Low and moderate income infill housing

Material Information

Low and moderate income infill housing the need, the resources, and new strategies to increase production
Upfal, Marjorie Brawer
Publication Date:
Physical Description:
95 leaves : map ; 28 cm


Subjects / Keywords:
Housing -- United States ( lcsh )
Housing ( fast )
United States ( fast )
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )


Includes bibliographical references (leaves 92-95).
General Note:
Submitted in partial fulfillment of the requirements for the degree, Master of Planning and Community Development, College of Design and Planning.
Statement of Responsibility:
by Marjorie Brawer Upfal.

Record Information

Source Institution:
University of Colorado Denver
Holding Location:
Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
14054399 ( OCLC )
LD1190.A78 1984 .U63 ( lcc )

Full Text
\ l *

\ s

i A+P
H 1190 A78 1984
isSUl^ *$$Sk*

The Need, the Resources, and New Strategies to Increase Production
Marjorie Drawer Upfal
Date Due

A thesis submitted in partial fulfillment of the requirement for
the degree of
Master In Planning and Community Development Department of Planning and Community Development College of Design and Planning University of Colorado at Denver
Spring. 1984

The Meed, the Resources, and New Strategies to Increase Production
Abstract Summary
Americas housing problems are large, complex, and growing. Although middle income households are increasingly faced with limited housing options, these problems have been especially severe for those of modest economic means. Increased housing costs, diminishing federal funds, and the gentrification of lower income neighborhoods have created an unparalleled housing crisis for the less affluent.
Infill housing development is an ideal vehicle to meet the growing need for lower income housing. Infill housing, or housing developed on "skipped over" parcels in otherwise developed areas, can help achieve many social goals. Infill housing not only increases the housing stock, it improves the image of declining areas. Vacant lots are a stark reminder of a neighborhood's unmarketability; the development of these lots goes a long way towards changing this perception. When developed by neighborhood-based development; organizations who are dedicated to affordable and compatible housing in the community, infill housing also helps to increase community pride and stability. Furthermore, infill housing uses the existing infrastructure and helps reduce urban sprawl and the resultant commuter traffic problems.
Although infill housing, in and of itself, cannot totally solve the current housing crisis, community leaders increasingly see infill as an important strategy to promote new, affordable housing and improve neighborhoods. Thus, public officials are combining resources with both neighborhood groups and the private sector to create new and innovative programs to encourage infill development.
There is a decided need for low and moderate income infill housing. Denver is an excellent model to illustrate this surging need. In the Denver metropolitan area, the growing population has increased competition for the limited housing stock and forced prices upward. In central Denver alone, this changing market has resulted in a projected net loss of 1,500 low and moderate income housing units despite an aggressive housing production program. Infill is a realistic approach to fill the growing demand for affordable housing. In the Cole, Lincoln Park, and Highland neighborhoods, there are ninety vacant lots that, if developed as housing to their maximum allowable density, could hold as many as twelve hundred new housing units. An

aggressive low and moderate income infill program throughout Denver could have great efficacy in solving many of the areas housing problems.
Unfortunately, the existing resources needed to promote this type of housing program are extremely limited. The Reagan Administration has severely cut funding for most housing programs and those remaining are largely based on pre-appropriated funds or "block grant" type programs which do not singularly target housing development. States and municipalities are just learning to adjust to reduced federal dollars and their existing resources are too limited to meet the demand for afforadable housing.
However, states and localities are experimenting with a variety of mechanisms aimed at encouraging low and moderate income infill development. These mechanisms are largely creative responses to current constraints. Most of them integrate the resources of the public sector, private sector, and neighborhood groups to insure broad based support and leverage existing resources. This thesis examines twenty such mechanisms. These mechanisms fall within several broad parameters: incentives, regulations, public-private partnerships, and for profit not-for-profit partnerships. These mechanisms are all highly flexible, limited only by the communitys collective imagination and its commitment to low and moderate income housing.
For communities devising new low and moderate income infill strategies and programs, a few steps are required for successful implementation. Each actor involved in these strategies, be it the public sector, private sector, or neighborhood group, must determine its level of participation. Once this is determined, these actors need to forge a consensus and devise a program that is both far reaching and has broad community support. Formulating a policy that reflects the community needs and input is necessary for a workable and successful infill housing program.
Although these new programs show great hope for meeting the demand for lower income housing, alone they are insufficient to meet the surging need. Broad based low and moderate income housing programs require a huge infusion of public funds to supplement new strategies. This is not to say that states and localities should abandon efforts to create innovative low cost housing programs. Rather, they are an excellent stop-gap measure and when combined with federal funds will be a highly effective way to meet fully the housing needs of all this nations people.

Extra special thanks to Eernie Jones for his enthusiastic support, and Kathy Ayers for quickly discovering that I write my "a's" backward. Also, thanks to all those people who gave time to this project, and to my husband, Mark, who never lost faith that one day I'd get this done.

A. Introduction to the Topic
B. Scope and Limitations
C. Literature Review
D. Methodology
E. Arrangement
A. What is "Low and Moderate Income?"
B. The Local Need for Low and Moderate Income Housing
II. INFILL HOUSING............................................14
A. The Advantages of Infill
B. The Potential for Infill Development
C. The Limitation of Infill
III. AVAILABLE RESOURCES FOR LOW AND MODERATE INCOME INFILL HOUSING.........................................................24
A. Resources for Site Acquisition
B. Resources for Construction Financing
C. Resources for Permanent Financing
IV. POTENTIAL MECHANISMS FOR LOW AND MODERATE INCOME INFIL HOUSING........................................................3
A. Potential Mechansims for Site Acquisition
1. Public Sector Resources
2. Private Sector Resources 3- Neighborhood Groups Resources
B. Potential Mechanisms for Construction Financing
1. Public Sector Resources
2. Private Sector Resources
3. Neighborhood Groups Resources
C. Potential Mechanisms for Permanent Financing
1. Public Sector Resources
2. Private Sector Resources
3. Neighborhood Groups Resources
D. Interim Strategies
V. WHAT ARE THE NEXT STEPS?..................................71
A. Creating Housing Policy
1. The Public Sectors Housing Policy
2. The Private Sectors Housing Policy 3- Neighborhood Groups Housing Policy
B. Creating A Housing Program
>-o f

C. Infill Housing as Part of a Comprehensive Program

i _ 'W*-

America's housing problems are large and complex. Some cities are plagued by vacant stock in their inner city core while other communities face severe housing shortages. Housing prices have increased more rapidly than personal income and affordability has become a national concern. The thirty year fixed rate mortgage, once considered as American as apple pie, is becoming obsolete while rising maintenance and energy costs are becoming the norm.^
Nowhere is this problem more severe than for those of modest economic means. Low and moderate income households are increasingly faced with unsatisfactory housing options and the inability to afford other goods and services. Three factors working simultaneously, have stifled lower income housing opportunities. First, for the past decade, housing costs have soared. Between 1973 and 1983, the average price of a single family home increased from $36,000 to $87,000, an increase of 243*.^ This, coupled with record high interest rates, increased production and utility costs and soaring demand over the past decade made housing less affordable to most Americans. However, those at the low end of the economic scale and with the least amount of disposable income suffered the most. According to a 1976 study, mere than half of this nations lew income household spent in excess of thirty percent of their gross income on housing.^ Second, the current federal administration, in an

effort to reduce the federal deficit, has streamlined or eliminated many housing programs serving lower income households. This has further restricted housing options for the poor. A third factor has been the current revitalization of inner city neighborhoods by the middle class. These communities, largely the domain of the poor, have been plagued by speculation, rising rents, and ultimately, the displacement of lower income households. This combination of factors has created a contemporary housing crisis for low and moderate income households that is unparalleled since the Great Depression.
Housing problems for those of lower economic status are particularly acute in growing states, such as Colorado.a In these areas, housing shortages have increased competition for the limited housing stock and forced prices upward. The theory of housing filtration, wherein construction of upper income units results in a series of housing moves and expands housing options for those lower on the economic scale, falls flat in such communities. This theory is based on the assumption that an adequate housing supply and a stable or declining population exists in the community. Perhaps this is the case in Newark it is certainly not the case in Houston or other growing Sun Belt cities.
Losses in existing stock, rising prices, and increased competition are pushing the demand for low and moderate income housing beyond expected production. As old housing theories lose their relevancy and former housing resources become extinct, the need for new strategies to encourage the production of low and

moderate income housing becomes a necessity. Current constraints require creativity and a commitment to meet this challenge. New mechanisms, which rely on the joint efforts of the public sector, the private sector, and the community need to be fostered. Old programs, which rely heavily on diminishing federal funds, must be rethought and new programs which maximise existing resources must be devised.
However, housing is more than just simple shelter. It is an essential part of community-building. One needs only to be reminded of the Pruitt-Jgoe^ to see the failures of paternalistic housing production programs for the poor. Housing programs that enfranchise community members will not merely increase the number of housing units, it will also increase community pride and stability. This is particularly crucial for lower income communities wherein displacement and lack of community control exacerbates social problems. Although community participation seemingly complicates the already complicated task of constructing low and moderate income units, this is not necessarily the case. Many lower income neighborhoods have a proliferation of vacant, blighted lots ripe for development as well as have many neighborhood development organizations dedicated to compatible and affordable housing development within their communities. Programs to increase neighborhoods development capabilities can achieve the dual goals of increasing low and moderate income housing stock and furthering neighborhood involvement and community building.

Thus, this thesis will explore new and innovative strategies to increase the construction of low and moderate income infill units. These strategies, which require the joint efforts of the private sector, public sector, and communities, provide an excellent vehicle for neighborhoods' to assume greater control of their own destinies.
Scope And Limitations
Many communities are exploring a variety of programs aimed at increasing low and moderate income housing opportunities or developing infill lots. Pew have taken on the somewhat more complicated chore of providing lower income infill housing opportunities. Thus, this thesis could have great efficacy for communities experimenting with housing programs. Although this thesis will be applicable to many communities in the nation, its focus will be on Denver. Denver, and particularly its lower income, inner city neighborhoods, is an excellent laboratory as it is a growing region with considerable vacant lands in the inner core. It also has a sophisticated network of neighborhood development organizations and community groups that are actively promoting neighborhood stabilization and development. Although the city currently lacks a broad-based program for constructing lower income housing, the newly elected city administration has pledged to make neighborhood development a top priority. Thus, an assessment of possible innovative housing programs applicable to Denver is both timely and necessary.
The thesis focuses on innovative mechanisms that do not require federal funding. Current federal programs have been

analyzed to determine their efficacy in promoting low and moderate income infill housing. However, this thesis is based upon the assumption that future federal funding for local housing programs will be minimal due to the current federal administration's philosophies. Thus, this thesis will explore possible alternatives for communities faced with both increasing housing demands and diminishing federal funds.
Further, this thesis assumes that much of the development of lower income infill housing will be carried out by neighborhood development organizations with support from state and local governments and the private sector. These alternative developers are willing to take on greater risk than traditional developers and are highly concerned with public good. Thus, neighborhood development organizations are the most appropriate vehicle to carry out lower income housing development within their communities.
Although much attention has been focused on both rehabilitation and low cost construction techniques as methods to increase lower income housing stock, these mechanisms are outside the scope of this thesis. These methods are valuable, however, the need for new development incentives is also crucial. Literature on both new construction techniques and rehabilitation abounds (Fisher, 1981; Department of Housing and Urban Development, 1981) and thus these topics are too broad for a single thesis.
Literature Review
Although there is literature available on innovative strategies to construct lower income and infill housing, it is

readily apparent that more research is needed. The current literature is either too broad or too narrow and none focuses directly on methods to encourage lower income infill housing. Some books present broad analysis of the contemporary housing dilemma (Nenno and Erophy, 1982; McKenna, 1982) but fail to survey different mechanisms to encourage low income housing construction. Others focus on various strategies, but limit their analysis to a single state (Price, 1981; James, 1983) or a single mechanism (Schwartz and Johnson, 1981). Still others concentrate on strategies to encourage infill housing, but do not limit their analysis to lower income housing (Real Estate Research Corporation, 1982). Thus, this thesis shall also attempt to fill some of the voids in current literature.
Because of the deficiencies in available research, this thesis is a patchwork of both primary and secondary research. Secondary research provided a broad understanding of the current housing situation as well as illucidated some possible strategies for encouraging low and moderate income infill housing. More than a dozen interviews, conducted with a variety of individuals involved with housing, helped to further understand the effectiveness of current and potential resources. Census data from 1970 and 1980, neighborhood demographics, building permits, and vacant land surveys were reviewed in order to illustrate the need for lower income infill housing. Thus, this thesis reflects a variety of research techniques.

