Denver mayor seeks sales tax hike to pay for affordable housing

A sales tax hike to fund affordable housing in Denver would appear on the November ballot under a plan unveiled Monday by Mayor Mike Johnston. 

The proposal, which calls for a 0.5% tax increase to raise about $100 million annually, comes just two weeks after the city council approved placing a 0.34% sales tax hike before voters on Nov. 5 to generate an estimated $70 million a year for Denver Health.  The city’s 8.81% total sales tax rate, which includes Colorado’s 2.9% portion, would rise to 9.65% if voters approve both the housing and health care tax hikes.

Johnston said the money from his plan would be used to create and preserve affordable housing.

“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,” he said in a statement. “The Affordable Denver Fund provides a clear path to meet Denver’s affordability needs and establish a community where anyone can build a vibrant life here, especially the workers who are serving, caring for, and teaching the residents of this city.”

The mayor pointed to a 25,000-unit gap between the 19,000 units the city is on track to create with local and federal funding by 2033 and an analysis that indicated an affordable housing unit shortage of 44,000 during the same time period for households earning less than 100% of area median income. 

Denver already has dedicated funding sources for housing. An Affordable Housing Fund created in 2016 raises about $42 million a year from a 0.5-mill property tax and a one-time fee on new development.

Voters in 2020 approved a 0.25% sales tax hike that generates about $50 million annually for a Homeless Resolution Fund. The city also gets funding from a proposition passed by Colorado voters in 2022, which directs revenue raised from 0.1% of the state income tax rate into the State Affordable Housing Fund.

The Denver Housing Authority issues bonds paid off with revenue from financed properties. 

Denver Health, Colorado’s sole safety net healthcare provider, has said it needs “additional reliable funding” to meet growing health care needs amid escalating uncompensated care costs.