Agenda Memo

CITY OF BOULDER CITY COUNCIL AGENDA ITEM Meeting Date: November 6, 2025 Agenda Title Second reading and consideration of a motion to adopt Ordinance 8712 amending Section 4-20-62, “Capital Facility Impact Fee,” and Chapter 8-9, “Capital Facility Impact Fee,” B.R.C. 1981, adding a new affordable housing impact fee rate for certain single-unit dwelling developments; and setting forth related details.

Staff Contact • • •

Sloane Walbert, Inclusionary Housing Program Manager, Housing & Human Services Jay Sugnet, Housing Senior Manager, Housing & Human Services Kurt Firnhaber, Director, Housing & Human Services

Draft Motion Language Staff requests council consideration of this matter and action in the form of the following motion: Motion to adopt Ordinance 8712, amending Section 4-20-62, “Capital Facility Impact Fee,” and Chapter 8-9, “Capital Facility Impact Fee,” B.R.C. 1981, adding a new affordable housing impact fee rate for certain single-unit dwelling developments, and setting forth related details.

Executive Summary The purpose of this item is for council to consider the first reading of proposed Ordinance 8712 (Attachment A) that would put in place a citywide affordable housing impact fee on replacement homes and substantial additions to homes of $11 per square foot of new floor area based upon a nexus study done by Gruen Gruen + Associates (“GG+A”) (Attachment B). Council should note that the nexus study has been revised to include below grade area in the analysis so that the impact fee can be implemented consistent with other impact fees in the city. The recommended fee has been reduced but the total amount of expected revenue is the same since the fee would apply to a larger amount of area in homes (including basements). The findings by the consultant indicate that rebuilds and significant additions to single-unit homes generate additional employment (jobs) and create the demand for additional affordable housing. An affordable housing impact fee on these types of development would help mitigate impacts on the demand for affordable housing created by that development. Proposed Ordinance 8712 has a recommended effective date of Jan. 31, 2026, providing a three-month window of time for developers/homeowners to plan for the impact fee and time for implementation by city staff. The draft ordinance was passed on first reading on Oct. 16.

Council Action Options Option Approve motion language as drafted

Outcome If the motion is approved, Ordinance 8712 would go into effect on Jan. 31, 2026.

Define and pass a modified motion

Council would need to define any modifications or amendments to the Ordinance. This would require staff to bring back an amended version for third reading.

Deny the motion or take no Action

If this motion is denied, Ordinance 8712 would not move forward.

Refer back to staff

If council refers this item back to staff, staff will follow any direction provided by council regarding this ordinance.

Sustainability, Equity, and Resilience (SER) Framework and Citywide Strategic Plan Alignment Healthy and socially thriving; Livable; and Responsibly governed.

Citywide Strategic Plan Strategy 4. Strengthen equity-focused programs that help meet community members’ basic needs, including mental, physical, and behavioral health, financial assistance, and access to services. Strategy 5. Support and provide holistic and accessible programs and services to enable diverse individuals and families to live in Boulder.

Staff Notes Impact fees fund capital facilities needed to address impacts of new development. The Boulder Valley Comprehensive Plan Policy 1.23 states “Growth will be expected to pay its own way with the requirement that new development pay the cost of providing needed facilities and an equitable share of services, including affordable housing, and mitigate negative impacts …”

Alignment with Additional City Plans The recommended impact fee is consistent with the Housing Affordability & Diversity policies of the Boulder Valley Comprehensive Plan.

City Council History City Council identified this regulatory gap as part of the Inclusionary Housing (“IH”) update process of 2022 and discussed adding this work item to the council list of priorities in 2023. On Apr. 10, 2025, City Council reviewed the findings of the Nexus Study with the consultant and provided feedback on the impact fee scope and process at a study session. Refer to the Apr. 10, 2025 Staff Memo and Study Session Summary for more information.

