Colorado housing development efforts spark suburban resistance

“The cost of housing still remains a major pain point for too many hardworking people,” Colorado Gov. Jared Polis said.

Bloomberg News

Colorado’s push to meet the housing needs of its growing population has stirred controversy with a group of cities asking a court to block the governor’s recent crackdown on housing development law compliance and the passage of a law requiring the state treasurer to invest in lower-interest housing bonds.

An executive order Democratic Gov. Jared Polis signed on May 16 directs state agencies to determine local governments’ compliance with seven recent laws “that offer flexibility and smarter growth for Colorado communities to meet our housing, climate, and transportation goals, and will allow housing supply to finally start catching up with demand.” Noncompliance could result in the loss of state funding grants.

“Colorado is making important progress to increase housing supply and reduce costs for Coloradans in communities around the state, but the cost of housing still remains a major pain point for too many hardworking people,” the governor said in a statement. “Housing is a multi-jurisdictional concern and today’s action prioritizes the building of new homes in communities that are working to successfully implement more housing now for all budgets.”

Last week, six Denver suburbs sued the state, Polis, and others in Denver County District Court seeking to block the governor’s executive order on the basis it exceeds his constitutional powers.

The complaint for declaratory and injunctive relief claims that two of the laws cited in Polis’ order trample on the cities’ respective land use and zoning codes and home rule powers and that their noncompliance would deprive them of competitive or discretionary state funding that has had “a meaningful impact on the cities’ budgets.”

The laws, which were passed by the Democratic Party led legislature in 2024, mandate site-specific zoning changes in “transit-oriented communities,” including the plaintiff cities, and preempt and negate their existing minimum parking requirements applicable to multi-family housing development or redevelopment, according to the complaint.

“Our purpose in filing the lawsuit is to have the court stop the state from controlling local land use matters that require local decision making and public input,” George Lantz, the mayor of Greenwood Village, one of the plaintiffs, said in a statement.

Polis spokesperson Eric Maruyama said the governor wants to bring everyone to the table to find solutions to the housing shortage and his office is confident the court will rule in the state’s favor.

“It’s disappointing to see certain local governments that have among the priciest homes in Colorado use taxpayer money on a lawsuit that could go toward lowering the cost of housing,” Maruyama said in a statement. “It’s clear this lawsuit is about preventing more housing from being built that Coloradans can afford.”

Rating agencies have noted the state’s housing situation.

“Housing prices have risen with the influx of new residents and are seen as one possible impediment to future growth,” S&P Global Ratings said in a September report affirming the state’s AA issuer rating.

Colorado, which was the ninth least affordable state for housing in 2022, has moved to eighth worst, according to a March report from The Bell Policy Center, a Denver-based progressive public policy nonprofit.

“Despite increased housing production and ongoing legislative efforts, Colorado’s housing affordability crisis persists, particularly for low- and middle-income households,” the report said.

“While housing supply has grown, home prices and rents remain high, making stable housing unattainable for many Coloradans,” the report said.

“While estimates show that at least 325,000 housing units need to be built, Colorado is also short 175,240 affordable and available units for families earning at or below 50% (area median income),” it added.

Colorado’s population grew to 5.957 million in 2024 from 4.972 million in 2009, making it the sixth fastest growing state during that period, according to a recent report by The Pew Charitable Trusts.

The state has poured resources into housing in recent years, including Proposition 123, which was approved by 52.6% of voters in November 2022. The measure created the State Affordable Housing Fund and dedicated 0.1% of state income tax revenue for housing programs.

A bipartisan bill Polis signed into law May 15 authorizes the state treasurer to invest up to $50 million of state money in lower-interest bonds issued by quasi-governmental agencies to finance new affordable, income-restricted, for-sale housing.

The Colorado Housing and Finance Authority is contemplated to be the issuer of the bonds, according to agency spokesman Matt Lynn.

At a March 24 House Finance Committee hearing on the bill, a member of Treasurer Dave Young’s office signaled reluctant compliance with the measure.

Leah Marvin-Riley, the treasury department’s policy director, said expected interest earnings of 3% are anticipated on the bonds, while the department can go to the market and buy bonds that earn about 6%, potentially costing the state $1.5 million in interest earnings.

She also raised liquidity concerns. “These bonds won’t necessarily be able to be traded in the public market,” she said.

“If the legislature chooses to pass this bill, we will do it, but if it was up to the department and the investment team, we would have to follow our current statutory requirements of safety, liquidity and yield,” she said.

Bill sponsors said the measure creates a pilot program for a revolving fund with the $50 million in proceeds expected to result in home ownership for 175 to 200 low- and moderate-income buyers.

“This program is a fiscally responsible solution,” Democratic State Rep. Manny Rutinel said. “The $50 million initial investment represents less than 1% of the state’s total investment portfolio.”

CHFA Executive Director and CEO Thomas Bryan told the committee the bill presents a new opportunity to support construction financing for single-family homes and passing savings onto low- and moderate-income home buyers with a below-market interest rate made available through the housing agency’s statewide network of participating lenders.

“This is critical, because rising construction costs and higher interest rates have made home ownership out of reach for many Coloradans,” he said.

A bill Polis signed into law on May 8 will give a boost to factory-built housing at the same time Rifle, Colorado, is issuing $23.4 million of unrated tax-exempt and taxable revenue bonds for Habitat for Humanity of the Roaring Fork Valley, Inc. to finance construction of a modular housing plant.

The bill’s aim is to make it easier to utilize innovative modular housing to reduce costs and create affordable homes, according to a signing statement from the governor’s office.

The new law calls for the development of regional building codes for the structures that would be adopted by the state housing board by July 1, 2026, as well as the adoption of rules prohibiting counties and municipalities from banning or imposing more restrictive standards on factory-built structures than those applied to site-built homes in the same residential zones.

The 66,000-square-foot plant in Rifle is expected to manufacture about 200 units of modular housing annually when operating at full capacity, according to the deal’s amended and restated preliminary limited offering memorandum.