If lawmakers don’t act to make housing more affordable now, “we will soon face a spiraling point of no return.”
That’s what Gov. Jared Polis said in January, during his annual State of the State Address. He noted myriad problems linked to rising housing costs.
People, he said, “are being forced out of their neighborhoods with no hope of ever living close to where they work.”
“That means more traffic, lost time and money spent on long commutes, more air pollution, and greater economic and workforce challenges,” Polis said.
Polis added that rising housing prices are “putting the dream of homeownership out of range for more and more Coloradans.”
The governor’s assessment squares with the findings of Colorado Community Media in our four-week series exploring what many experts say is a housing crisis — one that affects practically everyone in the Denver area. Lower-income workers are seeing larger chunks of their paychecks go to landlords. Young families can’t find starter homes they can afford. Retirees don’t see any attractive options for moving and downsizing, meaning their homes stay off the market, helping keep prices high.
“Just look west,” Polis said in his address. “In California, decades of poor planning has led to interruptions of drinking water and electricity for entire towns and cities, average home prices over $1 million in major cities and 16-lane freeways” with “bumper-to-bumper traffic.”
The governor then pivoted to what he sees as solutions. Since 2019, he said, billions of dollars have been invested in housing. For instance, American Rescue Plan Act funds have gone toward projects around the state, he said. And Colorado voters in November passed Proposition 123, which is expected to bring hundreds of millions more dollars to affordable housing efforts in the years ahead.
“But we can’t just buy our way out of this,” Polis added.
Public officials, he said, need to break down rules that stand in the way of building more housing.
That idea resonates with experts like Christy Rogers, who teaches housing policy at the University of Colorado Boulder.
“Where are our starter homes?” Rogers said. “Where’s our ability to provide housing for a bunch of different income levels?”
Many communities need more variety. Some need more density, housing units built closer together, she said.
Housing advocates often point to “the middle,” homes that are neither large, single-family units nor big apartment complexes. The middle consists of smaller single-family units and condos that get people their first foothold in homeownership, a home that they can build equity in and, as their family grows, sell and reinvest the profits to upgrade to a bigger one.
The governor appears to be headed in a direction where that kind of market is more possible. He said he wants to “legalize more housing choices for every Coloradan” while “protecting the character” of the state.
Yet it is an idea marked mostly by the sweeping language of the governor’s speech — at least for now.
Colorado Community Media asked the governor for more details since his address. In one statement, the governor said only that “across our state we need more housing for purchase and for rent at a lower price, and I look forward to working on all ways we can help make this happen.”
In another sign, the governor touted Lakewood’s “forward-looking vision” after he visited an apartment complex that includes some below-market-rate units and sits next to an RTD rail line.
Another hint at what the governor wants came in response to questions after his State of the State Address. Polis said that he doesn’t want the state to get mired in age-old local debates over what the ideal mix is between affordable and market-rate housing.
“There is no state AMI figure that works for Summit County, for Denver (and) for Boulder,” Polis said, in a reference to area median income, a measure often used to determine who is eligible for housing assistance.
However the mix of new homes might look, Colorado is wading deeper into spending to boost the supply of less costly housing.
Just days before the governor’s speech, the state announced a new program expected to help create up to 5,000 “high-quality, low-cost” housing units over the next five years. The Innovative Housing Incentive Program directs funding to Colorado-based housing manufacturers in an effort to boost the supply of houses that aren’t built traditionally. That includes modular homes, or factory-made houses, that are assembled at the location where the homeowner will move in.
Polis touted a company from the mountain town of Buena Vista, saying it “can build a home in roughly 18 working days, compared to close to a year for traditionally built homes.”
Alone, 5,000 new homes over several years won’t make a huge dent, but the state is also armed with other new initiatives.
Proposition 123 requires state officials to set money aside for more affordable housing and related programs. The money could go toward grants and loans to local governments and nonprofits to acquire land for affordable housing developments.
Funds could also go to help develop multifamily rentals, including apartments, and programs that help first-time homebuyers, among other efforts. As Proposition 123 ramps up, eventually about $300 million a year will be spent around the state on such efforts.
Polis’ office also highlighted how millions of dollars in federal economic recovery funds were spent amid the response to the coronavirus pandemic. In the last year, the state invested roughly $830 million into housing, including roughly $400 million based on funds from the federal American Rescue Plan Act in programs passed by state lawmakers, including:
- Affordable-housing spending detailed in House Bill 22-1304, which provides grants to local governments and nonprofits toward investments in affordable housing and housing-related matters.
- A loan program under Senate Bill 22-159 to make investments in affordable housing.
- The loan and grant program under Senate Bill 22-160 to provide assistance and financing to mobile home owners seeking to organize and purchase their mobile home parks.
- The expansion of the “middle income access program” of the Colorado Housing and Finance Authority under Senate Bill 22-146. The authority, a state entity, invests in affordable housing.
- The “Infrastructure and Strong Communities” program, also under House Bill 22-1304, to provide grants to enable local governments to invest in infrastructure projects that support affordable housing.
Those investments build upon an additional $460 million in emergency rental assistance, $180 million in homeowner assistance and $7 million in vouchers that Colorado also invested using federal funds, the governor’s office told CCM.
Polis portrayed housing as integral to the fabric of Colorado, placing it in the larger context of climate, economic and water policy.
