we will pilot a new partnership to open 400 existing, vacant apartments to low- and moderate-income residents struggling to find an affordable place to live.”

The two-year pilot program has a financial education component, too. Participants get help managing their money, and 5% of their rent payments are set aside in a savings account they can access when the pilot ends. Total payments are calculated to comprise 35% of participants’ monthly income.

To participate, single people must earn annual wages of between $25,200 and $50,400, and a family of four must have a household income between $35,960 and $71,920.

Although early city procurement documents suggested that the city was looking to partner with owners of “luxury” buildings, Erik Soliván, Brudzynski’s predecessor and one of the architects of LIVE Denver, said in an interview with Stateline that the program targets “existing, rehabbed buildings,” not the true top of the market.    

A Slow Start

Despite the buzz around the program, progress has been slow.

Soliván resigned in 2018 after a year on the job because, he told Stateline, he was frustrated with the mayor’s leadership on housing. That left the LIVE Denver program without a vocal champion. Until last fall, the Denver Housing Authority — which administers LIVE Denver—didn’t have a full-time staff member in charge of managing partne­rships with developers and employers.  

“There was a lack of committed leadership, committed resources,” said Mike Zoellner, managing partner of ZF Capital, a Colorado real estate development and investment company, who approached the city with a public-private partnership idea that evolved into LIVE Denver.

The Denver City Council approved $1 million, plus $180,000 in administrative costs, for a scaled-down version of the program last July that would serve just 125 households.

City officials decided they’d focus on lower-income renters, and on families who need larger apartments than the studio or one-bedroom units the city initially assumed would be the bulk of the program. That meant higher costs per household.

“It’s not surprising that it’s taken a while to get off the ground,” said Josh Leopold, senior research associate at the Urban Institute, a Washington, D.C., think tank, of LIVE Denver. Any attempt to pool money from a lot of players takes time and involves sorting through legal and financial issues, he said.

Brudzynski said city officials had also hoped to allow some low-income participants to receive both LIVE Denver funds and federal housing vouchers. But officials at the U.S. Department of Housing and Urban Development prohibited the city from pairing the two programs, she said.

LIVE Denver would have been easier to launch if the city had had more housing experts on staff, Soliván said. With more expertise, he said, the city and the Denver Housing Authority could have made a more forceful legal case to the federal government.

Other adjustments were made to the program too. Rather than restricting renters to a database of available units, the program now gives participants more say, said Celia Smoot, director of housing at Local Initiatives Support Corporation, the nonprofit that manages the LIVE Denver fund. That means more one-on-one negotiations with landlords, she said.

Smoot said that even with a subsidy, it’s not easy to find satisfactory housing for some low-income participants. “The challenge is for the families who are at the lower end of the scale,” she said. “Because we really want people to live in good housing.”

Stewart, of Gary Community Investments, suggested that the city’s changing housing stock could be part of the problem. “The city is coming in with these ideas at a time and space when, literally, single-family housing structures have been replaced by one-[bedroom], two-[bedroom] and micro-suite apartments,” she said.

Hospital Housing

As the only employer to partner with the city so far, Saint Joseph Hospital has paid to house three employees and could support as many as 20, according to Sister Jennifer Gordon, vice president for mission integration at the hospital. “I would love to have 20. I don’t know if we’ll get there,” she said. The hospital has paid $100,000 to join the program.

Although the hospital works hard to pay its employees fairly, it can’t afford to raise everyone’s wages to a level that would make Denver rents affordable, Gordon said. And raising wages might lead building owners to raise rents. “It becomes sort of chasing one’s tail,” she said.

For Valdez, the program has been an opportunity to live downtown, with easy access to shops, restaurants and the hospital where she’s worked for over two years. Her previous commute took about 30 minutes on a good day and an hour in heavy traffic, she said.

Her employer has benefited, too. She’s the only person on her team who lives within walking distance of the hospital, she said, and during last month’s “bomb cyclone” blizzard, she walked to the cancer center to call patients and tell them their appointments were cancelled.

Other employers have talked to the city about getting involved, and building owners remain enthusiastic, the city’s private sector partners say.

“Affordable housing is not one silver bullet,” said Nancy Burke, vice president of government relations for the Apartment Association of Metro Denver and the Colorado Apartment Association. “This is just one thing we could do as property managers to offer units to this program, and our members were really interested.”

ZF Capital’s Zoellner said, “We don’t have a shortage of apartment owners that want to participate in this.” It’s just taken time to iron out the details of the program, he said, such as ensuring compliance with fair housing laws and figuring out who pays security deposits. “It’s really just working through some of those practical logistics,” he said.

But he added that he’s been reflecting recently on the hassle and bureaucracy involved in partnering with the city, and whether it’s been worth it. “Maybe we should be thinking about a private [sector] solution,” he said.