When the Colorado Health Foundation was hunting for a spot near the state capitol in 2014, the nonprofit stumbled on a parking lot owned by the Denver Housing Authority.

The foundation offered DHA $2.4 million to buy the site for its new headquarters. The three-story, 32,500-square-foot building is expected to open Friday and not include a single housing unit.

Since 2014, the Denver Housing Authority has sold two lots to private developers and entered into agreements to sell seven others, though one of those deals seems to have fallen through. Some affordable units are planned to be built on the sites, but most of the construction won’t be geared directly toward housing the growing population struggling with the costs of renting and owning in Denver, according to information obtained by Denverite through a public records request.

“It seems easy that we would just put all of our land toward affordable housing, but then that would go back to what we’ve seen as a failed housing policy with problems that arise when we concentrate all very low-income individuals in the same neighborhood,” said Ryan Tobin, director of real estate at the Denver Housing Authority.

Experts believe having the mixed-income communities — where poor, middle-class and rich people live near one another — leads to better quality housing, improved services, increased neighborhood amenities and safer communities.

Selling DHA-owned properties to private and nonprofit developers creates those mixed-income neighborhoods, promotes revitalization in historically distressed areas and generates dollars for affordable housing projects in the city, Tobin said.

The housing authority said it uses money from land sales only for building new units or redeveloping existing housing, not operational or administrative costs.

Why DHA sells land

Several of the potential land sales are associated with the redevelopment of three public housing projects: Curtis Park, Benedict Park Place and Mariposa District. Housing authority officials said the benefits of the deals can be seen in the new communities evolving there.

In 1996, DHA received federal funding to demolish 286 units in Curtis Park and replace them with up to 200 for-sale homes and more than 332 mixed-income rental units. DHA’s development partner owns and manages 323 of the new units and makes 229 available to households that earn up to 60 percent of the area median income.

In the last two years, DHA has entered into purchase agreements on three properties associated with the Curtis Park redevelopment. It’s not clear what developers have planned for those sites, and one of the sites is no longer under contract.

In Benedict Park, DHA received funding in 2001 to demolish 250 units and build up to 200 for-sale homes and 582 mixed-income rental units. DHA owns and manages all of the rental units and makes 462 affordable. In addition to the Colorado Health Foundation building, DHA has two properties here under contract, one of which could become for-sale condos. Plans for the other site aren’t known.

And in the Mariposa District, DHA received federal funding in 2010 to demolish the 250-unit South Lincoln Park Homes development and replace it with up to 300 for-sale homes and 517 mixed-income rental units. DHA also owns and manages all of the rental units there and makes 406 affordable. DHA is selling two properties here that will become mixed-income townhouses, many of them market-rate.

Is this a good idea?

“If the idea is to de-concentrate poverty, then certainly DHA shouldn’t be the only ones developing housing in any one of these neighborhoods,” said Brad Weinig, a senior program director at the affordable housing-focused nonprofit Enterprise Community Partners.

Weinig was recently selected to sit on Denver’s new Housing Advisory Committee. The committee is charged with helping create a plan to address the city’s housing issues.

“Maybe DHA can certainly take care of the affordable components, but they may want to lean on other private or nonprofit development groups to develop additional housing — market rate or affordable. Or it could be housing isn’t the most appropriate use for that land and isn’t what the neighborhood needs, and it makes sense for them to dispose of the land for a different purpose whether it’s a school, a library, an office building or whatever the case might be,” he said.

A third possibility could be DHA simply wants to get some cash to fund development and can do that by selling property that doesn’t fit with their plans.

All three of those options are things DHA “can and should do,” Weinig said.

What DHA sells

The Denver Housing Authority is the largest public housing organization in the Rocky Mountain Region with more than 2,700 public housing units. During the last two years, the organization has only entered into agreements to sell vacant properties or parking lots, records show.

“On rare occasions, DHA will sell actual units from its existing portfolio to nonprofit partners when those units serve a population outside of its core programs,” said Stella Madrid, DHA spokeswoman.

This was the case in 2008 when DHA sold the single-room-occupancy Aromor Apartments to Mercy Housing for $1.4 million. Those apartment units are targeted toward those at-risk of becoming homeless, according to Mercy Housing’s website.

Other housing organizations in the state and country sell units on a more regular basis.

The Adams County Housing Authority sold two properties in 2015 that had 48 housing units combined, said Peter LiFari, deputy director of the organization.

Before selling property, ACHA makes sure the sale would lead to the creation of more units than what’s being sold and would allow the organization to add new units in areas with good schools and opportunities or build units in areas that would reduce commute times or other problems for residents, LiFari said.

