By Blair Lichtenfels and Caitlin Quander, Brownstein Hyatt Farber Schreck.
Revitalizing downtown Denver is top of mind for city officials, residents and businesses alike and there are many ideas from office-to-residential conversions to activating public spaces to help invigorate areas. Commercial business districts are now being reimagined as 18- to 24-hour environments that leverage their location, culture and connectivity to create community. Key questions remain: How do we pay for the myriad of revitalization efforts and regain the level of activity downtown once had?
Here is a breakdown of seven financing strategies that property owners, developers and public entities like the city of Denver are considering:
- Reenvisioning “free” public space with commercial components. Cities around the United States are reinventing public parks and streets to bring in commercial programming. The government can offer vacant land, parks, rights-of-way and public buildings so that placemaking can affordably happen. Denver has seen success with Skyline Park (with the Downtown Denver Partnership’s leadership), Civic Center Eats (with the partnership of the Civic Center Conservancy), and with the closures of Glenarm Plaza and Larimer Square, and can and should build on this work. Often, government regulations are not designed to provide the flexibility that placemaking efforts require, but streamlining city processes to make this simple will allow creativity to respond to public interest.
- Revitalizing Downtowns and Main Streets Act. H.R. 9002 is a bipartisan bill introduced in mid-July. This federal legislation would establish a new 20% tax credit to make possible conversion of underutilized commercial properties to residential use.
- Denver’s Affordable Housing Fund (AHF) and Affordable Denver Ballot Measure. While much of the focus on Denver’s Expanding Housing Affordability (EHA) program has involved incorporating affordable units into new projects and compliance dates, linkage fees have been paid into the AHF since 2017. As the linkage fees increase under EHA and some projects choose to pay the high fee-in-lieu instead of providing on-site affordable housing, the AHF will continue to grow. Additionally, voters approved a property tax and the city has chosen to allocate funds from recreational marijuana sales tax toward the AHF. The AHF is used to create and preserve housing for households across all income spectrums. The city’s 2024 budget projected $42,659,391 in AHF expenditures.
In addition to the AHF, Mayor Johnston, together with five members of the city council and the city’s Department of Housing Stability (HOST) are initiating a November ballot measure that will ask Denver voters to increase the sales tax by 0.5%. Widely anticipated to pass, Affordable Denver seeks to close the city’s gap in affordable housing—currently estimated by the city to be approximately 44,000 units. If passed, the sales tax increase is estimated to generate $100 million annually and could be put toward downtown housing projects.
- Expanding the Downtown Development Authority. In May 2024, Mayor Johnston introduced his plan to expand Denver’s existing Downtown Development Authority (DDA), originally formed in 2008 to support the redevelopment of Union Station and Market Street Station. It is a funding tool, created and authorized by Colorado statute, which allows a municipality to collect a portion of incremental taxes generated by a designated downtown area. There are over 20 DDAs across the state. Each DDA operates under a revitalization strategy called the “Plan of Development,” which would need to be modified by City Council. Culminating in a November vote by existing properties in the DDA, the city wants to expand the boundaries to include more of the Central Business District, especially portions of the CBD referred to as “Upper Downtown.” The expansion of the DDA is anticipated to generate approximately $500 million in funding for reinvestment in the expanded DDA boundaries.
- Proposition 123. Passed by Colorado voters on the 2022 ballot, Proposition 123 sets aside up to 0.01% of taxable income each year for affordable housing for creation of the State Affordable Housing Fund, which dedicates 40% of its revenue to the Affordable Housing Support Fund administered by DOLA and 60% of its funds to the Affordable Housing Finance Fund overseen by OEDIT. These funds support land banking, equity and debt investment to advance affordable housing and can support private development of low- to moderate-income multifamily developments through equity and debt gap financing and preservation of existing affordable housing projects.
- Middle Income Housing Authority (MIHA). Created by state legislation in 2022 and refined in 2023, MIHA is a special-purpose authority independent from the state that helps fund middle-income housing. The MIHA is gaining momentum and has established its board of directors and a process to review applications for funding. In March 2023, it conditionally selected six projects, and reopened the selection process in March 2024 with rolling applications. The primary tools offered by MIHA include issuing tax-exempt bonds and entering into public-private partnerships. In Denver, for example, it would serve households between $80,000–$126,000 for a family of four. MIHA funding is available to nonprofits, for-profit developers, housing authorities and cities.
- Downtown Area Plan. While not a funding source, we would be remiss if we failed to highlight the city’s recent commencement of the update to the Downtown Area Plan, which will officially kick off this fall. Last updated in 2007, the plan will be a tool to help city leaders guide future downtown development and investment. Because of the pressing needs of downtown Denver, the city is targeting completion of the update in 12 months.
Blair Lichtenfels is co-chair of the Real Estate Department and Caitlin Quander is a shareholder with Brownstein Hyatt Farber Schreck.
