Proposition 123 Implementation

DOH is excited to announce the launch of the new Proposition 123 website! This platform is designed to provide you with the most up to date essential information about Proposition 123 – funding opportunities, compliance guidelines, and much more. Our goal is to make navigating Proposition 123 details as clear and user-friendly as possible.

We invite you to explore the site and share any feedback you may have to help us improve the experience. Please note, the Engage DOLA website for Proposition 123 will no longer be updated as of November 15, 2024.

Introduction

Summit County has submitted a petition to change income limit eligibility standards to the Division of Housing within the Department of Local Affairs to use different percentages of median income than those percentages specified in statute for the Land Banking Program, Affordable Housing Equity Program, and Concessionary Debt Program. These programs are administered by the Colorado Housing and Finance Authority and overseen by the Governor’s Office of Economic Development and International Trade. Though the Division is not responsible for these programs, it is charged by statute (C.R.S. 29-32-105.5 (2)) to review petitions by localities that eligible projects within them be subjected to different income limits from those explicated in statute.

Scope of Petition

The petitioner has requested an increase of income limits for projects sited in Summit County receiving funds through the Land Banking Program, Affordable Housing Equity Program, and Concessionary Debt Program to 100% of Area Median Income (AMI), either on a per-unit basis or on average for all units in a project as allowable by statute. If approved, the petition will remain in effect from its approval date through December 31, 2026.

Current Area Median Income limits for these programs are as follows:

• Land Banking Program - 60% max AMI for Rental, 100% max AMI for Homeownership
• Affordable Housing Equity Program - 90% average AMI or below
• Concessionary Debt Programs - 60% AMI at or below or 60% max for rental

Process

The Division of Housing must follow the following process required by statute (C.R.S. 29-32-105.5 (5)):

The Division may approve the petition to use different percentages of area median income, but only if:

• The submitted housing needs assessment:
  • Is published by the state or is a local housing needs assessment that utilizes data from the state demographer or other publicly accessible sources, which in either case may be supported by other relevant and verifiable community data;
  • Has been completed within the past three years of the petition date; and
  • Is accompanied by a narrative description of why other funding sources cannot be utilized, are not sufficient, or are not accessible to meet the housing needs described within the petition; and
• The Division determines that the current eligibility standards would cause implementation of this article in a manner inconsistent with demonstrated housing and workforce needs within the jurisdiction, taking into consideration regional workforce commuting trends.

In the event that the petition is approved, the new income limits will be based on the average needs identified in the housing needs assessment (C.R.S. 29-32-105.5 (6)), and public comments will be considered in the review of the petition (C.R.S. 29-32-105.5 (4)). No recommendation will be made on approval or denial of the petition until the public comment period is complete and the comments are considered in the recommendation. If Division of Housing staff recommend the denial of the petition, then the petitioner may appeal the staff recommendation to the Division Director of the Division of Housing.

Implications

If the petition is approved then eligible affordable housing projects can make units available to households with higher incomes than would otherwise be possible.

If the petition is denied, then affordable housing projects currently under consideration may become financially infeasible in the event that they require higher revenues generated by higher income households. If demand for affordable housing is still present at lower income levels, they may be unable to afford the higher rents of these higher income units, potentially making less affordable housing units available for lower income households than would otherwise be required.

Basis of Petition

A housing needs assessment of the Summit County, produced in 2023. In describing why other funding sources cannot be utilized, are not sufficient, or are not accessible to meet the housing needs described within the petition, the petitioner wrote:

Summit County is using other funding sources to finance the USFS Housing Project. The majority of the funds for the $100 million project come from tax exempt government bonds. However, the funds from the bond issuance are not sufficient to cover the significant cost of construction. In addition to the bond proceeds, and through the rigorous application and procurement process, the project was awarded the following grants and loans: • $5 million grant from the Transformational Affordable Housing Grant program • $2 million grant from the More Housing Now Grant program for infrastructure • $2 million grant from the Strong Communities Grant program for roundabout construction • $7 million subordinate loan from the CHFA MIAP program Lastly, Summit County is providing a $3 million subsidy to be delivered at closing, and the USFS provided the land through a ground lease in exchange for in-kind consideration as well as a $1 million upfront subsidy for pre-development expenses. The costs of construction of the project continue to escalate and interest rates remain high. Additional funding through the Prop 123 programs would help to ensure that Summit County can keep the AMIs at the 100% average, and not be forced to raise those to close the gap on the financing. For the future conversion of the hotel and the development of the Lake Hill neighborhood, partnerships will be sought, as well as various sources of funding, as there will not likely be enough funding to realize those projects without support.

