A ballot measure that would set aside nearly $300 million each year in existing tax revenue to help local governments and nonprofits increase the number of affordable housing units across Colorado appears to have passed by a narrow margin.
By 11 a.m. Monday, 52% of the votes tallied were in favor of Proposition 123, while 48% were opposed, according to results posted on the Secretary of State website.
Proposition 123 will set aside up to 0.1% of taxable income each year for affordable housing. That’s estimated to be $145 million in the current fiscal year — which ends June 30, 2023 — and $290 million in 2023-24 and subsequent fiscal years.
The new funding from the measure will help ensure that teachers, nurses, firefighters and other essential workers can afford to live in the communities they’re serving and it will help address a full continuum of housing needs by serving people who are homeless as well as first-time homeowners, said Mike Johnston, a former state senator now leading Gary Community Ventures, the philanthropic organization that bankrolled the committee that worked to pass Proposition 123.
“For the first time in Colorado history, we brought together a coalition of more than 260 organizations across the state who have committed to creating a permanent supply of affordable housing for teachers and nurses and firefighters across Colorado, and that is something that people thought was never possible,” Johnston said.
“It is incredible to see Coloradans come together at a time when you think it’s very hard to find bipartisan agreement on anything,” he said. “And to see such a diverse coalition on one of the state’s toughest problems rally around such a thorough and comprehensive solution is really inspiring.”
Proposition 123 landed on the November ballot at a time when affordable housing is one of the most pressing problems in Colorado and across the country. Denver’s homeless population grew 12.8% in the last two years, according to a recent local survey, and a gap between Black and white homeowners in Colorado has continued to widen since 1970. A Colorado Health Foundation poll also recently found that 86% of Coloradans think the cost of housing is an “extremely serious” problem.
The politics surrounding Proposition 123 were complicated. It was endorsed by a number of prominent nonprofits and a host of Democratic state lawmakers and politicians. But it also had a bipartisan group of skeptics who wanted voters to think long and hard before weighing in on the measure, especially given the growing risk of a recession stemming from high inflation and rising interest rates meant to tamp down consumer costs.
“It’s past time to do something, and this offers a chance to do that without raising taxes,” Johnston told the Colorado Sun in early October, as Coloradans for Affordable Housing Now, also known as Yes On Prop 123, was holding town halls, news conferences and roundtables all over the state. The group includes more than 180 organizations, advocates and elected officials who feel the affordable housing crisis needs to be addressed promptly, Johnston said.
Funding from the measure will be used to help reduce the cost of building up to 10,000 units per year, Johnston said.
“What would happen next is we would begin to work with local communities to get shovels ready to build these affordable housing units, starting this summer (in 2023),” Johnston said. “Dollars would start moving this summer and we can expect communities to be ready to start getting houses built.”
Before Election Day, the median price of a home in Colorado was more than $500,000, which is out of reach for many Coloradans, according to a Thursday news release from Yes on Prop 123, the committee that worked to pass the measure. Calculations from Thrive Economics, a nonprofit working to achieve economic growth, estimated that if home prices continue to rise as they have over the past five years, by 2032, the median single-family home in Colorado will cost almost $1.7 million.
To qualify for a 30-year mortgage on this kind of single-family home, a buyer would need an annual income of at least $372,000. Simultaneously, the median rent in Colorado is estimated to reach $2,700 per month, requiring an annual income of at least $106,000, according to the news release.
How it will work
The measure will give grants and loans to local governments and nonprofits to acquire and preserve land for affordable housing development. Funds from Proposition 123 will help develop affordable multifamily rental units, increase homeownership rates in the state and provide down payment assistance for first-time homebuyers. It will also address homelessness by providing rental assistance and eviction defense programs, proponents said.
Opponents of the measure have said it won’t address the underlying causes of high housing costs and that pumping money into the housing market could distort it further.
State budget writers, both Democrats and Republicans, have also expressed concerns about the measure potentially diverting money from the state’s budget in years when the Taxpayer’s Bill of Rights cap on government growth and spending, which is calculated based on inflation and population growth rates, isn’t exceeded. The legislature would still be on the hook to find $290 million in its budget to allocate to affordable housing, they said.
In the years where state revenue is below the TABOR limit, the measure could reduce the amount of money available for the state budget.
In years where state revenue exceeds the TABOR limit, the measure reduces money returned to taxpayers. In tax year 2023, the measure is projected to reduce the TABOR refund by $43 and by $86 in tax year 2024, according to nonpartisan legislative staff.
Tanner Stogsdill, a 30-year-old Democrat who voted at Nova Church Tuesday morning, said the amount of money set aside by Proposition 123 seemed minimal, especially because all Coloradans, even those who aren’t in need of financial assistance, receive refund checks from the government during TABOR surplus years.
“It just makes sense, especially with it getting colder,” he said of Proposition 123. “Why would you not want to vote for more affordable housing? … I would want it if I were in that position.”
