Colorado is steering affordable housing money to the middle class — and away from the working poor (2024)

In 2022, the state of Colorado loaned a housing developer $640,000 to buy the Parachute Inn —a condemned hotel on the Western Slope that the buyer planned to convert into low-income apartments.

Local governments are chipping in too, with property tax breaks and fee waivers. And last week, the state Housing Board gave the development another boost — a $5 million grant to help build 50 affordable units with construction starting as soon as this year.

But in the intervening years, the project’s focus on lower-income workers vanished. Instead, many of the units will be rented out to the middle class.

In a major policy shift, Colorado state lawmakers have begun steering public dollars to affordable housing projects aimed at families who make as much as $170,000 per year, redirecting aid that has historically gone to the working poor.

The move, which began in the wake of the pandemic, upends a century of affordable housing norms as policymakers grapple with how to combat an affordability crisis that has spread well beyond the low-income households that traditionally qualify for taxpayer-subsidized housing.

In response, state lawmakers have steadily expanded who can get help from state affordable housing grants and loans, like the ones used in Parachute. In 2023, they passed a bill allowing mountain resort communities to petition to spend Proposition 123 affordable housing dollars on higher income levels. That overrides the limits approved by voters when the ballot measure, which sets aside state income tax dollars for housing projects, passed just months earlier.

This legislative session, lawmakers went a step further, setting aside $200 million over the next decade to create the nation’s first middle-income housing tax credit —a middle-class version of the state and federal tax credits for low-income housing.

The new tax credit passed with unanimous support from progressive and moderate Democrats alike, plus a few votes from Republicans — a sign of just how potent a political issue the middle-class housing problem has become.

“We can work on housing affordability for low-income Coloradans and middle-income Coloradans at the same time,” said Sen. Jeff Bridges, a Greenwood Village Democrat. “To say that we have to be one or the other is a false choice. And I know it’s a false choice because we’re doing both and we’re going to keep doing both.”

But the state’s broader shift toward subsidizing middle-class rentals has been met with trepidation from low-income housing groups, some of whom have bitterly opposed similar legislation at the federal level.

“It’s a really wasteful use of limited dollars, and it’s going to have a negligible effect on the underlying causes of the housing prices in Colorado,” said Sarah Saadian, who oversees public policy for the nonprofit National Low Income Housing Coalition. “It’s going to do very little to help those who are struggling the most.”

The need seems unlimited. Resources aren’t.

In the wake of the pandemic, a few of Colorado’s most desirable mountain communities crossed a startling threshold.

Not only can people making less than $100,000 no longer buy a home in Summit and Routt counties, they can’t even afford to rent the average apartment, according to Colorado Housing and Finance Authority data.

“You can be a doctor in a ski town and still not be able to afford housing in that ski town,” said Bridges, who sponsored the legislation creating the middle-income housing tax credit, House Bill 1316. “Because you’re competing against the richest people in the world who want to come enjoy the greatest mountains in the world.”

As median home prices in some counties push north of $1 million, prospective homebuyers now have to make close to $600,000 to afford the median home in parts of the mountains. That pushes higher earners into the rental market, driving up costs for middle-income workers in essential professions, like nurses, teachers and government administrators.

“There’s a sort of saying in Summit County that you get to live here if you work in a restaurant, for example, if you’re a server or if you’re cleaning houses,” said Tamara Pogue, a Summit County commissioner. “But the second you become a teacher, you have to move to a surrounding county.”

At the same time, paying rent hasn’t gotten any easier for those at lower rungs of the income ladder. Homelessness and eviction filings are at record levels. Rent has stayed on an upward climb even as inflation cools.

While middle earners may struggle to afford an apartment in the state’s most expensive resort towns, workers who make less than the median wage face far greater challenges. In the 11 counties that make up the Denver metro area, there are only three left — Elbert, Gilpin and Clear Creek — where someone making less than $60,000 can afford the median apartment without financial strain, according to CHFA data.

Kinsey Hasstedt, the director of state and local policy for Enterprise Community Partners, a nonprofit affordable housing developer, says it’s important to remember why the government subsidizes low-income housing in the first place. The free market simply won’t build it without taxpayer help.

“Affordable housing for decades has really been focused on serving people living on lower and fixed incomes, because the market is not set up to do it otherwise and will not do it otherwise,” Hasstedt said.

When developers partner with the government to build affordable housing projects, they agree to rent them only to people who make a certain level of income —typically less than 60% or 80% of the median income in their area. The public subsidy pays for the difference between the market rent the landlord would have otherwise charged and the rent considered affordable to those tenants.

