Proposition 123 Implementation

Introduction

Reference data is available within this table (External Link) to assist local governments in understanding how an affordable housing baseline and annual goal can differ based on the income limit used to calculate that baseline. This data is not the local government affordable housing baselines of localities — these will be developed by local governments, not the State — but are rather to assist in the development of baselines and to inform the design of other resources.

Data sources

The data used to create the baseline references are sourced from the U.S. Census Bureau American Community Survey, and the U.S. Department of Housing and Urban Development Comprehensive Housing Affordability Strategy. These sources are used to determine the estimated number of rental units at given gross rent range¹, ownership units at given value ranges², in addition to the portion of rental or ownership stock³ that may be available as suggested by recent movers over the past four years.

Statistical calculations

Estimates for municipalities are provided by the Census Bureau without the need for further analysis, municipalities are already included in Census Bureau datasets that contain places (though these do include Census Designated Places that are unincorporated). Conversely, we calculate estimates for unincorporated areas of counties by subtracting the estimates of municipalities from the county or counties that they lie within.

Data from the American Community Survey was collected from the period of 2017 to 2021 and may be considered as roughly from 2019 while data from the Comprehensive Housing Affordability Strategy⁴ was collected from 2015 through 2019 and may be considered as roughly from 2017. Income limits are provided by the U.S. Department of Housing and Urban Development in the form of Area Median Incomes for Federal Fiscal Year 2022⁵, and from the American Community Survey 2021 for the state median household income⁶.

The proposition allows for baselines to be calculated using the income limit of an adjacent jurisdiction. Adjacency is determined based on a county adjacency file from the National Bureau of Economic Research⁷. For these references, income limits are displayed for counties that may nor necessarily border municipalities yet do border the county or counties that the municipality lies within. This is done to provide more options for municipalities compared to determining adjacency based on coterminous borders which would be more restrictive.

Analysis and results

The home value, gross rent, and recent mover estimate data provided by HUD and the ACS is joined with income limit data to determine the portion of units that are affordable within each range for homes (for example, from $400,000 to $499,999) and rental units (for example, from $1,000 to $1,249) based on each income limit (for example, the area median income of the jurisdiction’s own county). The resulting dataset illustrates how the amount of housing that is considered as affordable within a jurisdiction differs based on the income limit that drives the affordability calculation.

Rental units are affordable if the gross rent of the unit is affordable at 60% of the selected income limit, while home ownership units are affordable if the value of the home is equal to or less than the income limit multiplied by 3.5 (to calculate the home value to income ratio). The home value to income ratio was derived from mortgages originated for home purchase in Colorado in 2019, made available through the Home Mortgage Disclosure Act Dataset published by the Consumer Finance Protection Bureau⁸.

The estimated baseline amount is further adjusted to consider the amount of housing that is not just affordable, but also available, by prorating the estimated amount of affordable housing by the portion of recent movers within that type of stock (owned or rented) for each jurisdiction. The end result of these aggregations gives localities a potential baseline and annual commitment estimates outlined by Proposition 123.

References

Note: Links to U.S. Census Bureau data are directed to a server that contains individual files for American Community Survey tables for the entire United States, these files are very large and require technical skill to analyze. To view this data more intuitively, we recommend visiting data.census.gov and searching for the relevant table (for example, Table B25063 regarding Gross Rents).

¹ U.S. Census Bureau (2022). Table B25063: Gross Rent, 2017-2021 American Community Survey 5-year estimates.(External link)(External link)

² U.S. Census Bureau (2022). Table B25075: Value, 2017-2021 American Community Survey 5-year estimates.(External link)(External link)

³ U.S. Census Bureau (2022). Table B25038: Tenure By Year Householder Moved Into Unit, 2017-2021 American Community Survey 5-year estimates.(External link)(External link)

⁴ U.S. Department of Housing and Urban Development (2022). Comprehensive Housing Affordability Strategy, 2015-2019.(External link)(External link)

⁵ U.S. Census Bureau (2022). Table B19013: Median Household Income, 2021 American Community Survey 1-year estimates.(External link)(External link)

⁶ U.S. Department of Housing and Urban Development (2022). Data for Section 8 Income Limits in MS EXCEL.(External link)(External link)

⁷ National Bureau of Economic Research (2017). County adjacency.(External link)(External link)

⁸ Home Mortgage Disclosure Act (2019). Loan Application Register.(External link)

The baseline number of affordable housing units within municipalities and counties is a major component of local government affordable housing commitments. These commitments must be filed for affordable housing projects and programs to receive funding made available through Proposition 123.

Proposition 123 requires the governing body of a local government (municipality or county) to first determine its own baseline number of affordable housing units by referencing one of the following:

• The 2017-2021 American Community Survey (ACS) published by the U.S. Census Bureau.
• The current version of the Comprehensive Housing Affordability Strategies (CHAS) estimates published by the U.S. Department of Housing and Urban Development.

Scope of housing units included in baselines

Housing units are considered as affordable if:

• Rental units:
  • Costs less than 30% of the monthly income for a household at or below 60% of the median income.
• For-sale units:
  • The mortgage payment costs less than 30% of the monthly income for a household at or below 100% of the median income.
  • The unit could be purchased by a household at or below 100% of the median income.

Income limits applied in baselines

The following types of income limits may be used to determine if a housing unit is affordable for the purposes of a baseline calculation:

• The Area Median Income of the county that jurisdiction is within.
• The Area Median Income of a county adjacent to the jurisdiction.
• The state median household income.

Flexibilities allowed in baseline development

Proposition 123 is unspecific about how some of these requirements are and applied by local governments. We are currently aware of the following implied flexibilities in baseline calculation at:

• Area Median Income Limits may be selected from past years. For example, income limits from Federal Fiscal Year 2021 may be selected instead of the most recently available limits from Federal Fiscal Year 2022.
• For municipalities that choose an income limit of an adjacent jurisdiction, they could choose an income limit for a county that the municipality is not directly adjacent to, but is adjacent to a county that their municipality resides within. The boundaries of municipalities are not necessarily coterminous with the boundaries of one or more counties; so this interpretation affords both municipalities and counties similar levels of flexibility in selecting income limits.
• Area Median Income Limits can be selected based on various household sizes. Household size is calculated by counting the number of people in a housing unit. Income limits are available for household sizes ranging from one to eight persons. The Median Family Income across households of all sizes may also be used as an alternative.
• The median household income for Colorado could be selected instead of an Area Median Income. This may be especially applicable for municipalities and counties where median family income and median household income differ, for example in areas with large portions of college students that have low to no earnings, resulting in a median household income that is much lower than a median family income.
• All affordable for-sale units do not have to be included in the baseline amount of affordable for-sale units. This amount can be prorated to only the units that are available.
• The amount of housing units at each rent or value level can be adjusted to bring the data closer in line with current housing market conditions. For example, a home price to income ratio can be chosen based on current market conditions instead of those in 2019.