Analysis Background Housing affordability has long been a significant challenge facing the City of Boulder. As articulated in the last update to the Boulder Valley Comprehensive Plan (BVCP), the high cost of local housing results in many households paying a disproportionate amount of their income for housing or finding it necessary to move farther from their work to find affordable housing (often out of Boulder County). Households that find housing costs burdensome, or the combined costs of housing and transportation, have less money available for other necessities, and they may find it difficult to actively participate in the community. This leads to a more transient and less stable workforce, a less culturally and socioeconomically diverse community, additional demands on supportive human services, and the exclusion of key community members from civic affairs. Continued escalation of housing costs has disproportionately impacted low- and moderate-income households. The “shed rate” (rate at which homes are lost from the affordable range) is outpacing the current replacement rate of attainable homes. A recent Regional Housing Needs Assessment done by the Denver Regional Council of Governments found that the percentage of households that pay more than 30% of their income on housing has increased from 44.5% in 2000 to 52.6% in 2022 for the north metro region (including the city of Boulder). The need to examine demolitions and replacements of single-family homes and/or significant additions was discussed as a priority by City Council in 2023 and incorporated into the Housing & Human Services workplan. The city selected GG+A in October of 2024 to provide research and analysis services to explore the extent that replacement homes and substantial additions to homes contribute to the need for affordable housing. This project is part of a larger effort to address the current housing challenges by expanding housing supply and diversity of available housing types, and in turn reducing housing costs and limiting displacement. In recent years, land use policies combined with labor and material costs have made it harder and more expensive to build residential development in the city affordable to low-, moderate-, and middle-income households. The data collected by GG+A shows that replacement or expanded single-unit homes are valued at significantly higher prices than smaller and older existing homes, not only due to larger living spaces, but also for a premium on new construction. Families and individuals purchasing replacement or expanded homes represent households at a higher-income level than households that occupied the replaced homes. Based on research done by the consultant, higher-income households within a local economy tend to result in an increase in personal consumption and spending, which generates additional employment (jobs). The nexus study’s fee calculations represent the estimated affordable housing needs multiplied by the estimated affordability gap between market-rate

and affordable housing units (per-unit feasibility gaps). Based on pro-forma analyses, the maximum supportable impact fee ranges from $11 to $23 per square foot of net new floor area, depending on the development scenario. Refer to the staff memo for the Apr. 10, 2025 City Council Study Session for more information. Legal Requirements Impact fees are used in the city to address the impacts of new development. Boulder has been using impact fees since as early as the 1950s with the adoption of plant investment fees for water and wastewater under its home rule authority. Colorado law now explicitly authorizes municipalities to impose impact fees to defray the cost of capital improvements that are necessary to accommodate the impacts directly related to a new development and also sets out requirements for the adoption of impact fees. Most notably, an impact fee must be based on a study that establishes an essential nexus between the impact of development, amount of the fee, and how the funds will be spent. The fee must have rough proportionality to the development’s impact, and the fee cannot be charged at a level greater than necessary to defray the development’s impacts. An impact fee is sometimes referred to as a linkage fee since they attempt to link, in the case of affordable housing, the production of market-rate real estate to the production of affordable housing.

Proposal The 2025 GG+A nexus study finds that the expansion of both existing and replacement homes directly contributes to increased demand for affordable housing in the city. The city’s IH program requires all residential developments of new dwelling units to contribute 25% of the total units, or the equivalent, as permanently affordable housing. However, the replacement of one older home with a newer home or an addition to a home cannot be addressed through the IH program. The recommended impact fee would ensure that these types of development contribute towards mitigating the affordable housing demand created by them. The recommended impact fee would apply to two types of residential development: 1. Demolition of a detached home and replacement with a larger detached home. 2. Substantial additions to single-unit detached homes (over 500 square feet). 1. Demolitions and Replacements The city’s land use code allows the IH requirement to be waived for homes in developments with four or fewer units that are demolished and replaced within three years. As a result, almost all newly constructed detached homes in the city are exempt from inclusionary housing requirements. In practice, this means that

someone who purchases a property with an existing home and rebuilds, regardless of home sizes, does not have to meet IH requirements (typically met through payment of a cash-in-lieu contribution). Whereas a person who builds a home on a vacant lot in the city is required to meet IH requirements. The payment in-lieu contribution for a new home on a vacant lot to the city’s affordable housing fund is $15.34 per square foot based on 2025 rates ($53,690 for a 3,500 square foot home). The recommended impact fee would result in equity between homes built on a vacant lot and replacement homes. The recommended impact fee on replacement homes would apply as follows: •

A flat rate of $11 per square foot of newly added floor area for detached single-unit homes. As with other impact fees, a project would get a “credit” for existing home size.

•

The impact fee would not apply to homes under 2,000 square feet in total area.

