When Mayor John Suthers delivered his State of the City address Sept. 12 at The Broadmoor, he devoted several minutes to a discussion of affordable and workforce housing.
“Our booming local economy has led to increasing rents and housing costs, making the issue of affordable housing a very real one,” Suthers said. “The city council and I will use all of the tools in our toolbox to facilitate the expansion of affordable housing in Colorado Springs.”
Suthers went on to say that the city is working on a comprehensive affordable housing plan “designed to allow for the construction, preservation and opportunities to purchase at least an average of 1,000 affordable units per year going forward.”
He said the city would help nonprofits such as Greccio Housing, Partners in Housing, Rocky Mountain Community Land Trust, Pikes Peak Habitat for Humanity and the Colorado Springs and El Paso County housing authorities develop affordable housing units.
“We will use available resources, including low-income housing tax credits, Private Activity Bonds, the El Paso County Housing Trust Fund and grants from the Colorado Division of Housing and the U.S. Department of Housing and Urban Development,” he said. “We will work with private developers to assist them in taking advantage of various incentives available to construct affordable housing in the community.”
Housing tool kit
Funding for affordable housing projects often begins with a developer applying for low-income housing tax credits.
The federal government issues these tax credits to state housing agencies, which then award the credits to developers of affordable housing.
To obtain funding, developers usually sell the credits to private investors, who then can claim the tax credits for 10 years. Investors also can claim other tax benefits, including depreciation, interest paid and net operating losses.
In Colorado, the tax credits are awarded through the Housing and Finance Authority in an extremely competitive process.
The tools available to the city to spur affordable housing development are administered by the Community Development Division.
“Our specific responsibility is to manage the grant funds that come to the city from the Department of Housing and Urban Development,” Manager Steve Posey said. “The city receives anywhere from $4.5 million to $5 million per year in those HUD funds, and we use those to accomplish a variety of different projects around the community.”
One of the grant funds the city receives is through HUD’s HOME Investment Partnership Program.
“We get about $1.3 million to $1.5 million per year,” Posey said. “We also receive Community Development Block Grant funds. We get somewhere between $2.5 million to $3 million a year in that program.”
The community development division makes HOME Investment Partnership funds available to developers in the form of gap financing for projects that are being pursued with low-income housing tax credits.
Private activity bonds are another type of financing to fund new construction of affordable workforce rental projects, Posey said. Essentially, they’re another form of tax credit.
According to the Colorado Department of Local Affairs, these tax-exempt bonds are issued by municipalities or housing authorities. Investor purchase of the bonds provides funds for affordable housing projects, and they can be paired with low-income housing tax credits to build larger-scale rental developments.
“Every year, the state divides up the total amount of the bonds that are going to be available,” Posey said. “In 2019, the city received an allocation of almost $25 million in private activity bonds, and we plan to issue those over the course of the next two to three years.”
The city has no obligation to repay the debt, Posey said.
Housing funds at work
It’s no secret that housing is becoming increasingly unaffordable for many working people.
According to Suthers’ presentation, Colorado Springs’ average monthly rent of $1,294 is 11 percent above the national average and continuing to climb, as are housing prices.
The city is between 5,000 and 6,000 units short for the those making between $14 to $18 an hour, Posey said.
Jobs at that wage level are clustered in the hospitality and tourism, retail trade and warehouse distribution sectors and comprise about 45 percent of the civilian workforce, Posey said.
“For folks who are more in the minimum wage levels, we also need a comparable number of units,” he said.
That doesn’t mean there are that many people without housing.
“It just means that we’ve got quite a few people who are paying more than 30 percent of their income for their housing,” Posey said.
For people who earn $22-$24 an hour — still below the area’s median income, “one of the things we’d like to see is increased opportunities for home ownership,” Posey said. “A lot of people are renting for longer than they have to. We’re going to be looking at how to encourage more first-time homeowner opportunities around $250,000.”
Affordable housing is an important piece of the city’s economic development strategy.
