(First of a Three-Part Series)
Colorado Springs has a serious affordable housing problem. The city is facing a projected shortage of 26,000 affordable units in 2019, and rising home and rental prices are pushing more and more people out of the market. It’s a complex issue that requires complex solutions. Yet one thing is clear: before we can do anything to fix the problem, we have to stop making it worse.
After the great recession, investors tiptoed back into the housing market, and for the most part, studiously avoided investment in low-income housing because that’s where the bubble burst the hardest. This led to a housing market heavily skewed towards above-market-value housing, which, when coupled with significant population increases in Colorado, created a serious shortage of affordable housing in cities like Denver, Boulder, and Colorado Springs.
This problem cannot be solved without significant increases in housing supply. But these increases in supply can’t mirror the investments of the last 10 years, which got us into this mess in the first place. Increases in expensive housing supply bring wealthy people to a city, creating a need for low-wage workers, and therefore, affordable housing. So increasing the supply of upscale housing without comparably increasing the supply of affordable housing will make the problem worse.
Still, very few people in the Colorado Springs city government seem willing to discuss this issue. Every time a major development is proposed, city officials look at the project in terms of economic growth, tax revenue, and strain on tangible city resources such as police and fire departments, and then make a narrow decision based on the merits of that project alone. While each individual development decision might make sense, taken together they demonstrate a fundamental inability to look at development through a long-term, holistic lens.
Moreover, most of the time these developments do not actually pass the economic litmus test of the City Council—that they ultimately pay for themselves—because of what they do to the affordable housing market. Since Colorado Springs is already short 26,000 affordable housing units, creating new need for affordable housing really means creating new people experiencing homelessness. Even if we are to set aside the human cost of this reality, this means that most upscale housing developments do not make economic sense for the city government.
This is because people experiencing homelessness cost city governments between $30,000 and $40,000 per year, between medical expenses, police costs, time in prison, and other services. When this is factored into how much developments cost the city government, it’s revealed that most of them do not pay for themselves.
The City Council seems poised to make this type of mistake again soon, and on a large scale, in the form of the development of Banning Lewis Ranch, a 24,000 acre plot of land northeast of Colorado Springs. The plan at issue would allow the Nor’wood Development Group, who owns 18,000 of the 24,000 acres, to build thousands of above-market-value single-family homes, drastically increasing the supply of upscale housing in the city. There are plenty of valid arguments for and against the development of Banning Lewis Ranch, which I will delve into in a future article, but since no one is taking into account the need it will create for affordable housing, it is a bad idea.
I’m wary to go into too much depth about Banning Lewis Ranch right now because it’s a complex issue that deserves more attention than I can give in this piece. But it’s illustrative of the type of bad economic math that the city does time and time again, so I will do so briefly.
It’s unclear exactly what the correct ratio of new affordable units to new above-market-value units should be—it depends a lot on the future of labor and economic development in Colorado Springs. It’s also unclear exactly how many new homes will be built on Banning Lewis Ranch—recent zoning changes allowed for 2,220 new homes on a 248-acre parcel. However, it’s safe to say that the development will create the need for thousands of new affordable housing units which, again, means thousands of people experiencing homelessness. At $30,000 per person experiencing homelessness, this means that the development will cost the city at least $30 million, more likely hundreds of millions. So when the proponents of the development tout that it will generate $49 million in tax revenue over thirty years, keep that information in mind.
This purely economic look at development masks the fact that these decisions have major human implications and that the affordable housing crisis Colorado Springs faces is ultimately a moral one. For that, I apologize. But since the decisions are so often made in primarily economic terms, it makes sense to have gone into why the prevailing economic wisdom is deeply flawed.
There are a number of great, innovative solutions to affordable housing issues and homelessness at work across the United States. Housing first—the idea of giving people subsidized housing without stipulations and then focusing on sobriety, employment, etc.—has been very successful. Inclusive zoning—laws that require every new development to set aside a certain percentage of units as affordable—also has a lot of promise, though it’s illegal in Colorado.
But we will never solve our affordable housing problems until we start to see all issues related to city governance and economic development as affordable housing issues.