Expanding Affordable Housing Options

Program requires all new residential development contribute 25% of the total units as permanently affordable housing.

Options for meeting the 25% requirement include providing the permanently affordable units on-site, dedicating off-site newly constructed or existing units as permanently affordable, dedicating vacant land for affordable unit development or making a cash contribution to the Affordable Housing Fund in lieu providing affordable units (Cash-in-lieu). Regardless of size, all residential development within the city limits not subject to annexation affordable housing requirements are subject to the requirements of IH.

Inclusionary Housing is a city ordinance found in chapter 9-13, Inclusionary Housing, Boulder Revised Code, 1981. The Inclusionary Housing Administrative Regulations are adopted by the City Manager and used to implement the program.

Because remaining land appropriate for residential development within Boulder is limited, it is essential that a reasonable proportion of such land be developed into housing units affordable to very low-, low-, moderate and middle-income residents and working people. This is particularly true because of the tendency, in the absence of interventions, for expensive housing to be developed within the city, which both reduces opportunities for more affordable housing and contributes to a general rise in prices for all housing in the community, thus exacerbating the scarcity of affordable housing within the city.

2022 Council Priority

Updating Boulder’s Inclusionary Housing Ordinance was identified as a priority by city council in 2022.

The objective of this council priority is to encourage more permanently affordable middle-income housing in the city and make changes to the Inclusionary Housing program in response to recent changes in state legislation.

Project Overview

The 2022 Inclusionary Housing update will analyze the program to identify opportunities to increase production of housing affordable to middle income households and incorporate best practices for the program.

Adopted in 2000, the Inclusionary Housing Program has had two major updates: the first in 2009 and the second in 2018. The 2018 update added a new requirement for 5% middle-income housing in addition to the existing 20% requirement for low- and moderate-income housing. The 2018 update also included numerous incentives for developers to build the affordable ownership housing on-site as part of the development. Due to numerous market and regulatory factors, on-site and ownership housing outcomes remain rare. This update will explore these market and regulatory factors and make recommendations for changes to the program to achieve more middle-income outcomes and incorporate best practices.

Project Timeline

  • July – Oct 2022: Scope and review potential Inclusionary Housing updates

  • October 27, 2022: Study session with council

  • Nov 2022 – April 2023: Consultant modeling and community engagement

  • July 2023: Bring IH ordinance to council

Inclusionary Housing (IH) is a regulatory requirement that all new residential development in projects with five or more dwelling units provide 25% of the total dwelling units as permanently affordable housing. Of the 25%, 80% of the homes should be affordable to low/moderate income households and twenty percent affordable to middle income households. Projects with four or fewer units are required to provide 20% of the dwelling units as permanently affordable.

Regardless of size, all development within the city that adds housing units are subject to the requirements of inclusionary housing. The means for satisfying the inclusionary requirement must be approved by city staff prior to application for a residential building permit.

Developers are encouraged to meet with staff well in advance of review or permit application to determine how the Inclusionary requirement will be met in order avoid delays. For-sale affordable units are constructed by a developer and sold, with city assistance, to an approved buyer. Rental affordable units must be owned all or in part by a housing authority or similar nonprofit agency. A deed restricting covenant for each permanently affordable unit must be signed and recorded prior to application for a residential building permit. In most cases, the city never owns the affordable units.

For-sale developments should provide at least half of the required permanently affordable units on site. The other half may be met through provision of the affordable units off-site, a cash-in-lieu contribution, dedicating vacant land or by any combination of options. The ordinance includes several incentives for providing affordable units on-site, including;

i. All for-sale affordable units provided on-site in developments with 20 or fewer total units will qualify for middle income pricing;

ii. When 50 percent or more of the required for-sale affordable units are provided on-site the remaining cash-in-lieu is reduced by 50 percent; and

ii. When 75 percent or more of required for-sale affordable units are provided on-site the pricing mix may be adjusted to allow half of the affordable units to be priced to be affordable to middle income households.

