Role of ‘taxpayer dollars’ in planned apartments near Parker is complicated

Local residents generally won’t be ‘subsidizing’ the development

Ellis Arnold
Posted 3/20/23

As news spread about a proposed affordable housing development near Parker — yet another flashpoint in the ongoing battle against new apartment complexes in the Denver suburbs — many area residents expressed concern about its funding.

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Role of ‘taxpayer dollars’ in planned apartments near Parker is complicated

Local residents generally won’t be ‘subsidizing’ the development


As news spread about a proposed affordable housing development near Parker — yet another flashpoint in the ongoing battle against new apartment complexes in the Denver suburbs — many area residents expressed concern about its funding.

“70% of the development cost will be absorbed by Douglas County taxpayers,” one resident wrote to the county.

That’s just one complaint in a long list of comments the county compiled that objected to the development’s funding. Said another: “We do not appreciate subsidizing 60 to 70% of the cost of that development after we have paid over 800,000 for our home.”

“Please hear the voices of the existing residents and not the developers who want to use our money to financially benefit only themselves,” another read.

But there would be no need to increase local taxes solely as a result of the development, according to a county spokesperson.

And the funding the developer could receive runs through a process that differs from what may be the usual connotation of “subsidized” housing. The bottom line appears to be that Douglas County residents need not worry about a large or even notable portion of their taxes going toward the proposed apartment complex.

Here's an examination of concerns about funding — and a look at worries about property values and crime, two other topics residents often raised regarding the development.

Not a local tax grab

Douglas County’s elected leaders recently allowed a development to move forward that would put about 200 housing units just south of the Town of Parker near state Highway 83.

Residents of The Pinery, an area that sits between Parker and Castle Rock’s northeast edge, have argued the proposed development does not meet the county’s approval requirements and that it is “incompatible with the existing character” of the area.

The Pinery, a relatively remote set of neighborhoods along a major state highway, consists largely of single-family homes.

Ulysses Development Group, the company behind the proposal, will be applying for an allocation of federal Low-Income Housing Tax Credit in connection with the development, according to Connor Larr, a partner at the company.

“It is a federal tax credit. Not a Douglas County tax credit,” Larr wrote in a statement.

The Low-Income Housing Tax Credit was created by President Ronald Reagan and Congress in the Tax Reform Act of 1986, designed to encourage private sector investment in the new construction, acquisition and rehabilitation of rental housing affordable to low-income households, according to the National Council of State Housing Agencies.

As a tax credit, it’s technically not funded by tax revenue. A credit is somewhat similar to a tax deduction: It can lower an individual’s or business’ tax bill and results in a person paying less in taxes. The government takes in less revenue than it would without the tax credit, but taxpayers aren’t technically funding an individual tax credit.

The Low-Income Housing Tax Credit program “is not funded by local or federal appropriations,” said Jerilynn Francis, spokesperson for the Colorado Housing and Finance Authority.

There is no government entity that would need to consider raising tax rates on Douglas County residents as a result of an apartment complex like this being built with Low-Income Housing Tax Credit funding, Francis confirmed.

Based on how the county rezoned the land, if a developer builds any “multifamily” residences — such as apartments — they will have to comply with certain rules about the income of their tenants, said Wendy Holmes, Douglas County spokesperson.

A development “would be entitled to any incentives the state or federal authorities offer for that type of construction,” Holmes said. “The county offers no such incentives.”

How the tax credit stacks up

Another complication: Investors are involved, and the exact value of the tax credit can be difficult to pin down.

“The developer will recoup 9% of the development cost every year for 10 years. That’s a full 90%,” one comment to the county claimed.

But that’s much higher than the amount turns out to be. There are two types of federal housing tax credits: the 9% credit and the 4% credit, according to the Colorado Housing and Finance Authority.

Credits are redeemable every year for 10 years and calculated as 4% or 9% of the project’s “qualified basis,” a figure calculated from the gross construction costs of the project’s affordable units. That’s according to the conservative-leaning Tax Foundation, a tax policy nonprofit.

“Interestingly, the 4 percent and 9 percent credits rarely end up being precisely 4 and 9 percent each year but a 10-year stream of credits equal to 30 percent and 70 percent of the qualified basis,” the nonprofit says on its website. “As interest rates fluctuate with the economy, the yearly value of the tax credits fluctuates around 4 percent and 9 percent.”

Ulysses is anticipating utilizing the 4% tax credit, Larr said.

“It should be understood that the tax credits are sold to investors who purchase the tax credits. The proceeds of that sale are used as equity (or funding) in the development” of the property, Larr said.