The thesis is arranged in five chapters, each building on the information provided in previous chapters. The first chapter examines the need for low and moderate income housing. The following chapter explores the need for and advantages of infill housing. The third chapter looks at how existing resources at the federal, state, and local level can be massaged to meet these needs. The fourth chapter explores potential mechanisms to encourage low and moderate income housing that fill some of the voids in current resources. These mechanisms are then combined into comprehensive programs in the fifth chapter. These comprehensive programs maximize the effectiveness of each mechanism and provide alternatives to a piecemeal approach.
The housing needs of America's poor are great. No one single program can meet this growing need. Although the development of infill housing may appear to be just a small step in meeting this challenge, if combined with other housing programs, it can be instrumental in providing adequate shelter for all our nation's people.

-dH* H- W r 1 J ..wr 1

Although housing affordability is of great concern throughout the nation, the issue is particularly complex in Denver. The Denver Metropolitan area is one of the fastest growing urban regions in the nation and experienced a 5^.4 percent increase in households between 1970 and 1980. This growth has put considerable pressure on the Denver housing market and the resultant
competition for the 1imited stock is one cause of a rapid
increase in housing O costs. This has effectively lessened
housing opportunities for low and moderate income people and rendered theories such as housing filtration obsolete. Several indicators show a growing demand for new low and moderate income housing, however, due to current constraints, the needs is far from being met.
What is "Low and Moderate" Income?
The criteria for low and moderate income varies from state to state and agency to agency. Obviously, this maleable standard can have political and social ramifications, particularly for those of modest economic means. Thus, for the purpose of this thesis, the federal government's definition of low and moderate income families will be used. This criteria is the most commonly accepted and designates those as earning 80# of the median income as low and moderate income families. Those earning 80 to 125# of the median income are generally classified as middle income and those earning 125# or more of the median income are considered upper income.

Currently, the median income of the Denver metropolitan area is $28,300 for an average size family of 3*6 members.3 Eased on the federal definition, a low and moderate income family would earn $22,640 or less, a middle income family would earn between $22,640 and $35,375, and an upper income family would earn more than $35,375-
From these figures, one can extrapolate the average costs per month that the different economic classes could spend for housing. The basic assumption here is that the average family would spend 25% of their income on housing. Although lenders currently will approve loans for those spending up to 33% of their income on housing, this figure includes renters who spend a smaller portion of their income on housing.^ Thus, low and moderate income families could spend as much as $471.48 on housing. Middle income households would spend between $471.48 and $736.98 for shelter, and upper income households would spend more than $736.98 on housing in the Denver Metropolitan area.
The Local Need for Low and Moderate Income Housing
Various indicators show that there is a need and a market for low and moderate income housing in the Denver Metropolitan area. This is particularly true in the core city, which houses established communities of low and moderate income families and is more ill-housed than the rest of the metropolitan area.^
Perhaps the greatest indicator of Denver's housing affordability problem has been the rapid rise in housing costs, particularly when compared to more moderate increases in income.

Between 1970 and 1980, housing prices increased 269$ while average household incomes increased by 137.9$-^ This scenario was similar throughout the state and by 1980, "the average household in Colorado could not afford to buy an average house.Those at the lower end of the economic scale were least able to keep up with the rising cost of housing. A study in 1976 found that lower income renters and homeowners spent over 35$ of
their limited income on housing. Because housing costs rose preciptiously during the latter part of the decade, the situation is likely to have worsened.
Denver's housing stock is generally less adequate than the rest of the metropolitan area. Throughout the entire metropolitan area, 1.1$ of the homes lack plumbing. In Denver, this number is higher as 1.9$ of the units lack this basic necessity.^ Denver also has the highest density in the metropolitan area. Slightly more than two percent of the units in the metropolitan area have more than one person per room, whereas in Denver, 3*3$ of the dwelling experience this type of overcrowding.^ Obsolete housing, generally the domain of the poor, is one strong indicator of the need for new low and moderate income housing units.
Production of housing, relative to population growth, is another important indication of general housing conditions. If production fails to meet demand, housing prices will increase and negatively impact affordability. Conversely, overproduction may lead to abandonment and disinvestment in older, established communities. The Denver metropolitan area was able to keep up with

and even surpass the demand for housing during the 1970's.^ This may explain, in part, why the core city experienced a 4.3#
1 P
decline in population. However, permits for new housing have been steadily declining since the late 1970's and have not come close to the record 45,826 permits that were issued in 1972. "Today the market is tight and getting tighter."-*-3 This tight market will ultimately increase price and further limit housing opportunities for those at the lower end of the economic scale.
A study conducted by the author in December, 1982^ highlighted the severity of this housing problem at the local level. This study, an inventory of Central Denver's housing production in the 1980's, found that production of low and moderate income housing has virtually stopped. Although this study focused on the inner city area, in many ways this area is the most fertile laboratory. It is both the home to many of the metropolitan area's low and moderate income households and the site of an intensive housing production program.
This study found that 5,388 units have been built or proposed in the central hub. Of these, 27# were for low and moderate income households. While that may appear to be exemplary, of the 2,430 units that are proposed, only 12# of these units will serve lower income residents. Further, 2,654 units have been lost due to demolitions or office conversion. Most of these units housed low income residents. Thus, although 1,146 new low and moderate income units are now added to Denver's housing market, there has been a net loss of 1,500 units for low and moderate income households. There is a substantial need for

new low and moderate income units merely to make what has been lost. This, however, will take a concentrated effort and require the joint cooperation of many housing activists.
The growing number of homeless in Denver is further testimony to the need for low and moderate income housing. There are approximately 1,500 to 2,000 individuals in Denver who lack basic shelter.^ These numbers are increasing and emergency shelters are ill-equipped to meet the surging demand. While many of these individuals are transient and/or homeless by choice, others are "the new homeless" who have been forced out of their existing homes by the current recession, redevelopment of the core area, and cutbacks in federal social programs. These people desperately need affordable and permanent shelters. Unless the conditions that are causing increased homelessness are abated or housing production increases, this problem is likely to become even more grave.
Although Denver faces many housing problems, it is not unique. Many other cities face similar quandries and in some ways, Denver may be better off than older urban hubs. The housing stock here, in general, is young and in relatively good condition. The metropolitan area is growing and even Denver's population decline is slight when compared to older core cities. The economy is relatively robust and the housing industry is recovering well from the slump in the early 1980's. Because the picture is bright, some may overlook the need to expand housing opportunties for lower income households. However, the need is great and growing new programs and projects are fundamental to

meet the demand and insure that all of Denvers people have
adequate and affordable shelter.


Infill development, quite simply, is development of vacant parcels in highly developed communities. The causes for vacant lots in a community are many: the lots may have been "skipped over" during the development process; the parcels may be odd sized and thus, preclude development; the existing infrastructure may be inadequate or the structures on the parcel may have been demolished. Always, such lots are indicative of poor land utilization and their development can be instrumental in meeting many community needs.
Infill lots can support many types of development: residential, commercial, industrial, or mixed use. However, a good proportion of these lots are best developed as housing. These lots are found in existing neighborhoods where residential development is most compatible with community wishes. The zoning affecting such lots frequently reflect this. The need for affordable housing, particularly in low and moderate income neighborhoods is acute and infill housing can help fulfill this need.
The Advantages of Infill
The negative impact of a vacant lot on a community cannot be understated. These lots are more than an example of the misuse of physical resources. Often, these parcels are eyesores, filled with trash and weeds. These lots become a symbol of a community's unmarketability and decline in the eyes of public officials, bankers, and community members. This serves to

the community and
reinforce prevailing attitudes about perpetuates a vicious cycle of decline and abandonment.
However, one can look at vacant lots as opportunities for community enhancement. These lots can be developed in a manner that reflects community needs and is sensitive to community wishes. Although infill development will not solve all of a community's problems, it is an important element in stabilizing declining areas.
Community enhancement is perhaps the greatest immediate advantage of infill development. New houses with tidy, landscaped yards can greatly change the perception of a community. Unmarketable areas may appear to be marketable and thus, infill development can lead to large scale revitalization. Although community enhancement is beneficial, if not handled sensitively, it may seriously disrupt the existing community. Land prices may soar and residents may be forced to move. Thus, infill development that is compatible with the existing community is extremely important. Neighborhood-based development organizations and other alternative developers who are sympathetic to community needs may be best able to both improve and stabilize existing neighborhoods.
Infill development that is community originated may have far reaching effects. Such programs can increase community involvement and pride. A commuity can get the satisfaction of completing a project and feel that the community's new image is due to its own efforts. This may make residents more resistant to displacement and more tied to their neighborhood. Such

projects may involve a great deal more community outreach than traditional developments, however, the effects of such projects can be widespread and truly aid a community.
Infill housing developments also have many other advantages. Development is frequently less costly because the infrastructure is established and frequently underutilized.1 Bonds for new roads, schools, and water lines are increasingly being rejected
by voters, thus limiting cities' ability to expand the infrastructure. Fully utilizing the existing infrastructure is the logical response to this dilemma. This advantage may have limited applicability in communities with aging infrastructures. However, in these communities, infill development may help to spread the cost of infrastructure repair over a greater portion of the population. Infill development can also assist in preserving lands and minimizing urban sprawl. A 1974 Department of Agriculture study found that some 300,000 acres of crops are lost annually to urban uses.^ Although infill development will not completely solve this problem, compact development is certainly one crucial element in the solution. Energy conservation and improved air quality due to reduced commuting time are other benefits accrued by minimizing urban sprawl.
Although infill developments may have advantages for cities, this is, of course, dependent on the availability of vacant lots. A community with few infill lots may not see the benefits of developing these parcels.

However, many communities have vacant lots. Even those that have few lots in actual numbers may be able to build a substantial number of housing units on each lot depending on the lot size and allowable zoning.
In order to assess the applicability for infill housing, three prototypical inner city neighborhoods in Denver have been evaluated in terms of their infill potential. These neighborhoods are 1) the Cole neighborhood in Northeast Denver, 2) Highlands neighborhood in Northwest Denver, and 3) La Alma/Lincoln Park on Denver's near Westside. These neighborhoods share several similar characteristics: they consist predominately of low and moderate income households; they are primarily minority neighborhoods; they are each represented by at least one neighborhood based developer; and they are target areas for Community Development Block Grants.


The land in each of these neighborhoods has been surveyed for vacant lots by neighborhood groups. Each lot has been analyzed by its size and zoning to give a thumbnail estimate of the maximum developable density. Two assumptions were made in this study: 1) that each lot would be developed as housing at its maximum allowable density; and 2) that the average unit size would be 600 square feet. Although these assumptions may give a high estimate of the infill housing potential in each neighborhood, each neighborhood has many vacant and abandoned buildings. Because some of these structures may not be rehabilitated, they were not included in this analysis, although they may add markedly to the infill potential of each community.
The Cole neighborhood in Northeast Denver has many housing problems. The Community Development Agency in Denver recently rated Cole as the third neediest neighborhood for Community Development Block Grant Housing funds. It has the second oldest housing in the city and the fourth lowest housing values/ A study in 1977 showed that only 6.1% of the homes in the community were financed by conventional mortgages, indicative of a high perceived risk of investing in the community.^ A neighborhood based development organization, Citizens Organized for Economic Development, has been incorporated to help further neighborhood stabilization through the development of infill housing and the rehabilitation of existing structures. Several other groups; such as Project New Pride, Northeast Housing Center, and Hope Communities; are also engaged in alternative development in the community.

