Affordable Housing FAQs
What defines Affordable Housing?
- Housing is considered affordable by federal law when a household pays no more than 30% of their gross annual income (wages, social security, etc.) for housing costs, including utilities. Housing costs can be mortgage or rent, and the cost of utilities which are not covered in the rent or mortgage must be added to that.
- So as an example, a starting Jeffco teacher earns $38,760 per year. Affordable housing (30%) for that teacher would be $969/month – yet average monthly rents in Jeffco are roughly $1370/month! A single income household would need to earn at least $26/hr ($54,000/year) to afford that average rent.
What is Assisted Housing?
- When the public sector (city, state, federal, non-profit) invests in a housing development, a restrictive covenant or land use agreement is recorded. These limit the cost of the unit and who is eligible to buy or rent it for a period of time (usually at least 10-15 years). So this assisted housing is designed to be affordable for a given segment of the population (i.e. one-bedroom apartments for lower income seniors, or 2 bedroom apartments or homes for families of 4 earning lower incomes, etc)
What Are Low Income Housing Tax Credits? (LIHTC – pronounced “lie-tek”)
- These are credits that apply to either Federal or State taxes. These provide the private market with an incentive to invest in affordable rental housing. Federal or State housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents. The most valuable Federal LIHTCs allow investors to receive a dollar-for-dollar credit against their federal tax liability each year throughout a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing. State LIHTCs work in a similar fashion, where the state government sets aside state funds, and the credits are sold to help reduce State tax liability.
- Equity raised from the sale of housing tax credits helps off-set between 30 to 70 percent of affordable housing developments costs. Without these critical equity investments, nearly 55,000 affordable housing units would not have been able to be built to date in Colorado.
What Are Other Ways to Create More Affordable Housing Besides LIHTC?
- Cities or counties can offer other incentives to developers to create more affordable (assisted) housing. They can donate land, offer to waive fees normally charged to developers, allow buildings to be built higher or have less open land (called density bonuses). They can also adopt legal requirements (ordinances) that developments they approve must have a certain portion be affordable (CO state law does not allow this ordinance for rentals, only allowed for for-sale properties). Cities or counties can create affordable housing funds using various types of taxes or fees (on developers, on real estate transactions, etc.)
- Other ways to increase affordable housing includes renovating existing buildings, encouraging landlords to rent at lower rates, allowing building of tiny homes or Accessory Dwelling Units, and encouraging co-housing (such as seniors renting out rooms to vetted renters).
Affordable Housing/Homelessness Resources
Housing Colorado provides various resources in a toolkit to share facts and data, as well as highlight the essential role affordable housing plays in Colorado’s economy and communities.
Jeffco Housing Exchange has resources, personal stories, and other news on permanent supportive housing and the value it brings to Jefferson County.
Federal Low Income Housing Primer (Includes a glossary in Chapter 11)
Affordable Housing Glossary
Primarily individuals who choose homelessness and often suffer from mental illness and/or addiction. These individuals are the most costly to support when they are on the street (ER visits, cold weather shelter, arrests, etc.)
Programs that include subsidized housing for individuals and families who are experiencing homelessness or high risk of homelessness. Programs usually include commitments for achieving goals toward self-sufficiency such as education, work related training, steady employment, classes in parenting and budgeting, etc. Transitional housing programs are on the decline as there is no housing available for people to transition into once they have completed the two-year program.
Subsidized housing for individuals who have a history of crisis, addiction, mental illness, chronic health problems, etc. Housing is provided along with support or oversight from caseworkers, social workers, trained mentors, etc.
A prevailing philosophy that taking folks out of homelessness must begin with housing.
Area Median Incomes; figures come from the US Census
CCH is a major non-profit in Metro Denver providing direct services, housing, and support for people experiencing homelessness. For the past thirty years, homeless families and individuals have turned to the Colorado Coalition for the Homeless to help them end their homelessness. Through a combination of integrated health care, housing, employment, and supportive services, they have helped tens of thousands leave the streets and shelters behind for new homes and opportunities.
Continuum of Care Funds (COC)
The CoC program was founded in 1994. The CoC represents seven counties in metro Denver including Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson. Since its inception, the CoC has worked to implement programs and projects including housing and services to support people who are homeless or at imminent risk of homelessness. Programs include prevention, outreach and assessment, emergency shelter, transitional housing, supportive services, permanent supportive housing and permanent housing. Its focus is in three primary areas: (1) regional needs assessment and service planning, (2) conducting and disseminating research, and (3) community organization.
Metro Denver Homeless Initiative for CoC is the organization that implements the CoC. The purpose is to create a collaborative, inclusive, community-based process and approach to planning for and managing homeless assistance resources and programs effectively and efficiently to end homelessness in the jurisdiction as specified in Department of Housing and Urban Development, 24 CFR Part 578, Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Continuum of Care Program. See also MDHI.
CAHPS is a system that enables a community to accomplish the following in a coordinated fashion:
(a) Assess and identify the housing and support needs of all individuals experiencing homelessness;
(b) Target outreach and housing navigation for those who are most disabled, most in need and have been homeless the longest;
(c) Match the right level service and/or housing intervention to these individuals as quickly and efficiently as possible, while being respectful of client choice and of local providers.