•

The area of a new accessory dwelling unit (“ADU”) would be exempt.

2. Substantial Home Additions Substantial additions effectively replace more affordable, smaller homes with larger, more expensive homes, but are not subject to IH regulations or any affordable housing impact fees. The findings by the consultant indicate that significant additions to single-family homes generate additional employment (jobs) and create the demand for additional affordable housing. The impact fee would apply or not apply to substantial additions as follows: •

A flat rate of $11 per square foot of added floor area for detached singleunit homes.

•

An addition to an existing dwelling unit of 500 square feet or less would be exempt from paying an impact fee. This would be offered as a one-time exemption rather than tracking a cumulative total of additions over time.

•

The area of a new ADU would be exempt.

•

The impact fee would not apply to homes under 2,000 square feet in total area, including the area of the proposed addition.

•

The impact fee would apply only to significant additions of square feet. It would not apply to renovations of existing homes. For example, a permit to finish an existing basement would not be subject to an impact fee.

Source: OpenAI’s DALL·E image generation tool

Figure 1: Sample floor plan for a 500 square foot addition Fee Structure

Staff recommend keeping the fee structure simple and, where possible, implementing the recommended fee in the same manner as existing residential impact fees. This approach will streamline implementation and minimize the need for additional staff time and resources. The recommended fee structure is as follows: •

Flat rate of $11 per square foot is proposed rather than a graduated scale. A graduated fee scale is unnecessarily complex because the fee already increases in proportion to the home’s square footage. Larger homes inherently incur higher fees, so an additional tiered system is unnecessary and is not supported by the nexus study.

•

Calculated based on the combined size of the principal and accessory structures (consistent with other fees).

•

As noted above, the impact fee applies only to homes exceeding 2,000 square feet.

•

As noted above, there is a one-time 500 square foot exemption for additions. The code currently contains an exemption of 200 square feet for additions for other impact fees. However, staff supports a larger square

feet exemption to apply to the affordable housing impact fee consistent with the consultant’s study and recommendations. •

The area of a new ADU would be exempt whether located in a building addition, detached structure, or a new home.

•

Assessed at the time of building permit application and paid at the time of final building inspection (new buildings) or permit issuance (additions), consistent with other impact fees.

•

Adjust the fee annually using an inflationary factor derived from the Engineering News Record cost index (consistent with other impact fees).

Refer to the Current Development Excise Taxes and Capital Facility Impact Fees (Attachment D) for current development excise tax and impact fee rates. For residential development, capital facility impact fees (CFIs) are charged on a square foot basis for fire, human services, municipal, parks & recreation, and police facilities on a graduated scale up to a maximum of 3,600 square feet. A development excise tax (DET) is assessed for transportation facilities based on the dwelling unit type. As an example, a 3,500 square foot expansion to an existing home (addition or replacement) would be assessed $11,073 in impact fees and $4,690.21 in DETs. In this example, the permit would be assessed $52,500 for the proposed affordable housing impact fee1. Staff recommends the fee become effective approximately three months after adoption of Ordinance 8712 (Jan. 31, 2026) to allow for updates to fee calculators and building permit information materials and applications. The new fee would apply to all complete building permit applications submitted to the city on or after Jan. 31, 2026. The delay will allow applicants to apply for permits for projects that are in the final plan development stages. It will also allow applicants to plan for potential financial impacts to future projects. Staff will continue to track the fee rate and evaluate possible effects on residential development.

Staff Analysis As described above, the 2025 GG+A nexus study finds that the expansion of both existing and replacement homes directly contributes to the demand for affordable housing in Boulder. Single-family redevelopment and substantial additions to homes do not currently mitigate that impact, and they are not subject to the city’s IH program, which contributes to the creation of affordable housing in the community. Based on research outlined in the nexus study, higher-income households within a local economy tend to result in an increase in personal consumption and spending. In turn, additional consumption and 1

For reference, a new 3,500 square foot home that is subject to Inclusionary Housing (IH) would contribute $53,690 to the city’s affordable housing fund.