A recent survey of Cole by community members found 27 vacant parcels in Cole. Most of these parcels were small lots in R-2 zoned areas and are ripe for development. As many as 186 housing units could be added to Cole's stock if each lot were developed at its maximum allowability density.' Additionally, 3 5 structures in Cole are abandoned. Redevelopment at these sites could also significantly aid in meeting Cole's housing need.
Highland neighborhood in Northwest Denver also appears to have a poor housing stock. The neighborhood has been targeted by the Community Development Agency for housing assistance due to its overall low income, old housing stock, and low housing values. The western half of the neighborhood has the oldest housing stock in the city and the neighborhood has the 11th lowest housing values in Denver. Highland Neighborhood Housing Services and Del Norte, both neighborhood based development organizations, were organized to help develop infill structures that meet community needs.
The North Denver Workshop found 42 lots vacant following a survey of the neighborhood. If each parcel was developed at its maximum capacity under the existing zoning, some 740 units could be built. This would significantly aid in meeting the community's housing needs as well as utilizing all existing parcels in the neighborhood. Additionally, there are 20 abandoned structures in the community that could increase the neighborhood's infill potential.
La Aima/Lincoln Park, like the two other inner city neighborhoods examined, has great housing needs. This neighborhood,

on Denver's near Westside, has old housing stock and low housing values.^ The western half of the neighborhood was ranked as the worst area in Denver in terms of housing values, housing age, and median family income. The eastern half was ranked as the fifteenth worse out of Denver's 120 census tracts on the same criteria. The neighborhood had 7.5$ of its homes conventionally financed, according to a 1977 study, x!1 indicative of minima 1 private sector involvement in the neighborhood. Two community based development organizations are active in the neighborhood. Brothers Redevelopment, one of Denver's larger non-profit developers, originated in La Alma/Lincoln Park and is still pursuing infill development projects in the area. NEWSED, another community based developer, has been largely concerned with economic development and is just beginning to branch into the development of infill lots for housing. The need for sensitive development is great in this area as 1,000 new middle income apartments have been built in the neighborhood and could create speculation which could cause the displacement of existing residents .
La Alma/Lincoln Park has twenty one vacant parcels within its boundaries according to a recent study by Westside Neighborhood Design.^ If each of these lots were developed as housing at the highest possible density, 275 new units could be built in the neighborhood. Additionally, 12 vacant buildings increase the housing potential in the neighborhood.
The following analysis shows that infill development has great potential for three prototypical low income Denver

Neighborhood Number of Vacant Lots Infill Potential Number of Abandoned Structures
Cole 27 186 35
Highlands 42 740 20
La Alma/ Lincoln Park 21 275 12
TOTAL 90 1201 67
neighborhoods. Within this small area, 1,201 housing units could be built on 90 vacant lots. Although these lots may not all be developed as housing, the potential for new housing is certainly good. These neighborhoods are typical of Denver's inner city area, and similar results may be found in other inner city neighborhoods. Obviously, an infill program that included all of Denver would have far greater and widespread impacts and may aid in resolving local housing problems.
Although infill housing has great potential, it also has limitations. As stated previously, the biggest limiting factor is the availability of lots. Some communities have little vacant land and thus infill has limited applicability. Additionally, some lots are vacant because they are undevelopable. They are odd shaped, have unique environmental features, or lack access to roads or to the infrastructure. Further, infill development may be discouraged if it taxes the already cverutilized infrastructure or if the density of the development is opposed by community

members. Although these problems can be overcome, they create roadblocks to successful infill programs, and thus, cause many developers, city officials, and financiers to seek "greener pastures" for development.
Infill will not, in and of itself, solve all this nation's housing problems. Rather, infill is one part, albeit important, in a comprehensive housing program. Code revisions, rehabilitation, zoning changes, and increased federal funding are all important elements for housing programs that meet all the needs of the larger community. However, because vacant land blights the community and weakens other programs that aim to stabilize declining communities, the import of a broad based infill housing program cannot be overstated.


Although there are resources available for low and moderate income infill housing, the situation has changed greatly in the past few years. The federal government has deeply cut housing programs, and in fact, for the first time since 1937, this country lacks a specific program for low and moderate income housing.As pre-existing appropriations dwindle, local and state government are beginning to feel the impact of federal cutbacks and are initiating new housing programs to meet local needs. These programs, however, are in their infancy and the status of housing resources throughout the national could be best characterized as transitional.
One major change that has affected housing assistance programs is the new federal ideology. The federal government, particularly under the Reagan administration, has advocated local self-determination for the use of federal funds. Hence, the government has moved away from funding catagorical programs, such as housing, and has moved closer towards providing large blocks of money for state and local governments to allocate based on local priorities. Thus, housing programs throughout the nation are now highly varigated and reflect local situations. In some areas, this means that housing programs are flourishing models of innovation. In other communities, housing is a lower priority with few allocated resources. In such communities, little, if any, subsidized housing is being constructed with federal funds.

The situation of diminishing federal dollars has impacted the delivery of housing throughout the nation. When the federal government was the major participant in financing low and moderate income housing, one program provided the necessary resources for site acquisition, construction financing, and permanent long term financing. However, under the current scenario, no one program can adequately meet all the resource needs for new construction. Rather, one program may provide the funds for site acquisition, a separate program may aid in construction financing, and still another may be used for long term, permanent financing. These programs are now being combined at the local level in order to provide comprehensive housing construction programs for low and moderate income households.
Resources for Site Acquisition
Resources for site acquisition are particularly crucial for successful infill development programs. Not only is a developable site a necessary prerequisite for any type of new construction, but the acquisition of targeted sites may also aid in the stabilization of existing neighborhoods.
Many neighborhood development organizations and ether groups involved in infill housing see site acquisition as a uniquely separate activity in the construction process. Unlike construction and permanent financing, which go hand-in-hand to assure affordable housing, site acquisition can occur at an earlier time before other financing is available. This process, known as "land banking," can insure that crucial lots are set aside when the resources are available. Later, when financing

rates are lower, the site can be developed or sold to other developers with similar goals in order improve the financial resources of the development organization and provide opportunities to acquire and develop other key lots in the community.
Community Development Block Grants (CDBGs) are the most widely used vehicle for infill housing developments. These federal funds, which are targeted to areas of blight, low and moderate income households, and urgent need are used for site acquisition, rehabilitation, and in limited circumstances, for construction financing, depending on local government preference. The block grants also can be used for a wide variety of social expenditures including housing, recreation, water and sewer facilities, economic development, and urban beautification. Because of the political process, these funds are generally used as broadly as possible to satisfy the needs of a variety of constituents .
The CDBG program has undergone several changes since it was initiated by President Richard Nixon in 197^.^ The philosophical basis of the program has changed with each successive administration. President Carter increased federal control over the use of these funds, encouraged targeting of these monies to maximize their effectiveness, and named lower income individuals as the primary beneficiaries of these funds. These changes were practically annulled by the Reagan Administration which remains firm in its commitment to increase local control over the use of these funds.3

After a lengthy battle, Congress reaffirmed its commitment to the Community Block Grant Program late last year. Low income individuals were designated as the primary recipients of these funds despite stiff administration opposition. The new legislation contained authorization for rental housing rehabilitation, the first new housing program enacted since 1980. Thus, despite the changing philosophies of federal administrations, Community Development Block Grants are likely to remain a viable and valuable federal housing resource.
Because Community Development Block Grants for housing are used according to local preference, funds are used in a variety of ways. However, Denver's program typifies the innovative use of these funds. In the city, one quarter or $2.^ million of the $10,167,000 in block grants are allocated for low and moderate income housing programs. The funds are limited to census tracts with relatively lower income households, aged housing stock, and low housing costs. These funds, allocated by the Mayor's Advisory Council, are generally used as low interest revolving loans for site acquisition and rehabilitation, and in limited cases, for construction financing. This program, although plagued with bureaucratic snafus, has been instrumental in helping neighborhood based developers acquire sites for infill development. This program shows great promise for the future when the programmatic problems are solved and the loans revolve, providing a new infusion of funds for housing.11
Urban Development Action Grants represent another federal grant program that is highly flexible and may aid in infill

housing development. The program, which was funded for 440 million dollars in 1984,^ is a discretionary grant program created to provide an incentive for private investment in distressed communities. These projects can take on a variety of forms they can be used for housing, commercial, or industrial uses, either large or small; they can be dispersed throughout a city or can be targeted to a specific area. Generally, these funds are used as loans to private sector developers for the acquisition of sites for rehabilitation or infill. The federal government is considering prohibiting action grants for housing-only project.^ Thus, all action grant housing projects would have to include other uses and thus, their availability for infill housing may be decreased.
Denver's one UDAG project was basically an infill program, although it was not geared to lower income households. The Lincoln Park UDAG was the largest Urban Development Action Grant awarded in 1978. The 13.5 million dollar loan was used to leverage an additional 100 million dollars of private investment in the community and added more than one thousand new housing units to the city's stock. In many ways, Denver's UDAG has become the prototype for mixed use UDAG's. However, many communities have maximized the effectiveness of UDAG loans by targeting loan repayments to neighborhood groups or community reinvestment pools, thus furthering community stabilization.
Denver also has a variety of local resources for acquiring infill lots. One, Tax Increment Financing, is a sophisticated tool for lowering land costs in blighted areas. Bonds are issued

for the purchase of land and, in some cases, for construction financing. As the property improves and the property taxes increase, the incremental rise in taxes is used to retire the bond. After the bond is retired, the city benefits from both an improved community and tax base.
Under Colorado law, Denver is eligible to use tax increment financing but has yet to complete a project using this somewhat awkward financing mechanism. The Denver Urban Renewal Authority (DURA) is authorized to carry out tax increment programs. DURA has steadfastly maintained that housing construction is hardly feasible with tax increment bonds. The agency believes that such financing works best for dense developments that generate significant tax revenues to retire the bond.^ Mixed use projects that include housing, may be feasible, but units in most liklihood, would be relatively expensive. Dense and expensive infill units would not be compatible with most existing inner city communities and may increase community instability and gentrification.
Despite DURA's contention that tax increment financing has little utility in the construction of affordable housing, other communities use of this tool has proven otherwise. Specifically, California state legislation authorizes communities to sequester funds occuring from tax increment redevelopment to provide a one-to-one replacement of housing lost within the project area. At least twenty percent of the sequestered funds must be used for affordable housing unless an absence of needs can be shown. Seven thousand one hundred units of low and moderate income and

elderly units have been built in Los Angeles alone using tax in-
crement financing. Those involved with the program cite a strong local and state commitment to affordable housing as the key to the programs success." Obviously, DURAs attitude must change if tax increment financing is to be an acceptable mechanism for infill and affordable housing.
Another possible resource for site acquisition in Denver is the Skyline Recapture Fund. Fifteen to twenty million dollars remain from the Skyline Project, a federally funded urban renewal project which was instrumental in the redevelopment of thirty three blocks in the Central Eusiness District. Currently, the city and the Department of Housing and Urban Development are litigating over the rightful ownership of this expansive resource.
Even if this money does remain part of the city's housing resources, no one knows exactly how these funds will be utilized. Traditional urban renewal projects have funded the condemnation and clearance of land which is then sold to developers at below market rates. However, urban renewal has earned a poor reputation and is both too expensive and resource wasteful for current citizens' and bureaucrats taste. Joint ventures, revolving loans, and smaller projects that include neighborhood participation are both far more effective and less controversial. Additionally, political pressures may dictate that the Skyline Recapture money be spread broadly over most sectors of the city and net necessarily targeted to lower income individuals. Until Denver and the Department of Housing and Urban Development reach

an accord on the use of these funds, the efficacy of the Skyline Recapture fund for affordable infill housing cannot be gauged.
The Olympic Bond was passed by Denver voters in 1972 to provide housing for the 1976 Olympics, then scheduled to be played in Colorado. Because the Olympics eventually occured elsewhere, the 10 million dollar bond was used broadly to encourage housing opportunities in Denver. Designed primarily as revolving loans, this money circulated three times and its uses have included scattered site infill housing as well as rehabilitation and weather!zation programs. Currently, this money has been used to buy the land for a 400 unit middle income housing development at 17th Street and Grant Street. The principal on this money is rapidly being depleted and it is somewhat questionable if the money can be rolled over again. The Denver Housing Authority, which is responsible for the allocation of the bond money, must show a renewed commitment to affordable housing if this money is to be used to increase low and moderate infill housing opportunities.
A variety of resources are available or potentially available for site acquisition. However, this inventory of resources may appear somewhat misleading. Many of these resources have broad applicability and are not necessarily limited to affordable housing. With many parties competing for limited funding, it becomes readily apparent that new and innovative strategies are necessary if site acquisition for affordable infill housing occur with lowered levels of federal assistance.

