If We Want Affordable Housing, Local Governments Must Look in the Mirror

In every discussion about Colorado’s housing affordability crisis, the discussion often focuses on the ill effects of construction defect litigation.  While that issue certainly affects the supply of attainable for-sale housing, particularly condominiums and townhomes, it is far from the only factor driving up the cost of housing in the Denver Metro area.

A new study from the Home Builders Association of Metro Denver (HBA), Development Fee Study: Executive Summary (June 2025), sheds light on another major obstacle to affordability: the staggering fees imposed by local governments before a single shovel of dirt is turned.  These costs, often exceeding $60,000 per home, raise the price of new housing and make “attainable” homeownership ever more elusive.

The Hidden Cost of “Impact” and “Linkage” Fees

According to the HBA’s study, the average total of development-related fees, including building permit fees, use taxes, impact fees, and utility development charges, ranges from roughly $52,000 for attached homes to $68,000 for detached homes across sixteen jurisdictions in the Denver Metro region.  Jurisdictions impose these costs upfront, before construction begins, and are baked directly into the sales price of each home.

Jurisdictions often justify these fees as necessary to fund infrastructure or community programs.  Yet the cumulative effect is clear: every new home carries an additional five-figure surcharge imposed by the very entities that claim to be pursuing affordability.

The RedT Homes Case: When Builders Push Back

One Denver builder, RedT Homes, has taken the extraordinary step of challenging Denver’s “Linkage Fee Ordinance” in federal court.  In RedT Homes v. City and County of Denver (Case No. 1:25-cv-01681), RedT alleges that the City’s requirement that developers pay $25,000 to $45,000 per project into an “affordable housing fund” as a condition of receiving a building permit violates the Takings Clause of the Fifth Amendment.  RedT, which builds LEED-certified, attainably priced “LiteHomes,” argues that Denver’s ordinance effectively penalizes builders which are part of the solution.  As the complaint puts it, “Denver cannot make housing more affordable by making it more expensive.”

RedT contends that the fees fail the constitutional tests established by the U.S. Supreme Court in Nollan v. California Coastal Commission, Dolan v. City of Tigard, Koontz v. St. Johns River Water Management District, and Sheetz v. El Dorado County, which require a direct, proportional relationship between a development and the public problem the government seeks to mitigate.

In this case, RedT argues that building homes alleviates, not causes, the city’s housing shortage, making the exaction unconstitutional.  The lawsuit seeks declaratory and injunctive relief to prohibit Denver from imposing the fees on residential builders altogether.

A Broader Reflection: The Cost of Doing Good

Regardless of whether RedT prevails, the lawsuit raises an uncomfortable question for local governments, to wit: “How can we claim to be promoting affordable housing when we continue to make it so expensive to build?”

Builders are expected to deliver lower-priced, energy-efficient, high-quality homes while shouldering mounting layers of cost, land use restrictions, infrastructure fees, labor and materials inflation, and litigation risk.  Every added burden narrows the segment of the market that can afford new housing.

And unlike private-sector costs, municipal fees are entirely within public control.  Cities could, if they chose, reform their fee structures, defer or reduce impact fees for attainable products, or offset them through tax credits or streamlined approvals.  Few have done so.

Why Jurisdictions Must Look in the Mirror

If local governments are serious about addressing Colorado’s housing affordability crisis, they must examine their own role in creating it.  It is not enough to blame builders, insurers, or lawyers.  The math does not lie when a city adds $60,000 or more in fees to every new home, it directly prices thousands of families out of the market.  To be sure, according to the HBA’s study, every $1,000 increase in the price of a new home, whether from fees, regulation, or construction costs, prices out 978 Denver-area households, 1,699 Colorado households, and 115,593 American households from qualifying for a median-priced home.

Jurisdictions that want affordable housing must start by asking:

• Are our development fees proportionate to the actual impacts of new housing?
• Are we charging homebuilders to fund policies unrelated to their projects?
• Have we evaluated how our fee structure affects attainable product types like condominiums, townhomes, or duplexes?

Until cities confront these questions honestly, efforts to expand affordability will remain half-measures.

Conclusion

Colorado’s housing shortage will not be solved by focusing on one villain.  Litigation reform, labor availability, land use policy, and local government fees all interact to shape the cost of building homes.  The HBA’s Development Fee Study (June 2025) and the RedT Homes lawsuit both highlight the same truth: we cannot regulate or fee our way to affordability.  Real progress will come only when public policy aligns with economic reality, and when jurisdictions, not just builders, share in the responsibility for making housing attainable.