Colorado’s set to make what could be the largest ongoing investments in affordable housing in the state’s history. And yet, some housing advocates will walk away a little disappointed about what might have been.
Just days ago, a package of bills moving through the state legislature would have invested more than $600 million in affordable housing over the next seven years, with ongoing funding of about $50 million a year thereafter. But in a span of 48 hours last week, one measure got slashed by $190 million. And another was cut by about $53 million over the next two years, after lawmakers tapped its funding source to pay for a health care program instead.
In some ways it was deja vu all over again. Colorado’s housing affordability crisis has been top of mind for the state’s residents for years now, but has struggled to emerge as a top spending priority at the state Capitol, consistently taking a back seat to roads, schools and health care.
Still, if the bills are adopted — even in their scaled back form — they would represent a staggering sum in a state that has typically spent less than $10 million a year on housing grants. And, assuming lawmakers don’t divert its revenue stream again in the future, Colorado for the first time would have a dedicated funding mechanism for housing, fulfilling a long-standing goal of affordable housing advocates and their Democratic allies.
The bills have to clear several hurdles before they become law. And a lot still could change.
“The need is obvious”
When Cathy Alderman talks to policymakers about housing, she never has to convince anyone of the need.
“We’ve hardly had to talk about the housing crisis,” said Alderman, the vice president of communications and public policy for the Colorado Coalition for the Homeless. “Everyone knows we’re in one. The need is obvious.”
The stats are eye-opening. One out of every four renters spends more than 50% of their income on housing, according to Housing Colorado. It would take a minimum wage worker 74 hours a week to afford the typical one-bedroom rental home at fair-market rent, according to the National Low Income Housing Coalition.
The poor have been hit the hardest — leaving many homeless — but the cost crunch has been felt throughout the middle class and all across the state.
“If you’re spending that much on housing, you’re not spending it on health care, you’re not spending it on a gym membership, you’re not investing it in your kids’ activities,” said Elena Wilken, the executive director of Housing Colorado, a nonprofit advocacy group. “…It’s exacerbated at lower income levels and we’re starting to see it at higher incomes as well.”
The causes are complicated, but the problem is pretty simple. There’s not enough supply to meet the demand, and that has made rents and home prices skyrocket, from the least expensive apartments to high-end homes.
Not only has the private market not kept pace with demand, the public sector hasn’t either. The primary funding source for subsidized housing — the federal government — has not kept up with construction costs or population growth. The two largest federal housing grants are the Community Development Block Grant program and HOME, and since 2000 their funding has fallen by 57% and 64%, respectively, according to an analysis by the left-leaning Center for Budget and Policy Priorities.
But where other states have stepped in, Colorado has largely left cities to fund solutions on their own. In the current 2018-19 budget year, the federal government spent $426 million on housing in Colorado, while cities allocated $97 million. The state chipped in $35 million, but the bulk of that was one-time money that was diverted to transitional housing for ex-offenders and homeless people struggling with mental health problems.
Since the Great Recession, the state has typically spent $9 million or less per year on housing development grants, and $5 million annually on tax credits to incentivize private development.
Here’s what the bills would do — and how they were changed
Amid a sea of housing-related bills this session, there are two that would directly invest public dollars to build units, subsidize rent or provide assistance to homebuyers, and a third to expand an existing tax credit.
The most significant is House Bill 1245, a measure that would generate up to $50 million a year for the state’s housing development grant fund by revamping a tax break claimed by retailers.
Here’s how it would work: Today, businesses can claim a tax break known as a vendor fee to help offset the administrative costs of collecting sales taxes. And under the bill, most businesses would actually get to keep a larger share of the taxes they collect because the vendor fee would increase to 4% of taxes collected from 3.33%.
However, the amount a business can keep as a tax break would be capped at $1,000 per month, meaning the state’s largest retailers — those that do at least $12 million a year in sales — would lose money. According to an analysis by Rep. Mike Weissman, the bill’s sponsor, about 98% of businesses would get to keep more money under the changes. But the largest retailers — including Amazon, Walmart and Target — would pay so much more that it would generate new revenue — about $50 million for the housing fund.
In the latest version of the bill, affordable housing won’t receive the full amount until 2021-22. In the next two fiscal years, housing would receive $8 million and $10 million, respectively.
The second is House Bill 1322. Initially, this one would have taken up to $40 million a year from the state’s unclaimed property fund for seven years. But lawmakers last week reduced it to $30 million a year for three years starting in 2020-21, instead of $40 million for seven years.
This fund is made up of money from insurance policies, stocks and bank accounts that haven’t been collected, often by distant relatives who don’t realize they’re entitled to the money. The state attempts to reach those who are owed money, but is often unsuccessful.
State Treasurer Dave Young told lawmakers the fund has more than enough money in reserve to cover the costs of the housing fund, and still have enough in the bank to pay any claims that come forward. The bill has safeguards in place to reduce or prevent transfers as needed to keep the fund solvent. It’s also contingent on whether the state owes taxpayer refunds.
A third proposal, House Bill 1228, would double the state’s affordable housing tax credit, costing $150 million over the next decade, according to a fiscal analysis. In 2018, developers used this credit to help finance 533 new affordable rental units and preserve more than 2,500 units, according to the Colorado Housing and Finance Authority.
“It’s a lot of money”
Housing advocates see the two housing grant bills as complementary, and long overdue. One provides an three-year infusion of cash after years of neglect; the other, a permanent funding mechanism for housing, which already exists in most other states.
Unlike federal dollars, which have rigid low-income restrictions, housing advocates envision the money helping many middle-class families, as well. A teacher or firefighter making close to the median income could still struggle to afford housing in many of Colorado’s high-cost mountain towns, advocates say.
Housing costs have “been a problem for years — acutely so,” said Weissman, the Aurora Democrat who sponsored the vendor fee bill. “I think it’s just time to start making more serious investments and bringing affordable housing to market so that people can access it, can purchase it, can rent it, and can have a stable foundation for the rest of life.”
Weissman’s bill passed the House despite opposition from a handful of Democratic lawmakers. But the unclaimed property bill has both bipartisan support — and Republican critics.
During last week’s floor debate on the unclaimed property measure, Rep. Shane Sandridge, R-Colorado Springs, said housing costs were a clear problem — but one the free market was better equipped to solve.
And, he added, “it’s a lot of money.”
“I sit back and ask could this money be used for something a little bit different — transportation, education? I don’t know if this is the best bang for the buck,” he concluded.
Democratic leaders agreed, reducing the spending levels in both bills, while tapping some of the vendor fee money for another priority: Gov. Jared Polis’ health reinsurance plan.
Affordable housing advocates expressed disappointment, noting that even the original bills would have been a drop in the bucket compared to the overall need.
“We think that housing is a better use for the money than reinsurance,” said Wilken, the director of Housing Colorado. “But that being said, we’ll take what we can get.”
And — as of Monday — what they’re getting is still more than they’ve ever had.
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