Uptown Partnership, one of Denver’s top affordable-housing developers, is facing a nearly $1 million foreclosure by the Colorado Housing and Finance Authority.
The pending action, which comes one month after the city brokered a deal to bail out an affordable- housing developer in Stapleton that defaulted on $4.7 million in loans, signals what could be a troubling trend.
If organizations that provide homes for low- and middle-income residents continue to struggle to break even, the city could end up with a shortage of affordable housing when the current rental glut dries up.
“This is a sad thing to witness. There is a lot of affordable housing that will leave this market,” said Lee Hansen, asset manager for one of those developers, Hope Communities.
That scares Ron Mondragon, a mentally ill man who has lived at Uptown’s building at 1205 Washington St. for six years. He lives on $560 a month in disability payments and pays $150 in rent.
“Will they make me move? It’s hard to get into another place,” said Mondragon, 43. “I would have to move some of my teddy bears. I don’t want to go live with roaches again.”
Uptown owes $955,000 in loans for the 35-unit development in Capitol Hill. The nonprofit and the housing authority are trying to work out a deal to avoid foreclosure.
Regardless, officials with the Colorado Housing and Finance Authority said Mondragon and Uptown tenants will not be displaced.
“We’re trying to find a way to resolve this,” said Tom Hemmings, chief financial officer of CHFA.
But Marney McCleary, executive director of Uptown, said, “The rental market is so poor, we can’t keep up with our debt payments. We’re trying to sustain ourselves so we’re still here to help people when the economy changes – because it will.”
A combination of factors has hit the affordable rental market particularly hard. Many people who lived in the rental units lost their jobs two or three years ago and haven’t been able to bounce back, McCleary said.
Additionally, many real estate experts, including CHFA, cite a surge in construction of units in the early 2000s. Then, historically low interest rates enabled many renters to buy homes.
Apartment-vacancy rates skyrocketed, resulting in landlords offering special deals and rents plummeting.
“Those of us with mixed-income projects are like everyone else dealing with a decrease in rents that occurred in the marketplace in the last two and three years,” said Henry Burgwyn, a partner with Inner-City Community Development Corp. “Low-income housing is very difficult to make work.”
Uptown was renting units for $325 to $475. Now they have all dropped to $300, McCleary said, and her vacancy rate is hovering around 30 percent. Her clients run the gamut from firefighters, teachers and nurses to single moms and elderly residents who used to be homeless. Many are now able to afford larger, higher-end apartments.
Hansen at Hope Communities said that about 90 percent of his group’s 12 properties are occupied, but rents have dropped. Soon, he said, it won’t matter if buildings are fully occupied or not because investment returns will be so diminished.
“At some point, the market will stabilize, mortgage rates will even out and people will need affordable housing,” he said. “But there is a potential that some of us won’t survive, and it won’t be there.”
Staff writer Karen Crummy can be reached at 303-820-1594 or kcrummy@denverpost.com.
