Colorado towns could buy properties for affordable housing under new bill
(Colorado Newsline) Local governments in Colorado would gain the ability to purchase multifamily properties before private bidders as long as they commit to use them for affordable housing under a recently introduced bill in the state Legislature.
Supporters say that by giving cities and counties the “right of first refusal” for buildings when they go up for sale, House Bill 23-1190 would provide local governments the advantage they need to pursue affordable housing projects in a competitive market crowded with wealthy developers.
“What we’ve seen is that municipalities and counties really lack the timeline or capacity to step into the affordable housing space, specifically related to multifamily housing,” bill sponsor Rep. Andrew Boesenecker, a Fort Collins Democrat, said. “This levels the playing field a bit and lets a municipality or county evaluate whether the sale of a multifamily housing unit would actually impact their long term affordable housing goals.”
At the same time, it would keep the seller in the driver’s seat of the transaction, Boesenecker said.
The bill applies to any development with five or more units in urban areas or three or more units in rural-resort areas. When a local government gets a notice from a seller about a property going on the market, they would have two weeks to preserve their right of first refusal to use it for affordable housing. They then would have 90 days to make an offer and 180 days to close the deal.
Essentially, governments would be first in line to buy multifamily properties if they can match a competing offer and commit to maintaining affordable housing at the property for at least 50 years. Colorado would be first state with a right of first refusal requirement.
Bill sponsors say this would give governments the time to pull together the various financing methods — including Proposition 123 funds — they often need for these large purchases. Proposition 123, which voters approved in November, dedicates $300 million in annual funding to state affordable-housing initiatives, by tapping into funds that could otherwise be returned under Taxpayer’s Bill of Rights refund mechanisms.
“Often, a private hedge fund or developer will come in with cash and a municipality is going to be a financed offer, so a cash offer has often been prioritized by the seller. So what this says is that as long as the final asking price is the same, one offer cannot be considered to be advantageous over the other,” Boesenecker said.
Benefit to cities across the state
Summit County Commissioner Tamara Pogue said the legislation is her favorite housing bill of a session that promises to consider an assemblage of policy aimed at spurring development and addressing the affordable housing crisis in the state.
“Many of the housing bills we see in the Legislature are really designed to help mitigate the housing crisis in Denver or along the Front Range. This bill actually has an impact across the entire state and particularly in rural resort communities like mine,” she said.
It would aid in the effort to keep housing available for the workforce in places like Breckinridge, Vail and Aspen, where workers are often forced to live far away and make long commutes in the name of affordability, Pogue said.
“Government struggles in the same way (as homebuyers) in a cash market against these private developers who may want to turn properties into second homes or short-term rentals. Having the right of first refusal allows us to be more effective in trying to protect the workforce housing we have left,” she said.
She also pointed out how the bill defines who the affordable housing should serve based on whether it is in urban, rural or rural-resort area: households that make 80% of the area median income in urban areas, 120% of the AMI in rural areas and 140% of the AMI in rural-resort areas.
Resort towns, despite desperately needing affordable workforce housing, can sometimes get shut out of the process or funding streams because of its AMI.
“Traditionally, funding availability has been really limiting for those of us that live in higher AMI communities,” she said. “This bill provides flexibility and sets realistic AMI limits.”
The success of the bill, if passed, could depend on how organized a local government, or its housing authority, is and the volume of multifamily properties available. There is also the persistent issue of accessing the right blend of financing and finding available funds.
“Governments that opt-in will need to be prepared to work fast. Our area’s housing authority is a large organization with an active real estate development arm that is poised to act quickly,” Julie Brewen, the CEO of Housing Catalyst, the Fort Collins housing authority, wrote in an email. “Still, in order to be able to close the gap between what a private corporation can offer, it will take access to capital or subsidy. We may need some changes to the primary gap sources we use from the state and federal funds for affordable housing development so that they can be readily available. Historically, those sources have been slow to access.”
Scope of bill said to be too big
Opponents of the legislation argue that it is an unwieldy concept that applies to too many properties and could quell development in an already unstable economic landscape.
“If your goal is to preserve affordable housing, then their definition of what it applies to is way too broad,” said Andrew Hamrick, the senior vice president of government affairs for the Apartment Association of Metro Denver. “You can imagine there are luxury high rises downtown that could never be affordable housing, so putting this definition onto more than they need to for this purpose is bad.”
He said he would like to see bill sponsors change the eligibility requirement to properties that have at least 50 units in urban areas and 10 areas in non-urban areas. Boesenecker said there wasn’t data that supported that higher threshold.
Instead of a right of first refusal, Hamrick said he would support a requirement for property sellers to send requests for offers to local governments, so they could participate in the purchase process.
“This whole concept of stopping the sale so local governments can figure out if they might want to buy the property is problematic,” he said. “No matter how you look at it … this is billions of dollars of theft from existing Colorado property owners to give it to local governments.”
The bill is set to be considered in the House Transportation, Housing and Local Government Committee on Feb. 28. In addition to Boesenecker, it is sponsored by Democratic Rep. Emily Sirota of Denver and Sen. Faith Winter of Westminster.