Northern Colorado continues to grapple with creating affordable housing - BizWest
Thomas Clayton
Northern Colorado continues to grapple with creating affordable housing
People interested in finding solutions to the lack of affordable housing in Northern Colorado gathered at The Forge today to tackle the subject. Ken Amundson/BizWest.LOVELAND — Finding affordable housing, still the dream for those wanting to live in Colorado, remains a nightmare for many as incremental solutions creep toward implementation.
Affordable housing was the topic today as the Northern Colorado Affordable Housing Summit played out at The Forge Event Center in Loveland. Builders, lenders, insurers, Realtors and community planners put their heads together to grapple with the topic at the BizWest-hosted event. And like a year ago, no magic bullets were discovered, although some progress was reported.
In leading off the summit, Kristin Todd, president and CEO of the NoCo Foundation, and Brooke Cunningham, the foundation’s point person on the housing issue, said that since last year, five work groups have been established to help alleviate a problem.
To put numbers to the problem: 60.2% of Colorado households are unable to afford the median-priced home because they don’t earn enough. And at the average wage, a worker would have to clock in for 97 hours a week in order to buy that median-priced home.
The foundation, which works to convene interest groups to jointly work on issues and establish regional solutions, has placed its focus on creating a public and political will to solve the problem, to understand the cost drivers of the problem, to create partnerships in the region, to devise regional strategies and, perhaps most significantly in its first year of focus, creating a cash fund to put money behind the efforts.
Todd said the foundation has committed $5 million to the effort, and Cunningham said that $2 million of that will go toward downpayment assistance, with the remaining $3 million placed in a revolving low-interest-loan fund to help make affordable-housing projects feasible.
The foundation’s cash, Todd said, is just the start. Private investment will help to grow those “impact investment funds.”
Participants in the summit also discussed specific issues that have hampered efforts to build less expensive homes to meet the demand.
Accessory dwelling units (ADUs)
Colorado legislators crafted legislation that took effect in June to require cities and towns to permit ADUs, which might be defined as small housing units on a property that contains a larger home. ADUs are used by senior citizens looking to downsize, by young adults and college students getting started, and by those not needing a large home. They can serve as a source of income when rented to a tenant. Or, in some cases the owner of the property may choose to live in the ADU and rent out the larger home.
Greeley-Weld Habitat for Humanity is among the developers that have embraced the ADU concept. Cheri Witt-Brown, CEO of the Greeley-based Habitat, said that virtually all the lots in its Hope Springs development permit the construction of ADUs. Lots are deep, she said, so a homeowner may choose to build a stand-alone garage with an apartment above it, or perhaps a one-story casita on the same property with the main house.
“It has become one of the most-effective, flexible tools,” she said. They “stretch every acre of land” when land prices are among the factors that are driving up the cost of housing.
Siduri Taylor, a Realtor with C3 Real Estate Solutions, said not every property is suitable for ADUs, but when they are, they can add to property values.
Nicole Hahn, a City of Loveland engineer, said from a government perspective ADUs help to increase density without much impact. Chris Aronson, architect with VFLA Architecture + Interiors, called ADUs “gentle density” and “small and mighty opportunities” that allow young professionals to live in communities where they work.
While some communities, such as Greeley, had already embarked on local code changes to permit ADUs, the legislation forced other communities to get on board. “It changed the conversation from IF we can allow them to HOW we can allow them,” Hahn said.
Still, ADUs can be cost-prohibitive when building a new unit on a new house property. Lenders may not be able to include potential rental income in the loan calculation, one lender said.
Witt-Brown said the cost per square foot is higher, because even a small house requires extension of utilities and other costs required by code.
“Time, money and utilities,” are the barriers, Aronson said. “You can’t run an extension cord from the main house or connect a garden hose to the sink,” he said.
Condominiums
Condominiums may also be a lower-cost solution for people wanting to get into a home they can own. Except contractors aren’t building them. Construction-defect lawsuits remain a high barrier and have chased the vast majority of builders out of the condo market.
Sally Piskun, an equity partner with Berg Hill Greenleaf Ruscitti LLP, said that one condo is built for every 14 apartment units. Legislation to provide relief to builders has passed the legislature and will take effect in 2026. It remains to be seen if it will have an impact.
Clayton Sharkey of the insurance firm IMA Inc., said Colorado is the riskiest state in the nation for insurance companies to underwrite policies to protect builders, and thus the insurance costs are high. “Colorado has high frequency and high severity of claims” in the construction defect arena, he said.
Premiums can run more than 5% of the project cost, said Peter LiFari, the housing fellow with the Common Sense Institute. The insurance cost is added to the sales price of the unit, thus driving up the buyer cost.
The Colorado Dream Act, Piskun said, was meant to incentivize builders by decreasing the threshold for litigation. The legislation limits claims to actual damages, to loss of use, to actual or reasonable risk of bodily injury or death, and failure of the building to perform as intended.
Builders would have 90 days to offer to repair instead of litigating the issue, and if the offer is rejected then the builder may be able to recover attorney costs.
Still, insurance underwriters “have no interest in the Colorado Dream Act,” Sharkey said. “They don’t see anything substantive (in the law) to reduce the frequency or severity of claims.”
John Mosier, president of Landmark Homes, said his company is one of just 17 in the state that still builds condos. “Our margins are very thin. We wonder why we’re in it. We are switching our focus to build more for-rent properties.”
City fees and infrastructure
Fees meant to cover impacts of new construction add $100,000 or more to the cost of a home, and they vary by community.
Patrick McMeekin, president of land development for Hartford Homes, displayed a chart showing a range in costs for the same $500,000 home built in multiple markets. On the high end, the builder pays upward of $116,000 in water and development fees for homes built in areas served by the Fort Collins-Loveland Water District. Homes built in Fort Collins and Loveland face the lowest water and impact fee charges at $61,530 and $69,727, respectively.
Building to Water Sense standards, which can reduce water usage by 30%, can reduce the ongoing cost to homeowners, and some jurisdictions are beginning to take that into account when charging fees.
Brian McBroom, community development director for the City of Greeley, said city councils are under a lot of pressure because while they recognize the housing cost problem, they also struggle to balance increasing expenses with a slower growth of revenue. Impact fees and administrative fees help to make up what property taxes and sales taxes fail to bring in.
“Greeley has a pro-growth stance, and we try to find the sweet spot of charging reasonable fees. We try not to charge more than we have to,” McBroom said.
McMeekin said that Hartford looks at two things when it considers building projects: “What’s the metropolitan district policy (for the community) and what’s the water policy. If those aren’t right, we don’t do the project.”
McBroom said that impacts on which fees are based are the same whether a home is affordable or not. Cities have wiggle room, however, in charging administrative fees and there’s room for discussion about those fees.
McMeekin said neighborhood developers often are required to build parks and at the same time are charged park fees. “Is that double dipping,” he asked.
Hartford Homes compared fees for various cities and jurisdictions where it builds, using an identical home. Courtesy Hartford Homes. | Tom Clayton Communication and Media Specialist, Public Affairs |
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