Denver Wants to Turn Low-Income Owners Into Landlords
October 5, 2018
A new program being piloted in west Denver sets out to help low-income homeowners build accessory dwelling units, or “granny flats,” onto their homes to then rent out and earn extra money as landlords. The program hopes to add more affordable units will help to address the area’s housing shortage.
Mortgage financing giant Fannie Mae is funding the program, selecting it as one of three “innovative ideas” submitted by city officials this year in tackling housing shortages. Fannie Mae has earmarked $10 million over two years to address shortages.
The proposal to use accessory dwelling units in west Denver stood out to Fannie officials, Maria Evans, vice president of Fannie Mae’s Sustainable Communities Partnership & Innovation Initaitive, told U.S. News & World Report. “We saw lots and lots of proposals that involved ADUs,” Evans says. “West Denver was a good solution to help long-term residents fight off that dislocation that often comes from gentrification.”
Housing costs in Denver have soared past income growth. Between 2011 and 2016, average rents climbed 46 percent, from $941 a month to $1,376. Homeowners are seeing their property taxes climb and some are being priced out of their homes.
The plan submitted to Fannie Mae—proposed by Renee Martinez-Stone, director of the West Denver Renaissance Collaborative—requires city officials and community development nonprofits to work together to educate homeowners how to build ADUs, which often are a standalone unit in a backyard or a converted garage, onto their properties. Partners such as Habitat for Humanity will be able to provide designs for ADUs that are affordable to build and preapproved plans that can help curb an often expensive permitting process. The homeowners will also get aid for securing loans for construction and training to manage the property they will then be able to rent out at below-market rates.
Landlord training will be key to the program’s success, officials say.
“You have to maintain [the property],” Jeff Martinez, president of Brothers Redevelopment, a firm that builds and manages affordable housing in Denver (who is not related to Martinez-Stone or with the Collaborative), told U.S. News & World Report. “You have to plan for when things break, have reserves ready. You’re going to want to have a strong lease agreement. You can’t go in without thinking about all these considerations.”
But he adds he does believe the program could potentially help more homeowners afford their homes. “It could be a good source of income for someone who might not otherwise be able to increase their income,” he says. “ADUs absolutely would fill a need in Denver.”
Updated: October 16, 2019