Resources for Construction Financing
Denver generally lacks resources which can lower the cost of construction financing for developers of lower income infill housing. Construction financing is generally the neglected element in financial resources for housing because it is generally a short term cost. Construction loans, in general, run a few points above the prime interest rate and borrowers hold the money for about a year. However, if a developer were to borrow $50,000 at, for example, fourteen percent for a year, the cost of the money would be $7,000 in simple interest. This obviously adds considerably to the cost of housing and helps to push affordable housing beyond the reach of lower income individuals. Thus, new programs that provide lower cost loans and grants to cover construction costs are necessary to make housing more affordable.
One new innovation is the Local Initiative Support
Corporation (LISC). A LISC program is essentially a public spirited investment entity that is currently being organized in Denver. The Ford Foundation, the originators of the LISC program, will donate up to $500,000 for an investment pool of money, if matched dollar for dollar by local business contributions. These funds are then loaned to neighborhood based developers at below market rates to assist in housing and economic development programs. Board members of the LISC, consisting of local donors, establish the criteria for this investment pool, including target areas, interest rates, types of projects, and acceptable degrees of risk. Because the Denver

Local Initiative Support Corporation is not yet fully established, its philosophical basis is largely unknown. However, it is quite likely that some of the loans will go towards promoting affordable housing opportunities in the inner city.
Some of the programs which were described under the section, "Resources for Site Acquisition," can also be used to provide assistance with construction financing. Community Development Block Grants can be used as construction loans if the developer is a non-profit, neighborhood based development organization. This designation requires both the Department of Housing and Urban Development and the City Attorney's written approval. To date, no neighborhood development organization has received this designation at the local level and instead, funds are passed through other agencies which tack on administrative fees. This has increased construction costs as well as delays for neighborhood based organizations. Urban Development Action Grants and Tax Increment Financing can also be used for construction assistance, although this is not a typical use of these resources.
Many developers overcome the high cost of construction funds by utilizing less expensive construction techniques. Although outside of the scope of this thesis, modular housing and prefabricated interiors lower construction time and cost. This solution, however, has limited applicability and financial resources are also necessary to broadly lower the cost of construction.

Resources for Permanent Financing
Permanent financing is a crucial element in low and moderate income housing delivery. High permanent financing costs are currently being blamed for this nation's housing affordability problem. However, if interest rates make new housing prohibitive for middle income households, they truly compound the housing problems of the poor. Additionally, affordable, long term financing is a requisite if lower income individuals are to purchase rather than rent their housing unit. Home ownership can help a household feel more attached to their neighborhood and more likely to resist negative neighborhood impacts.
Tax Exempt Mortgage Revenue Bonds have been the typical source of below rate permanent financing for housing. This program, which is administered throughout the state by the Colorado Housing Finance Authority (CHFA), provides mortgages which are backed by tax free bonds. The gap between conventional mortgage interest rates and the rate of CHFA mortgages is about 30-35 percent.^-0 The mortgages are limited to low and moderate income households and thus, have expanded housing opportunities for those unable to afford conventionally financed homes. The bonds have worked well for all types of housing programs, including infill single family, multi-family, and rental units. Denver has also issued tax exempt mortage bonds, but to a much smaller degree than CHFA.
Current legislation for tax-exempt mortgage credit for home mortgages expired December 30, 1983- A bill extending this legislation has been introduced in Congress, although its passage

is somewhat questionable as the Reagan Administration finds this subsidy expensive. Bonds for multi-family units are still available; however, these are generally used for large projects and thus, are not appropriate for most infill projects.
The Denver Family Housing Corporation is an arm of the local philanthropic Piton Foundation. This corporation buys-down mortgages with a long term, low interest second mortgage to lower the cost of permanent financing for low and moderate income households. When combined with tax exempt mortgage revenue bonds, these second mortgages are able to reach those traditionally outside the realm of homeownership. The corporation has targeted its efforts to the inner city and has provided mortgages for both existing and new homes. Additionally, the corporation provides down payment assistance and home ownership counseling. The corporation is also considering other mechanisms of lowering housing costs and has become the boldest and most sophisticated innovator on the local scene. In some states, the Housing Finance Authority has taken on a similar role to the the Denver Family Housing Corporation. With appropriations from the state, they are aggressively buying down mortgages and offering homeownership counseling to help expand housing opportunities for those of lower economic means.
At first glance, it may appear that the Federal Housing Administration (FHA) and the Veteran Administration (VA) also provide below market financing. This, however, is only partly true. While FHA and VA mortgages generally run a percent or two below market rate financing, the seller must pay up front costs,

or points, to cover the difference between market rate and PHA or VA financing. Although the buyer benefits by lower monthly payments, the seller usually includes the costs of points in the selling price. Thus, PHA and VA financing, while giving the appearance of offering below market interest rates, do little to lower homeownership cost for lower income households.
The Reagan Administration is proposing a housing voucher program that would lower the cost of housing to consumers, although it would not effectively limit the costs of long term financing. This entitlement program is similar in format to the food stamp program in that cash outlays would be given to individuals to help cover their monthly housing costs. The vouchers would be limited to those lowest on the economic scale and have become quite controversial. Many fear that vouchers would force upward pressure on rents and fail to deal with the housing production problems of this nation. Reagan has included this proposal in his past budget and this year Congress passed an experimental housing voucher program. This program, however, will have little impact on new construction.
No new solutions for lower cost permanet financing are needed. Mortgage revenue bonds may be severely curtailed, leaving only the relatively limited resources of a philanthropic organization to carry the brunt of Denver's below-market mortgage financing. Without new programs, low and moderate income housing consumers will find housing options severely limited and extremely costly.

I < iict
Permanent Financing---------------------------------------7 .-Financings ,-------------------------------Site Acquisition
Program Name Description Funding Allocated by Amount Funded Applicability to Low Income Infill Housing Future
1 j Community Develop-I ment Block Grants 1 l 1 1 Block Grants to serve primarily low income j households, Variety 1 of eligible uses. j 1 Feds to States S3.45 billion for FT 82 $10.4 million to Denver Has housing section. Eligible acitivites include site acquisition and rehabilitation Funding may increase, low income people may not be primary bene-ficaries.
| Urban Develop-| ment Action Grants Discretionary grants to localities to leverage private investments in blighted areas. Feds $440 million Grants applicable to housing among many other uses. Housing may only be part of mixed use developments.
1 Tax Increment J Financing Bonds issued to redevelop blighted areas Local govt. (DURA) Depends on amount of bonds Local government not sure of applicability. Successful applications in other states Has yet to be used locally
Skyline Recapture Funds Funds left over from the Skyline Urban Renewal Feds? Locals? $15-20 million Depends on the criteria used to spend the funds. Could go back to HUD
i Olympic Bond : . Bond floated in 1972 for a variety of housing oroiects. Local govt. (DHA) $10 million Used on some scattered site infill Principal is being depleted.
Local Initiative i Support Corp. 1 | ! Public spirited investment entity -currently being formed locally. Local Corpor- ations Ford Founda- tion Up to $1 million Many provide loans for infill May be a lending entity in near future.
Tax Exempt Mortgage Revenue 3onds Tax free bonds backed back lower interests mortgages for low income homebuyers. Colorado Housing Finance Authority acting on Federal Legislation CHFA has floated over 800 million in bonds since 1975. Targeted to lower income new and existing housing Law expires! December 31, 1983 for single family mortgages
| Denver Family Housing Corporation Writes low interest second mortgages to lower effective mortgage rate. DFHC an arm of the Piton Foundation Targeted to lower income new and existing mortgages Looks good
Federal Housing Administration/ Veteran's Admin- i istration Lower cost loans-seller pays points Feds Limited final costs usually competitive with conventional financing Rates may be deregulated.
Housing Vouchers Proposed Entitlement Program to help cover housing cost reds 1 Would not encourage housing production Experimental program was passed in F.Y. '84

Although there Is a variety of programs aimed at lowering the cost of site acquisition, construction financing, and permanent financing; each one, in and of itself, is adequate to meet housing production needs, particularly in growing states such as Colorado. Even when these programs are combined, they have only limited effectiveness. The dollars allocated to these programs are far below the amount needed. Further, there are few mechanisms available to insure that those at the lowest end of the economic scale are able to secure decent housing. Thus, new and innovative mechanisms are needed to extend and maximize valuable housing dollars.


For several decades, communities throughout the nation have relied heavily on the federal government to provide housing for low and moderate income households. Because of the ready availability of federal funds, few communities created their own mechanisms to aid in housing delivery. These communities are just beginning to understand truly the magnitude and impact of the dwindling federal funds for housing program. With little hope for a new infussion of federal funds, many communities are beginning to create innovative housing programs that maximize existing resources and utilize new tools to meet the growing demand for affordable shelter.
Concurrently, as the problems of housing lower income households grow more complex, they are increasingly the concern of civic-minded corporations and philanthropic foundations. The private sector, typically those concerned with housing finance and construction, are beginning to analyze methods of lowering housing costs for the disadvantaged. Although these corporations are guided to a degree by a sense of alturism and growing public sector pressure, new strategies that maximize tax shelters and minimize risk while helping to fill the void in federal housing funds are more agreeable to even the most fiscally conservative private sector entity.
Neighborhood groups are increasingly rallying around affordable housing issues as well. Neighborhood groups that are

witnessing rapid housing inflation, increased mortgage foreclosures and evictions, and minimal construction are acutely aware of the impacts of federal funding cutbacks. Neighborhood development organizations, at the same time, are increasing their development capabilities and maturing into sophisticated organizations that can successfully utilize a variety of tools. Thus, a growing number of neighborhoods now have both the need and ability to carry out development projects that combine existing resources with new and innovative tools.
Thus, a new and somewhat odd coalition is forming to meet the challenges created by decreases in federal housing funds. City and state governments are increasingly finding themselves in a partnership with the private sector and neighborhood groups to provide housing for low and moderate income households. Most of these new partnerships are in their infancy and the individual partners are just beginning to experiment with the tools that they uniquely offer the other partner members. New mechanisms to lower housing costs are being experimented with in communities as diverse as Brighton, Colorado and San Francisco, California. These mechanisms are in different stages of development; many are untried but promising concepts; others are newly revamped housing programs; and still ethers are working models of innovation.
Although few of these new partnerships have created comprehensive housing programs that can fill the current void, each of these separate housing mechanisms is a potential part of the broader program development. Because the new comprehensive infill housing programs are essentially innovative methods of

resource building, a single weak link or ineffective mechanism may render an entire program ineffective. Thus, each mechanism, in and of itself, requires a great deal of exploration. The advantages, disadvantages, governmental costs, political limitations, and local applications are important elements in analyzing a mechanisms effectiveness. Thus, this chapter will explore these mechanisms to determine their efficacy for low and moderate income housing.
These innovative mechanisms are similar to the existing resources in that they are generally applicable only to one element of housing development, be it site acquisition, construction, financing or permanent financing, rather than applicable to the entire program of development. Thus, these new mechanisms need to be combined with either existing or new tools to truly lower housing costs.
The public sector still has a variety of resources it can utilize to lower the cost of site acquisition. In fact, this is the area in which government support can be the greatest because the government partially controls the use of land through both taxation and zoning. Additionally, government at all levels is a mighty landlord and has considerable property holdings. Many communities have used their power of taxation and zoning as well as fully utlized their land holdings to provide infill sites for low and moderate income households.