Public Comments

Public comments will be accepted for 30 days, starting on the date that the Division of Housing posts notice that a petition has been filed on its website. The petition and relevant attachments will be included in the notice, and available at this petition to change income limit eligibility standards.

The State Division of Housing / Department of Local Affairs is excited to announce that the Proposition 123 commitment filings are now open. Municipalities, counties, and tribes may submit a commitment to annual increases in affordable housing using our online form.

Filing a commitment makes a local government or tribe, along with entities operating within their jurisdiction, eligible to apply for funding through the programs implemented by the Colorado Department of Local Affairs (DOLA), the Office of Economic Development & International Trade (OEDIT), and/or the Colorado Housing and Finance Authority (CHFA). Local governments, non-profits, community land trusts, private entities, and developers are only eligible for this funding if their project or program takes place in a municipality, county, or tribe that has successfully filed a commitment to increasing their affordable housing stock above a baseline amount.

Programs from the Office of Homeless Initiatives are the only programs that can award funding to jurisdictions, or entities operating within them, that do not require a commitment on file.

Local governments that made an accepted commitment in 2023, do not need to submit an additional commitment until 2026. A list of jurisdictions that have previously made commitments is available online.

Passed by Colorado voters in 2022, Proposition 123 created the State Affordable Housing Fund, dedicating 40% of funds to the Affordable Housing Support Fund administered by DOLA and 60% to the Affordable Housing Financing Fund overseen by OEDIT to fund housing programs.

The three Affordable Housing Support administered by DOLA are:

• Affordable Home Ownership - up to 50% of the Support Fund and administered by DOH
  • $32 million in Year 1 and estimated to be $63.6 million in Year 2
• Program Servicing Persons Experiencing Homelessness - up to 45% of the Support Fund and administered by DOH
  • $28.8 million in Year 1 and estimated to be $57.24 in Year 2
• Local Planning Capacity Development Program - up to 5% of the Support Fund and administered by the Division of Local Government (DLG)
  • $3.2 million in Year 1 and estimated to be $6.36 million in Year 2

Due Date: November 1, 2024

DOH and its partners will be working with any interested local government to file its commitment no later than the deadline established in Proposition 123, which is November 1, 2024. Funding programs may be available sooner than the November 1st deadline, so DOH encourages local governments to commit as soon as possible.

Eligibility

If your jurisdiction previously filed a commitment for the 3-year (9%) cycle in 2023, a new commitment is not needed at this time. Only authorized officials of county and municipal governments and tribes, or persons acting on their behalf, may submit a filing.

Filing Process

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 2-year period ending on December 31, 2026. The dissemination of baseline data for a local government’s consideration is the first step toward achieving this important goal. 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. Local governments may submit a commitment using our online form.

Compliance

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. DOH interprets this to mean that ultimately a demonstration of a 6% increase over the baseline at the end of the 2-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, 2024, then a local government and any development project in its jurisdiction are ineligible to receive any funding established by Proposition 123 during the 2025 calendar year. If this is to occur, a local government may file a commitment by November 1, 2025, for a 1-year commitment to increase its affordable housing stock by a total of 3% by December 31, 2026.

If a local government is unable to meet its 6% 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.

Beginning on January 1, 2027, expedited review (fast-track) is required for projects with 50% or more affordable housing units, as per statute. Local governments will need to demonstrate they have implemented a system to expedite the development approval process for affordable housing projects when filing their Proposition 123 commitments by November 1, 2026.

Detailed guidance on the expedited review (fast-track) requirements is available to provide strategies and examples on how local governments can create an expedited review process that takes into account their unique local context. Grant funding is available to support local governments with the implementation process.

DOLA’s Division of Housing (DOH) is committed to transparency and keeping you apprised of our progress as we implement Proposition 123. We’re pleased to announce the publication of the Proposition 123 Homeownership guidelines for New Construction/Acquisition Rehabilitation, Mobile Home Programs, Down Payment Assistance Programs (DPA), and Single Family Owner Occupied Rehab Programs (SFOO).

