Boulder City Council on Tuesday discussed possible amendments to encourage increased housing and decreased non-residential uses in the opportunity zone in east Boulder.

The opportunity zone is a tract of land generally between 55th and 28th streets and Diagonal Highway and Arapahoe Avenue that the federal government, as part of the December 2017 tax cuts, designated as an area in which taxes on capital gains invested in equity would be deferred. Council in December enacted a moratorium on demolition and development in the zone because of concerns that development would not be in line with the Boulder Valley Comprehensive Plan, which is used to guide long-range planning.

Council had already discussed possible changes, but during a Tuesday study session revisited the matter to provide further guidance to staff about a subset of proposals. Staff aims to have a proposed ordinance before council this summer to implement changes and lift the moratorium.

The majority of council supported allowing efficiency living units — those that are 475 square feet or less — in most zoning districts. Currently, they require a use review if they make up more than 20% of the units on a site.

Council also supported requiring a use review for construction of single-family homes in high-density residential zones, rather than prohibiting them outright. They reasoned that a use review would act as a disincentive to building more single-family homes but still allow some flexibility.

Also discussed was whether to allow housing on the ground floor of buildings in the business regional zones, including a proposal that up to 75% of the ground floors of those buildings could be residential.

“The idea is that we need more housing,” Councilman Aaron Brockett said. “If you have a decent-sized parcel, making the whole ground floor need to be retail is restrictive. It restricts your ability to do housing.”

Council discussed the idea that space on the ground floor along the street is retail, while the rest of the space behind it is housing.

It also discussed two proposals aimed at addressing Boulder’s jobs-housing imbalance. Staff had previously recommended prohibiting offices in residential zones, but council discussed whether to allow some office space if it is capped in size and subject to a use review.

“We do have this horrific imbalance,” Councilwoman Cindy Carlisle said. “I don’t know why we would be permitting more office in what might be residential.”

Council moved toward allowing offices in residential zones through a use review, though it wanted staff to examine a smaller cap on the size of the office space if it’s converted from housing and a larger cap on the size of the office space if it’s in a new building.

Brockett initially expressed concern that capping new office space would work against the idea of walkable and mixed-use neighborhoods.

Councilman Sam Weaver replied that the cap would not be meant not to work against walkable neighborhoods but instead to prevent losing housing to more offices.

“I don’t think this is an attempt to argue against that it’s good to have people be able to work close to where they live,” Weaver said. “This is more of an attempt to prevent an erosion of the residential into office space.”

The second of the two proposals examined whether to restrict offices in business zones to no more than 25% of the building, but allow up to 50% if on-site permanently affordable units are included in the project. Some council members expressed concerns about whether the move would reduce office space too much in the long term, but they agreed to continue discussing the matter and working with the percentages.

“To me, this is a necessary step to get what we want,” Weaver said. “Otherwise, the whole thing may end up filled with offices because it’s the most lucrative thing to build.”

Councilwoman Lisa Morzel added later: “We are so out of balance. We need more housing, and we need fewer jobs.”

Staff also recommended, and council supported, keeping in place the moratorium in two specific zoning districts within the opportunity zone, residential high-four and residential medium-one, because of the concentration of market-rate affordable housing there.

“We looked at it and couldn’t think of a way to prevent the demolition of the units there,” senior planner Karl Guiler said. “Based on that, we’re recommending that the moratorium be continued during the duration of the opportunity zone (through June 2020).”

In the meantime, staff and council will explore a citywide adjustment to discourage demolitions of market-rate affordable units for the construction of high-end units.

Council also discussed how it could, more broadly, encourage affordable housing to be built in the opportunity zone, particularly at the Diagonal Plaza. Weaver suggested charging developers there a higher linkage fee, meaning the per-square-foot fee developers pay into the city affordable housing fund, if they build commercial space and allowing projects that include affordable housing to jump to the front of the review queue.

Staff encouraged, instead, that council issue a prospectus identifying affordable housing as its priority there.

“Rather than trying to achieve that through a regulatory tool, what I think we may want to explore is being really clear in terms of what we are looking for, especially if it’s related to residential,” interim Planning Director Chris Meschuk said.

Council will continue that discussion with staff input.

“If there’s anything good that’s going to come out of the opportunity zone, we might as well try to get it where we want it,” Mayor Suzanne Jones said.

Added Carlisle: “Give it a nudge.”

Further changes that affect the opportunity zone, such as consideration of allowing restaurants in industrial zones, also could come through the East Boulder Subcommunity Plan that is being developed.

The opportunity zone discussion is an accelerated portion of a broader review of the city’s use standards and table, which determine what can be built where in the city. Council on Tuesday expressed an interest in prioritizing 15-minute neighborhoods as part of that project. In such neighborhoods, people live or work within a 15-minute walk of goods, services and transit.