The largest source of such housing by far is the federal government. In recent years the state has upped its own contributions. It’s still far from enough.

For every 100 households in the Denver metro area, there are just 91 affordable units available to those making less than 80% of the median income, or about $90,000 for a family of three in Denver. At 50% of the median income, there are just 44 affordable homes for every 100 households.

“When we pull public funds to serve higher income households, we are taking away funds that could serve lower income households,” Hasstedt said. “That feels like it stands to exacerbate inequities.”

Even in mountain communities where those making middle-income salaries face the worst housing burdens, the situation is far worse the less you make.

The CHFA data shows that in mountain communities, 69% of renters who make less than 60% of the median income are considered rent burdened, meaning they pay more than 30% of their income on rent. Less than 10% of those who make above the median income are rent burdened.

But new state laws are allowing public dollars to be spent on renters making as much as 140% of their area median.

Saadian, with the National Low Income Housing Coalition, says this illustrates that politicians are responding to middle-class constituents who vote in higher numbers rather than those with the highest need.

“It’s important that we see this for what it is,” she said. “This is about politics, not about actually solving the housing crisis.”

Supporters see it differently. As the cost of land and construction soars, the fundamental case for low-income units now applies to middle-income housing in some parts of the state. The market simply won’t build it otherwise.

“For us to be able to stand up a school district, a hospital, law enforcement, public services, government — we have got to have housing for the working local,” said House Speaker Julie McCluskie, a Democrat from Dillon, who has pushed to loosen income restrictions for affordable housing in resort towns like hers.

“And while I absolutely agree, funding needs to go to those with the greatest need, when you’re looking at the continuum of housing and what you need to provide for all levels of your workforce, our needs are fairly significant.”

Serving the workforce

When lawmakers insist mountain communities need flexibility in setting income limits, the Parachute Inn is just the sort of project they have in mind.

A town of about 1,400 people, Parachute sits along Interstate 70 in southern Garfield County.

The developer, Grady Lenkin with Headwaters Housing Partners, told The Colorado Sun that he initially set out to build a low-income housing project. But after months of talking with community leaders, residents and employers, he changed course.

“What everybody said to us was, please make this a project that serves the workforce of the town,” Lenkin said. “You know, the manager of the new Love’s gas station, or the assistant police chief or assistant superintendent or the teacher.”

Lenkin says he still plans to partner with the local housing authority to provide some vouchers for low-income workers. But the development will now allow renters making up to 100% of the area median income, up from 30% to 60% in his original plans.

It’s the sort of project a functioning housing market should be able to provide without government help.

But “a number of local bankers who I spoke with, they just didn’t want to touch Parachute,” he said, pointing to a stigma that lingers decades after an oil and gas bust gutted the region’s economy. “As part of my application to the (state) Division of Housing, I submitted a stack of rejection letters just saying, ‘No, we’re not going to lend in Parachute.’”

While some of Parachute’s housing challenges are unique to Garfield County, the broader story could be told up and down the Rocky Mountains. The rise of remote work has allowed more people to live in Colorado’s most picturesque locations. And there aren’t enough homes to fit them all.

“You only need to add a really small number of people who want to be in the region to break the housing market —and that happened,” Lenkin said.

When you zoom out from Parachute, low-income housing advocates say a different picture emerges. Study after study confirms there is indeed a growing need for middle-income housing in some communities. But at the regional level, it is dwarfed by the need for lower income units.

A 2019 study of the Greater Roaring Fork region, which stretches from Parachute to Aspen and Eagle County, estimated the area will face a shortage of 5,000 units by 2027 for those making less than 60% of their area median income. The region is expected to need 590 more homes for those making 80% to 100% of AMI, and 1,100 for those making more than the median.

“People earning middle incomes are experiencing housing cost burdens — no doubt. It’s starting to creep up that ladder,” Hasstedt said. “But that doesn’t mean that people living on less aren’t experiencing the same or worse.”

Earlier this year, Chaffee County, home to Salida in Colorado’s high country, became one of the first local governments to petition the state to waive the income limits for affordable housing under Proposition 123, seeking to use state dollars for people making up to 120% of the median income. In Chaffee, that’s around $73,000 for an individual or $94,000 for a family of three.

The county’s housing study, submitted to the Colorado Department of Local Affairs as part of its application, shows there’s a shortage of 50 units at that income level, underscoring the county’s argument.

But those making less than 60% of the median income —the population voters intended Proposition 123 to serve —face a shortage of 295 homes.