Key highlights include:

• Increase to $70,000 per unit cap for developing homes;
• Possibility of bonus funding for State’s priorities;
  • Up to 10% for projects addressing transit-oriented development, density, energy efficiency, mixed-use, early childhood education, or inclusion of income restricted ADUs as wealth-building device
  • Up to 10% for projects utilizing modular construction
  • Max subsidy bonus: 20%
• Pre-development grants may be made up to $25,000 for local governments, small nonprofits and housing authorities.
• Up to 20% of the purchase price of down payment assistance may be provided.
• For fiscal year FY 24-25, $60 million will be available for homeownership projects and programs. DOH will initially prioritize $45 million for homeownership development and $15 million for programs (DPA, SFOO) throughout the fiscal year. This is more than five times the amount DOH invested in homeownership from last fiscal year, excluding one-time stimulus funds. It is also important to note that additional funds will be available, but the funds will be included in competitive rounds and the funding source is eligible for both homeownership and rental.

Division of Housing Application Due Dates and Funding Available

The calendar for the rest of FY 24-25 will be released no later than November 1, 2024; this will include funding for both rental and homeownership development projects.

Due Date: July 15, 2024

• Letters of Intents (LOIs) due for August 1 application cycle

Due Date: August 1, 2024

• Application Type: Homeownership Programs (DPA & SFOO)
• Funds Available: $10 million
• Source of Funds: State Prop 123 Homeownership funds

Due Date: August 15, 2024

• Letters of Intents (LOIs) due for September 1 application cycle

Due Date: September 1, 2024

• Application Type: Homeownership Development
• Funds Available: $10 million
• Source of Funds: State Prop 123 Homeownership funds

Funding amounts are subject to change, as Vendor Fee proceeds are impacted by sales tax proceeds. DOH will announce how much funding will be made available with each application upon publication of LOIs.

Introduction

The Town of Fraser has submitted a petition to the Division of Housing within the Department of Local Affairs to use different percentages of median income than those percentages specified in statute for the following programs: the Equity Program. These programs are administered by the Colorado Housing and Finance Authority and overseen by the Governor’s Office of Economic Development and International Trade. Though the Division is not responsible for these programs, it is charged by statute (C.R.S. 29-32-105.5 (2)) to review petitions by localities that eligible projects within them be subjected to different income limits from those explicated in statute.

Scope of Petition

The increase of income limits for projects sited in the Town of Fraser receiving funds through the Equity Program to 100% of Area Median Income (AMI), either on a per-unit basis or on average for all units in a project as allowable by statute. If approved, the petition will remain in effect from its approval date through December 31, 2026.

Current Area Median Income limits for these programs are as follows:

• Land Banking Program - 60% max AMI for Rental, 100% max AMI for Homeownership
• Affordable Housing Equity Program - 90% average AMI or below
• Concessionary Debt Programs - 60% average AMI or below

Process

The Division of Housing must follow the following process required by statute (C.R.S. 29-32-105.5 (5)):

The Division may approve the petition to use different percentages of area median income, but only if:

• The submitted housing needs assessment:
  • Is published by the state or is a local housing needs assessment that utilizes data from the state demographer or other publicly accessible sources, which in either case may be supported by other relevant and verifiable community data;
  • Has been completed within the past three years of the petition date; and
  • Is accompanied by a narrative description of why other funding sources cannot be utilized, are not sufficient, or are not accessible to meet the housing needs described within the petition; and
• The Division determines that the current eligibility standards would cause implementation of this article in a manner inconsistent with demonstrated housing and workforce needs within the jurisdiction, taking into consideration regional workforce commuting trends.

In the event that the petition is approved, the new income limits will be based on the average needs identified in the housing needs assessment (C.R.S. 29-32-105.5 (6)), and public comments will be considered in the review of the petition (C.R.S. 29-32-105.5 (4)). No recommendation will be made on approval or denial of the petition until the public comment period is complete and the comments are considered in the recommendation. If Division of Housing staff recommend the denial of the petition, then the petitioner may appeal the staff recommendation to the Division Director of the Division of Housing.

Implications

If the petition is approved then eligible affordable housing projects can make units available to households with higher incomes than would otherwise be possible.

If the petition is denied, then affordable housing projects currently under consideration may become financially infeasible in the event that they require higher revenues generated by higher income households. If demand for affordable housing is still present at lower income levels, they may be unable to afford the higher rents of these higher income units, potentially making less affordable housing units available for lower income households than would otherwise be required.