Although the government owns land which it utilizes for a variety of civic purposes; it additionally holds tax delinquent properties on which back taxes are due. These properties are generally in ill repair and of little utility to the city. Rather, they are dead weight on tax rolls and cost the city considerable sums of money to manage. Cities are eager to put these properties back to taxable use and hold annual tax sales to dispose of these properties and assure that back taxes are paid. However, because these properties fall into city control, the city can designate specific use for the property at a tax sale to help meet city objectives.
In Des Moines, Iowa, residential vacant tax delinquent properties are offered for sale at a nominal cost. Back taxes are waived, however, the buyer of the property must build affordable housing. The resultant housing must meet established price guidelines and fifty percent of the units must serve low and moderate income households. Housing that is constructed in designated revitalization areas is also eligible for a three year tax abatement to lower housing costs further. This program has been a decided success. It represents the single most substantial housing program in the city.-1- It has been a major impetus in generating low and moderate income housing opportunities and has helped to encourage compatible infill activity in declining areas. Although the city incurred costs as a result of this program, the redevelopment of these properties will generate incrased tax revenues and help the program pay for itself eventually.

This mechanism, although promising, is of marginal utility in Denver. Although tax sales are held annually, under Colorado law, title to a property is not exchanged until three years after a tax sale. This safety net helps to insure that lower income households do not lose their properties for back taxes. Because of the generous time limits, only one percent of the properties actually end up among the citys land holdings and most revert back to the original owner, according to the citys tax assessor. Generally, the properties the city eventually takes are odd sized, lack access, or are otherwise undevelopable. Changing state laws to encourage programs like Des Moines would probably be ill advised because it would lack the safeguards for low and moderate income households and may ultimately create more problems than it solves. However, the city and the Denver Housing Authority own other scattered site properties throughout the city. Providing the land at a minimal cost to developers who meet stringent requirements could help provide incentives to develop these properties for low and moderate income infill housing.
Cities often provide land write-downs to encourage development on specific parcels. Generally, write-downs occur on city owned property or property acquired during urban renewal projects. Essentially the city sells the property below its market value and absorbs the loss. Write downs can occur on any type of development that meets city policy.
Portland, Oregon used this mechanism to help encourage the development of middle income housing on city owned land. The

city drew up a sophisticated redevelopment program that included a specific number of residential units. The city then requested proposals from developers. Although the city did not mandate middle income housing on the site, it stated in the proposal, "Middle income housing refers to residential units priced between $50,000 and $120,000 in 1982. For units above this price, there will be a surcharge on the residential land equal to ten percent of the difference between the selling price and $120,000."^ The extent of the city land write-downs was tied to housing costs, thus providing an incentive to developers to build middle income housing.
Denver has recently come under fire for subsidizing luxury housing developments. This mechanism could be massaged to readily address this criticism and encourage low and moderate income housing production. Such a policy could have many benefits for Denver. It could provide tangible financial incentives to developers of low and moderate income housing, yet allow developers who wish to build more expensive units the right to do so. The new city administration would be making a clear policy statement, yet it would not be regulatory and thus, would be more politically palatable. Additionally, such a program would cost no more to administer than conventional write-down programs and may cost less if city housing objectives are not met. This program does require a definite municipal policy to encourage low and moderate income housing and some city officials, like those in Portland, may find that a policy favoring middle income housing is politically expedient.

The city may use its ability to regulate property to encourage low and moderate income housing programs. Although housing codes and zoning language are currently being revamped to lower housing costs, the city of Palo Alto, California has used its ability to regulate in a unique manner. Palo Alto uses incentives to encourage industrial and commercial developers to provide funds for housing. In California, all proposed commercial and industrial developments must undergo an environmental assessment that reflects both socio-economic and physical concerns. In Palo Alto, if after initial review, the development looks like it may cause minimal negative environmental impacts, the developer may opt to donate money to a housing fund in lieu of being required to conduct a full blown Environmental Impact Statement. The rate of donation is one dollar for every square foot of development. The city provides this incentive because it has found that the biggest negative impact of most commercial and industrial developments is new population growth and the resultant impact on the limited housing stock. All eligible developers have opted for this incentive rather then risk a negative Environmental Impact Statement and thus, the small city has added one and half million dollars to the city's low and moderate income housing program over a year period.^ Thus, this program provides a popular alternative to developers and tangible benefits for the city.
Program administrator, Glenn Miller, feels that such a program is applicable to any community if tied to some form of regulatory relief. In Denver, the main difficulty would be

finding a regulation that could be easily waived as well as providing an enticing incentive. Eliminating environmental impact statements may be ill-advised, because this may solve one problem while promoting another. The funds accrued from this type of mechanism could be used for construction and permanent financing as well as for site acquisition. Thus, this mechanism can provide comprehensive financing for development.
Another similar yet simpler mechanism is fast-track development review. Streamlining the review process has been hailed as one method of lowering housing costs. The developer can avoid holding expensive, undeveloped land for longer periods of time. Increased reliability in the review process can lower developers anxiety levels and increase potential developers' interests, as well as cut costs and time. Many communities, such as Fort Collins, Colorado, are rewriting review procedures to facilitate development. However, citizen particiption can be lost in this process and obviously a balance is crucial between regulatory ease and community interests. The economic impact of fast track review is highly dependent on the amount of time necessary for the normal review period as compared to the time required for a quicker review.
One way to help decontrol the review process while benefitting the entire community is to limit fast track development review to projects that meet established community objectives. Minneapolis, Minnesota, in an effort to attract middle income housing development to the inner city, streamlined the review procedures for middle income housing within certain

boundaries. This ten step review process included city and community input on specific developments as well as adding a degree of reliability for the developer. Community members, city representatives and developers, all worked on designing the new
system, thus helping to insure that all actors objectives were
, , it
met by the program.
Fast track development review that is tied to specific types of developments could help promote low and moderate income infill housing. A streamlined review process would help both to lower pre-construction costs and to remove some of the disincentives inherent in this more risky type of development. Limiting streamlining to specific types of developements would insure that both community values are met and developments, in general, retain some degree of regulation.
Publicly owned land can be a valuable resource for low and moderate income housing. Cities, in particular, own a great deal of property within a community. Libraries, fire stations, schools, and parks are all city owned. Frequently, the government also owns undeveloped properties that are ripe for development. These developments can be designed to meet city objectives as well as increase the citys income.
San Diego, California is a large landholder and has decided to pursue development on city owned tracts to promote affordable housing within the city. The city is currently leasing some of its highly developable land at below market rates. Low cost land leasing provides the city with a steady income on previously vacant tracts and helps to lower land costs for developers. More

than eight hundred primarily moderate income units have been built on city owned land.5 However, the city has had to give up some of its prime urban open space to develop these units.
Although much of San Diego's success has been due to its large land holdings, such success is possible in areas like Denver as well. The benefits to both the developer and the city would be great despite the relatively minimal land holdings of the city. The city must first inventory all city owned properties to find out how many tracts are available for both long term leasing and lower income infill housing. After this analysis, the city can gauge the potential impacts of long term leasing and design a program that would best meet community housing needs.
Many cities are also analyzing air right housing as a mechanism to lower land costs for new housing. Essentially, the city gives a developer the air rights on city owned property. Housing can be built atop parking structures, libraries, police stations, and other city owned facilities. Although the developer actually receives free land, usually the developer must also build a new city owned facility. Depending on the use, this could add substantially to the overall cost of development. Nonetheless, Denver should fully analyze its land holdings to determine which, if any, are appropriate for the type of development. The city could benefit from both a new municipal facility and lower income housing.

Private Sector Resources
Although the private sector has far fewer mechanisms available to lower land costs, the private sector owns and controls considerable amounts of land in urban areas. Land in this country is a commodity, something to be bought and sold, ideally at a profit. Few land holders want to give away their property to help someone else lower development costs without receiving something else in return.
However, new mechanisms are being devised essentially to encoruage this type of activity. Because any donation to a tax-exempt, non-profit group is tax-deductible, a land holder can give land to a tax-exempt development organization and deduct the contribution from his/her taxes. These transactions can occur two ways. The land can be fully donated to a tax-exempt groups and the market price of the land can be deducted from the grantor's taxes. Thus, a $50,000 land donation by a person in the fifty percent tax bracket can net the owner $25,000 in tax savings. These donations happen infrequently and generally only when the owner has little hope of selling the land or a strong sense of social commitment.
A more popular form of donation is the bargain sale. The non-profit group actually pays for the land, but at below market rates. The difference between the selling price and the market price is tax deductible. Thus, the buyer gets discounted land and the seller can get relatively close to market rate values for the property. This mechanism would work for speculators who bought high priced inner city land during Denver's office boom

and are now unable to sell or develop the property due to the current office glut. These developers, although reluctant to take a loss, are eager to sell their properties. However, bargain sales have limited applicability during periods of growth unless the seller is more motivated by alturism than by profits. Neighborhood Resources
Neighborhoods have limited resources to lower land costs, but they can create organizations to compliment public or private sector initiatives. Specifically, neighborhoods can create community land trusts. These non-profit trusts provide a ready vehicle for bargain sale properties or tax deductible land contributions. As non-profit groups, the trust are also eligible for foundation monies or Community Development Block Grant funds for site acquisition. Frequently, these trusts hold the land until either the funds are available to develop them, or a developer is found who will develop these properties according to community wishes. Neighborhood organizations can help facilitate the development of public sector mechanisms. Lobbying and research are the keys to making many of the public sector programs instrumental at the local level. Further, neighborhoods can help developers obtain necessary rezonings, thus facilitating the development process.
All mechanisms to lower land costs can be massaged to meet local needs and provide incentives for new housing. Many of these mechanisms can be expanded to meet other community objectives besides low and moderate income infill developments and can be done at little outright cost to the city. Further, all three

sectors can make important contributions towards lowering land costs for housing. Not only can the private sector and neighborhood groups develop their own programs, but their input is also necessary to create effective and broad based programs at the local government level.

i 1 Sale of tax de- 1 Tax delinquent linquent proper- | properties are ties 1 put on tax rolls j and low income housing is en- j couraged j 1 Effectiveness limited by number of tax delinquent properties Back taxes may i be waived, but program eventually pays for itself j _ i In most states i none, although j there might be | dissent on limited the j i uses of tax de-j linquent pro- i perties Minimal due to state laws, only 1Z of tax delinquent properties end up in city hands
Land write downs 1 Encourage low in- | tied to housing j come housing j costs J without mandating j i it by tying subsidy to unit cost I City loses some degree of control over final type of development No more than traditional write down program. May cost city less if objectives are not met Requires com- j mitment to lower income hous ing Very applicable City under fire for subsidizing luxury units
Industrial/Com- j Makes new commer-mercial Incen- cial/industrial ; tives for Housing 1 developments pay | I for the resultant I pressures on 1 housing Needs balance between regulatory waivers and enticing incentives None Regulation waivers may meet with political opposition Could be highly applicable Must find appropriate type of regulatory relief
! Fast track development review i } Provides incentives to build housing that meets municipal objectives Needs balance between streamlining development process and insuring community input None Ill-designed program may short change community participation Would work if neighborhoods, private sector, and city help design program
Low cost land leasing Lowers housing costs; city benefits from rental revenues Effectiveness depends on amount of city owned land None Some may oppose using open space for housing Denver does not have a great deal of city owned land
Air right | housing Free land for low income housing Developer may have to build or upgrade expensive city facilities None Densities must be consistent with neighborhood City owned properties must be fully explored
j 3argain sales l\ Seller gets tax deduction, n-p developer gets below market land Does not work well in period of growth Government loses tax revenues None High because many speculators have been caught with expensive land during the current office glut
j ; Community land j Important tracts j trust l preserved for j eventual devel-| opment ll 1 Trust needs resources to purchase land None None Denver has sophisticated neighborhood organizations who would benefit from a land trust