“Building smart, efficient housing statewide, especially in urban communities and job centers, won’t just reduce costs, it will save energy, conserve our water, and protect the lands and wildlife that are so important to our Colorado way of life,” Polis said.
Beyond spending, zoning is an important tool that officials — from the governor to city leaders — are looking at tweaking in hopes of alleviating the rising cost of housing and its effects on communities.
State role in the mix
It’s a conversation that is older than many Coloradans. Making the case for new policies today, Polis harked back to changes from five decades ago.
“The last time Colorado made major land-use changes was in 1974 — before I, and most of you, were born,” Polis said. “We were a different state then.”
The governor’s office didn’t specify to CCM more about those changes, but at least two pieces of legislation arose that year that affected how local governments regulate how land is used.
Polis seemed to tease at the possibility of state intervention in how local communities govern housing.
“Since issues like transportation, water, energy, and more inherently cross jurisdictional boundaries, it becomes a statewide problem that truly impacts all of us,” Polis said.
He spoke of the need for more flexible zoning to allow more housing and “streamlined regulations that cut through red tape.” He touched on expedited approval processes for projects like modular housing, sustainable development and more building in transit-oriented communities.
The governor and his office also didn’t specify what changes to zoning policy he would support or oppose. Polis has not said that he wants the state to require zoning changes in cities. Instead, the governor spoke about the state leaning in on an existing policy.
“We want to lean in to allowing local governments to use tools like inclusionary zoning to help create the right mix for their community, and I think that local input in design is very important,” Polis said in a Jan. 17 news conference, following his address.
So-called “inclusionary” housing policies typically ask property developers to set aside a percentage of units in new developments for affordable housing, although developers are given different options to fulfill those requirements, The Colorado Sun has reported.
The landscape of local governments’ power to affect housing affordability in Colorado saw a big change recently. In 2021, Polis signed state House Bill 21-1117, allowing cities to impose affordable housing requirements on new or redeveloped projects, so long as developers or property owners have alternatives.
For example, they could trade those for affordable units built elsewhere, pay a fee into an affordable housing fund, or any number of other options, the Sun reported.
It's unclear whether Polis would support anything further than the existing allowance for cities to use inclusionary zoning.
As of late January, the governor was focused on gathering input to work with state lawmakers and develop a proposal on land-use policy. As of press deadline, no bill had been introduced.
‘Can’t expect to lose money’
Polis noted the wide gap that has opened between housing prices and people’s income over the last several decades, putting homeownership out of reach for many families.
More government spending on housing is part of the solution to affordability, experts told CCM, including Yonah Freemark, senior research associate at the nonprofit Urban Institute, based in Washington, D.C.
“Assuming that we can rely entirely on the private market to address the affordable housing need is, I think, unrealistic and unlikely to address the needs of the people who have the lowest incomes,” Freemark said.
Ron Throupe, associate professor of real estate at the Daniels College of Business at the University of Denver, said “it’s inevitable” that government must provide the needed funding to bolster the supply side of the housing market.
“We do things (on) the supply side, but it’s not enough,” Throupe said. “And you can’t expect a developer to build something and lose money.”
Spending from higher levels of government could benefit in particular the suburbs, which are struggling with housing affordability but have less political appetite to tackle the problem themselves, Freemark said.
“Ultimately, the most exclusionary places, which are often suburbs, have no incentive to invest in affordable housing” because “they don’t see affordable housing as (needed) by their residents,” Freemark said.
That said, creating housing affordability for key workers like teachers, police and firefighters is an important part of the puzzle for communities, Throupe said.
“You lose your teachers, and then you lose the quality of your schools, and it hurts the area. Same with police and fire,” Throupe said.
In the larger business community, housing plays a crucial role too, Polis said.
“Coloradans have to be able to afford to live in our communities where they can earn a good living, and companies need to be able to find the workers they need to thrive,” he said in the speech.
‘We are not California’
The governor’s one-liner when speaking about housing — “We are not California. We are Colorado” — raises the question of where the state could be headed if it doesn’t change course.
Net migration, the difference between the number of people coming into and the number of people leaving an area, has long been positive in Colorado. In 2015, net migration was about 69,000 people, according to the State Demography Office. Although the number reached a recent pre-pandemic low in 2019 with about 34,000, newcomers are still flowing in.
“There are (home) buyers moving in from out of state, and many of them come from higher-priced areas, so they don’t have sticker shocks,” Throupe said, speaking to the sustained high demand and high prices in metro Denver.
Looking to the future, Throupe doesn’t think the metro Denver housing market is on a similar trajectory that large metro areas such as New York City and San Francisco have experienced in terms of high housing prices.
“New York is a coastal city and a financial center — same with (several) California (cities), San Francisco. We’ll never be that. We’re our own animal,” Throupe said.
"The choice between those cities and Denver pricing-wise has been extreme; it’ll tighten up. It’ll never be their prices, but it’ll tighten up,” Throupe added.
Freemark noted that geographically, Denver has less of a physical barrier to new construction than in places like San Francisco — and that New York City is largely surrounded by water.
Rogers, the teaching assistant professor in the program for environmental design at CU Boulder, described the metro Denver housing market’s future in terms of uncertainty.
“I think that we are in a place we’ve never been before, so I can’t extrapolate the future from that,” Rogers said. “I feel like we’re in unknown waters.”