spending generates additional employment (jobs). This increase in jobs generates new workers and, in turn, the number of affordable units required to house them. Current program rules may create incentives for the demolition of smaller homes, which have typically been more affordable, to rebuild much larger and more expensive homes. Reducing the number of smaller, more affordable homes in the city contributes to greater economic disparities among residents. The benefit of the recommended fee on rebuilt and expanded homes is to level the playing field for companies and households building large homes within the city (the IH regulations currently only apply to newly created housing units). The recommended fee is projected to result in collection of approximately $1,200,000 annually. These funds will be utilized for rental units affordable to households with incomes below 80% of the area median income (AMI) and forsale ownership units affordable to households with incomes ranging from 80 to 120% of AMI. Local funds in the affordable housing fund can be leveraged two to three times with state and federal funding. The recommended $11 rate was found by the consultant to support policy goals without rendering single-family home replacement and expansion projects financially unviable. Based on the estimates in the nexus study, the net profit for private developers would decrease by less than one percent to an estimated 9.6%-14.1% based on the project type. For reference, the average profit on single-family home building nationwide is equal to 11% of the sales price. The proposed fee has been structured to exempt modest sized homes, smaller home additions, and ADUs to support market rate attainable housing consistent with BVCP plan policies. The 2,000 square foot exemption supports the construction of modest sized homes and members of the community with more modest incomes. Modest sized housing tends to be more affordable since smaller homes often have a lower purchase price, smaller down payment, and smaller monthly mortgage payments. In addition, the 500 square foot threshold allows for modest additions to existing homes (up to two bedrooms and bath). ADUs are encouraged in the city to increase workforce and long-term housing options and to add modest sized units to the overall housing stock. As documented by the consultant, smaller homes, modest additions, and ADUs do not contribute to the need for additional affordable housing in the community. For a 750 square foot addition to an existing home, the recommended fee would constitute approximately 0.5% of the total project cost (assuming a typical cost of $700 per square foot of new construction). An addition of 750 square feet (two to three bedrooms, a bathroom and a game room) will cost the average household approximately $525,000, which increases the value of the home by almost $750,000. With the 500 square foot “credit” this proposed fee would be $2,750 (250 x $11), which is one half of one percent of the overall project cost

and one quarter of one percent of the increase in the home’s value. Refer to Table 1. TABLE 1. SAMPLE IMPACT FEE RATES BY PROJECT SIZE Addition Size (sq. ft.)

Typical Cost per Square Foot

Total Project Cost

AH Impact Fee on Added floor area greater than 500 sq ft

AH Impact Fee % of project cost

500

$700

$350,000

$0

0.0%

750

$700

$525,000

$2,750

0.5%

1,000

$700

$700,000

$5,500

0.8%

2,000

$700

$1,400,000

$16,500

1.2%

3,000

$700

$2,100,000

$27,500

1.3%

4,000

$700

$2,800,000

$38,500

1.4%

Equity Analysis At the inception of the project staff completed a Racial Equity Analysis and Public Engagement Plan (Attachment C) to guide community engagement and the scope of work. The Rapid Response Equity Assessment includes four guiding questions on how the proposed fee will apply to underrepresented groups, ensuring equity in decisions across age, race, ethnicity, gender, sexual orientation, socio-economic status and abilities. The City of Boulder actively works to maintain existing affordable homeownership and rental units and increase the stock of permanently affordable housing. Funds collected from an impact fee would be earmarked for affordable housing and reserved in a separate account. Monies received into this fund are restricted solely for the construction, purchase, and maintenance of affordable housing. Typically, residents of affordable housing in Boulder are more racially, ethnically, and economically diverse compared to the general population (Affordable Housing Data Dashboard). Residents of affordable housing in Boulder are also more diverse in their ability status. Housing is key to reducing intergenerational poverty and increasing economic mobility. Accessibility to quality affordable housing has been shown to improve quality of education, health and well-being, personal relationships, security, and financial outcomes.

Fiscal Note Estimated Fiscal Impact Narrative Based on the consultant analysis, the recommended fee is projected to result in additional revenue of approximately $1,200,000 annually to the Affordable Housing Fund. This assumes trends for this type of development will be similar to the past and a more conservative approach is recommended. Within the fund financial expected revenue for 2026 is $400,000 since the fee will be assessed

on new permits starting in February and fee payments are not anticipated until later in the year. This first year of revenue is not budgeted to an affordable housing project but will contribute to fund balance to support future projects. Starting in 2027, the anticipated revenue is $1,000,000 annually and may be adjusted to align with actual revenues received. The revenue generated from the fee will be used to increase affordable housing within the city, and the costs of administering this new fee will be absorbed within current resources. Current Year Estimated Fiscal Impact No fiscal impact is anticipated in 2025. Fund: 2140 Affordable Housing Fund Department: Housing and Human Services Program: Community Investments - Housing FY 2025 Budget

