When the apartment building at 1371 Xenia St. went up for sale in 2024, the East Colfax Community Collective feared what might come next.
Built in 1961, the Denver rental property was falling apart, its tenants facing winters without heat, even as their rent kept going up.
The wrong buyer could mean further neglect, or worse: The people living there could be priced out entirely. Major investments along East Colfax threaten to accelerate gentrification in a neighborhood where 1 in 4 households live in poverty.
The nonprofit began to cobble together financing to buy the building, repair it and keep the rent affordable for the working-class families who lived there. It applied to the state for funding through Proposition 123, the voter-approved initiative designed for projects just like this: rental housing affordable to low-income families that the private sector simply won’t build without public assistance.
But the state rejected the application.
Colorado is at risk of losing 24,000 affordable units over the next 15 years, even as the state spends heavily to bring more homes online that working-class families can afford.
Unless policymakers do something to change that trajectory, low-income housing advocates say, the state stands to lose a unit of subsidized housing for every two that it builds. And those estimates may be low: they don’t include the potential loss of older market-rate apartments like the 23 units at Xenia, where rising costs of living already weigh heavily on tenants.
Proposition 123 was designed in part to help. One program managed by the Office of Economic Development and International Trade is explicitly required to fund the preservation of existing affordable rental units.
But a Colorado Sun analysis of state housing awards found that out of the 11,000 homes Proposition 123 has helped fund, only 20 units — less than 0.2% of the total — meet that definition.
Gov. Jared Polis and state officials defended their funding decisions, saying they believed prioritizing new construction was the best way to maximize the impact of limited dollars. The state already receives far more applications than it can afford, and funding for affordable housing is expected to take a hit in the coming budget.
“We are focused on maximizing investments to deliver the most newly constructed homes Coloradans can afford and addressing our housing shortfall by building more homes now,” Polis said in a statement.
Gary Community Ventures, an advocacy group that spearheaded the 2022 ballot measure and has continued to advise the state on its implementation, agrees with the administration’s approach.
“I think different economic conditions incentivize different kinds of housing, and I think Colorado is severely in a housing deficit,” Zach Martinez, the organization’s policy director, said in an interview. “We need as much housing as we can possibly get.”
(Gary Community Ventures is currently funding a Colorado Sun reporting project focused on child care in Colorado.)
Low-income housing advocates don’t disagree that new construction is needed, says Kinsey Hasstedt, the director of state and local policy for Enterprise Community Partners, a nonprofit that develops and invests in affordable housing.
But, she says, building without preservation is a lot like pouring water into a leaky bucket.
Hundreds of millions of dollars are flowing in from taxpayer-funded housing programs like Proposition 123 and state and federal housing tax credits. But if no one plugs the leak, the new construction won’t result in as much affordable housing as it appears on paper.
Much of what’s built will simply replace what’s being lost.
”Increasing housing supply is not an either/or with production and preservation,” Hasstedt said. “It’s a ‘yes, and.’
“We’re undermining the overall effort if we’re not simultaneously investing in preservation projects,” she said.
Why units are being lost
In recent decades, most of the publicly funded affordable housing in the U.S. has been built with help from the federal low-income housing tax credit.
In exchange for taxpayer financing, developers agree to rent out their units for no more than 30% of a renter’s income. And they agree to house families making less than 60% of the area median income, on average — though some units can be rented to people earning more.
Income limits vary by household size and where you live, but a Denver couple can make up to $67,260 to qualify under the 60% threshold. A renting family of four can make up to $84,060.
However, the owners of those apartments don’t have to keep the rent low forever. The program’s restrictions typically last only 30 years. According to Enterprise, nearly 24,000 Colorado apartments built in the late 1990s and 2000s are about to lose their tenant protections. That’s about 20% of the entire stock of income-restricted housing in Colorado.
When restrictions expire, landlords can raise rent to market rates — or flip them to investors likely to do the same. In recent years, private equity firms have become some of the largest owners of affordable housing in the country, acquiring more than 100,000 units built with taxpayer dollars.
At the same time, the rising cost of living is depleting another source of affordability — so-called “naturally occurring” affordable housing that wasn’t built with public dollars, but is still relatively inexpensive. Many of them are like the Xenia Street project: older buildings in poorer neighborhoods that may have fallen into disrepair.
“Because of our market, those are very, very attractive to investors,” said Jennie Rodgers, the vice president of Enterprise’s Rocky Mountain communities. “You can make a good return if you buy those older properties, take everybody out and you increase the rent.
“That means displacement, it leads to homelessness, it leads to people not being able to afford to live,” she said.
In the 2024 legislative session, lawmakers passed a law giving local governments a right of first refusal to buy low-income properties that go up for sale and keep them affordable longer.
But raising money to do so fast enough to beat buyers with cash on hand is no easy task — especially for small nonprofits, like East Colfax Community Collective, that don’t have large balance sheets to show lenders.
Older affordable properties often have major maintenance needs, too.
“With that level of renovation you basically need to make it market rate to make it worth your while,” said Carson Bryant, the nonprofit’s housing director. That’s where public subsidies could play a pivotal role, but federal and state housing tax credits are designed to flow to new construction.
“This is where the Prop. 123 question is significant, because that’s supposed to be an alternative to tax credits,” Bryant said. “But they, to my knowledge, have never funded a typical preservation project.”
