Denver Mayor Mike Johnston proposes sales tax for affordable housing

Denver city leaders plan to ask voters in November to increase the sales tax rate to pay for more affordable housing projects and help Mayor Mike Johnston meet his housing development goals.

Johnston unveiled the proposed new tax — which would add 0.5% atop the Denver’s current effective 8.81% sales tax rate — during a news conference Monday morning on the steps of the City and County Building. The Denver Post reported in early June that his administration was considering a new tax to fuel the city’s affordable housing efforts amid surges in home prices and rents that have made Denver unaffordable for many workers.

If passed, the tax would raise an estimated $100 million a year, with proceeds used to support affordable housing development and other housing initiatives. City officials said the money would pay for more housing vouchers, bridge loans for construction projects and other programs.

“We are very focused on the outcomes we can deliver for Denver here,” Johnston said. “So the goal is that this allows us to build or to bring on 44,000 additional units, which is what the estimate is (for) the total gap we have to fill over the next 10 years.”

He said that without the tax, Denver is on pace to see about 20,000 housing units built over the next decade. The city’s gap is part of a housing deficit that Zillow recently estimated at 70,197 homes across metro Denver.

If referred to the ballot, Denver’s tax measure would be the second sales tax hike up for voter approval in November.

Last month, the City Council voted to refer a 0.34% tax to the ballot that would create a revenue stream to shore up the finances at Denver Health. The city’s social safety net hospital is contending with a roughly $70 million budget shortfall driven by uncompensated care it provides to people who do not have health insurance.

The council still would need to vote to refer Johnston’s affordable housing tax measure to the ballot. The 0.5% rate amounts to five cents on a $10 purchase.