The city of Durango implemented major changes to an inclusionary zoning program that intends to force the hands of developers to build more affordable housing.
The leverage? The city will charge developers nearly half a million dollars if they don’t comply.
Changes to the city’s Fair Share Program took effect this week.
City Planner Mark Williams said the city’s goal is to incentivize developers to build a percentage of affordable housing in development projects instead of paying fees in lieu of affordable housing, by raising said fees.
For single-family home developments, those fees in lieu have been raised to $434,307.
“We wanted to make the cost of paying in lieu more comparable to the cost of building an affordable unit,” Williams said. “The Fair Share program was created 15 years ago and the housing market has obviously changed a lot.”
Agave Durango owner Mark Williamson, a local builder who developed the Animas City Park Overlook townhomes on East 33rd Street, said as far as getting developers to build more affordable housing instead of paying fees in lieu, the changes to the Fair Share Program are sure to deliver.
The city defines “affordable housing” as housing targeted to households with incomes at or below 80% area median income, which in La Plata County in 2024 is $60,300 for a household of two, according to the Colorado Department of Local Affairs.
Likewise, the city defines “attainable” housing as housing affordable to households between 80% area median income and 125% area median income. A household of two earning 120% area median income earns $106,100 yearly, according to DOLA.
The city’s Fair Share Program has been expanded to include rental properties, whereas prior to Tuesday the program applied only to for-sale housing projects. It also resets the target average area median income for affordable units in housing projects to 100%, or $88,400 for a two-person household, according to an outline of the city’s Fair Share Inclusionary Zoning Program.
Mike French, housing and tourism coordinator with the city, said a majority of people earning less than 125% area median income are often renters, and the expanded Fair Share Program encourages the development of rental units priced under market for that demographic.
When Durango City Council approved the revised Fair Share Program in May, it set a new average 100% area median income requirement.
French said the 100% average aligns the city to its Proposition 123 commitment of building 184 affordable units by 2026.
Since its implementation in 2009, the Fair Share Program has required developers to offer 16% of units in projects with four or more units at affordable prices. But it gave developers the option to donate land or pay fees in lieu of affordable housing.
Developers have historically favored paying fees in lieu of affordable units because that’s the simplest way to recoup construction costs and make a profit on projects, Williamson said.
With the changes adopted Tuesday, the program now requires developers to offer just 12% of units in projects with nine or more units at affordable prices. Developers can still opt for land donations or to pay fees in lieu, but fees have increased to $434,307 for single-family residences. For multifamily residences, including rentals, condominiums and townhomes, fees in lieu have been set to $398,809, as described by the city’s Fair Share Inclusionary Zoning Program outline.
“I'll tell you that no one's ever going to pay that in-lieu-of fee anymore, because they made it really high,” Williamson said.
He said under the previous Fair Share requirement that required developers to offer 16% of units at below market area median income rates, it was impossible to build and sell units at that rate. Paying fees in lieu was “the easy way out,” he said.
He said Eva Henson, former housing innovation manager for the city, who helped draft the changes to the Fair Share Program, intended to make fees in lieu so “astronomically high” (while requiring less affordable units per project) that developers wouldn’t consider paying them over building affordable units.
He said the city's plan to incentivize affordable housing worked. By lowering the number of required affordable units while raising fees in lieu, building more affordable units is suddenly the more attractive option
While the Fair Share Program will make building affordable units more appealing to developers, construction costs for building those units will be passed onto market rate homebuyers.
He said if he builds 10 homes, one home must be offered at an affordable price under the new Fair Share Program. If each home costs him $500,000 to build and the affordable unit must be offered at a reduced price of $350,000, the other nine units will go up in price by approximately $16,000 to account for a $150,000 loss on the affordable home. A comparable adjustment would be made in the case of rent rates for rental properties.
He said he’s uncertain of the concept of inclusionary zoning. But he believes in the importance of having an affordable housing stock for teachers and other members of the workforce, and he said he’s trying to do his part.
A program where the city donated land to a developer or otherwise subsidized construction in order to support projects that consist solely of affordable housing to be offered at an agreed upon price is more his lane, he said.
“It just seems like there are other ways to end up with more affordable units, rather than just telling any developer out there, ‘Hey, anytime you build nine or more units, 12% of them have to be affordable,’” he said. “I mean, that's one strategy, but it just seems like there's other ways to get a lot more volume out of it.”
He said it’s tricky to strike a balance with developers between building affordable units and making up the cost of those units’ construction. But while he is a developer, he’s also a community member who understands the need for more affordable housing.
“I've been here for over 25 years and raised my two sons here, and so, you know, I get it,” he said. “Things were not nearly as expensive a long time ago. I'm trying to do my part, and the more open-minded we all can be, I think the better result we'll have.”
cburney@durangoherald.com