Public Sector Resources
A few municipalities and states have devised mechanisms to lower the cost of construction financing. Unlike the federal government, whose resources lower construction costs through direct subsidy, local governments are now devising a variety of mechanisms that decrease construction time, increase densities, or lower one element of construction costs.
Local government has used its power of zoning the help lower construction cost by increasing allowable densities. Cities throughout the country are rewriting their zoning statues to achieve this objectives. If done totally across the board, such zoning language changes will have some favorable impact on lower income housing because smaller, denser units are cheaper to build. However, bonus zoning, wherein only developers of lower income units are allowed to build at increased densities, provide a real incentive. Of course, like any change in zoning, community input must be sought to assure that increased densities do not conflict with community interests. This is particularly crucial of infill developments in inner city areas that are generally already densely developed.
Bonus zoning has been used in some instances to encourage lower income housing. In California, developers may increase densities by 25$ if they include 25$ low and moderate income housing units in their development.^ Additionally, bonus zoning has been used to encourage other municipal objectives. It has been used locally to encourage housing in lower downtown by

offering increased floor-area-ratios for mixed-use developments. Similar changes are proposed for other zones surrounding Denver's Central Business District. With the precedent already set, the city could consider using this vehicle to encourage the production of low to moderate income housing units in inner city neighborhoods.
Many communities have taken the power of zoning a step further and have mandated that low and moderate income units must be a part of every new multi-family development. Inclusionary Zoning has been used broadly in suburban communities to meet Fair Share housing requirements.
Montgomery County, Maryland was one of the first areas in the nation to institute inclusionary zoning and in many regards, the countys program typifies this type of mechanism. Twelve percent of the units in developments of fifty units or more must be set aside for low and moderate income housing. Price controls are set on these units to discourage speculation and tenants must meet strict income limits. Developers are granted a twenty percent density incentive on these units and also have the option of transferring finished lots on the development site to the county in lieu of constructing units. A recent study of inclusionary zoning found that local government commitment combined with flexible incentives are the keys to the successful application of this mechanism.^
Although inclusionary zoning is primarily a suburban response to the current housing dilemma, this mechanism can be applied to urban areas as well. Specifically, it can work in

developing areas such as Denver's Platte Valley. Larger infill developments may also be applicable. Some communities allow cash payments to a low and moderate income housing fund in lieu of constructing new units for smaller projects. This gives small developers an incentive to build affordable units that meet the established guidelines and can also provide funds for construction on smaller infill lots. This program, especially when combined with incentives, could readily work in growing urban areas such as Denver.
Other regulations have been experimented with to promote lower income housing. Perhaps the most innovative is San Francisco's Office/Housing Production Program. San Francisco faces a severe housing crisis: its housing is the most expensive in the nation and housing construction has failed to keep up with the pace of office construction, thus, exacerbating housing problems. Municipal officials, pressed to design a mechanism that would respond to this dilemma, created the Office Housing Production Program in 1981. This mechanism requires that office developers must also construct housing or provide funds for housing at the rate of four hundred square feet of housing for every two hundred and fifty square feet of office development. In the program's first year, seventeen million dollars were donated by developers and twenty one hundred units were constructed or rehabilitated. Although the housing production requirement is not limited to low income units, the city has created a low interest mortgage loan pool for lower income households with some of these funds. Developers dislike the program

and have been lobbying against it. Nonetheless, office construction continues at a brisk pace, indicating that this regulation has been at most a minimal disincentive for office construction.
A similar mechanism could work in Denver. It requires a firm commitment to housing by bureaucrats and politicians at the risk of alienating developers. It is unlikely that elected officials would put more teeth into the mechanism and specifically earmark funds for lower income housing. This program also is not recession-proof and may have limited impacts due to the current glut of office space. Nonetheless, its effectiveness in San Francisco is indeed impressive and local applications should be pursued.
Cities can also eliminate or reduce fees to lower housing construction costs. Fee waivers can prove to be an enticing incentive when one looks at the average cost of fees for each housing unit. In Denver, fees run about $6,200 for a 1,000 square foot house valued at $50,000. These fees Include:
Water Tap Fees Sewer Tap Fees Pin Survey Soils Report New Address Building Permits
Total Feesu $6,210.00
Additional costs as high as $4,500^ are incurred in outlying areas that lack infrastructure. Thus, fees add considerably to the construction costs of new housing and ultimately to the final selling price.

Cities extract a healthy income from fees and many communities are unwilling to lose this valuable source cf revenue even if social benefits can be accrued. However, there are several ways to circumvent this loss and help achieve municipal objectives through fees. Omaha, Nebraska, in an attempt to encourage infill developments, waived sewer and plat fees in inner city areas and subsidized them by increasing fees in outlying areas.1 Although the city has not monitored this mechanisms effectiveness, development activity in the inner city has increased since this program was instituted.
Water and sewer are expensive development fees and, unlike building permits, are based on a fixed schedule. In some regards, this hardly seem appropriate. A house with six bathrooms is likely to have greater water and sewer requirements than a house with one bathroom. Pees could easily be based on the number of plumbing fixtures in a house, on the size of a house, or on the final cost of the unit. Thus, lower cost, smaller units would likely benefit from lower fees. The city would not lose revenues as more expensive units would subsidize the reduced fees. Although this would have a lesser impact than total fee waivers, it also would not impact municipal revenues. Private Sector Resources
An anomaly impacts private sector resources for lowering construction costs. Although businesses and corporations have substantial resources for lowering construction costs, few private sector members wish to take on the increased risk and challenge alone. Public spirited development entities can lower

corporate risk while providing a broad based vehicle for developing infill lots. Essentially, private sector members pool limited amounts of money to help meet civic objectives in two forms, for-profit entities and non-profit entities.
For-profit entities are infrequently used for lower income housing developments. However, they do have limited efficacy, especially when combined with other mechanisms that lower housing costs. Essentially, corporations purchase shares in a public spirited development corporation. In return, they receive dividends on their shares as a result of the corporations activities. These dividends are frequently less than the profits accrued from traditionally developed projects. Risk is shared by several businesses which are concurrently fulfilling civic obligations.
Non-profit public spirited development entities are used far more broadly for lower income infill and rehabilitation projects. Corporations donate funds to a development entity. Donations are tax deductible. The development entity has essentially free capital for projects and thus, effectively lowers housing construction costs. Although not organized to generate profits, these entities must take on successful and marginally risky projects; unsuccessful projects alienate future donors. Funds are frequently used on a revolving basis to maximize their effectiveness.
Frequently, non-profit and for-profit development entities are created in the same city, both to garner broad-based corporate support and to have the necessary resources to achieve

a wide variety of civic improvements. Minneapolis typifies this arrangement and was the first city in the nation to use these mechanisms successfully. The Greater Minneapolis Metropolitan Housing Corporation is the non-profit arm. Ten to fifteen firms donate $200,000 each annually. These funds have been combined with federal programs to maximize their effectiveness. The corporation has constructed 3,000 housing units and has completed 80 million dollars in construction.1-*- The Minneapolis Downtown Development Corporation is the for-profit arm which develops market rate housing in the downtown area. Twenty three local firms own shares in the corporation, which is responsible for the construction of almost 900 units in nine years.^
Denver is seeking to develop similar entities locally. The Denver Partnership has been spearheading this effort with support from the city administration. However, the most successful development entities are found in cities with many corporate headquarters, such as Minneapolis, Hartford, Connecticut, and Cleveland, Ohio. Large firms are most willing to invest in their hometowns, and thus, Denver may be at a slight disadvantage and able to create only a smaller development entity due to the limited number of corporate headquarters established locally. Neighborhood Resources
Neighborhood organizations have limited resources for lowering the cost of new construction. Construction financing is out of the hands of average citizens, and thus, they have little ability to impact this element of development. However, neighborhoods can develop Neighborhood Development Organizations.

These organizations are similar to public spirited development entities in that they are eligible for tax deductible donations, if organized as a tax-exempt, non-profit corporation. Additionally, these organizations are uniquely eligible to use Community Development Block Grants for new construction. These organizations are able to respond to community wishes best because they are neighborhood based. Denver has a proliferation of neighborhood development organizations which have been responsible for much of the infill activity and the construction of lower income housing locally. These organizations, although in and of themselves, are not a mechanism to lower housing costs; they are an obvious vehicle to utilize a variety of mechanisms in an effective and comprehensive manner to lower housing costs.
House moving, although not new construction, is another manner of infilling lots with lower income housing units. Houses scheduled for demolition, can be donated to non-profit neighborhood development organizations. These units can be moved to a vacant lot and rehabilitated by neighborhood workers and sold at below market rates.
The Center for Community Development and Design at the University of Colorado at Denver has become a local clearinghouse for house moves. The Center has orchestrated four house moves to date. Nine hundred square foot units sell for less than $40,000, a decided bargain in today's housing market.^ Neighborhood development organizations financed, rehabilitated, and sold the unit; thus increasing their own development capabilities while providing lower income housing. Though the numbers are small,

the result has been indeed impressive, and other house move possibilities are being explored.
Public sector, private sector, and neighborhood groups throughout the nation are exploring methods to lower construction costs. These innovative strategies, when combined with less expensive construction techniques and revamped municipal codes, can help fill the void in current construction programs and increase housing opportunities for low and moderate income households.

ood vat tor
| 3onus Zoning Lowers cost and provides incentives for lower income housing City loses degree of control over densities None Density incentives should not exceed community wishes Has been used to encourage downtown housing and could be applied to affordable units
, Xnclusionary Zoning 1 1 Mandates that all developments include lower income units Less applicable in urban areas None Requires governmental commitment to low income housing at the risk of alienating developers Works best in developing areas like the Platte Valley or for large infill projects
Office/Housing Production Program Requires that office developers build housing to offset resultant impacts on housing stock Not recession-proof None Developers dislike this exaction and thus, may be a disincentive for office construction Will not work until Denver's office glut has been absorbed
Fee Waivers Can substantially lower housing cost City relies heavily on revenues Requires interagency cooperation Municipal cost would be high, unless fees were based on sliding scale Upper income households may balk at sliding scale fees Currently, sliding scale fees could help offset subsidy
For Profit Public Spirited Development Entities Provides funds for housing while corporate donors earn money Marginally applicable for low income housing None May end up gentrifying neighborhoods Currently being organized
Non-profit Public Spirited Development Entities Pool of funds for housing development Neighborhoods may be outside of decision making process Frequently combined with governmental resources Can compete with neighborhood based developers for money Currently being organized
House Moving Saves existing stock, infills lots and lowers housing costs Requires coordination between several entities None None Currently being promoted in Denver

Public Sector Resources
There are few innovative resources being created by the public sector to lower the cost of permanent financing. Government at the state and local level has little influence over the cost of permanent financing and thus cannot lower this cost without an outright subsidy.
Some governments have tried to fill this void by floating General Obligation Bonds for housing. These municipal bonds, if approved by voters, help to finance housing at below market rates. Property taxes are increased to repay the bond. General Obligation Bonds have limited app1icapabi1ity as voters are unlikely to approve bonds on an ongoing basis. However, this mechanism shows some promise for lowering permanent financing costs for affordable housing.
Seattle, Washington voters passed a General Obligation Bond in 1982 to finance one thousand elderly units. This 48.1 million dollar bond was widely approved by voters and resulted in an average property tax increase of twenty three dollars per annum City officials, although pleased with the results, feel that General Obligation Bonds for low income family units would be far more difficult to get approved.
Denver's Olympic Bond was a General Obligation Bond approved by voters In 1972. As stated previously, this bond was used for a variety of housing developments including low and moderate income infill. It is questionable if voters would approve a new bond, especially without it being attached to something like the

