Colorado Looking to Fund Equity and Affordable Housing Programs By Reducing Tax Refunds

In September, the average sales price for a single-family home in Colorado was almost $670,000. That’s a number most first-time home buyers and lower-income families find difficult to swallow.

As a result of Colorado’s sky-high housing costs, state legislators have taken measures to increase affordable housing.

But Nov. 8 is the first time Colorado voters get to voice their opinion on the matter by either voting for or against Proposition 123, “Dedicate Revenue for Affordable Housing Programs.”

If passed, the measure will set aside tax revenue for affordable housing projects in Colorado and exempt the income from Colorado’s constitutional revenue limits, called the Taxpayer’s Bill of Rights, or TABOR.

But in exchange for the dedicated funds, Proposition 123 will reduce future tax refunds to Colorado residents and instead go towards government programs, like the one for homeowners to share home equity with their tenants.

Colorado’s Housing Problem

According to the latest U.S. Census Bureau data, from 2010 to 2020 Colorado’s population increased by 14.8 percent. In comparison, the national population increased by 7.4 percent.

If the state’s housing projects had kept pace with the increase in population, Colorado might have avoided a housing crisis. Instead, the rapid growth caused housing prices to skyrocket as demand quickly outstripped supply.

In September, the Common Sense Institute reported an estimated housing unit shortfall of 93,000 to 216,000 units.

Also in September, the Colorado Association of Realtors released its statewide report that found the year-to-date median sales price for a single-family home in 2022 was $570,000—an increase of almost 14 percent from the same time last year. As a result, housing affordability decreased by 32.4 percent.

Auburn Ridge Senior Apartments in Castle Rock, Colo. The 90 units of affordable housing serve a mix of incomes, and have paved the way for more affordable housing in Douglas County. (Housing Colorado)

That decrease in affordability impacts all would-be home buyers but has a more pronounced impact on first-time homebuyers and lower-income families.

Consequently, Colorado lawmakers proposed and passed several affordable housing initiatives, including Colorado House Bill 21-1117 “Local Government Authority Promote Affordable Housing Units,” and Colorado House Bill 21-1271 “Department of Local Affairs Innovative Affordable Housing Strategies.”

Additionally, Colorado allocated more than $1.2 billion from the federal American Rescue Plan Act of 2021 for affordable housing and services.

Proposition 123 differs from the above laws because it’s the first time Colorado voters get to decide on an affordable housing initiative. It also requires voter approval as it impacts the taxpayer bill of rights.

Proposition 123

According to Colorado’s 2022 state ballot information booklet, Proposition 123 sets aside 0.1 percent of taxable income each year to address affordable unit production shortfalls.

That equates to $145 million in the 2022-2023 budget year and $290 million after that.

Colorado’s government will use the money to create six separate government programs focused on “higher density, environmentally sustainable projects serving households with a range of income levels.”

The High Mar Senior Community is a 59-unit affordable apartment community for seniors and is the first senior community built

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