A report from Nationwide Insurance earlier this month ranked Colorado Springs as one of the least affordable housing markets in the nation.
That fact worries Colorado Springs City Council President Richard Skorman.
Skorman cited the report as he kicked off a discussion of affordable housing at a council retreat Sept. 18.
“It is a lot about people not being employed and not being able to afford the rents and the housing prices in the market,” Skorman said. “But there’s another potential issue with Colorado Springs in our future housing market and affordability, and that is COVID. … It may be that with hurricanes and fires in the coastal areas and on the West Coast, there’ll be a big influx of people coming to our region.”
That could keep the hot housing market blazing but might also widen income disparities, Skorman said.
“So this is a more valuable discussion than we even imagined,” he said.
The average apartment rent tops $1,250 a month, said Laura Nelson, executive director of the Apartment Association of Southern Colorado. And according to rentcafe.com, only 4 percent of Colorado Springs apartments rent for $700 a month or less.
On the single-family housing side, while housing priced at $300,000 or below represents about 20 percent of the market, homesstarting below $250,000 represent only about 3 to 5 percent a year, said Andrea Barlow, public policy adviser at N.E.S. Inc.
The biggest need locally is housing for people who make 50 percent or less than the area median income.
“For a family of four, earning a little over $40,000 is 50 percent of the area median income,” said Chad Wright, executive director of the Colorado Springs Housing Authority.
“These are the folks that drive our tourist economy; these are the folks that drive our service economy,” he said. “It is a challenge to ensure that we have adequate housing, and housing with adequate quality, for those folks.”
NEW PRODUCT TYPES
Steve Posey, manager of the city’s community development division, said the city is doing “very, very well” on its goal of adding 1,000 affordable housing units annually. “Across all of the programs we’re offering, … I am currently [seeing] a total of 1,925 units” since Mayor John Suthers announced that goal in 2018, Posey said. “That is a very positive aspect.”
In addition, Posey said, he is encouraged by new product types that are coming into the city.
“I am working with two development teams on mixed-income projects” that will have a percentage of affordable units as well as market-rate product, he said.
“Colorado Springs has not had something like that for quite some time,” Posey said, “and it is a very encouraging sign to me that we’ve got development teams who are coming forward with projects like that.”
Posey said below-market financing is incentivizing that type of development.
In addition, Colorado Springs’ hot market has induced purchasers from other parts of the country to look in the area for apartment and multifamily properties, he said.
“They are looking specifically at some of the Class B and Class C apartment buildings here in town and are coming forward with what I feel is a positive commitment to trying to maintain some affordability,” he said.
Posey explained that Class A properties are new, high-end developments like The Mae on Cascade, Blue Dot and Casa Mundi, while Class B and C properties are older developments with fewer amenities.
Posey said that one of the core objectives in HomeCOS, the city’s housing plan, is to increase the supply of affordable rentals. Other objectives laid out in the plan are reducing homelessness through a housing-first approach, increasing homeownership opportunities, housing for the aging and disabled population, creating innovative design and development solutions and alternative financing.
Developers are well aligned with the objectives in the plan, and it has “really helped put Colorado Springs on the map with the Colorado Housing and Finance Authority. We have a lot of applications going in to CHAFA, and this plan has been really helpful to the development community to zero in on what types of projects are the most needed here in Colorado Springs,” Posey said.
The housing and finance authority is a state agency that invests in affordable housing and community development.
While the city has done a good job of making sure that CHAFA is awarding projects out of every round of competitive tax credits, “we need to do a better job coming up with some other ways that we can develop housing that is not necessarily dependent on the tax process,” Posey said.
Public-private partnerships with the business community to provide workforce housing and establishing a revolving loan fund through the U.S. Department of Housing and Urban Development are two potential avenues the community development division is exploring, he said.
Low vacancy rates are sustaining high apartment rents.
As of the second quarter of this year, “we had a vacancy rate of 4.5 percent,” Nelson said.
COVID-19 has disrupted normal migration patterns into the city, she said.
Whereas the annual influx usually starts in June, “we starting seeing folks move here in April,” Nelson said. “When the schools closed and people were told that they were going to be working remotely for the foreseeable future, many folks in the U.S. decided that Colorado Springs was a great place to live.”
Nelson expects the strong demand to continue.
In response, “there have been very few slowdowns for our folks that are developing new products, and there is a fair number of what we consider workforce housing,” she said.
Nelson cited projects by Goodwin Knight, which has several projects under construction or in development.
As those projects are completed, Nelson said, “they are filling up as fast as they are built.”
Landlords are working with tenants who are having trouble making rent payments, and that is helping to keep apartments full, along with the state’s eviction moratorium, which recently was extended through Dec. 31.
But Nelson is concerned that the eviction moratorium and the overall COVID crisis is going to dissuade investors from buying into apartment complexes.
Housing for lower-income earners “is going to be a tough sell,” she said. “The numbers have to work.”
One reason why smaller, more affordable single-family homes aren’t getting built is that the city’s zoning is not flexible enough to accommodate smaller lots, Barlow said.
While the city’s approval processes generally are “not bad,” there are some agencies “that are extremely slow with their comments and delay the process,” she said. “Rapid response needs more teeth.”
Additional costs to developers for drainage channel improvements are a deterrent, she said. A proposed water development fee of $10,000 per unit could further inhibit new projects.
The drainage and channel fees “seem extraordinary from the developers’ perspective,” Barlow said.
“I think that there could be a focus on maybe giving a break to the affordable housing projects on some of these fees,” she said. “The challenge I see with that is that it could get pushed onto the market-rate housing and make that even more expensive. So there is a balance, and I know it’s a difficult balancing act.”
The lack of easily developable land is the biggest challenge to building new affordable housing, said Chad Wright, executive director of the Colorado Springs Housing Authority, along with competition across the state for low-income housing tax credits.
“I think preservation and renovation need to be a priority,” he said. “We have spent a lot of time, effort and resources of the housing authority over the last six to eight years in renovating our existing inventory. So the economic life of that inventory is going to have to run longer, maybe, than it was originally intended.”
Lee Patke, executive director of Greccio Housing, said it is important for the city to continue to keep pressure on the state “for getting our fair share of tax credits. It’s rare that any one city gets more than one award in a single round.”
Patke said, however, that “you’re not going to build your way out of this” affordable housing crisis. “It’s not just zoning or building — it’s jobs. … We’re still about 14 percent below the national average of wages in our community. We’ve got to have better, high-paying jobs, and attracting those employers is critical for our community.”