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Denver Has a Plan for Its Many Luxury Apartments: Housing Subsidies

The downtown skyline of Denver, where an abundance of high-end apartments has planners looking to find ways to use them to house lower-income residents.

Denver has a plan for its glut of sparkling new, high-end rental apartments with amenities like gyms, roof decks and sometimes even pet spas: It will use them to house teachers, medical technicians and others who can’t afford the city’s soaring rents.

Under a program to be unveiled later this month, the city, along with employers and charitable foundations, will pay the difference between what a lower-income resident can afford and the market rent of an apartment.

Like other cities across the country, Denver is grappling with a shortage of affordable housing for middle-class workers. “Instead of having these units sit vacant, if we can create opportunities to help some of our employees, our residents get into those units, that’s an immediate response,” said Denver Mayor Michael Hancock.

Created with Highcharts 6.0.4Rooms to SpareEmpty apartments for rent in Denver metro area, quarterlySource: MPF Research

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The Lower Income Voucher Equity program, or LIVE Denver, will be open to a range of tenants, from single residents making $23,500 to $47,000 a year to families of four with household incomes of $33,500 to $67,000.

Residents in this city of roughly 693,000 will receive subsidies to live in the units for two years, during which time a portion of their rent will be put into a savings account that can be used for a down payment.

The program has enough money to subsidize 400 units initially, and officials say they have about 100 units signed up so far. The city has requested units in new or recently renovated buildings. The city will do an analysis to ensure landlords charge market rates. City officials expect to spend about $500 a month subsidizing a single person and roughly $900 for a family.

It will take managing to avoid upsetting residents of the buildings who are paying full rent. Mike Zoellner, a local developer who helped create the program, said he envisions landlords advertising their participation in the program to signal to tenants they could live in a socially conscious property.

“This is not a welfare program or anything like that. This is people who are working at hospitals, hotels and food service. We want them in our community and we want them in our building,” he said.

Some housing experts said they are concerned the program risks protecting properties from market forces and doesn’t allow rents to decline naturally as supply outstrips demand.

“What you would hope is that excess supply leads to lower rents. If the city is pumping subsidies in, aren’t they going to be propping up the upper end of the market?” said Chris Herbert, managing director of Harvard University’s Joint Center for Housing Studies.

Denver is trying to make some vacant high-end apartments affordable for lower-income residents.

Denver is trying to make some vacant high-end apartments affordable for lower-income residents. Photo: Carmel Zucker for The Wall Street Journal

City officials say rents won’t come down quickly enough to prevent people from being pushed out of the city now.

“Yes, eventually prices will come down over a two- to three-year window,” said Erik Soliván, executive director of Denver’s office of HOPE, the department that oversees housing policy in the city. “We need a solution to help families today.”

Denver, for example, has added 12,000 apartments since 2015 and another 22,000 more are under construction, according to CoStar Group Inc. More than 90% of those units are considered luxury, meaning they incorporate higher-end finishes and amenities.

There are currently 16,000 vacant units in metropolitan Denver, up 5,500 from three years ago, according to MPF Research. Rents for a typical one-bedroom in Denver range from around $1,200 to $1,600. Rents for luxury apartments are at the top end of that range.

Because the buildings are higher-end, landlords won’t have to undergo the rigorous frequent inspections that make some wary of other government-subsidized housing programs, said Nancy Burke, vice president of government affairs at the Colorado Apartment Association.

The market for more affordable apartments remains tight. Just 3.4% of units below the median rent in Denver were vacant in 2016, according to a Harvard University analysis of U.S. Census data. Average rents in Denver are up 30% over the last five years, according to MPF. That is pushing middle-class workers to the suburbs.

Jamie Smith, president of St. Joseph Hospital, which employs about 2,200 workers in central Denver, said his medical technicians and newly graduated nurses are scattering further and further away from the city.

“These folks are in high demand,” Mr. Smith said. “They’re driving by four or five other hospitals much closer to their home to get to us, and at some point it becomes a problem from a recruitment and retention standpoint.”

The hospital is contributing $100,000 to the funding for the program and hopes it will help house dozens of employees.

Hope Faulconer, a 27-year-old nursing assistant in the hospital’s oncology unit, says she often spends 45 minutes driving from her sister’s house, where she rents a room, to begin her 6 a.m. to 6:30 p.m. shift. Her commute home swells to an hour, she said.

“I would love to live on my own, not have to have a roommate and not a cracker-box apartment,” said Ms. Faulconer, who makes just under $17 an hour and also is paying for nursing-school tuition.

Write to Laura Kusisto at laura.kusisto@wsj.com

Appeared in the January 9, 2018, print edition as ‘Denver’s Fix for Luxury Glut: Subsidies Luxury Apartments, Affordable Rents.’

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