This story was produced as part of the Colorado Capitol News Alliance. It first appeared at coloradosun.com.
The vast majority of local governments in Colorado could be barred from receiving affordable housing funding through Proposition 123 for the next three years unless the state legislature steps in to prevent it.
The problem stems from a provision in the 2022 ballot measure that was designed to hold local governments accountable for increasing the supply of affordable housing. To remain eligible for the $350 million a year that the measure generates, cities and counties must show that they’re increasing their local supply of affordable housing by 3% a year.
But housing advocates — including those who wrote the ballot measure — say the requirement approved by voters has proved impossible for some communities to meet.
And, if lawmakers don’t pass a bill to change the rules, a provision designed to incentivize affordable housing could have the opposite effect: Upward of 90% of local governments enrolled in Proposition 123 could be disqualified from the three-year funding cycle that starts Jan. 1 because they aren’t meeting the 3% annual target.
“Ultimately the goal is creating more housing, right?” state Rep. Rebekah Stewart, D-Lakewood, said at a committee hearing in March. “It set goals that certain jurisdictions were never, never going to be able to hit — (affordable housing) goals that exceeded the amount of building permits that they actually issue year over year. Just completely unrealistic — unachievable.”
Lawmakers and the Polis administration have proposed a fix in House Bill 1313, which is headed to the Senate after passing the House on Thursday. Stewart is cosponsoring the measure alongside House Speaker Pro Tem Andrew Boesenecker, D-Fort Collins, and Sen. Matt Ball, D-Denver.
But the proposed solution — a complex formula that gives local governments various paths to maintain eligibility under the law — is raising fresh questions about what sorts of housing taxpayers should be incentivizing in the first place.
An unachievable goal
Pueblo is among those that would be disqualified under the current rules, officials say, in large part because the city already has a lot of relatively affordable homes.
Most of them are what’s considered naturally occurring affordable housing — homes that low-income families can afford at market rates without public assistance, typically because they’re older and located in less expensive neighborhoods.
But because they count as part of the city’s existing affordable housing stock, they make it that much harder to achieve the 3% annual growth rate required by the formula.
“We must produce 1,206 new deed-restricted or Proposition 123-funded affordable housing units over a three-year cycle,” Melissa Cook, the city’s director of housing and citizen services, told the House Committee on Transportation, Housing and Local Government.
“This is more residential units than the city of Pueblo has ever created in any three-year cycle in decades, let alone of documented affordable housing.”
Ironically, Pueblo would be punished for still having a lot of naturally occurring affordable housing — one of the things Proposition 123 directs the state to protect. And the result would be a loss of state funding for a city with a high concentration of poverty — the people who need the most help affording rent.
The median household income in Pueblo is $56,664 — 40% less than the state as a whole, according to U.S. Census estimates.
The requirement that communities expand their affordable housing supply was supposed to ensure that, in exchange for state funding, local governments were doing their part to address the state’s housing crisis. But even before voters approved it, some affordable housing groups were worried the requirement was so strict it could deter communities from participating at all.
Most local governments ultimately opted into the program, quelling some of the early fears. But with the three-year mark approaching, the 3% growth target has proven to be too crude a measure to apply to every community in the state, according to Gary Community Ventures, an advocacy group that spearheaded the ballot measure.
“The structure we created was based off of back-of-the-envelope math,” Zach Martinez, the group’s policy director, said at the March hearing. “The concept here is not to let local governments off the hook, but to create a system that actually is grounded in reality that will change with economic conditions and the reality of Colorado.”
(Gary Community Ventures is currently funding a Colorado Sun reporting project focused on child care in Colorado.)
A new formula
Under the formula proposed in House Bill 1313, each community would have a different target based on how much housing is actually being built there, and how quickly an area is adding jobs. A city that issued 3,000 housing permits over the past three years, for instance, would need to add about 300 affordable homes over the next three years to stay in compliance, assuming they add jobs at about the state average.
Local governments would also be able to apply for a waiver if they miss the new target but can demonstrate “good faith” effort to the state.
Some units count extra toward the goal to incentivize things like building for-sale housing, donating public land for projects or developing deeply affordable housing for the lowest income families.
Low-income housing groups, including Housing Colorado, Enterprise Community Partners and Archway Communities, pushed the bill’s sponsors to add incentives for preserving the affordable housing the state already has, much of which is at risk of being lost as housing costs rise and federal rent restrictions expire in coming years.
But even though voters required the state to fund preservation through Proposition 123, a Colorado Sun analysis found that state administrators have approved very few such projects.
In March, the housing committee agreed to amend the bill to count preservation projects toward each community’s target, but no one offered an amendment to incentivize preservation.
Brian Rossbert, the executive director of Housing Colorado, told lawmakers he was “heartened” by the incentives for some of the hardest to build housing, including units affordable to those making less than 30% of the area median income.
“While we would have preferred to see an incentive for preservation included in the amendments, we are nonetheless eager to see how and if these incentives will help build these housing types, while, at the same time, helping jurisdictions remain eligible for funds,” he said.
Time will tell how the new formula plays out.
“I will say that if every local government stays qualified for Proposition 123 funding after the cycle, it means that we did not succeed,” Martinez said. “But if every jurisdiction got booted from Prop. 123, that also means we have not succeeded.”
