The city of Durango expects to generate close to $1 million in the next few years from fair-share housing fees, a windfall that could help the city achieve affordable housing goals.
Fair-share housing fees require developers who build four or more units within city limits to either set aside 16 percent of the units as affordable housing or pay fees in lieu of the affordable units. Fair-share housing fees were adopted by the city about 10 years ago.
The windfall is a result of new development occurring in the city.
The fees are one source of revenue for an ambitious affordable housing plan the city passed last year to increase affordable housing for residents, create a land banking program and establish 1,000 affordable units by 2040.
The city is uncertain how all the fees will be spent, and there is no timeline for making those decisions, said Kevin Hall, assistant city manager.
Those discussions may begin Monday when the Durango Planning Commission reviews the city’s housing plan. Durango City Council has final approval over major investments in affordable housing plans.
The expected revenue over the next few years is at least seven times more than the city has generated through its fair-share housing ordinance since the ordinance was adopted, according to city data.
Since the city started leveling fair-share fees on housing developments, all the revenue – about $287,624 – has been given to HomesFund, a Durango nonprofit, Hall said.
The nonprofit has used the funding to help 18 first-time buyers purchase homes within the city of Durango by providing second mortgages, said HomesFund Executive Director Lisa Bloomquist Palmer. The nonprofit has loaned all of the funding that it has received, she said.
“That’s probably our greatest bang for our buck right now because it is putting people in homes,” Hall said.
Without city funding, HomesFund couldn’t provide second mortgages to buyers in Durango because of the limits on the nonprofit’s federal funds, Bloomquist Palmer said. The federal funds received by HomesFund can be used to help only those who earn 80 percent or less of the area median income, and those annual wages aren’t enough to buy a home in town, even with assistance, she said. The area median income for a family of four is $62,800. The city funds can be used to help those who earn up to 125 percent of area median income.
City revenue sourcesFive new developments representing 117 new homes scattered across the city are expected to generate more than $800,000 in fees in the coming years, Hall said.
The ordinance has also prompted the construction of nine new affordable housing units at Mountain Trace, near Florida Road and East Animas Road (County Road 250), and Eastside Lofts on College Drive and East Eighth Avenue, Hall said.
Three Springs and Twin Buttes were approved for development before the fair-share ordinance was in place and are not subject to the ordinance, Hall said.
However, Three Springs charges a 0.5 percent transfer fee on the sale of homes and land within the subdivision until 2057 to fulfill the city’s affordable and attainable housing requirements.
The transfer fee has generated about $312,450 to date, Hall said. It is expected to generate about $25 million for housing programs in Durango over the next 40 years, according to the city’s housing plan.
Twin Buttes is negotiating with the city about how it will meet the city’s affordable housing requirements, Hall said.
Affordable housing strategiesPlanning Commission Chair Peter Tregillus said the city could prioritize funding housing that will serve those most in need.
“We have some critical emergency needs,” said Tregillus, who will leave the planning commission this spring.
For example, the city could use the funds to purchase property for homeless campers who do not have a safe and legal place to stay in or near the city, he said.
Setting aside land for affordable housing, or land banking, is one strategy the city could use to encourage development of rental units, Hall said.
For example, the city sold a 3-acre parcel in Three Springs to the Volunteers of America for $10. The VOA plans to build a 53-unit senior housing development on the land, he said.
Not everyone is excited about the fair-share ordinance.
While the fees present the city with new opportunities, Bob Smith, the president of the Homebuilders Association of Southwest Colorado, said the fees function to push up the price of homes because they are passed along to buyers.
Addressing affordable housing is a community problem and shouldn’t fall to those building new homes, he said.
“This is just another form of an impact fee,” he said.