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Why Denver Housing Authority Has Sold Off Prime Real Estate Instead Of Building Affordable Housing

As Denver grapples with an unprecedented demand for affordable housing, developers continue to build high-end housing on prime land — some of it purchased from the Denver Housing Authority, the agency charged with providing affordable housing in the city.

Sun Valley Homes is slated for denser, mixed-income development.

Over the past several years, DHA has shed a number of properties where developers are now building high-end condominiums and townhomes. Westfield Development purchased land at 25th and Lawrence in 2015 for its S*Park condo project, and NAVA Real Estate Development got a piece of Uptown for $7.1M in 2018. In the fall, DHA sold 1.2 acres at West 11th Avenue and Mariposa Street to Koelbel Urban Homes for $2M.

So why is DHA selling prime parcels in central Denver where it could build affordable housing?

Phase VII of the Mariposa project at 1040 Osage St. includes 45 units in a 50K SF building with 29 parking spaces and 1,700 SF of commercial space.

Ryan Tobin, DHA’s director of real estate development, said these properties had always been targeted for homeownership under revitalization plans the authority had submitted to the U.S. Department of Housing and Urban Development under the federal Hope VI program. For DHA to participate in Hope VI, it had to conduct community engagement exercises in neighborhoods where it owned property to understand what residents of those areas wanted there. Overwhelmingly, residents said the neighborhoods needed more homeownership. HUD's Hope VI program was created to revitalize the worst public housing projects in the United States into mixed-income developments.

“Hope VI is the only way housing authorities can preserve or improve public housing and create mixed-income housing,” Tobin said.

But some people are concerned by the DHA land sales, saying that selling prime parcels for more expensive housing pushes people who have lived in the city center for decades to the fringes.

The Denver Housing Authority plans to renovate six of the existing structures in its Platte Valley Homes property and sell the land beneath the remaining three structures to developers of for-sale homes.

“The DHA, which could actually be a backstop to prevent that because they’re a public agency, is actually accelerating the problem,” Zeppelin Development President Kyle Zeppelin said. “They’re the firewall for gentrification because every successful effort to curb gentrification and have inclusive growth depends on leveraging existing public holdings.”

Other developers think the land sales are a smart move. Zocalo Community Development President David Zucker said selling the land is a responsible move on DHA’s part because it allows it to develop more affordable units in other parts of Denver than it could in the city’s high-priced core.

“It may look questionable, but it’s entirely logical,” Zucker said. “It’s a smart practice to sell high-valued, high-development-capacity land and use those dollars for additional development. In some ways, it’s like development arbitrage — selling high value and putting it into lower value. It’s strategic. The impact is greater because they’re taking those dollars to Sun Valley or Knox Court, where they can build twice the number of units they could have if they built on Washington or Lawrence.”

Denver Housing Authority Executive Director Ismael Guerrero

DHA Executive Director Ismael Guerrero said the properties the agency has sold have cleared the way for denser development with a more diverse mix of housing options in those neighborhoods. DHA won’t have more land to sell until it finishes projects at Sun Valley Homes and Westridge Homes that will create more affordable housing units on a smaller footprint, freeing up land to sell for development as market-rate for-sale and rental units.

“There is a commitment to creating mixed-income neighborhoods,” Guerrero said. “That’s really what drives our neighborhood revitalization work.”