Affordable housing crisis in Colorado: the boat is sinking fast!

by | Jun 9, 2017 | Colorado Real Estate values, Colorado Ski towns

Want to move into an apartment with knotty alder cabinets, walk in closets, energy efficient appliances, fitness room and more?  Welcome to Steamboat’s newest affordable housing development!

As the front range and mountain populations explode and the median home price approaches almost 500k in metro affordable housing (or lack thereof) is a huge problem.  There are five factors that will basically eliminate affordable housing options going forward.   Unfortunately, the current housing initiatives are only exasperating the problem.  What can be done to help the current crisis?

The above picture is an “affordable” housing project that was recently completed in Steamboat.  I use  ”affordable” in quotes as the building has the look and amenities of many higher end apartment complexes.    It is a great looking building and cost taxpayers over 16 million dollars to build 48 units, that is almost 350k/unit!  Building properties at 350k/ affordable housing unit is not sustainable by any standard as hundreds more units are needed just in Steamboat.  What is driving the cost so high?

This article was published in the CO Biz Magazine by Fairview Lending

Before discussing possible solutions, it is important to highlight the factors causing the current housing crisis.  There are five factors that are weighing on the ability of developers to meet the demands of the affordable housing market.  Individually, each factor is not a deal breaker, but combined these five factors will greatly reduce or eliminate affordable housing options both in the front range and throughout most ski towns.

Land costs: This is the obvious factor driving up costs.  As more people migrate to the front range and ski towns there is less available supply of buildable lots.  With basic economics with high demand and less supply prices increase.  As lot prices increase developers are forced to builder more expensive houses since there is no other way to even break even. According to a Bloomberg report, this means” focusing on high-end apartments that offer better profit margins. The wealthiest residents are the only ones who can buy, and a vicious cycle is created.”

Infrastructure costs: Assuming a developer could find land at a reasonable cost, there are huge infrastructure costs.  One of the largest costs is water and sewer.  For example, if you were going to build a single family home in Louisville the water and sewer taps alone would be $35k.  Colorado has some of the highest infrastructure costs in the country

Impact fees:  If infrastructure and land costs haven’t sunk the idea of affordable housing, impact fees will further sink any plans.  For example let’s say you were going to build a single family home that was 2k square feet, the impact fee would add 1200 to the cost of the project.  That doesn’t sound like allot, but let’s assume you were going to build a 50k foot apartment complex that fee is now 75k.  Increased fees are passed on to the end users as there is not enough profit margin to just “absorb” the fees.

Labor costs: With Colorado having one of the lowest unemployment rates in the nation, this means that skilled laborers can demand even higher wages.  For example, I did a project in Steamboat Springs (a ski town), a plumber was charging 125/hour.  At rates like these building becomes quite expensive.  Along with labor rates the time to build has also lengthened due to the labor market tightness.  As the old saying goes, time is money.  The longer it takes to build the higher the capital costs are.

Property Taxes:  As property taxes rise, affordable housing becomes even less attainable.  For example in Denver, property values went up 40% plus in many areas which means property taxes also went up. Those taxes are passed through to renters in once affordable neighborhoods.  On top of that, the impact fees also add additional taxes on existing single family homes.  Higher taxes also make it harder to qualify for a mortgage since anyone who was close to be able to buy a house based on their income could easily be denied as taxes are factored into the total payment on the house.  Higher taxes result in less buying power for borrowers.


While each of the items above on their own is not a deal killer for affordable housing, when you combine them all you have a huge problem.  What is the solution?  First taxing homeowners and developers is a bad idea; the increased taxes further propagate the cycle of unaffordable housing as more borrowers and renters are priced out as the taxes are “passed through”.  Second, change zoning laws to allow higher density.  This will allow developers to increase the supply therefore slowing down the rapid pace of appreciation.  Third, allow alternative housing types.  For example, allow modular/prefab housing.  You can buy a fully functional modular for around 40k dollars; much cheaper than 350k/unit spent in Steamboat.  Finally, building codes need to be relaxed; the more rules developers must adhere to (for example a stone façade) the more expensive the building is.  I’m not saying life and safety items should be waived, but some of the more aesthetic items (like min square footage or certain roof materials, or the need for a fitness center in an affordable housing project?) needs to be waived to enable builders to offer products at lower price points.

None of the above changes will be easy but they must be implemented to at least give affordable housing a fighting chance.  This affordable housing ship is sinking; will the above policies be implemented in time to keep the boat afloat?



Resources/Additional Reading


Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).

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