6 days Ago By By Ed Pinto and Arthur Gailes
On Nov. 5, Denver’s voters rejected Affordable Denver, a half-cent sales tax increase for subsidized housing. The tax hike would have burdened working families while failing to address the root causes of unaffordable housing.
But the vote’s outcome opens the door for a better solution — not only in Denver but also in other Colorado cities: Livable Urban Villages, or LUVs. They’re a simple, cost-effective, and proven approach that would create housing abundance in Colorado’s cities without raising taxes. Affordable Denver, which proposed spending $100 million a year on housing subsidies, was destined to fail to address affordability for the same reasons all housing subsidy programs fail.
These are the Five Cs: cost, complexity, crowding out, corruption and cronyism. Like similar programs nationwide, it would have created a bureaucratic maze while raising costs for working families through higher sales taxes. This is the route California has taken over the past decade, resulting in fewer homes at higher costs, thus benefiting a select few while making housing less affordable for everyone else.
California is effectively moving toward a two-class society: one where its richest build McMansions and the rest fight for a few subsidized studios or count themselves among the 278,000 net moves from California to Colorado since 1990. Colorado needs to avoid following in California’s housing unaffordability footsteps. LUV offers a better path by unleashing market forces to create abundant housing for a broad range of income levels.
Rather than relying on subsidies and quotas, it restores property rights and allows organic growth in the places that make sense: commercial corridors and their surrounding neighborhoods. The result is more homes at lower costs, thriving local businesses, and enriched communities — all without raising taxes or creating new bureaucracies. The concept is straightforward: Legalize housing in and around LUV core areas (those zoned for commercial, industrial, and mixed uses).
These areas, with their existing or potential urban amenities, are perfect for townhomes, mid- and high-rise apartments, and condominiums. LUV adjacent areas, within one-quarter mile of a LUV core area, would allow light-touch density including townhomes, accessory dwelling units, duplexes, triplexes, and multiplexes up to eight homes per parcel. The American Enterprise Institute’s Housing Center examined Denver’s LUV potential, finding that the city could add 40,000 homes over the next 10 years — 10,000 in LUV core areas and 30,000 in LUV adjacent areas.
This would provide a broad mix of owner-occupied and rental homes, most family friendly. The price of new for-sale LUV homes would be about the same as the median price of an existing single-family detached home in Denver. While Affordable Denver was slated to add 44,000 homes over 10 years, some have questioned how this could happens given that the subsidy amounts to $23,000 for each home.
The answer is that Affordable Denver subsidies would likely have either been used to supplement other subsidy programs or for renovations. In either event, it would not have built 44,000 new homes. Denver (like cities elsewhere in the nation) has a history of light-touch density coexisting with single-family detached homes going back to 1900, as evidenced by successful developments in and around downtown.
The Cherry Creek neighborhood southeast of downtown demonstrates a longstanding successful LUV implementation. LUV policy restores this history to Denver, allowing it to create naturally abundant and affordable housing that’s consistent with its existing needs and character. The potential extends across the Front Range.
Colorado Springs could add 15,000 homes over 10 years with LUV policy. Aurora, Fort Collins, and Lakewood could combine to create 37,000 homes. Each city has commercial corridors and aging retail spaces that could become vibrant, mixed-use communities.
Add in Denver, and the five largest Fort Range cities could use LUV to build 92,000 new homes over 10 years — addressing the region’s housing crisis through market forces alone. Denver’s experience shows the superiority of the LUV approach. The city has rapidly increased its sales tax since 2018, now totaling 8.
31% when combined with Colorado’s levy. This worsens affordability, slowly strangles local businesses, hurts downtown areas, and increases the cost of living. Meanwhile, much of Denver’s housing stock is atrophying and, due to high demand and inadequate supply, getting more expensive.
This leaves seniors without means to repair their homes while denying their children and grandchildren the option to stay nearby. In addition to creating more homes, LUV improves neighborhoods and communities by getting the incentives right. Instead of a few rental buildings subsidized by tax increases, LUV would create tens of thousands of naturally affordable homes for families and individuals to rent and own.
Because these efforts will be undertaken with private funding, these will be state-of-the-art homes that add to the character and value of their neighborhoods. By requiring less land and providing smaller, family-sized homes, LUV makes new and existing housing affordable to a broad range of middle-class families. LUV’s housing abundance will also have a positive impact in addressing Denver’s burgeoning homeless rate.
Housing Center research found, in a review of 54 variables, that the median-home-price-to-median-income ratio (displacement pressure) had the highest correlation to the homelessness count per 1,000 population (displacement rate). In Denver’s case, its 2024 displacement pressure was deemed severe at a level of 6.0.
This had an impact on its 2024 displacement rate, which was deemed extreme at a level of 9.1 per 1000. The solution to bringing this down to a moderate level is building more abundant housing the LUV way.
Rather than burdening taxpayers, LUV generates substantial fiscal benefits for Colorado and its cities. In Denver, LUV Adjacent areas would generate $590 million in additional property tax revenue from 2025-2034. By replacing one home with two to eight new homes, the city gets to tax those new homes, which will be worth more collectively — simple math that ensures future development will enrich rather than deprive communities.
The new homes would generate $720 million in city sales tax receipts on construction materials over the decade, plus an estimated $410 million in additional city sales tax revenue from new residents (all figures in 2024 dollars). In total, that’s $1.7 billion in new revenue for Denver without raising tax rates.
As an added bonus, this approach would be effective in addressing what Mayor Mike Johnston describes as Denver’s “downtown doom loop.” LUV housing in the top five Front Range cities would likewise generate over $2 billion in tax revenue for the state and these cities over the next decade. Colorado, which imposes at 2.
9% tax rate, could generate an extra $870 million, $700 million from the purchase of construction materials and $180 million for sales tax (assuming a state average of $1,900 per household). The five cities would benefit from hundreds of millions of dollars more. Next, add over $1 billion in additional city property taxes over the next ten years.
LUV would provide a significant boost to state and local budgets without raising taxes. Adopting LUV would make Colorado competitive with states like Montana, Texas (in Houston and Austin), and Florida, which have adopted abundant housing policies to maintain affordability. With LUV, Colorado’s cities will restore property rights to where they belong: in the hands of homeowners and renters, not government bureaucrats.
The result would be abundant naturally affordable housing, revitalized downtowns, and enriched communities across the state. Ed Pinto is co-director of the American Enterprise Institute Housing Center in Washington, D.C.
Arthur Gailes is the center’s senior manager for housing supply initiatives..