Olympics. However, vigorous lobbying efforts may help garner support for a General Obligation Bond for housing.
Property taxes are the second largest carrying cost of housing-^} and abatements may lower both the cost of home-ownership and monthly housing payments. A few states offer tax abatements for low and moderate income households. California has an abatement program for housing constructed in designated "blighted" areas. Connecticut provides abatements and reimbursement to municipalities for low and moderate income projects for forty years. Ohio allows municipalities and counties to freeze property taxes in special rehabilitation districts.1^ These mechanisms, while effective, are not popular. Taxes impact the liquidity of cities and local officials are zealous to keep them high.1^ Further, while states legislate property taxes, municipalities are the recipient of this revenue. Thus, support at both the state and local level is a necessary prerequisite for this program.
Colorado has circuit breaker tax relief for the elderly wherein the costs of property taxes are offset by state income tax credits. Denver also offers tax abatements for elderly people meeting specific income requirements. These programs are limited to a specific class of low income housing consumers and do little to lower housing costs for the majority of low income households. Statewide elections to amend the constitution would be necessary to expand these laws and it is questionable if abatements would be popularly supported. If abatements limited to particular housing units, such as new lower income infill, it

may be more politically palatable and less costly for cities.
Other mechanisms that have been previously mentioned may be applied to lowering the cost of permanent financing. Specifically, regulation waivers, inclusionary zoning, and the Office/Housing Production Program may result in a pool of funds that can be used for mortgage assistance. However, municipal officials are frequently unwilling to commit funds for a long duration and prefer to utilize them for site acquisition or construction funds that are quickly recycled. Using this pool of money as second mortgages to lower the effective rate of housing payments can spread this limited resource further. If cities use mechanisms that create pools of funds, efforts should be made to use these funds as broadly as possible. Cities need to first be aware of the funds that can be pooled together and devise innovative methods to disperse them.
Private Sector Resources
The private sector can easily lower the cost of permanent financing by changing some policies. For example, interest rates could be based on sliding scales or certain types of housing consumers could be given a break on loan costs. However, as is the case with site acquisition, few private sector entities are likley to branch out individually into new and risky territory. Savings and loan institutions, banks, and mortgage institutions, however, can each contribute funds to a non-profit mortgage pool.
Mortgage pools are somewhat common. Denvers Lender's Mortgage, a separate mortgage company that sold its loans to six local banks, wrote 400 loans during the four years of its

1 ft
existence to help spur investments in the inner city.10 loansj however, were market rate and helped banks fulfill their Community Reinvestment Act requirements. The company was a local model of innovation and could be reincorporated to serve low income buyers with below market mortgages.
Neighborhood Resources
A complicated mechanism that combines the resources of the private sector and neighborhood groups is equity syndication. Syndication is an increasingly popular method of financing projects and lowering long term costs. Although syndication does not replace a mortgage, it provides the necessary equity to make a project feasible. Essentially, a non-profit neighborhood development organization forms a limited partnership with affluent and generally civic minded investors. The neighborhood development organization is the general partner who manages and assumes all risks for the project. The investors, or limited partners, put up the front end cash for the project and are otherwise passive in the project's development. The limited partners incure the tax deductible losses from the project. These are not acutal losses, but rather paper losses resulting from depreciation. Positive cash flow is usually divided between the limited partners with a small amount going to the general partner. Upon sale of the development, profits are split evenly between the limited and general partners. Syndication can help lower the rents of low income housing developments because investors can finance the difference between rents and operating losses.19 Because of the capital requirements, syndication

generally works best for larger projects.
Syndication has been used widely throughout the country. Non-profit developers in cities as diverse as Lancaster, Pennsylvania and Savannah, Georgia have used this mechanism. Additionally, several investment firms strictly handle syndication. Syndication is being explored in Denver and a few local non-profits groups have used this mechanism to finance projects. It is, indeed, an intriguing mechanism with tangible benefits for both investors and neighborhood developers.
Neighborhood development organizations can also lower permanent financing costs by developing cooperative housing. Ownership of a cooperative building is shared jointly by all residents. This method of ownership does not necessarily assure affordable housing. However, sharing costs can frequently mean lower costs. Additionally, real estate brokerage fees, which can add seven percent to real estate transactions, do not apply to cooperative units. Cooperative ownership is generally not speculative and thus, resale values are controlled. Further, cooperative developments are run democratically which can give lower income individuals a greater sense of control and increased ties to the community.
Cooperatives have not been as widely used in this nation as
they have been abroad. In Denver, there are currently ten
p n
cooperatives. u However, possibilities are being explored to expand this mechanism. Several programs have been instituted by the Federal Housing Administration to provide incentives for cooperative projects. These programs include federal loan

insurance, rehabilitation loans, and loans to help tenants purchase converted units. Non-profit neighborhood development organizations are the logical vehicle to develop affordable cooperative housing on vacant inner city lots. These developers are uniquely aware of community housing needs and are also eligible for grants, low interest loans, and federal funds which can further lower housing costs.
Infill development is a time consuming process. It takes a concerted effort to develop even one site and most inner city neighborhoods have a proliferation of vacant lots and deteriorated tracts. Interim strategies are also necessary to help visually improve lots while allowing time to coalesce resources for development. Community gardens are low cost alternatives to weeded and littered lots. This type of project also helps to bring neighbors closer together. Pocket parks, although more expensive, can also meet community needs while mitigating the ill-effects of blighted lots. Pocket parks are best in lots that are a low priority for development because of the costs associated with their development. Other projects that can fulfill community needs should be planned on vacant lots as well. Additionally, the city can encourage infill development by surveying vacant lots. This can help the community prioritize infill projects and can streamline assemblage of developable sites. These interim activities have immediate, beneficial impacts for communities and accelerate community Improvement.

Cities, working in conjunction with the private sector and neighborhood groups, should create a comprehensive housing programs by combining a variety of mechanisms mentioned in this chapter. While the combinations are nearly endless, communities must be selective when devising programs that fulfill their needs.
Although more than twenty mechanisms have been explored in this chapter, the possibilities for lowering housing costs are boundless. Regulations, incentives, tax deductible donations, and other types of mechanisms can be manipulated in a variety of ways. Local officials, combining efforts with the private sector and neighborhood groups, should be able to create new mechanisms that uniquely respond to city needs and compliment other existing resources. Thus, the aforementioned mechanisms should not be seen as a conclusive list. Rather, these mechanisms should be seen as some of the possibilities that result when housing activists collaborate and creatively respond to the current housing crisis to encourage affordable infill development.

-fll JSh JXb iSU,'-

Clearly, communities have several options if they wish to pursue low and moderate income infill housing program. Cities, such as Denver, can adopt one or several of the mechanisms discussed in the previous chapter and adapt them to meet specific, localized needs. Cities also can combine these mechanisms with existing resources to leverage their effectiveness. They can create new mechanisms or take a passive role and let the private sector and the neighborhood groups design mechanisms to achieve this goal. These options are limited only by the imagination and the community's commitment to affordable housing.
The actions that the public sector, private sector, and neighborhood groups take to create a housing program should be based on clear policy decisions and priorities. Adopting a mechanism or creating a comprehensive housing program should not be taken lightly. Each low and moderate income infill housing mechanism requires definite support if it is to be successfully implemented. Programs that lack this underlying foundation are likely to be ineffective and ultimately fail.
Thus, the first step for any c ommun ity interested in implementing a low and moderate income infill housing program should be defining clear and definite policies. All housing actors need to be intimately involved in this process. These policies, once established, can then become the basis for a truly comprehensive and broad-based housing programs.

Creating Housing Policy
The public sector, private sector, and neighborhood groups all have different goals and objectives when defining housing policy. Before the individual actors can sit down at one table and design city-wide housing programs, each needs to have defined its own housing objectives. Each group needs to determine its level of commitment, both in time and resources. Once this important exercise is completed, a program that reflects a consensus by the various actors can be readily devised.
Public Sector Housing Policy
The public sector housing policy is, perhaps, the most crucial element in the formation of a housing program. The public sector, particularly at the local level, is likely to be responsible for the administration and implementation of a housing program. Thus, the city needs to support the program vigorously. Programs that fail to represent public policy will be difficult to effectuate at the local level.
The public sector has many assets and liabilities that ultimately impact policy decisions. The city and state control many federal resources and must decide whether to use these funds to improve housing conditions. The public sector controls land use through the powers of taxation, zoning, and eminent domain. Again, the powers can be used to achieve social goals, should the public sector so choose. Government also has a neutral position. While this makes the public sector an excellent mediator between grassroot organizations and the private sector, it may be reluctant to take positions which affects this neutrality or alienate

any housing actor. Similarly, the government many be reluctant to take on any unpopular policies because it is essentially a political animal that frequently bases decisions on political expediency rather than social gains. In addition, the government is not one singular entity and different representatives may have differing objectives. Because of declining federal subsidies to cities and states, localities are increasingly basing decisions on tax base impacts rather than social impacts. This, too, ultimately affect low and moderate income housing policy.
Thus, the private sector has to make several important decisions in order to establish housing policy. These decisions include:
How much of their federal resources are states and municipalities willing to commit to help increase low and moderate income infill opportunities?
Is the public sector willing to risk alienating some housing actors to achieve this goal? Is local government willing to work with all actors to minimize opposition?
Would the public sector be willing to support incentives and/or regulation to achieve this goal?
How much staff time is the public sector willing to commit to this program?
Is the public sector willing to use its power of taxation to help subsidize affordable housing? Is it willing to provide a shallow subsidy to lower income housing projects at the expense of other programs?

City, state, and local officials all need to be involved in this decision-making process. Input should be sought from representatives from a variety of departments and agencies as well as from elected officials. Decisions need to be politically palatable to politicians and administratively feasible to administrators. This process may not be easy and the impacts of each decision need to be thoroughly explored. However, these decisions, which will become the basis for housing policy and programs, need broad-based support to be successfully implemented .
The Private Sector Housing Policy
Formulating a private sector housing policy is much more difficult than formulating public policy. The private sector is made up of many distinct actors, each with its own goals and objectives. Further, the private sector is less committed to the public good than the public sector. Eecause of competition, intergroup cooperation may also be less than desirable. Thus, a task force or an independently established arm of the private sector may work best to decipher private sector housing policy and achieve group consensus. If broad support is difficult to obtain, the other partners may only involve those private sector members that have favorable attitudes towards affordable housing programs.
The private sector can greatly impact low and moderate income housing construction as it owns most of this nations urban lands. Additionally, the private sector finances or builds most residential development and there are few housing production

programs that do not rely on the private sector for some assistance in the development process. Thus, private sector involvement is crucial in any housing program.
However, the private sector's primary motivation is profits. Projects that do not have ample profit margins or low risks are likely to be outside the interest of the private sector. Thus, the private sector generally will not get involved in lower income, inner city housing wherein the profit margin is small and the risks great. Despite this, many private sector entities, particularly foundations and larger corporations, have a strong sense of public commitment and alturism. Therefore, private sector housing policy must attempt to fulfill this sense of social responsibility while maintaining healthy profit margins.
Thus, devising private sector housing policy is a difficult task. The private sector will face many issues when formulating policy including:
What is this group's level of social commitment to low and moderate income housing?
How can this commitment be achieved with minimal impacts to profits?
How does this policy affect other private sector, inner city development policies such as the renovation/gentrifi-cation of older neighborhoods and developments of mixed use projects?
Will incentives be sufficient to encourage the production of low and moderate income housing?