An ongoing debate
In some ways, the lack of funding for preservation is emblematic of a broader debate that’s been playing out among housing advocates.
To the Polis administration and its allies, Colorado’s housing crunch is fundamentally a supply problem, something they’re attacking in tandem with public subsidies for affordable housing and zoning reforms at the local level to spur construction.
And, as housing cost burdens climb the income ladder, policymakers have also pushed to expand the definition of affordable housing so that public assistance reaches renters making middle income wages. Proposition 123, for instance, has programs that serve both homebuyers and renters making the median income or above.
“We hear from employers that one of their top concerns is making sure that their employees have an affordable place to live, preferably near where they work,” Eve Lieberman, OEDIT’s executive director, told The Sun in an interview. “We really prioritize making sure that we are increasing housing supply, all types of housing, quickly, efficiently, and affordably.”
Low-income housing providers agree that more supply is needed — but they say limited public dollars should be targeted to those in greatest need.
Vacancies are up and rent has been falling at apartments that people making close to median income can afford — a point of pride for Polis, who has pointed to it as evidence that his supply-focused housing strategies are working.
But the same isn’t true for those who make less than 50% of the area median income. (In Denver, that’s about $56,000 for a couple or $70,000 for a family of four.) Waitlists remain long for deeply affordable housing, low-income housing providers say. And homelessness has risen each of the last five years in the Denver metro area, according to the city’s housing needs dashboard, even as the median rent falls.
Trouble is, those projects also are also harder to build, requiring deeper subsidies and slimmer profit margins. For-profit developers usually don’t build them at all, unless they can combine them with higher-priced units.
That’s led affordable housing advocates to look for new strategies. And the most cost-effective one might be to preserve the affordable housing the state already has. Studies show that preservation costs 30% to 50% less per unit than new construction.
The state hasn’t done a full accounting of how Proposition 123 dollars have been spent. OEDIT manages only about 60% of the money, with the Department of Local Affairs handling the rest. But Lieberman promises it’s coming, along with a statewide assessment of housing needs. For now, though, that makes it difficult to say with precision whether the program is truly meeting the need.
There’s no doubt, however, that program administrators are prioritizing new mixed income construction over the preservation of lower income units.
The Sun reviewed thousands of pages of project applications, local planning documents and news reports to assess how Proposition 123 dollars have been spent.
Of the $568 million awarded through Jan. 1, The Sun found that at least $500 million went directly to creating or preserving affordable housing, with the rest going to other programs, like emergency rental assistance and local planning grants.
The vast majority, $408 million, was for new construction or redevelopment.
About $59 million was spent on preservation, but almost all of it was for homeownership: programs to acquire or update mobile home parks, and to buy single-family homes to sell at affordable prices. Another $11 million was awarded to programs that help existing homeowners pay for repairs.
The only project with a preservation component that was aimed at renters was mostly new construction. The Northeast Denver Housing Center got $6.2 million to rehab 20 units of rental housing at 1600 Pearl St. and build 138 new units next door.
Hasstedt, the policy advocate at Enterprise, says that doesn’t follow the spirit or the letter of Proposition 123. The law says the state “shall” fund preservation of affordable rental housing among a list of other activities.
“My read of it is that new production and preservation activities, they kind of have equal callout in statute,” Hasstedt said. “They should be considered on equal footing.”
“What we have heard from partners is that applications for preservation projects aren’t getting picked. And I think that’s discouraging for folks — not believing they have a shot means they’re not coming back in.”
When asked if the state was telling preservation applicants they would not be competitive against new construction, Lieberman did not answer directly. In a follow-up email, she said that OEDIT was in discussions with the Colorado Housing Preservation Network to identify at-risk properties, and “implement a coordinated strategy to ensure the long-term affordability of housing units.”
A success, and two failures
The Xenia Street project worked out in the end.
East Colfax Community Collective was able to raise enough money from nonprofit lenders and charitable foundation grants to buy the property. The city of Denver’s Department of Housing Stability is helping, too, providing a low-interest, 30-year loan that will help it cover the project’s $3.85 million cost.
The tenants there, who make less than 50% of area median income, pay as little as $995 for a studio, and up to $1,525 for two-bedroom — hundreds of dollars less per month than the average rent in Denver. And thanks to the nonprofit’s renovations, their rent now affords them a habitable home, with a working furnace, new appliances and a freshly repaired roof.
With state funding, Bryant said, ECCC would’ve been able to make more renovations. It also could have kept the rent down at more units, allowing the complex to serve more of the lowest income families who struggle the most to find housing. Instead, to cover the building’s operating costs, the rent for some apartments will go up as current tenants move out.
Bryant said his organization walked away from two other preservation opportunities in the neighborhood due to a lack of state support. At the price the seller wanted, Bryant said, there was no way to pay for badly needed repairs without public subsidies or large rent increases.
He applied for Proposition 123 funding for one of them, 1345 Yosemite St., but was rejected by the state.
When 1380 Moline St. in Aurora went up for sale, Bryant didn’t bother applying.
“(State housing officials) had effectively told us that preservation projects simply wouldn’t get funded,” Bryant said. “It wasn’t worth my time to submit an application knowing the funding wasn’t going to be awarded.”