Proposition 123 Implementation

Organizations applying for funding through the Proposition 123 - Affordable Housing Financing Funding, administered by the Colorado Housing and Finance Authority (CHFA), may be eligible for policy flexibilities if their project is located in a county or municipality that is classified as a Rural Resort Community.

By filing a petition, these projects may serve households with higher incomes than would otherwise be allowable -- assuming the petition is approved by the Division of Housing within the Department of Local Affairs.

Only petitions submitted by a local government will be accepted, other interested entities such as developers or non-profits must have a local government submit a petition on their behalf.

This petition can only increase income limits for projects that are awarded funding through the Land Banking Program, Equity Program, and Concessionary Debt programs administered by CHFA. Projects that have not been awarded funding from these programs cannot benefit from this petition.

A petition submitted by a local government and accepted by DOH is considered valid for the entire jurisdiction for the duration of the current 3-year funding cycle.

An informational handout on the petition process is available here.

Access the online Rural Resort Petition Form through your AccessGov.com account.

DOLA is pleased to announce the Local Planning Capacity (LPC) grant program, made possible by Proposition 123 with funding from the Statewide Affordable Housing Support Fund. This grant program will be managed by the Community Development Office (CDO) within DOLA’s Division of Local Government (DLG).

October 19th Informational Webinar for Local Government Input:

Local government representatives are invited to participate in an informational webinar outlining the requirements and allowable activities under the Local Planning Capacity Grant Program. This interactive session will give local governments an opportunity to ask questions and give input on the final program guidelines. Comments may also be submitted via phone or email.

• Recording of the LPC Webinar on Oct 19, 2023
• PDF of the Slides from the Webinar

Estimated Program Timeline for Year 1 (2023-2024):

• Thursday, October 19 – Informational Webinar
• Monday, October 23 – deadline to submit stakeholder input on grant program guidelines through 5pm.
• November 1 – Letter of Interest (LOI) opens; accepted through December 4
• Mid-December – Notification of invitations to apply
• January 3 - February 15, 2024 – Full Application is open, through the DLG Online Grants Portal per the Notice of Funding Availability (NOFA).
• March 2024 – Estimated Grant Award notification.

More information about this grant program is available on the Program website.

The intent of the program is to increase the capacity of local government planning departments responsible for processing land use, permitting, and zoning applications for housing projects. The program supports local governments’ capacity to address affordable housing, especially by expediting review, permitting, zoning, and development for which 50% or more of the residential units constitute affordable housing. Grant funds could support new staff wages, hiring consultants, implementing new systems and technologies, revising land use development codes, regional collaborations, developing future commitments, or other efforts that achieve fast track goals by 2026, as required by Proposition 123.

Organizations applying for funding from the Affordable Housing Financing Funding, administered by the Colorado Housing and Finance Authority (CHFA) and overseen by the Governor's Office of Economic Development and International Trade, may be eligible for policy flexibilities if their project is located in a county or municipality that is classified as a Rural Resort Community.

By filing a petition, these projects may serve households with higher incomes than would otherwise be allowable -- assuming the petition is approved by the Division of Housing within the Department of Local Affairs.

Staff of local governments may submit a Petition to Increase Income Limits in Rural Resort Communities at this link.

Only petitions submitted by a local government will be accepted, other interested entities such as developers or non-profits must have a local government submit a petition on their behalf.

This petition can only increase income limits for projects that are awarded funding through the Land Banking Program, Equity Program, and Concessionary Debt programs administered by CHFA. Projects that have not been awarded funding from these programs cannot benefit from this petition.

Instructions on how to complete the petition, as well as other context and restrictions, are available at the link above.

The Department of Local Affairs (DOLA) is providing free technical assistance to help local governments understand Prop 123, establish their baselines and file their commitments, in order to opt in to Prop 123. DOLA held a series of webinars through August 2023. Each of these webinars was tailored for the following types of communities: large municipalities, smaller municipalities, rural, rural resort, and unincorporated counties.

Recordings and slides of recent webinars

• Thurs, Aug 10 Large Urban Municipalities (pdf slides for large urban municipalities)

• Tues, Aug 15 Small Urban Municipalities (pdf slides of small urban municipalities)

• Fri, Aug 18 Rural Resort (pdf slides of rural resort

• Thurs, Aug 24 Unincorporated Counties (pdf slides of unincorporated counties)

• Wed, Aug 30 Rural (under 5,000 population) (pdf slides)

These interactive webinars featured example communities for a demo of the baseline tool and explored how adjusting the data impacts the growth calculations.

From September through October 2023, the next phase is to provide technical assistance to local governments through small work group sessions in regional groupings. These work sessions are tailored to address all questions for each participating jurisdiction. Additional support may be available, depending on the need.