Community Development Block Grants (CDBG)
The Community Development Block Grant (CDBG) program is a flexible program that provides communities with resources to address a wide range of unique community development needs. Beginning in 1974, the CDBG program is one of the longest continuously run programs at HUD. The CDBG program provides annual grants on a formula basis to 1209 general units of local government and States. The CDBG has several programs: Entitlement Communities, State Administered CDBG, Section 108 Loan Guarantee Program, HUD Administered Small Cities, Insular Areas, Disaster Recovery Assistance, Neighborhood Stabilization Program, Colonias (HUD website)
Colorado Housing Trust Fund: Housing Trust Fund
Housing trust funds are distinct funds established by city, county or state governments that receive ongoing dedicated sources of public funding to support the preservation and production of affordable housing and increase opportunities for families and individuals to access decent affordable homes. Housing trust funds systemically shift affordable housing funding from annual budget allocations to the commitment of dedicated public revenue. While housing trust funds can also be a repository for private donations, they are not public/private partnerships, nor are they endowed funds operating from interest and other earnings. In Colorado the revenue source are National Mortgage Settlement funds but a report in 2010 showed no revenue for the fund in Colorado (Center for Community Change).
Home Investment Partnerships Program (HOME)
The HOME Investment Partnerships Program (HOME) provides formula grants to States and localities that communities use – often in partnership with local nonprofit groups – to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rent or homeownership or providing direct rental assistance to low-income people. HOME is the largest Federal block grant to state and local governments designed exclusively to create affordable housing for low-income households.
HOME funds are awarded annually as formula grants to participating jurisdictions (PJs).The program’s flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancements, or rental assistance or security deposits.
Housing Colorado is a statewide, multi-sector membership association for affordable housing professionals. We are recognized throughout Colorado as a valuable resource, providing important information, education, advocacy, and networking services.
Housing Choice Vouchers (Section 8 Housing)
The housing choice voucher program is the federal government’s major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Since housing assistance is provided on behalf of the family or individual, participants are able to find their own housing, including single-family homes, townhouses and apartments.
The participant is free to choose any housing that meets the requirements of the program and is not limited to units located in subsidized housing projects.
Housing choice vouchers are administered locally by public housing agencies(PHAs). The PHAs receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program.
A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family’s choice where the owner agrees to rent under the program. This unit may include the family’s present residence. Rental units must meet minimum standards of health and safety, as determined by the PHA.
A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Under certain circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home. (HUD website)
Home Investment Partnership Program (HMIS)
Colorado Coalition for the Homeless (CCH) is the implementing organization for the Homeless Management Information System (HMIS), under the direction of the Metro Denver Homeless Initiative (MDHI) Continuum of Care (CoC). HMIS utilizes a computerized data collection tool designed to capture client-level information over a period of time. HMIS collects information on the characteristics and service needs of persons experiencing homelessness, or who are at risk of becoming homeless. It incorporates a set of policies and procedures around client confidentiality, data collection, computer entry, and reporting. HMIS is designed to aggregate client-level data to generate unduplicated counts of clients served in the community.
Low Income Housing Tax Credits
Granted by IRS to investors; Similar grants by state; administered by the Colorado Housing Finance Authority
The Low-Income Housing Tax Credit (LIHTC – often pronounced “lie-tech”, Housing Credit) is a dollar-for-dollar tax credit in the United States for affordable housing investments. It was created under the Tax Reform Act of 1986 (TRA86) and gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. LIHTC accounts for the majority (approximately 90%) of all affordable rental housing created in the United States today. As the maximum rent that can be charged is based upon the Area Median Income (“AMI”), LIHTC housing remains unaffordable to many low-income (<30% AMI) renters. The credits are also commonly called Section 42 credits in reference to the applicable section of the Internal Revenue Code. The tax credits are more attractive than tax deductions as the credits provide a dollar-for-dollar reduction in a taxpayer’s federal income tax, whereas a tax deduction only provides a reduction in taxable income. The “passive loss rules” and similar tax changes made by TRA86 greatly reduced the value of tax credits and deductions to individual taxpayers. Less than 10% of current credit expenditures are claimed by individual investors.[2 (Wikipedia
Metro Denver Homeless Initiative (MDHI)
The Metro Denver Homeless Initiative (MDHI) was formed in 1994 to coordinate the assistance available from homeless-serving agencies throughout the metro area. MDHI brought together 70 organizations, including homeless-assistance and housing providers, local and state agencies, foundations, mental health centers, neighborhood groups, and homeless individuals to develop a Continuum of Care (CoC) for area residents who are homeless or at risk of becoming homeless. With support from the U.S. Department of Housing and Urban Development (HUD) and other public and private sources, MDHI has since become a regional leadership body that coordinates resources and services, identifies needs, and disseminates best practices related to homelessness. Allocates Low Income Tax Credits (IRS) and state tax credits
The National Low Income Housing Coalition (NLIHC)
“…dedicated solely to achieving socially just public policy that assures people with the lowest incomes in the United States have affordable and decent homes.
Founded in 1974 by Cushing N. Dolbeare, NLIHC educates, organizes and advocates ensuring decent, affordable housing for everyone. Our goals are to preserve existing federally assisted homes and housing resources, expand the supply of low income housing, and establish housing stability as the primary purpose of federal low income housing policy. NLIHC’s staff teams work together to achieve our advocacy goals. Our Research Team studies trends and analyzes data to create a picture of the need for low income housing across the country. Our Policy Team educates lawmakers about housing need and analyzes and shapes public policy. Our Field Team mobilizes members and supporters across the country to advocate for good housing policy. Our Communications Team shapes public opinion of low income housing issues. And our Administration Team works to ensure NLIHC remains a sustainable, high-capacity organization.
Colorado members are: Colorado Coalition for the Homeless, Housing Colorado