Affordable housing obtained through city programs is deed restricted as permanently affordable. This means a given apartment or home has an ongoing restriction designed to keep it affordable in perpetuity to lower income households. The exact terms of the resale restriction are contained in a land covenant that is recorded against each property.

Maximum allowable sales prices for the affordable housing units are calculated on a quarterly basis to take into account mortgage interest rate changes and are established when the affordable covenant is signed. Current low/moderate and middle-income pricing sheets can be found in the 'Related Documents' section below. For information on how the maximum allowable sales prices for new affordable homes are determined, review the Sales Price Calculation Methodology. Please note that these are the maximum allowable sales prices and not a guaranteed minimum price. Depending upon the market and desirability of a given permanently affordable unit, prices may need to be adjusted downward in order to successfully complete a sale.

Rents for permanently affordable units are determined annually and can be found in the Affordable Rent Chart. Affordable rents include the total rent paid by the tenant including any non-optional fees and the established monthly utility allowance. City of Boulder maximum rents are grounded in the CHFA maximum rent and reflect the Boulder market. The city maintains the discretion to amend maximum rents or substitute an alternative index.

In addition to cash-in-lieu, there are additional alternatives for single home owner builders. Details may be found in the Inclusionary Housing Ordinance.

The IH requirement is a proportional determination of unit type, number of bedrooms and unit size to the market units. For-sale affordable units must be distributed throughout the development and not aggregated in one area or building.

The expectation is that the permanently affordable units will be “functionally equivalent” to market rate units. This means that if the market units include dishwashers and garbage disposals they must also be provided in the affordable units. It also means that finishes and appliances provided in the affordable units, such as kitchen cabinets, countertops, flooring, etc., does not need to be identical to what is provided in the market units. For example, market rate units could include granite countertops, while laminate countertops of reasonable quality would be acceptable for the permanently affordable units.

Permanently affordable homes are expected to be constructed as complete and livable homes. As such, upgrades should be offered in moderation and must be approved in advance by the city. Upgrades are allowed in for-sale homes only and include items which would be more costly or structurally difficult to add after construction. A list of acceptable upgrades may be found in New Construction Pre-purchase Upgrades.

All affordable units must meet the Livability Standards for Permanently Affordable Housing. This includes standards such as linear feet of cabinetry, minimum room sizes, amount of storage and closets and appliance warranties.

Developments with for-sale units are required to provide a minimum of 50% of the required affordable units on-site. For the remaining 50%, developers may make an in-lieu contribution to the Affordable Housing Fund. If a developer does not want to provide any affordable units on or off-site, the ordinance allows the requirement to be satisfied with 100% cash-lieu if additional community benefit in the form of additional CIL is provided.

Developments with rental units do not have an on-site requirement and may satisfy the entire inclusionary requirement with a cash-in-lieu contribution. Accordingly, if an owner chooses to convert the rental units to for-sale units within five years they will be required to pay the difference between the rental and for-sale CIL amounts.

Cash-in-lieu amounts are adjusted annually on July 1st and are applicable for 12 months. Refer to the Cash-In-Lieu Chart.

This option is evaluated on a case-by-case basis. Dedicated land must have residential zoning and meet a number of other land use criteria.

An owner may choose to provide the required affordable housing at another location than their development. Existing or newly constructed homes may be proposed to be deed restricted to satisfy the inclusionary requirement. A number of process and other requirements apply including location approval, concurrency of construction, providing a financial guarantee, and housing inspections. The first step in the process is to have a proposed off-site location approved by submitting a Pre-Application Review form to the planning department. Refer to the Off-site Process and Timelines for Developers document for more details.

An administrative level Affordable Housing Design Review is applicable to any affordable housing provided off-site or in a building on-site with greater than twenty five percent (25 percent) affordable units that does not complete a site review.

In order to ensure fair access to permanently affordable homeownership opportunities, the city requires all affordable home sales to comply with a set of fair marketing procedures. These may be found in the Marketing Procedures for Developers.