Denver 2R affordable housing sales tax loss pinned on lack of clarity

The defeat of Denver’s ambitious affordable housing sales tax by voters has generated plenty of reflection in the week since Mayor Mike Johnston and other supporters’ hopes for a narrow passage flickered out.

Political activists, observers and even supporters say the proposal suffered from the lack of a clear spending plan that could be explained to voters upfront. Without more detail, they said, big promises to deliver relief for struggling renters and to provide a leg up for people fighting to buy homes in a deeply unaffordable housing market didn’t carry sufficient weight.

Some of those observers also lamented that efforts to build a coalition backing the measure failed to secure support from several progressive organizations that could have mobilized the few thousand additional voters it needed to pass.

“This was winnable,” said Robin Kniech, a former Denver city councilwoman with a deep background in housing policy work, in an interview last week. “In trying to provide something for everyone, they failed to articulate any specific outcomes for anyone.”

All told, Ballot Issue 2R would have been the largest dedicated sales tax in city history — a 0.5% addition to the city’s rate that would have generated an estimated $100 million per year in revenue for the affordable housing cause. That money would have paid for investments in new mixed-income housing developments, preservation of existing affordable housing, rent subsidies, down payment assistance for homebuyers and more, according to the campaign.

Despite the scope of that ask, Kniech and others said the campaign still fell short on those cornerstone elements of winning campaigns.

Close election losses can sting the most. And Issue 2R suffered a very close loss: It fell short by just a shade over 1%, or 3,706 votes, in final unofficial results posted by the Denver Elections Division.

“The worst type of defeat is when you lose by 1%, because you’re going to say everything mattered,” said Deep Singh Badhesha, a Denver-based progressive political activist who supported 2R.

Maybe a few more well-placed yard signs could have made a difference, Badhesha said. Or perhaps one more key endorsement.

In the wake of the measure’s failure, thoughts in city hall are turning toward what comes next.

Johnston, in a statement to The Denver Post on Friday, emphasized that Issue 2R was not the only path to deliver on his promises to bring more affordable housing to the city that elected him mayor last year.

“We will continue to work around the clock to create innovative solutions to our housing challenges, partner with the state and federal governments, improve our own processes and reevaluate our programs to ensure they are as effective as possible,” Johnston said. “I look forward to sharing more on our path forward in the coming weeks.”

National debates may have played role

City Council members who backed Issue 2R are left to look at smaller, incremental moves the city can make to reduce the city’s severe and growing shortage of housing affordable to low- and middle-income residents. Those include ongoing discussions about how the city spends money from its existing Affordable Housing Fund and Homelessness Resolution Fund — and if that spending can be shifted to better meet the needs, members say.

In the meantime, some who co-sponsored the legislation referring 2R to the ballot this summer also lamented the lack of clarity around what it was meant to do.

The tax went from a big idea pitched by the mayor at a press conference in front of city hall to a record-setting sales tax increase on the ballot in the span of just four months. Had it passed, city housing officials were slated to prepare a detailed first-year spending plan that could be reviewed and voted on by the council in January.

“People have to be really familiar with what a sales tax is going to do and how it’s going to be administered,” said City Council president Amanda Sandoval, one of those co-sponsors. “As much work as we did, just the clarity of the plan was not there. (That’s) what I heard from my voters.”

Sandoval said she also encountered misinformation — something she traced to noise coming from the presidential campaign about immigration and other issues. Some voters, she said, told her they didn’t want to support a tax that would raise money to house more migrants and people who are homeless.

That perception created another barrier, she said — causing some to believe 2R was focused on those issues in Denver rather than on supporting multigenerational families and people like Sandoval’s own children, who are worried about their ability to afford homes in the city.

“The hurdles that were in front of us with the rhetoric from the presidential campaign, I don’t know how we could have done it differently,” she said.

Councilman Darrell Watson is no stranger to the finer points of city housing policy. He previously chaired the Denver Housing Stability Strategic Advisors board, a body organized to provide guidance on city housing policy and spending. He also pointed to the challenges of selling a sales tax increase at a time when economic uncertainty and the still-looming shadow of inflation colored many voters’ decisions, from the presidency on down — even in a place like deep-blue Denver.

“Folks are still worrying about their pocketbooks, but I think sales tax measures are always tough,” Watson said. “It was not as clear-cut a message as some of the other issues that were on the ballot.”

“Promise what you can deliver”

Denverites did pass another large sales tax increase this year. Ballot Issue 2Q, a new 0.34% sales tax designed to raise $70 million per year to shore up the finances of Denver Health, the city’s safety-net hospital, won support from 55.7% of voters. With its passage, Denver’s effective sales tax rate will increase to 9.15%.

The Denver Health tax campaign entered election season with a head of steam after months of stakeholder engagement and then council referral to the ballot. Denver Health CEO Donna Lynne, on election night, credited the measure’s early lead to its leaders being clear with voters about what the tax would pay for.

Denver Health representatives explained that the money would support focus areas that included emergency and trauma care, pediatric care, and addiction treatment and recovery.

“We have talked to voters directly in detail about Denver Health, and they understand our service. And I think that’s what’s making the difference,” Lynn told The Post after initial results rolled in.

From the time Johnston introduced the separate tax proposal that became Ballot Issue 2R, he pitched it as the critical funding source Denver needed to fill a projected affordable housing gap of 44,000 units over the next decade.

Kniech also saw this as a campaign strategy mistake. The housing shortage is so complex, she said, that voters already doubt the ability of government leaders to make a difference.

“Follow the Denver Health model — promise what you can deliver,” Kniech said. “There is no need to risk the public trust by overstating what one city can accomplish with one funding source.”

Badhesha, the political activist, pinpointed another weakness identified by other observers. Despite building a coalition of supporters that included many recognizable nonprofit organizations and affordable housing builders, 2R’s campaign didn’t receive endorsements from some grassroots groups.

To him, that hinted at potential missed opportunities to rally the extra 4,000 or so votes needed to pass it. Notably, 30,943 voters skipped the question on their ballot.