Will the private sector utilize mechanisms that maximize tax benefits?
Because the private sector consists of many independent entities, one definitive poicy may be difficult to achieve. Thus, the private sector's housing policy is not likely to be a concise document; rather, it is likely to be acceptable parameters for private sector participation in low and moderate income housing. However, polling the private sector to determine their level of commitment to this civic cause is necessary to create a broad-based and widely supported housing policy. Neighborhood Groups' Housing Policy
Neighborhood groups also need to determine their housing policy. This will help neighborhoods have better control over their own destiny as well as help create a housing program that reflects grassroot needs. Defining these policies will be no easy task. Each neighbor and each neighborhood is likely to have individual goals and objectives. Developing policies could come as the result of a long community planning process. Workshops on this specific issue may help to accelerate the process while maintaining broad-based community participation.
Neighborhood input is crucial in developing a workable housing policy. Neighborhoods will be the direct recipients of a low and moderate income infill housing program. However, too often, neighborhood groups are not seen as equal partners in policy decisions. This alienates the community from the project and may make an otherwise highly workable program the source of much unnecessary yet justified resentment. Further, neighborhood

support is necessary for zoning changes or other regulatory adjustments that are part of the adopted housing policy. Determining the level of grassroot support for these changes is necessary from the earliest stage of program formulation. Finally, neighborhood based development organizations are to be the likely vehicles for developing low and moderate-income infill housing. These organizations will take on projects with greater risks and lower profits than traditional developers. Thus, housing policy and the resultant programs must maximize neighborhood based developers' capabilities and enfranchise community groups.
Neighborhood groups, like any other housing actors, must define their housing policy. Some issues that neighborhood groups must resolve include:
What are acceptable zone changes that neighborhoods will support to achieve low and moderate inocme housing?
What do neighborhood groups need to leverage their finances successfully?
Are neighborhood willing to make trade-offs to encourage low and moderate-income infill housing? Are density increases or middle income housing palatable to low-income neighborhood groups?
What are the neighborhoods' development priorities? Which lots are ripe for development? What are appropriate interim uses for lots? Can housing programs be tied to other types of development?
As with the private sector, a singular neighborhood housing program is unlikely to be unanimously supported. Every neighbor-

hood has its own housing goals. Thus, a policy may again only be broad parameters. A consortium of neighborhood groups, like Denver's Neighborhood Partnership or Inter-Neighborhood Cooperation, may be best able to hash out workable parameters for neighborhoods. These rough outlines will then be given final form by the individual neighborhood groups.
After the private sector, public sector, and neighborhoods determine their own housing policies, the next step is to create a city-wide policy that reflects the constraints and commitment of each groups' policy document. A task force may be created to refine this housing policy. The task may be easy if each individual policy compliments the others. Policy formulation will be far more difficult if the goals and objectives of the housing policies conflict. However, the creation of a city-wide housing policy that is satisfactory to all housing actors is an extremely important step. This policy will become the foundation of a housing program. The degree of commitment and participation by each housing actor, as laid out in this policy, will determine the tone and impact of the final housing program.
Creating a Housing Program
With this groundwork laid, the creation of a workable housing program is considerably easier. Essentially, members of the public sector, private sector, and neighborhood groups must select new mechanisms that will leverage existing resources and meet the goals of the housing policy. The mechanisms in the previous chapter are all highly combinable with one another and with existing resources. However, these mechanisms all reflect

varying levels of commitment and effectiveness. Thus, the selection of mechanisms should reflect the degree of commitment that is evidenced in the city-wide housing policy.
If the city, private sector, and neighborhood groups are all moderately committed to low and moderate-income housing, an incentive program may be a workable solution. This program consists of incentives to entice developers to construct low and moderate-income infill housing. However, the construction of such units is not mandatory. This program relies heavily on private sector and neighborhood developers to utilize the incentives if it is to be broadly effective. If the incentives are not enticing enough, few low and moderate-income units will be developed. If the incentives are broad and positively impact the feasibility of a project, it is likely that many new units of affordable houisng will be developed.
Incentives include mechanisms such as fast-track development-review, air right housing, bonus zoning, fee waivers, and tax abatements. The city may adopt one or several mechanisms. It can use its existing resources as further incentives to build low and moderate-income housing as well. Although this program is not indicative of a broad level of commitment to low and moderate-income housing, it is possible that by combining these varied and effective mechanisms, lew and moderate-income housing production may be greatly encouraged.
Perhaps the public sector and neighborhood groups find themselves very committed to low and moderate-income infill housing, but the private sector does not share this commitment.

Regulations may prove to be a feasible program. Essentially, the city requires developers to build lew and moderate-income infill housing or donate funds to help achieve this goal. Regulations may vary in their severity. Some may exact a good deal at the risk of alienating developers from developing in the city. Others may be weak or unenforceable and may yield very little new construction of affordable units. Obviously, the best program strikes a balance between the two: they are broadly effective and do not hinder the level of development in the city.
San Franciscos Office/Housing Production program and inclusionary zoning are two examples of regulatory mechanisms. Both could work in Denver, but they would have to be massaged to reflect local constraints. Denver's downtown office glut affects the current viability of the Office/Housing Production Program and limited open space negatively impact inclusionary zoning programs. Nonetheless, these or similar regulatory programs could create new opportunities for low and moderate-income infill housing. Because the impact of the program is determined by the degree of requirements and the level of development within the city, long term effectiveness is hard to gauge.
While the public sector, private sector, and neighborhood groups may all be committed to lower income housing, the private sector may not willingly invest in it unless the city takes on a share of the financial responsibility. In such cases, programs that include a public sector subsidy may be feasible. These programs would vary from the traditional subsidy program by the type of subsidy that is utilized. While in the past subsidies

have been largely grants or low interest loans to developers, these programs use innovative mechanisms to create new sources of revenue.
Some new public subsidies include fee waivers, tax abatement, sale of tax delinquent properties, low cost land leasing, and general obligation bonds. The city and state must be willing to aggressively use their power of taxation as well as shift funds from other programs. Thus, this program requires a strong degree of municipal commitment; the city must be willing to invest in the goals in which it truly believes. These subsidies can be combined with one another or with existing resources to lower housing costs. As in any program, its final form determines the level of effectiveness.
It is possible that, upon defining housing policy, the public sector commitment to affordable housing is less than that of neighborhood groups and the private sector. In this case, a program which utilizes tax benefits may work. In this program, the private sector and non-profit neighborhood groups form partnerships that maximize tax advantages and the city assumes a more passive role. These tax mechanisms, although used on a small scale at present, would have to be implemented on a much broader level if a substantial amount of new housing is to be constructed.
Bargain sales, community land trusts, non-profit public spirited development entities, equity syndication, house moving, and mortgage pools all utilize tax benefits to help lower housing costs. Such programs could work locally, although some entity,

perhaps the public sector, would have to serve as a coordinator to encourage partnership formation. However, because the tax benefits free up less capital than other housing mechanisms, they are a less than perfect substitute for public participation in housing programs.
Although many of the mechanisms discussed in the previous chapter are readily catagorized into one of these four programs, housing programs need not be limited to such narrow parameters. Programs can combine incentives, regulations, subsidies, and tax benefit mechanisms in a variety of ways. This, in fact, may increase their effectiveness. A recent study (Schwartz and Johnson: 1982) found that inclusionary zoning programs that combined incentives with regulations were best able to achieve public objectives. This study found that incentive-only programs did not provide broad enough enticement and regulation-only programs caused developers to seek areas unencumbered by regulations. In addition to combining different types of mechanisms, cities may also want to adopt several programs in order to encourage a variety of development projects. This flexible format can respond to the differing needs of neighborhoods better than one, rigid program. Thus, cities have a variety of options when establishing low and moderate-income infill housing programs that reflect public policy.
Infill Housing as Part of a Comprehensive Program
Low and moderate-income infill housing, although an appropriate vehicle, is not the panacea for this nation's housing problems. While many mechanisms and programs are highly

effective, they also have limitations. New public policies, that reflect a nation-wide concern for low and moderate-income housing are needed if housing programs are to be effective on a broad scale.
Inter-regional competition limits the abilities of communities to create strong regulations or exaction programs. These programs frequently cause developers to develop in other communities which exacerbates local housing production problems. Currently, the City of Denver is losing population and is unable to compete with suburban areas for new residential development. An exaction program is likely to compound this problem. Thus, housing production programs need to be mandated on the broadest level of government possible to provide a truly comprehensive response to the nation's housing production problems. California requires every community to have its own affordable housing program. Because of this, California has become a national model of innovation and without inter-regional competition, its municipalities have created extensive new housing mechanisms. One can only imagine the impacts if a similar requirement was mandated at the federal level.
A further limitation of many of these mechanisms and the resultant programs is that they fail to address the needs of the very poorest individuals. The term "low and moderate-income" encompasses a broad range. Typically, developers, when given the option, build for those at the upper end of moderate-income rather than those at the low end of low income. The mechanisms that yield a housing trust fund are able to provide housing for

low income individuals, but the financial limitations of these funds preclude a thorough response to this dilemma. Thus, while new efforts to encourage low income housing should be applauded, they are generally unable to meet the growing demand fully. A new infusion of housing subsidies is sorely needed by most municipalities .
Additionally, infill housing is only one element of a comprehensive lower income housing program. As stated previously, infill is limited by the availability of vacant lots and existing zoning. While infill has the decided advantage of improving neighborhoods and concurrently producing new housing, it cannot be the foundation for an effective housing program. Rehabilitation of existing units, mortgage and rental assistance, and new production as well as infill all need to occur on a broad scale. All elements need to be included in programs if this nation's housing problems are to be solved to a large degree.
Finally, the financial resources of cities, states, and the private sector are inadequate to meet the growing need for truly affordable housing. These resources are limited and as states and cities find themselves increasingly strapped for cash, funds will further contract. As long as the current federal administration opposes funding lower-income housing construction, the nation's housing supply problems will be exacerbated. Without outright and large scale subsidies, developers, be they for-profit or non-profit, will be unable to construct housing for the nation's needy. Thus, a renewed commitment to lower income housing on the federal level is necessary to respond to the na-

tional housing problem in a comprehensive and truly effective manner.
Despite these limitations, or perhaps because of them, cities and states should pursue vigorous infill strategies as part of their housing programs. Unless the 1984 election results in a new administration, changes at the federal level are unlikely. Housing conditions for those at the lower end of the economic scale are likely to worsen in the absence of federal assistance. Thus, states and municipalities must initiate, at least, stop-gap measures to address this growing need. Cities, such as Denver, that are currently experiencing declining housing opportunities for the poor and increased competition for limited housing stock, can utilize vacant land and strengthen existing communities by promoting low and moderate-income infill housing. New mechanisms that rely on the joint cooperation of the public sector, private sector, and neighborhood groups can help meet this need while concurrently promoting civic unity and pride. Thus, innovative programs to encourage low and moderate-income infill housing, while only one part of a comprehensive housing program, can be instrumental in achieving a variety of important community goals.
Perhaps this innovation at the local level, if broadly instituted, can be translated into a national concern. If states, municipalities, and their constituencies find affordable housing a crucial need, this can help to forge a new and enlightened attitude at the federal level. All levels of government working together and combining efforts with the

private reaching nation's
sector and grassroot community groups can create programs that can meet the housing needs for all people.
f ar-thi s


J 1^5 tf tS fc

1 Council on Development Choices for the 80Ts, Development Choices for the 80's (Washington: U.S. Department of Housing and Urban Development, 1980), pp. 4-5.
c Price Index of New One Family Houses Sold: First Quarter 1983 (Washington: U.S. Department of Commerce, 1983), p. 3-
The President's National Urban Policy Report ('Washington: U.S. Department of Housing and Urban Development, 7980), pp. 52.
For greater detail, see the Governor's Public-Private Housing Strategies Task Force; Housing Colorado: An Agenda for State Leadership and Action (Denver: Center for Public-Private
Sector Cooperation, 1983 ).
5 Pruitt Igoe was 43 high rise buildings of public housing constructed in 1954. It rapidly became a black ghetto. By 1972, it was so dangerously deteriorated and generally uninhabited, that a number of the buildings were demolished by the city.
Chapter I
1 Census of Population: General Population Characteristics: Colorado (Washington: U.S. DeDartment of Commerced 1983), ppu T~
For greater discussion, see Franklin James', Colorado Housing: Current Problems and Future Challenges (Denver: Center
for Public-Private Sector Cooperation, 1982).
3 U.S. Department of Housing and Urban Development, telephone conversation with Jim Cole, November, 1982.
^ James, Colorado, p. 46.
5 Eased on analysis of the 1980 Census Data.
^ Census of Population: Genera 1 Social and Economic
Characteristics: Colorado (Washington: U.S. Department of
Commerce, 19^3), PP- 7_l4 and Census of Population: Genera 1 Housing Characteristics: Colorado (Washington: U.S. Department
of Commerce, 1983), PP* 7~9-
1 James, Colorado, p. 38.
The President's National Urban Policy Report (Washington: U.S. Department of Houisng and Urban Development, 1980), pp. 52.