Summary
Colorado is addressing a dearth of middle-income housing on multiple fronts, while other states are also realizing and responding to the need for more affordable housing for workforce families and individuals.
The Upshot
- The Colorado Middle-Income Housing Authority, created under a 2023 law, recently started funding projects, and workforce housing has emerged as a priority for other agencies within Colorado and elsewhere across the country.
- These efforts come amid mounting consequences of tax and public finance laws that have created the “missing middle”—households that have incomes too high to qualify for traditional low-income housing subsidies or tax-advantaged finance mechanisms, but too low to afford to live near their jobs.
- Recently, a Colorado nonprofit corporation launched a pioneering pilot project for an innovative model for financing workforce housing in the state. Ballard Spahr represented the nonprofit, Fulcrum Communities, in planning and closing a 501(c)(3) tax-exempt bond transaction through the Colorado Housing and Finance Authority (CHFA).
The Bottom Line
Colorado is among the growing number of states actively seeking to increase its middle-income housing stock near job centers for working people and families, using tax and finance laws to spur investment.
Colorado is addressing a dearth of middle-income housing on multiple fronts, while other states are also realizing and responding to the need for more affordable housing for workforce families and individuals.
These efforts come amid mounting consequences of tax and public finance laws that have created the “missing middle”—households that have incomes too high to qualify for traditional low-income housing subsidies or tax-advantaged finance mechanisms, but too low to afford to live near their jobs. Typically, low-income subsidies target households with income under 80% of area median income (AMI), while middle-income financing programs target households with incomes up to 120% of AMI or higher.
The workforce housing shortage is especially acute in many resort areas, where housing costs are often well beyond the reach of the typical hospitality industry worker. Colorado ski resort towns are prime examples, leading state lawmakers to pass the Middle-Income Housing Authority Act establishing the establishing the Middle-Income Housing Authority (MIHA) in 2023 to begin addressing the need for billions of dollars of investment to meet workforce housing demands across the state.
Numerous other states have instituted middle-income and workforce housing initiatives, as well, including California, Florida, Georgia, Kansas, Massachusetts, Michigan, Minnesota, and Rhode Island, along with Oregon, which recently launched its Moderate-Income Revolving Loan (MIRL) program. The MIRL program provides zero-interest loans to cities and counties to spur development of new housing units for families making up to 120% of AMI.
While MIHA and other initiatives have been ramping up, alternative creative solutions are being employed to address these growing housing needs, including nonprofit financings of workforce housing.
Innovative Financing
Recently, a Colorado nonprofit corporation launched a pioneering pilot project for an innovative model for financing workforce housing in the state. Ballard Spahr represented the nonprofit, Fulcrum Communities, in planning and closing a 501(c)(3) tax-exempt bond transaction through the Colorado Housing and Finance Authority (CHFA). Fulcrum Communities will use the proceeds to acquire a three-bedroom townhouse in Parker, Colorado, which will be leased to middle-income tenants earning between 80% and 120% of AMI.
Because the MIHA was still in its formative stages and unable to collaborate with Fulcrum at pilot launch, the CHFA stepped in. In approving the Fulcrum financing, the CHFA cited the project’s purpose “to lessen the governmental burdens … with respect to solving for the acute shortage of affordable middle-income housing in the State.” Fulcrum Communities’ process of acquiring turnkey properties and then leasing them bypasses new construction and substantial rehab—providing a faster and more efficient method for delivering middle-income housing units.
CHFA has been instrumental in issuing tax-exempt bonds for low-income housing projects and operates its own middle-income housing loan program. Ballard Spahr collaborated with the agency and its bond counsel to develop project documents that not only effectuated the recent Fulcrum transaction, but are also designed for efficient future acquisitions and related tax-exempt middle-income housing bond financings, as Fulcrum plans additional transactions on a larger scale.
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