“Knowing that there is housing stock available in the community that matches the wages that employers are paying makes businesses more likely to want to locate and expand here,” Posey said.
Suthers noted that three workforce housing projects are either underway or planned.
The Ridge, a 60-unit multifamily project, is under construction in the Broadmoor Bluffs neighborhood. The developer of the project is Commonwealth Development of Fond du Lac, Wis., in partnership with Colorado Springs’ Greccio Housing.
The Barnes Apartments, which will break ground before the end of this year, are being developed by Pavilion Construction of Lake Oswego, Ore. The Creek at Cottonwood, being developed by Carmel, Ind.-based Pedcor in partnership with the Colorado Springs Housing Authority, will break ground next year. Together, these two projects will add another 500 units of workforce housing.
“The incentives we were able to offer for those were just to make sure they got through their land approval process as efficiently as they could,” Posey said. “More meaningful incentives, we’re still working on developing a program for that. … We’re looking at a tiered fee structure for all of our development review fees.”
Putting an incentive program in place is important to demonstrate to the Colorado Housing and Finance Authority, the issuer of low-income housing tax credits, “that there is a lot of local support for affordable housing here in the community,” Posey said. “It is going to raise our regional profile so that we’ve got a better-than-average chance of getting tax credit projects awarded every cycle.”
Like affordable workforce projects, housing for people experiencing homelessness and seniors often relies on partnerships.
Greenway Flats, with 65 units of permanent supportive housing for people exiting homelessness, was developed by Nor’wood Development Group and Springs Rescue Mission, and part of the funding came from low-income housing tax credits. The project opened in July.
Nor’wood “has been a very effective partner for that project,” Posey said. “We are hoping they will do more.”
Greccio Housing is planning to develop its first affordable ground-up project, the 54-unit Atrium at Austin Bluffs, at 4129 Templeton Gap Road. The nonprofit was awarded more than $1.38 million in federal and state tax credits. It was the only Colorado Springs applicant among the 19 entities awarded credits in the first funding round this year.
Another nonprofit, Silver Key Senior Services, also is trying its hand at developing affordable senior housing.
Silver Key applied for $1.15 million in tax credits for its project, a 71-unit community for seniors, in the second funding round. Results haven’t been announced yet.
While some local entities are involved in affordable housing development, the majority are out-of-state developers that sometimes have local partners.
In part that’s because the financing for affordable housing is complex, competitive and specialized.
“Currently the projects in the pipeline are being proposed by out-of-town developers who have experience with tax credits and private activity bonds,” Posey said. “As a result, they are comfortable with the requirements that come along with access to the funding.”
The Inland Group of Spokane, Wash., has built four developments in Colorado Springs: Copper Creek and Copper Ridge, both affordable workforce-type housing; Traditions at Colorado Springs, an age-restricted, tax credit community; and Affinity, an age-restricted, market-rate community.
“We generally do 180- to 250-unit communities,” Development Manager Keith James said. “A lot of local nonprofit developers focus on smaller deals, 50 to 70 units. That’s not to say that folks in the market couldn’t do it, but they weren’t necessarily specializing in it.”
There’s a clear need for larger communities in Colorado Springs, he said, because of the overwhelming demand for affordable housing.
But regardless of the type of community or financing, “there shouldn’t be a difference between an affordable and a market-rate product,” James said. “If you’re pushing the market-rate side, you can spend some additional dollars on finishes, but our hope is that an affordable product is as nice qualitatively as a market-rate product.”
Posey said sponsors of six additional projects have applied for low-income housing tax credits, including the Silver Key community and three other senior projects totaling more than 230 units; a permanent supportive housing project for families trying to exit homelessness; and one being developed by the Colorado Springs Housing Authority that will serve a mix of residents.
“It’s too soon to elaborate on these projects other than to say that there is more development activity in the pipeline than our region has seen in quite some time,” Posey said. “What’s also remarkable is the number of projects being considered by local nonprofits, including some of our faith-based organizations.
“These days it seems like everybody is stepping up to the plate to address affordable housing, and that gives me a very positive outlook for the next couple of years.”