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The Case for Mixed-Income Transit-Oriented Development in the Denver Region

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Mixed-income TOD has the potential to meaningfully address the growing affordability crisis in the Denver region. This report, which was commissioned by the Enterprise Community Partners of Denver, concludes that there is a growing demand for housing near transit, and a closing window of opportunity to develop it in a sustainable way with mixed-income housing.

Executive Summary

The passage of the “FasTracks” ballot measure by metro Denver voters in 2004 signaled the start of a new era of transportation, growth and development in the area. FasTracks has terrific potential to deliver on its promises of reduced congestion, livable neighborhoods and greater economic competitiveness, but its success is dependent on the kind of development that grows up around new and existing transit stations.

Well-planned “transit-oriented development” (TOD) can foster greater use of FasTracks light rail by encouraging housing, retail and office developments in the districts around transit stops. Incorporating affordable housing into TODs presents opportunities to meaningfully address the region’s growing affordability crisis by tackling housing and transportation costs simultaneously—while expanding access to jobs, educational opportunities and prosperity for the many households living in the Denver region.

By offering truly affordable housing, a stable and reliable base of transit riders, broader access to opportunity and protection from displacement, mixed-income TOD holds the potential to address the problems of worsening congestion, rising unaffordability and the growing gap between lower income and wealthier residents in the region.

This study reviews the demand for housing near transit; explores the benefits of mixed-income, transit-oriented neighborhoods; analyzes the barriers to creating such communities; offers an array of tools for overcoming those barriers; and applies those tools in the context of four planned transit station areas in metro Denver.

Demand for Housing near Transit

Demographic trends and changing housing preferences are converging to create new demand for housing near transit stops. While only about 45,000 households in metro Denver live within one-half mile of a transit stop today, the creation of FasTracks means that, at a conservative estimate, potential demand for such housing could grow to 155,000 households by 2030—a 344 percent increase. At least 40 percent of that growth is expected to come from low-income households, defined as households earning below 80 percent of area median income, or $51,600 for a family of three in 2006.

The potential demand for housing in TOD is likely to exceed the number of homes that can be developed in transit districts. Consequently, there is considerable risk that virtually all new development near transit in the region will be unaffordable to lower income households. Additionally, new or enhanced transit service could displace existing residents of currently low-income and mixed-income neighborhoods as transit proximity makes those neighborhoods more desirable.

Currently, only luxury housing projects can afford to absorb the time, uncertainty and cost of risk inherent in TOD in the Denver region. Absent deliberate policy actions to reduce costs and make TOD more inclusive, it will be easiest for developers to respond to demand from moderate and high-income market segments exclusively, particularly aging baby boomers and younger, childless professionals, further minimizing opportunities for low-income families in the area.

Benefits of Mixed-Income Transit-Oriented Neighborhoods

  • Provide truly affordable housing by minimizing transportation costs in relation to household income. Nationally, transportation is the second largest household expenditure after housing.
  • Increase ridership by providing easy access for those individuals who use transit the most. Low-income households in Denver are four times as likely as higher-income households to use transit.
  • Broaden access to opportunity by connecting lower-income households to opportunities both in their own neighborhoods and others in the region that can be easily reached on the transit system.
  • Alleviate gentrification pressures near transit stations by making conscious decisions to preserve opportunities for affordable housing near transit stops, thereby enabling low-income households to benefit from the transit investment in their neighborhoods.
  • Increase employers’access to metro workforce by enabling lower-wage workers—who make up a large percentage of the metro area workforce—to live in areas with good transit access.

Current Barriers to Developing Mixed-Income Housing at TOD Sites

  • Land prices are high at these sites.
  • Affordable housing developers lack capital to buy and hold land for several years in anticipation of the arrival of transit in the future.
  • Transit improvements can cause displacement of existing low-income residents by spurring increases in land and housing prices.
  • Subsidies for affordable housing have decreased in recent years because of federal cutbacks and state budgetary constraints.
  • Mixed-income developments require more complex financing structures than those aimed at a narrower audience .
  • Inclusionary zoning ordinances have limited reach in the Denver region, meaning that policy makers have, at present, little authority to require the creation of mixed-income housing at TOD sites.
  • TOD sites frequently require rezonings and land assembly, which can lead to lengthy—and expensive—acquisition and permitting processes.
  • TOD development involves expensive infrastructure which can be beyond the capacity of affordable housing to fund and sustain.
  • Significant residential density in TODs is necessary to offset high infrastructure costs, but can generate NIMBY opposition.
  • Parking requirements can be unnecessarily high, making development more expensive and thus less feasible for affordable housing providers.

Tools to overcome Those barriers

  • Create a TOD Affordable Housing Acquisition Fund to provide the “patient capital” necessary to finance the acquisition and holding of land or existing buildings near transit for affordable housing purposes.
  • Use RTD joint development powers to permit RTD to buy and hold property around transit stops—and, eventually, develop its own mixed-income housing on those parcels.
  • Modify Colorado’s Low Income Housing Tax Credit program to offer incentives for developing mixed-income housing at TODs.
  • Encourage greater use of Metro Mayors Caucus TOD Fund by providing additional incentives to developers of affordable housing.
  • Increase the number and effectiveness of local inclusionary zoning ordinances in order to generate below-market-rate rental units and lengthen the time requirement for affected properties beyond 15 years. At the same time, modify existing ordinances such as Denver’s to make them more attractive and less burdensome for developers.
  • Create incentives for station area planning and zoning to decrease the time, cost and risk required to develop affordable housing at TODs and minimize the risk of displacement of low-income households.
  • Create a regional TOD infrastructure fund with affordable housing incentives to offset planning and development costs.
  • Leverage tax increment financing (TIF) for affordable housing— e.g., by dedicating a portion of the TIF to cover infrastructure costs for affordable housing or by requiring affordable housing over and above that required by existing ordinances—in station areas where housing is envisioned and TIF is proposed.
  • Use metropolitan districts to create funding for transit zone infrastructure in return for the incorporation of affordable housing as part of the resulting TOD.
  • Reduce parking requirements in transit areas to reflect the greater reliance on transit, thereby lowering the cost of housing development.

Time is of the essence. As this report makes clear, mixed-income TODs will not happen by themselves. The creation and preservation of diverse housing options in transit corridors will require proactive planning and policy development—and soon, because the more time that elapses, the more difficult it will be to create and preserve mixed-income neighborhoods. As land near transit is purchased and locked away for housing targeted to the upper end of the market, a once-in-a-generation opportunity for transit-oriented development that serves the needs of the entire community will be lost.