Real Estate

Denver Proposes 0.5% Sales Tax to Raise $100M Annually for Affordable Housing

Denver proposes 0.5% sales tax increase to generate $100M annually for affordable housing projects and rental assistance.

By Tal Alexander

7/10, 12:03 EDT
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Key Takeaway

  • Denver proposes a 0.5% sales tax increase to raise $100 million annually for affordable housing, exempting food, fuel, medical supplies, and hygiene products.
  • The fund will support capital projects and rental assistance for extremely-low-income to middle-income households.
  • Current Affordable Housing Fund generates over $40 million per year; new measure aims to address the city's housing crisis and labor shortage.

Denver's Bold Move for Affordable Housing

Denver is taking a significant step to address its affordable housing crisis by proposing a 0.5 percent sales tax increase, which aims to generate $100 million annually. This initiative, spearheaded by Mayor Mike Johnston and supported by several city council members, seeks voter approval in the upcoming November ballot. The funds raised will be allocated to various housing projects and rental assistance programs, targeting residents across the income spectrum. This move underscores the city's commitment to ensuring that essential workers and long-time residents can continue to afford living in Denver.

Details of the Proposed Tax Increase

The proposed sales tax hike would translate to an additional 5 cents on a $10 purchase, with exemptions for essential items like food, fuel, medical supplies, and personal hygiene products. The revenue generated will be funneled into the Affordable Denver Fund, which will support the development and preservation of affordable housing units, provide project-based vouchers, and offer rental assistance. This initiative builds on the existing Affordable Housing Fund, which currently generates over $40 million annually through property tax revenue and fees on new developments.

Broader Implications and Comparisons

Denver's approach to funding affordable housing through a sales tax increase is part of a broader trend seen in other regions grappling with similar issues. For instance, the Bay Area is considering a $20 billion bond measure to address its affordable housing needs, funded by property tax increases. This measure, if approved, would provide low-cost loans to support housing projects and related infrastructure. Both Denver and the Bay Area's initiatives highlight the growing recognition that substantial public investment is necessary to tackle the affordable housing crisis.

My Perspective on Denver's Initiative

Denver's proposed sales tax increase is a pragmatic and necessary step to address the city's affordable housing shortage. While some may argue that sales taxes are regressive, the targeted exemptions for essential items help mitigate the impact on lower-income residents. Moreover, the potential benefits of stabilizing housing costs and preventing displacement far outweigh the modest increase in sales tax. Drawing parallels with the Bay Area's bond measure, it's clear that innovative funding mechanisms are crucial in the absence of sufficient state and federal support. However, the success of such measures hinges on gaining public trust and demonstrating tangible outcomes.

Management Quotes

  • Mike Johnston, Mayor of Denver:

    "Denver cannot be a vibrant, inclusive city without ensuring that teachers, nurses, first responders and seniors can continue to call Denver home. There is a tremendous shortage of affordable homes for long-time residents and new residents alike, and this shortage will only grow if we don’t take action now."