FY 2025 FY 2025 Estimated Impact Net Change

Beginning Fund Balance

$12,000,000

$0

$12,000,000

Total Forecasted Revenue

$21,660,000

$0

$21,660,000

Total Estimated Expenses

$24,450,000

$0

$24,450,000

Ending Fund Balance(s) After Reserves

$8,960,000

$0

$8,960,000

FTE

10.4

0

10.4

Item

Three-Year Estimated Fiscal Impact

Item

FY 2025

FY 2026

FY 2027

Total Forecasted Revenue

$0

$400,000

$1,000,000

Total Estimated Expenses

$0

$0

$1,000,000

Net Estimated Impact

$0

$400,000

$0

Climate, Resilience, and Sustainability Considerations No considerations are anticipated.

Community Engagement In alignment with the city’s commitment to good public process and engagement, staff prepared a Racial Equity Assessment and Public Engagement Plan, included in Attachment C. The engagement focused on online tools, email outreach, existing advisory board processes, community meetings, outreach events, and information sharing. 

Staff has continued community engagement on the project by including updates in department newsletters, updating the project website, and reaching out to interested neighborhood representatives and housing advocacy groups.



Staff presented the results of the nexus study and solicited initial feedback on the impact fee before Planning Board, Housing Advisory Board (“HAB”), and City Council earlier this year. A summary of the board’s comments can be found in the staff memo to City Council and Council’s questions and comments can be found study session summary. A summary of the engagement that occurred prior to April can also be found in the staff memo.



An engagement site was published in late June via the Be Heard Boulder platform. The site contains information regarding the project and specific questions for feedback. Participants are able to post comments on the site for staff and other community members to view.

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An email containing information and soliciting feedback was sent directly to contacts (owners, contractors, design professionals) listed on a permit for a home addition within the last three years.

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Staff presented the staff recommendation to the Housing Advisory Board on Aug. 28, 2025 (See Attachment F for HAB minutes) and the Planning Board on Sep. 2, 2025. (See Attachment G for draft Planning Board minutes.) Both meetings were a public hearing.



Staff also solicited feedback on the project in the city’s “What’s Up Boulder” event that took place on Sep. 7.

Feedback Received The project team has collected 29 formal comments through the engagement activities described above. Respondents expressed a clear divide, with some strongly supporting the fee and others firmly opposed. Those in support cited the need to preserve attainable housing stock, ensure equity and fairness between

vacant lots and redevelopment, and the need for large homes to contribute towards affordable housing options. Those opposed stated that the impact fee would drive up the cost of already expensive market-rate housing. The fee would also unduly affect people trying to improve their homes, considering the aging housing stock in much of the city. Some of those opposed recommended that the city make housing development easier and cheaper to encourage the development of attainable housing. In general, there was support for exemptions for small additions, modest sized homes, ADUs, and below grade floor area. Emails and Be Heard Boulder responses can be found in Attachment E. After public hearings, both Planning Board and HAB voted to recommend the impact fee to City Council. Board members expressed strong support for the proposal and were appreciative of the staff and consultant analysis. One member of HAB argued that the fee was vulnerable to legal challenge and that any new source of revenue for affordable housing should be approved as a tax by voters. Public testimony was mixed with opposing views that the fee disproportionately impacts middle income households to the fee needs to be significantly higher to account for the true impacts.

Workplan Considerations The staff time needed to complete the work for the impact fee is included within departmental work plans. As proposed, the fee structure is consistent with existing residential impact fees. Changes to the fee structure that add complexity to the implementation may result in additional staff time to administer.

Next Steps for City Council Adoption of Ordinance 8712 would implement the proposed impact fee effective Jan. 31, 2026. No further action would be necessary from City Council.

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Attachments A - Proposed Ordinance 8712 B - Nexus Study Report C - Public Engagement Strategy and Racial Equity Analysis D - Current Development Excise Taxes and Capital Facility Impact Fees E - Emails and Be Heard Boulder Responses F - Aug. 28, 2025 Housing Advisory Board Minutes G - Sep. 2, 2025 Planning Board Minutes