Basis of Petition

A housing needs assessment of the Town of Fraser, produced in 2022. In describing why other funding sources cannot be utilized, are not sufficient, or are not accessible to meet the housing needs described within the petition, the petitioner wrote:

The cost of construction and current interest rates both remain high, raising the cost of affordable housing projects. We are accessing a wide range of funding to make this project feasible and to serve the demonstrated need in our community. The planned capitol stack and financing for the project includes Town funding, multiple grants, including Strong Communities and More Housing Now funding through DOLA, and an Operation Turnkey Grant through Colorado DOH used to purchase the land, bonds, LIHTC, CHFA sub debt, developer deferred equity, and DOH gap financing. Without closing the gap that currently exists in the proforma, which the Prop 123 equity funding would allow us to do, we may need to look at other options such as raising AMIs across the project in order to make the project pencil out.

Public Comments

Public comments will be accepted for 30 days, starting on the date that the Division of Housing posts notice that a petition has been filed on its website. The petition and relevant attachments will be included in the notice, and available at this link.

DLG has awarded $1.7 million in its latest round of Local Planning Capacity grants, a new program established by Proposition 123, the State Affordable Housing Fund. These awards support local governments implementing Prop 123 goals including fast tracking review of affordable housing and achieving Prop 123 commitments. Review a list of awardees and project descriptions.

The next round of funding opens September 1 - 30, 2024 with $4.8 million available. An informational webinar for prospective applicants is scheduled for Wednesday, July 31 at 2:00 PM. All application materials are available on the website, and interested applicants will need to schedule a pre-application meeting with Program Manager Robyn DiFalco to discuss your proposed project.

In order to remain eligible for Prop 123, local governments must demonstrate they have implemented an expedited review process for affordable housing by the end of 2026. This LPC grant program provides funding to support local governments with implementation of this requirement and can also support local government capacity to achieve local affordable housing goals and Prop 123 commitments.

Today, Gov. Jared Polis, the Colorado Office of Economic Development and International Trade (OEDIT), and the Colorado Housing and Finance Authority (CHFA) announced the preliminary selection of the first six recipients of the voter-approved Proposition 123 Equity program. These funds will provide investment capital for low- and middle-income multifamily affordable rental housing projects, supporting the creation of an estimated 628 affordable housing units.

“We need more housing now, and the recipients announced today will help create 628 affordable housing units so more Coloradans can live where they want Today, Gov. Jared Polis, the Colorado Office of Economic Development and International Trade (OEDIT), and the Colorado Housing and Finance Authority (CHFA) announced the preliminary selection of the first six recipients of the voter-approved Proposition 123 Equity program. These funds will provide investment capital for low- and middle-income multifamily affordable rental housing projects, supporting the creation of an estimated 628 affordable housing units.

For complete details, refer to the press release.

The Department of Local Affairs has posted detailed guidance on the Proposition 123 expedited review (fast-track) requirements. These are provided to help local governments (municipalities, counties, and tribal governments) navigate the requirements.

Local governments that file a commitment by November 1, 2026 for the next funding cycle (2027-2029), must demonstrate they have implemented an expedited review process for housing projects where at least half of the units are affordable.

This guidance is intended to provide strategies and examples on how local governments can create an expedited review process that takes into account their unique local context.

Join Webinars

To learn more, you can also join upcoming webinars about the requirement.

The Division of Housing was grateful to have about 60 community partners attend our Proposition 123 homeownership feedback forum on April 17.

Throughout the forum, stakeholders added helpful questions and insights about the proposed allocation and distribution of Proposition 123 funding to address homeownership, outlined in these four documents:

• Down Payment Assistance (DPA)
• New Construction and Acquisition Rehabilitation
• Mobile Home Programs
• Single Family Owner-Occupied (SFOO) Rehabilitation

You can review the session slides and session recording.

Feedback

You can submit additional feedback or ideas by taking the feedback survey, which will be open through April 26.

The Department of Local Affairs (DOLA) will host informational webinars on April 22 and 25 to provide guidance and clarity around the Proposition 123 requirement to expedite review of affordable housing.

Proposition 123 states that, in order to remain eligible for Proposition 123 funds in the next three-year cycle (2027 to 2029), local governments must demonstrate they have implemented an expedited review process for housing projects where at least half of the units are affordable. While the law states that expedited review must take place within 90 calendar days of a complete application submission, there are many additional details to consider.

DOLA’s guidance does not prescribe an approach but instead provides a list of strategies and approaches. Each community will need to determine which strategies are most effective for their local processes. Grant funding is available to support local governments with the implementation process.

Upcoming Webinars

• Monday, April 22, noon to 1:30 p.m.
• Thursday, April 25, 2 to 3:30 p.m.

Note that webinar registration has closed.