City planning officials are hoping to throw a lifeline to developers with a proposed new amendment to the Denver City Code, giving them more time to secure building permits and financing.

The proposed change, if supported by the City Council, would spare roughly 22,600 planned residential units from loss due to expiring city paperwork, as Denver experiences a sharp decline in the demand for multi-unit building permits.

At a Tuesday City Council Committee meeting, Community Planning and Development officials warned that Denver risks losing thousands of new residential units if projects with city-approved site development plans cannot be accommodated with additional time, citing a sharp contraction in development activity. The officials attributed that contraction to elevated construction costs, high interest rates, and declining rents.

Under the proposed “Site Development Plan Validity Extension” amendment, any site development plan approved by the city on or before Dec. 31, 2025, would receive a 36-month extension of its validity period to obtain building permits.

A site development plan (SDP) is a document that serves as a blueprint for how a private development project complies with the Denver Zoning Code.

Site development plans are required for all new developments that are not one- and two-family homes, explained Chris Gleissner, the agency’s director of site design and neighborhood development.

“As you know, we had a huge log of projects come through, about 40,000 units worth of projects,” Community Planning and Development (CPD) Executive Director Brad Buchanan told committee members. “About half of them followed through and completed their SDPs.”

Those projects that have completed their SDPs are now approaching their 30-month SDP expiration date at a time when the city is seeing an oversupply in the marketplace.

“And so the punchline is,” Buchanan said, “we’re trying to keep those projects alive so that we can take advantage of this unique moment in time to build in pipeline as quickly as the market can.”

New housing permits surged to record levels in 2021 and 2022 as strong rent growth and low interest rates made it easy to finance new apartment projects.

Many of those new projects that began in 2021 and 2022 are now coming online, according to the city. That, in turn, is driving down rent across the market.

Denver’s Expanding Housing Affordability (EHA) ordinance, a major housing policy passed by the city in 2022, sought to boost affordable housing by incentivizing developers to build beyond luxury units. 

When it comes to overbuilding, Denver is not unlike other major cities in the U.S., Buchanan said. 

Building projects dropped during the COVID pandemic, then recovered strongly, peaking in 2022 and dropping since.

Oversupply has brought supply in line with demand, driving rental prices down, officials said.

“In downtown Denver, there are market-rate rents that are in the 80 to 100% area median income range,” Buchanan said. “So, the private sector marketplace today is creating much-needed affordable housing products itself.”

In short, the new supply coming online is driving down rent and improving affordability across the market.

Over the past five years, Denver has adopted strategies to try to attract developers to invest in the Mile High City and build more housing.

Among the city’s most notable moves are the recent blanket zoning changes and fast-track permitting. Additionally, Denver Mayor Mike Johnston brought back Buchanan, a well-known development leader, to streamline the city’s Community Planning Development. Developers have applauded the moves to streamline processes, notably the efforts to make permitting more efficient.

Denver’s mayor has also set his sights on convincing middle-income families that the city is “affordable” with a new pilot program that seeks to build more units for those with annual incomes between $60,000 and $100,000.

He plans to do so by offering property tax incentives to interested builders and investors, according to the city.

In return, rental units within those projects must be deed-restricted for 30 years to remain “affordable” to households earning less than 100% of the area median income, which was $98,100 for one person and $140,100 for a four-person household in July, according to city officials.

At both the state and local levels, governments have been imposing a number of regulatory strategies to spur housing development. But builders who work with higher density projects have said that the governments’ medicine doesn’t treat what ails the market for affordable homes.

Notably, they pointed to the virtual total lack of a housing product that is a route to homeownership in other major cities as a major problem for Colorado — the condominium.

Additionally, they have cited energy requirements for large-scale buildings adopted by the state and Denver, both of which have required sweeping reductions in energy use and greenhouse gas emissions by larger commercial buildings, adding these changes would significantly add to costs, which will be passed down to consumers.

The Energize Denver ordinance, adopted in 2021 and enforced by Denver’s Office of Climate Action, Sustainability and Resiliency (CASR), requires buildings sized 25,000 square feet or larger to slash emissions 30% by 2032 and by 80% by 2040.

Meanwhile, a bill passed by the legislature in 2021, issued as Regulation 28 by Colorado’s Air Quality Control Commission in 2023, mandated 7% reductions in buildings of 50,000 square feet and larger by 2026, and 20% by 2030.

In an interview last year, Andrew Hamrick, senior vice president of the Apartment Association of Metro Denver, which represents apartment management firms, noted that apartment rents were falling slightly.

“It’s tapering off,” Hamrick said back in October, referring to apartment units currently arriving. “There is still stuff coming in, but longer term, we see far fewer permits and we see institutional money drying up.”

Helping make the situation less favorable for lower-income renters is that the newest units are often absorbed by renters overqualified for the price they pay, he said. But developers and their investors have been reading the slower absorption rate and are penciling it into their project plans. And they’re perceiving a regulatory climate here that builders said is less than inviting.

“We see institutional money drying up,” Hamrick told The Denver Gazette. “A lot of investors can get a better return by going to Utah or Texas. This money is internationally sourced, so in some ways we’re competing against Utah, Texas and anywhere on the planet.”

Some developers have also pointed to Denver’s policy requiring a portion of new housing developments with 10 or more units to apportion a share for rent or sale to lower income households. Industry representatives have complained that the policy only serves to delay development, since it translates to a rent loss of 3.2% to 4%.

Buchanan, the city official, has called Johnston’s efforts to create more housing in the city “totally right-minded.”

“Eliminating any, or reducing hurdles and challenges for creating housing in our city is our focus right now, and that’s true for every kind of investment, but certainly around housing,” he said. “And if you want to talk about affordable housing, the best way to create affordable housing is to keep the supply in line with the demand — that creates naturally occurring affordability.”

The amendment now heads to the Community Planning and Housing Committee on March 24, then to City Council for first reading on April 6 and a public hearing on May 4.

Reporter Mark Samuelson contributed to this article.