Common Goals for Affordable Housing with Conflicting Strategies

Affordable housing has been one of the hottest political topics in Colorado during the last decade. At the root of the issue has been massive population growth (particularly between 2013 and 2017) with lagging production of new housing units. The economic upheaval caused by virus related business closures has elevated the issue to national prominence and massive levels of new federal spending has been allocated to attack the issue. In addition to the nearly $500 million of federal money that has been channeled into Colorado’s ERAP system to provide rental and mortgage assistance, Colorado has been given over $400 million allocated to promote affordable housing solutions. The State has created the Affordable Housing Transformational Task Force Subpanel to advise Colorado’s legislature on how to best use the money. CAA has been successful in gaining a seat on that subpanel.

There is widespread agreement among all involved on a number of key issues. Everyone agrees that less expensive housing is an important objective. Everyone agrees that failure of housing supply to keep up with demand is the root of the problem. Everyone agrees that breaking down barriers to developing housing units is an important solution.

Based on the agreement about the goal and the cause of the problem, one would think there would be unanimous agreement to leverage the $400 million to create the maximum number of new housing units possible. A simple formula of new housing units created divided by dollars spent (Units/$) would be the perfect measurement of the strength of any proposed program. However, there are two groups of thought that diverge from this perspective.

There are people who believe that only inexpensive housing units contribute to the solution. Their proposals call for creation of housing units at a reduced price available only to those that make below certain thresholds of income (30%, 60% and 80% of Average Area Monthly Income are commonly cited thresholds). For this group, a program that generates 500 new “affordable units” is better than one that creates 20,000 new units at whatever cost the market requires. This group ignores that the cost of building a housing unit is dictated by the market. Land, materials, labor and regulatory barriers dictate the cost of housing. None of those commodities become less expensive because of the desire to build less expensive units. Any requirement that new units come in at a price below market is only a limitation on the creation of new units and makes the problem worse by creating fewer new units. Building more housing units, regardless of price, takes economic pressure off the price of all other units. Building a new expensive housing unit doesn’t make a poor person able to afford it, but it does take the person who can afford it out of the bidding for other units. This makes other existing units more affordable.

The second divergent view are those who see the solution as channeling money to those most in need. Their proposals involve giving money to people identified as in need of more help rather than creating new units. It doesn’t really matter what attributes they use to assess those deserving of housing assistance. Whether the assistance is doled out based on income level, ethnicity or disability, these policies do nothing to increase housing units or relieve market pressures of more people chasing housing units than housing units available for delivery. Such solutions only make winners of some at the expense of everyone else.

Policies that do and will work leverage private investment in new housing units. Tax credits and subsidies motivate private industry to build where economic conditions do not allow building. Restoring residential use of land to a use by right, with minimal local restriction on new housing units is what Colorado needs. High housing costs are a barometer for the barrier to creating new units. CAA will continue to advocate for policies that lead to additional housing units and to measure the success of policies by the number of units generated divided by the amount of money spent.

Drew Hamrick is the Senior Vice President of Government Affairs for the Colorado Apartment Association.