Colorado Gears Up To Leverage Federal Affordable Housing Bump
Colorado affordable housing advocates hope to capitalize on the federal expansion of low-income housing tax credits by leveraging the state's own investments in funding.
Changes in the One Big Beautiful Bill Act expand LIHTC, the most used financing mechanism for affordable housing in the country, and add an estimated $1B in equity to the market. The bill also reduced the threshold for affordable properties financed with private activity bonds from 50% to 25% of land and building costs.
Novogradac estimates the additional financing will help bring 30,600 more rental units to the state over the next 10 years.
Those changes will be compounded in Colorado, where the state implemented the country’s first middle-income housing tax credit program, which supports projects serving between 80% and 120% of the area median income, or up to 140% of AMI in resort counties. The state has also dedicated funding through Proposition 123.
Another effort to expand affordable housing in the state is the proposed Housing Opportunities Made Easier Act, which would allow schools, housing authorities and some nonprofits to build housing on their properties regardless of local zoning.
With all the available funding, competition in the affordable housing market is growing, Dani Vachon Bell, development director at MGL Partners, said at Bisnow’s Affordable Housing Summit on March 4, held at the Westin Denver Downtown.
But Vachon Bell said the threshold reduction for private activity bonds also allows MGL to get more creative with its projects.
“We’re looking at existing buildings that are maybe Class-C that we can convert to housing, and we’re looking at extended-stay hotels and how those could be converted to affordable or even workforce housing, so we’re really trying to shake all of the trees,” she said.
Vachon Bell added that projects are often leasing below 60% of AMI because of the softness in the Denver market and low market-rate rents competing with income-restricted housing.
In the last quarter of 2025, the average rent fell to $1,754 per month. Older buildings were even cheaper, with apartments built in the 1970s renting for an average of $1,423, according to the Apartment Association of Metro Denver.
“We are still underwriting our projects at 60%, 70% and 80% AMI, but really we’re trying to get as many sources as possible into those deals to get those rental rates down to 50% or 55%, which is actually leasing right now,” Vachon Bell said.
Should market-rate housing continue to take the pressure off higher-income households, the hope is tax credits will be more available for lower-income projects, Kentro Group principal Chris Viscardi said.
Ideally, continuing to build market-rate housing will “open up more funds on the lower affordability end” and concentrate spending on projects below 40% AMI, Viscardi said.
To build interest from developers, Colorado Housing and Finance Authority is working to diversify funding sources and make capital more flexible for projects, CEO Thomas Bryan said.
“The affordable housing tax credit from the state and federal [governments] have been great in creating a ton of housing in the state of Colorado, but I think we’d be short-sighted to say that those resources are always going to be there,” Bryan said.
