West Denver Renaissance Collaborative plans to launch a major housing initiative early next year to help West Side homeowners gain more stability by building accessory dwelling units, or carriage houses, on their property.
In 2010, a zoning change allowed ADUs in some Denver neighborhoods based on a number of factors, including community desires. The idea of squeezing low-rise, small-scale affordable housing into existing single-family neighborhoods is very popular in the world of affordable housing theorists, and what’s not to love? Homeowners get an additional source of income, renters get more options and neighborhood character doesn’t change as dramatically as when single-family houses are scraped for mid-rise apartments.
But since 2010, just 139 ADUs have been built in Denver. There are a variety of reasons for this, but one of them is that it’s really expensive and nearly impossible to get financing. By the time you account for hiring an architect and waiting months for permits, it can cost around $250,000 to build a 600 square foot unit, and banks generally won’t issue loans for them because they can’t repossess a granny flat if you default.
The WDRC coordinates public and private investment in the west Denver neighborhoods of Westwood, La Alma/Lincoln Park, West Colfax, Athmar Park, Barnum, Barnum West, Valverde, Villa Park and Sun Valley. It’s housed within but is distinct from the Denver Housing Authority, and by operating as a district, it can attract money from foundations and impact investors who wouldn’t necessarily invest in projects at the neighborhood level.
“Single Family Plus,” the Renaissance Collaborative’s housing initiative, hopes to build some 250 accessory dwelling units over the next five years in eligible neighborhoods on the West Side. If the program is successful, it could be expanded to other parts of Denver.
The initiative would make a range of low-cost financing options available to interested homeowners and offer a set of six “off-the-shelf” designs from which people can choose without hiring an architect. Martinez-Stone said she believes the collaborative can cut the cost of building ADUs in half, and after refinancing their primary mortgage, many homeowners will see their costs stay the same or go down while adding a new source of income.
“Single Family Plus” isn’t just about ADUs. The program will also help homeowners in west Denver, many of whom have older mortgages at higher interest rates, refinance even if they don’t have room for an extra little house or aren’t interested in becoming landlords. That alone can help longtime community members stay in place even as home values rise and the neighborhood changes, Martinez-Stone said.
Homeowners who take advantage of public funds to build their carriage houses and casitas would have to agree to rent to people making no more than 80 percent of area median income. Roughly 78 percent of renters in west Denver fall into that income range.
The funding for this program would come from the city’s affordable housing funds, from nonprofits and foundations, from private lenders willing to take a risk and from “impact investors.”
The Denver Foundation, Enterprise Community Partners, the city and county of Denver and Denver Housing Authority are all involved. Facilitating ADU construction is a strategy in Denver’s comprehensive housing plan, and Single Family Plus will be part of the city’s action plan for 2018. The Colorado Housing and Finance Authority plans to start purchasing Fannie Mae HomeStyle Loans. CHFA doesn’t issue loans directly, but as a purchaser of various types of home loans, it helps shape the private market. Habitat for Humanity Colorado plans to offer the services of its paid employees to help build the ADUs. This is a new venture for Habitat for Humanity, but one that administrators there see as within their mission.
Lance Guanella, deputy director of the Southwest Improvement Council and a HUD-approved housing counselor, said ADUs would help many of the homeowners who come to him in distress avoid those situations.
Looming property tax increases mean even more people will be in this situation. But the flip side of rising property values is that many homeowners now have significant equity in their homes, in contrast to 2009 and 2010, when more homeowners had lost value. Guanella said the program needs to have a significant education and counseling component to make sure people understand the risks they’re taking on and don’t use up all their equity, but many homeowners are in a good position to refinance and invest in their properties in ways that will serve them in the future.