These downloadable fliers serve as a quick-reference handout to share with colleagues or elected officials:

• Flier 1: General info about Prop 123 Baselines & Commitments
• Flier 2: Prop 123 Funding Programs

To request a technical assistance session, please contact:

Andy Hill, Director

Community Development Office

Division of Local Government

andy.hill@state.co.us

303-864-7725

Robyn DiFalco, Program Manager

Local Planning Capacity Grant Program (Prop 123)

Community Development Office

robyn.difalco@state.co.us

720-682-5202

Commitment Filings for 2024

Commitment Filings for 2023

Commitment filings to increase affordable housing have been accepted for the following municipalities, counties, and tribes:

The entire team at the State of Colorado would like to thank our stakeholders for your vital feedback on the implementation of Proposition 123 over the past several months. We have integrated what we have learned and developed so far into a series of new processes and resources below:

• Municipalities, counties, and tribes may submit a commitment to annual increases in affordable housing using our online form.
• The Baseline Assistance Tool can be used by any interested stakeholder to develop a baseline amount of affordable housing, so that it can be incorporated into a commitment to annual increases in affordable housing.
• Several answers to frequently asked questions have been added, find these on the right side of the page under the heading "FAQs".

This update is the first of many as the State and our partners continue to create and improve processes surrounding the programs and commitments created by Proposition 123. Come back to this site and subscribe to our newsletter to stay involved and up to date on this rapidly evolving project.

We are excited to announce that articles detailing Proposition 123 implementation concepts are being run on the main website of the Department of Local Affairs.

These articles are categorized into series, with the first series covering definitions of important terms in the proposition. Check out Defined: Local Government Affordable Housing Commitment and Defined: Local Government Affordable Housing Baseline to read the first articles in this series.

A separate series is being published about resources that local governments and other stakeholders can use to assist in their own research and development work surrounding Proposition 123, with the first article titled Resources: Affordable Housing Baseline Estimate References discussing the methods that the Division of Housing used to calculate non-binding reference data that can be used in affordable housing commitment drafting.

Local Government Affordable Housing Commitments must be filed with the Division of Housing to receive funding made available by Proposition 123. Municipalities make commitments on behalf the entirety of their jurisdiction, while counties are responsible only for unincorporated areas. Entities will be ineligible for Proposition 123 funding if their project is located in, or program operates within, a municipality or unincorporated area of a county that has not filed, or is out of compliance with, their commitment -- even if the entity is otherwise eligible.

Drafting a commitment

Once an interested local government has determined its baseline amount of affordable housing units, it can then plan its commitment to increase that number by 3% each year for a 3-year period ending on December 31, 2026. Ultimately, DOH and its partners will be working with any interested local government to submit its commitment no later than the deadline established in Proposition 123, which is November 1, 2023. Funding programs may be available sooner than the November 1st deadline, so DOH encourages local governments to commit as soon as possible. The dissemination of baseline data for a local government’s consideration is the first step toward achieving this important goal; additional information on the process through which commitments may be filed will be made available in the next several weeks.

Compliance

It is important to note that Proposition 123 requires a local government to file a commitment specifying how it will increase a combination of its newly constructed affordable housing units and its existing units converted to affordable housing over its determined baseline number of affordable housing units by 3% each year. The Division of Housing interprets this to mean that ultimately a demonstration of a 9% increase over the baseline at the end of the 3-year commitment period ending on December 31, 2026, satisfies this requirement even if a 3% increase may not be accounted for in a particular year during that time frame.

If a commitment is not filed by November 1, 2023, then a local government and any development project in its jurisdiction are ineligible to receive any funding established by Proposition 123 during the 2024 calendar year. If this is to occur, a local government may file a commitment by November 1, 2024, for a 2-year commitment to increase its affordable housing stock by a total of 6% by December 31, 2026.

If a local government is unable to meet its 9% total commitment by December 31, 2026, then it and any development project in its jurisdiction are ineligible to receive any funding established by Proposition 123 for calendar year 2027. The good news is it may file a new commitment by November 1, 2027, for a 2-year commitment to increase its affordable housing stock by a total of 6% by December 31, 2029.

As an interested local government works to package its commitment and file it with DOH by November 1, 2023, it does not have to include verification of a “fast-track approval process” in this initial commitment. This will be a requirement in future commitments starting with the one due by November 1, 2026. However, Proposition 123 does provide that for this first commitment and future ones, “local governments should prioritize high-density housing, mixed-income housing, and projects consistent with the goal of environmental sustainability, when appropriate, and should prioritize affordable housing in communities in which low concentrations of affordable housing exist.”

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.