Larr added: “Given the market factors and unknowns regarding future LIHTC pricing, along with uncertainty with respect to how much of our total development cost will be (eligible), it is impossible to say if the LIHTC equity contributed to the project will equal 30% of the total development cost.”

Unlike direct subsidies, the tax credits are received over time based on performance, according to the Colorado Housing and Finance Authority, often called CHFA.

“Investors do not receive their tax credits unless the housing is suitable for occupancy and is rented to households with low-income at restricted rents during the initial 15-year term,” CHFA’s fact sheet says.

Who could live there

The proposal documents label the apartment complex as “workforce housing units,” a term that can vary depending on who is using it.

Units would generally be available to individuals and families making no greater than 60% of the area’s median income, as that figure is calculated annually by the U.S. Department of Housing and Urban Development, according to a Sept. 16 letter from the developer’s team to county staff.

As of April 2022, local households making no greater than 60% of the AMI, and thus eligible for a unit, typically earn between $40,000 to $80,000 per year, the letter says.

“Households with incomes in this range may include employees of Douglas County government, Douglas County School District, local businesses … and critical services, including the Parker Adventist Hospital system and other emergency and essential service organizations,” the letter says.

The income limit could end up being even higher for some units.

“As we have presented in our public meetings, we are anticipating providing a 100% income-restricted property to benefit Douglas County. Based on federal guidance we anticipate a range of AMI set asides up to 80% AMI at the maximum,” Larr said.

Property values on the mind

One comment to the county, as compiled in a December county staff report, claimed that if the apartments are built, nearby property values will be “eroded by potentially hundreds of thousands of dollars.”

Several research studies don’t back that assertion.

Some studies have found that Low-Income Housing Tax Credit developments in “higher-income” areas are associated with house price declines, according to the nonprofit Urban Institute.

But results have varied. A New York University study on New York City found that affordable housing developments have led to increases in property values in many cases.

“The completion of LIHTC projects is associated with an immediate positive and significant (fixed) effect, indicating that prices surrounding the tax credit housing rise more than prices in the larger neighborhood,” the study reads. “After completion, the degree to which prices in the vicinity of tax credit housing exceed those in the larger neighborhood rises by 3.8 percentage points.”

A 2017 Stanford Graduate School of Business study found that LIHTC construction in neighborhoods with median incomes above $54,000 leads to housing price declines of approximately 2.5% within 0.1 miles of the development site.

“These declines, however, are only seen in high income areas with a minority population of below 50%,” the study says.

The impact can also change over time, says the study, which looked at counties in 15 states.

“At distances of 0.3 to 0.4 miles away from the LIHTC site, there are modest declines in house prices right away, but they fall over time. It appears the housing market very quickly ‘prices’ the impact of LIHTC very locally, but it takes 5 to 10 years for the house prices 0.3 to 0.4 miles away to fully adjust.”

A study on Alexandria, Virginia, found that affordable housing in higher-income neighborhoods has a “positive and highly significant effect on surrounding home values, as does affordable housing in lower-income neighborhoods.”

“This calls into question prior findings that affordable housing in high-income areas necessarily causes nearby property values to decline,” the 2022 Urban Institute study says.

The study adds: “We find that affordable units in the city of Alexandria are associated with a small but statistically significant increase in property values of 0.09 percent within 1/16 of a mile of a development, on average — a distance comparable to a typical urban block.”

Locally, in 2010, the median single-family home price in metro Denver was about $200,000. It was roughly triple that as of 2022, according to Colorado Association of Realtors data.

Worries of crime

Many comments submitted to the county mentioned crime as a concern with the proposed apartment complex.

The Stanford study also looked at the impact of affordable housing development on local crime rates in certain cities.

“We find both violent and property crime decline in low income areas, regardless of minority share. However, in higher income areas we do not see any increase in crime, rather property crime may even fall slightly,” the study says.

Lawsuit filed

More than 100 area residents recently filed a lawsuit against Douglas County’s elected leaders for allowing the development to move forward.

Residents of The Pinery brought the lawsuit, arguing the proposed development does not meet the county’s approval requirements and that it is “incompatible with the existing character” of the area.

The Douglas County commissioners voted 2-1 on Jan. 10 to allow the development to move forward. The lawsuit, filed in February, asked a court to reverse the county’s decision and stop the development.

For a look at the lawsuit and the county’s approval requirements, see Colorado Community Media’s previous story here.

Douglas County Colorado, Parker, The Pinery, apartments, affordable housing, subsidized


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