“There’s no free lunch,” said state Sen. Chris Hansen, a Denver Democrat and former member of the Joint Budget Committee, who is now running to become Denver’s next mayor. “K-12 and higher education (are) where the marginal dollar is in our state budget. So $1 less means $1 less for education,” Hansen said in late September.
In its 2022 voter guide, the libertarian-leaning Independence Institute, a political nonprofit, recommended a “no” vote on Proposition 123. Rather than using taxpayer money to address the affordable housing shortage, the group said, politicians should focus on reducing government regulations that create barriers to new housing supply, including local zoning regulations and strict building codes.
For projects to qualify for funding, local governments will have to commit to increasing affordable housing by 3% each year and will have to create a fast-track approval process for such projects.
The measure defines affordable housing based on two factors: household income and housing costs. For a housing unit or project to qualify as affordable housing under the measure, housing costs such as rent or mortgage payments must not exceed 30% of the household’s income.
The measure requires that the funding add to, and not replace, existing state money spent on affordable housing.
The affordable housing programs developed under Proposition 123 will be managed by the Colorado Housing and Finance Authority and the state Division of Housing.
Proponents of the measure said it will create a new source of funds to tackle housing issues without raising tax rates. It also will give local communities the flexibility to respond to their specific needs.
“Only about one-third of 1% of the state budget goes to housing right now, so, this is a solution that actually relieves pressure on the general fund because it finds a way to fund the state’s most urgent priority right now by funding it out of refunds and not funding it out of the general fund,” Johnston said in early fall.
An expensive housing market
Housing prices in Colorado are making it too hard for many households to afford rent or buy a home. The new programs proposed under Proposition 123 will help Coloradans participate in the housing market now and in the future. Creating more homes will allow residents and essential workers to remain in their communities, proponents said.
Four voters who cast their ballots at Nova Church in Denver’s Capitol Hill neighborhood on Tuesday morning said they voted for Proposition 123.
Bailey Johnson, a 25-year-old nurse and registered democrat in Denver, said she voted in favor of Proposition 123, in part, because of the city’s growing homeless population and the few resources to address the affordable housing crisis.
Andrea Keppers, a 46-year-old Democrat, was skeptical. She voted for Proposition 123 but said she doesn’t think $300 million will be enough money to make a dent in the state’s affordable housing problem.
☀ READ MORE
Grand Junction Mayor Anna Stout in early October said Proposition 123 was designed to keep affordable housing funding in Colorado neighborhoods and will offer local leaders control when trying to address housing challenges facing their residents. In Mesa County, the average cost of buying a home has increased 30% percent in the past two years, she said. Simultaneously, Grand Junction has an apartment vacancy rate of about 2%, meaning people looking for an apartment have few options for housing in town, she added.
Local governments can now increase the number of homes that Coloradans can afford by 3% every year, according to the Coloradans for Affordable Housing Now news release. An affordable housing equity program outlined in Proposition 123 will also give renters a path to homeownership while they’re still renting and could help them build equity and generational wealth, Stout added.
Grand Junction is working on several housing strategies that will require funding, such as new land banking projects, plans to remove obstacles for housing development, and providing first-time homeowner or down payment assistance. Proposition 123 will give Grand Junction leaders the financial resources to implement those programs, she said.
“I’m grateful that the state recognizes that we have a problem and we have to have resources to be able to begin to fix it,” she said. “A plan is only as good as your ability to implement it,” she said. “Proposition 123 gives us the funding to actually carry out our housing strategy.”
Garfield Warren, who teaches Advanced Placement U.S. History at DSST: Green Valley Ranch High School, said he has been on the hunt to purchase a home for eight months but the biggest obstacle, so far, has been the high cost of houses in the area.
Now that Proposition 123 has passed, he said, Colorado is one step closer to solving the housing crisis, a relief for future generations, especially younger Coloradans who want to continue living in the state. Developers may also see a boom in business with the need for construction rising in different cities that will now apply for funds from Proposition 123, he said.
“I have a dream to have a house but I’m trying to figure out how to make that vision possible,” said Warren, a second generation American whose parents immigrated from Jamaica.
“To build generational wealth is the American dream for me,” he said. “Owning a home is me continuing on the pathway to providing for my community, providing for America and being there as an active citizen in my community.”
Coloradans for Affordable Housing Now has spent nearly $5.6 million advocating for Proposition 123, through Oct. 26, while raising $6.7 million through Nov. 5. Gary Ventures contributed nearly $2.1 million to the committee, according to campaign finance data.
Habitat For Humanity Metro Denver gave the committee $250,000 and Action Now, a nonpartisan human service organization in Houston, has given $500,000 to support the ballot measure.
The Association of Realtors also donated $276,000 to support the measure in July, according to campaign finance records.
The conservative political nonprofit Advance Colorado Action was against the measure, senior advisor Michael Fields has said.
No on Prop 123, a small-scale issue committee opposed to the initiative, did not report any spending or fundraising to oppose the measure.
Colorado Sun Reporter Sandra Fish contributed to this report.