ACHA is using money from the 2015 sales to build a new, 70-unit affordable housing development at 71st Avenue and Federal Boulevard.

Public housing authorities also sell units to cut down on operational costs.

The Aurora Housing Authority sold 32 units about five years ago because their maintenance costs were outpacing the dollars they were bringing in, said Craig Maraschky, executive director of the organization.

“At some point, you can’t keep subsidizing the costs. You’ll shut the agency down,”Maraschky said. AHA is in the process of building 74 units near South Havana Street and East Kentucky Avenue.

Some metro housing authorities have stepped away from owning public housing units altogether because of the cost of maintaining and administering them, Madrid said. The Denver Housing Authority has a board policy that requires the organization “maintains, preserves or adds to its public housing.”

Federal support on the decline

As federal support for public housing authorities has wavered in recent years, organizations like DHA have had to come up with creative ways to make up operational costs and fund housing. Land sales are one option available, said Will Fischer, a senior policy analyst with the Center on Budget and Policy Priorities, a liberal think tank that focuses on poverty and inequality.

The New York City Housing Authority is using land sales and leases to stabilize its program and address a multi-billion dollar capital repair backlog. The Chicago Housing Authority has also reportedly shown interest in selling land to private companies to bolster its financial reserves for voucher-based housing. And the Seattle Housing Authority has used land sales to revitalize neighborhoods in the city.

The need for rent and housing assistance are on the rise across the United States, Fischer said. “Rents have been increasing in this country while the incomes for low-wage earners have stayed stagnant. Meanwhile public housing funding hasn’t been growing, so the need for assistance is greater.”

Housing assistance funding from the U.S. Department of Housing and Urban Development was at $2.1 billion in 2016 — 4.6 percent below the 2010 level, according to the Center on Budget and Policy Priorities.

Getting affordable homes built

“Usually what we’ll see is we come in, do our large-scale redevelopment, rebuild infrastructure, create opportunities for private development and stabilize the neighborhoods. That’s when we’ll attract those for-sale opportunities or those private developers that are interested in investing in our neighborhoods as well,” Tobin said.

Denver-based Koelbel and Co. is looking to buy within the Mariposa community. The developer is under contract to buy parcels at West 9th Avenue and Navajo Street and West 11th Avenue and Mariposa Street.

Between the two, there are expected to be 58 new townhomes, said Peter Benson, senior vice president at Koelbel.

“Denver Housing Authority put a lot of money in improvements in the area, and we think it’s an up-and-coming area,” Benson said.

The Mariposa District in west Denver links the 10th and Osage light rail station with the Santa Fe Arts District. Redevelopment of the area was intended to reduce concentrated poverty by creating a mixed-income community and create a denser, more walkable neighborhood oriented toward the light rail station.

DHA was looking for someone to build for-sale homes as a final phase of the redevelopment project in the community. Six of the 58 units will be sold to those who earn 80 to 120 percent of the area median income. The remainder will likely be sold in the $400,000 price range, Benson said.

Percent of Area Media Income House Hold Size 1 2 3 4 5 6 30% $16,850 $19,250 $21,650 $24,300 $28,440 $32,580 50% $28,050 $32,050 $36,050 $40,050 $43,300 $46,500 60% $33,660 $38,460 $43,260 $48,060 $51,960 $55,800 80% $44,900 $51,300 $57,700 $64,100 $69,250 $74,400 90% $50,490 $57,690 $64,890 $72,090 $77,940 $83,700 95% $53,295 $60,895 $68,495 $76,095 $82,270 $88,350 100% $56,100 $64,100 $72,100 $80,100 $86,600 $93,000 Source: City of Denver

The Denver Housing Authority uses the city’s rules to ensure affordable housing units are built after developers purchase properties. Developers building 30 or more units at one site are required to make 10 percent of those units affordable to people earning less than 80 to 95 percent of the area median income.

DHA will continue to require developers to follow the affordable housing percentage goals next year and in future redevelopments despite the city’s new ordinance that collects affordable housing fees instead of requiring units to be built.

“The housing authority’s stance is we don’t allow them to opt out. They have to build those affordable units on site,” Tobin said. “Neighborhoods are formed on having all different demographics living in them, and we want to encourage that by making sure developers aren’t just putting in a high-end housing site that would not provide the affordability that we look to obtain through our redevelopment efforts.”

Business & data reporter Adrian D. Garcia can be reached via email at agarcia@denverite.com or twitter.com/adriandgarcia.