State leaders have already distributed millions of dollars this year to dozens of local governments and housing organizations that have pledged to build affordable units across Colorado in the coming years.
The state departments of local affairs and economic development and the Colorado Housing Finance Authority, for example, have awarded nearly $80 million to local governments and housing organizations that plan to build affordable units using funds solely from Proposition 123.
Voters approved the ballot measure in November 2022 and it requires participating local governments to plan to build at least 3% more affordable housing every year for the next three years.
Some of the organizations that have already received funds to build, are in the process of purchasing land, said Zach Martinez, legal counsel and policy advisor at Gary Community Ventures, the philanthropic organization that backed Proposition 123.
“It’s really exciting to see that the first dollars are moving and that they’re aligning with the promise that was made to voters back in 2022,” he said. “It’s also meaningful that some of the first dollars are going toward purchasing land, which is the most precious and limited resource that Colorado has.”
Addressing the affordable housing gap
The first rounds of funds are being awarded while state leaders work to find other ways to address the affordable housing crisis facing Coloradans, such as an initiative announced last week to help curb evictions and keep people in their homes statewide.
Lawmakers also are debating two bills intended to reduce the number of properties used as vacation rentals and one that would encourage high-density development along transit corridors.
Increasing the number of affordable units is expensive and time consuming. But state leaders said there are few other options to make housing more affordable sooner.
One important goal of Proposition 123 is that it will help lower-income Coloradans purchase homes and build wealth, said Stefka Fanchi, president and CEO of Elevation Community Land Trust, a nonprofit helping families with low incomes purchase affordable homes.
Proposition 123 also provides gap financing to developers, something that is hard for builders working on affordable housing to find, she said.
Funds for buying and preserving land
On Jan. 31, the state announced it awarded more than $25 million in land banking funds to 16 local governments and housing organizations that plan to create about 1,380 affordable housing units. The land banking program is funded by the Colorado Affordable Housing Financing Fund, established by Proposition 123.
The money allows local governments and housing organizations to acquire and preserve land for affordable housing, a critical first step in creating additional units for Coloradans who earn some of the lowest salaries statewide, state leaders said.
The properties must be zoned with an active plan for development within five years and must be permitted and funded within 10 years, Martinez said.
All projects built using funds from the land banking program must be affordable, meaning residents must earn 60% or less of their area’s median income, he said.
Some of the recipients include organizations planning to build housing for at-risk young adults and people transitioning out of homelessness.
Availability of land is one of the most significant barriers to affordable housing development, state leaders said.
The Colorado Housing and Finance Authority received 113 letters of intent from organizations seeking more than $255 million from the land banking program.
“Only about 10% of the requests actually got fulfilled, which I think shows the promise of what this program offers,” Martinez said. “It creates an opportunity for nonprofit developers to be able to access land, which oftentimes is out of reach.”
“One of the main elements that CHFA and OEDIT were considering was projects that were ready to be built,” Martinez said. “Even though there are five year and 10 year deadlines, these projects were picked because they believed they could build units even faster than that.”
Funds for modular housing
On Feb. 13, the state announced it distributed $38 million to eight modular housing manufacturers, funded by the Innovative Housing Incentive Program and the Proposition 123 Affordable Housing Financing Fund, which offer low cost financing options.
Those eight companies expect to create 1,280 jobs to build as many as 4,755 housing units per year. Those modular units include panelized homes, tiny homes, kit homes and offsite 3D printed homes.
Modular housing units are an important part of addressing the affordable housing crisis because those homes can be built faster and at a lower cost when compared with traditional development, Martinez said.
They are also better for the environment, are built almost entirely in factory settings and save homeowners and builders effort, time and money, according to the National Association of Home Builders.
Affordable housing for homeowners in rural Colorado
Elevation Community Land Trust received $750,000 through the land banking program to purchase lots and build 30 for-sale units for future homeowners in Walsenburg, Trinidad and Fort Garland.
The Denver-based nonprofit plans to start construction in one or more of those communities within a year and expects to finish all 30 units by the end of 2026, said Fanchi, the land trust CEO.
“Even though 30 doesn’t sound like a lot of homes, that is a huge impact on those three markets,” she said.
Elevation Community Land Trust leaders plan to do outreach and engagement campaigns in the southern Colorado towns to spread the word about the new homes, which will be offered to people who own 80% of the area median income or less and qualify for a mortgage.
The three rural communities have few affordable and newly constructed units, Fanchi said.
It also costs more to build units in those communities because there isn’t an adequate workforce. That could mean hiring workers from other areas at premium rates, or working with the only plumber in the area, who might charge more because they have no competition, for example, she said.
People in rural areas tend to make lower salaries, their local governments have less funding available for affordable housing and there are fewer public finance tools to help developers build homes for sale than there are for developers creating rental units, Fanchi added.
“These are 30 homes that we would not be able to provide, and these communities would not have access to, if it weren’t for these Prop. 123 funds,” Fanchi said.
The nonprofit’s leaders applied for land banking funds to help support three affordable housing initiatives but it was only awarded for the one it submitted to build homes in Walsenburg, Trinidad and Fort Garland, Fanchi said.
“I think the edge that this particular project had is that we’re serving an area where nobody else is doing homeownership,” she said. “This stood out because of the area we’re serving.”