Wheat Ridge council agrees to pursue linkage-fee study, preserve short‑term rental revenue for housing fund

Wheat Ridge City Councilors on July 7 directed staff to pursue a linkage (nexus) fee study and to prepare a policy that would continue directing short‑term rental tax revenue into the city’s housing fund, after staff recommended postponing mandatory inclusionary zoning.

Staff summarized a consultant feasibility report and four policy options, and recommended a linkage fee study rather than a mandatory inclusionary requirement. The consultant tested multiple pro‑forma models and concluded that most future development in Wheat Ridge would be small infill projects, that projects under about 60 units face strained financial feasibility, and that higher‑density projects could better absorb inclusionary requirements if zoning and other limits allowed them. Senior housing planner Shannon Terrell said the consultant’s recommendation was “a mandatory inclusionary policy ... that applies to new residential projects with 10 or more units,” but that staff’s further review raised concerns about feasibility for the city’s common, smaller infill projects.

The consultant’s draft scenario for mandatory inclusionary zoning would have required 10% of rental units be affordable at 80% of area median income (AMI) and 10% of for‑sale units at 100% AMI, with fees‑in‑lieu of $58,000 per rental unit or $97,000 per for‑sale unit as an alternative. Staff told council the consultant estimated that, over 10–15 years, the policy could produce nearly 200 on‑site affordable units or about $12,000,000 for a housing fund if developers paid fees in lieu.

Staff recommended option 3 in the memo: pause work on a mandatory inclusionary zoning framework and instead pursue a linkage (nexus) fee study. Staff noted linkage fees apply to development based on demonstrated impacts and would require a nexus study and legal review. Shannon Terrell summarized the next‑step costs and timing: the earlier feasibility study cost roughly $25,000, and a linkage/nexus study would be roughly $55,000 and take about six to eight months to complete, depending on consultant selection.

Council discussion focused on scope, timing and use of revenue. Councilors asked whether a linkage fee could be applied to residential and commercial development, whether the fee could be structured to allow some revenue for capital projects tied to development impacts, and how the fee would align with large redevelopment projects the city is already negotiating (for example, the Lutheran campus redevelopment). Staff said the nexus study could be scoped to test residential only, commercial only, or both, and that the council could set when a future fee would take effect (for example, by tying it to dates such as site plan submission).

Councilors also queried existing sources and uses of the Wheat Ridge Housing Fund. Staff reported the fund currently pays staff costs (including the senior housing planner) and previously contributed about $400,000 to Foothills Regional Housing for an affordable building purchase (Vance Street Lofts). Staff said a $2,000,000 grant is likely to support long‑term deed restriction at Fruitvale School Lofts. Council member comments emphasized the need for an explicit policy to keep short‑term rental tax revenue dedicated to housing. Councilor Hoppe asked for and received consensus to move forward with a linkage fee study, broaden the nexus scope, and bring forward a policy to protect short‑term rental tax revenue for the housing fund.

Council did not adopt mandatory inclusionary zoning at the meeting. Several councilors said they preferred a slower approach given current market volatility, the city’s limited development parcels, and the risk that mandatory requirements could discourage small infill development. Staff and councilors noted ongoing negotiations with two private developers to secure donations or fee‑in‑lieu contributions as projects are negotiated and when the city provides subsidies or urban renewal/TIF assistance.

Next steps: staff will issue a scope and seek consultant proposals for a nexus/linkage study (estimated $55,000; 6–8 months), and prepare a policy proposal to formalize the short‑term rental tax allocation to the Wheat Ridge Housing Fund. The council asked staff to return with the study results and recommended priorities for the housing fund after the nexus study is completed.