Updated March 3, 2025 |
Innovative Housing Incentive Program (IHIP):
Program guidelines
Contact: Jack Tiebout, Senior Program Manager, OEDIT
jack.tiebout@state.co.us
Introduction
Background
The Innovative Housing Incentive Program (IHIP), which emerged as a recommendation from the 2021 interim Affordable Housing Transformational Task Force, was introduced to the Colorado General Assembly as HB22-1282 with bipartisan sponsorship in March 2022 and signed into law by Governor Polis in May. The program was designed to help address the state’s critical lack of affordable and attainable housing by supporting innovative housing manufacturing businesses across the state through grants, loans, and cash incentives. The program was initiated with $40 million in state funding and no sunset date.
The program includes three funding mechanisms for innovative housing manufacturers: an operating expense reimbursement grant, a per-unit cash incentive grant, and a factory loan. The operating expense reimbursement grant partially reimburses innovative housing businesses’ operating expenses. The per-unit cash incentive rewards manufacturers who build affordable and sustainable homes with a cash award for every unit built and installed in Colorado. Finally, the factory loan program helps finance the construction of new innovative housing manufacturing facilities or expanding existing facilities across the state. Each mechanism will be described in greater detail below.
Program status and timeline
The program was funded and staffed by the Office of Economic Development & International Trade (OEDIT) in July 2022. As directed by statute, OEDIT sought feedback from the public, industry stakeholders, and state agency partners to ensure that the program runs smoothly and meets stakeholders’ needs. The publication of previous draft guidelines on September 29, 2022 marked the beginning of a two-week public comment period, ending on October 13, 2022.
Upon concluding the public comment period, OEDIT consulted with an interagency group consisting of partners from the Department of Local Affairs (DOLA) Division of Housing (DOH), the Colorado Energy Office, the Governor’s Office, and the Colorado Housing & Finance Authority (CHFA). That group advised OEDIT on the initial guidelines and subsequent revisions, and will continue to use their domain expertise to advise OEDIT as it implements the program.
We began receiving applications for the grant program in December 2022 and grant applications remain open for applications on a rolling basis. We opened the factory loan program for applications in fall 2023 and announced the first round of loan recipients in February 2024. We will continue to update the public on application dates and other program updates through the IHIP webpage and the IHIP newsletter. A newsletter sign-up form is available on the IHIP webpage.
OEDIT may continue to revise guidelines as the program continues.
Summary of statute
While the statute lays out the three funding mechanisms introduced above, many of the details regarding how they are implemented has been left for OEDIT to determine with input of agency partners, industry stakeholders, and the public.
Some aspects of the statute that apply to all three funding mechanisms are discussed here, while others that are mechanism-specific are discussed in more detail in each mechanism’s respective section of this document.
Grant and loan utilization
Businesses will be allowed to utilize both the grant and the loan components of the program if the loan and grant apply to different facilities. Businesses may not use a grant and loan for the same facility.
Eligibility
The statute provides some parameters for eligibility, and otherwise allows OEDIT to determine which businesses are considered innovative and eligible for funding. Colorado-based manufacturers with under 500 employees that produce prefabricated, panelized, 3D-printed, tiny, or kit homes are eligible for the incentive. Modular homes are presumed to be included in the prefabricated category. To be eligible, the homes must be built for installation on permanent foundations. Tiny homes builders must be manufactured off-site and receive a metal insignia from DOLA.
Additional processes for determining eligibility will be described in the section for each funding mechanism, but the general litmus test for whether a given business is considered innovative is if it uses a technology or process that significantly reduces the amount of on-site time and labor required to build a home.
Funding limits
The statute does not dictate how the $40 million should be allocated among the three funding mechanisms, though it does allow OEDIT to spend up to two percent of the overall allocation per year ($800,000) to cover direct and indirect costs of implementing the program.
At this point, OEDIT has not set an overall limit on how much of the $40 million is allocated to each funding mechanism. Instead, it has created lifetime limits per business for each funding mechanism ($1.5 million for grants and $10 million for loans), and will further evaluate allocation limits based on the performance of each mechanism.
OEDIT currently expects to make the working capital grant and per-unit incentive to be available for five years, while the loan program may continue to revolve indefinitely.
To ensure that small and early-stage businesses are able to benefit from the program, OEDIT will set aside $3,000,000 in combined grant funds for businesses with 5 or fewer full-time employees at the start of the contract period. These funds will be reserved for the first five years of the program, or until all funds set aside are absorbed by small/early stage businesses.
There is also an annual limit on how much of the lifetime limit is absorbed in each contract year. OEDIT will disburse up to 50% of the lifetime limit for operating expense reimbursement and up to 150 units for the per-unit incentive in a given year. The $50,000 affordability bonus (detailed below) is divided across each year of the contract period.
Additional details on the pathway for early-stage businesses can be found in the following section of the program guidelines.
Funding mechanism | Lifetime limit per business |
Working capital grant | $350,000 for businesses in non-Just Transition counties* $450,000 for businesses in Just Transition counties |
Per-unit cash incentive | $1,000,000 for all eligible businesses |
Factory loan | No more than $10 million will be loaned to any business |
Working capital grant and per-unit incentive guidelines
Process
Because businesses will be eligible to utilize both the operating expense reimbursement grant and the per-unit incentive, OEDIT has merged the two funding mechanisms into one application process. This will save time for both the participating businesses and OEDIT staff, while still giving the business the ability to opt out of either mechanism if they choose.
Applications for both programs will be accepted on a rolling basis, as described below:
- Businesses submit a screener survey to determine eligibility. If they meet basic eligibility criteria, they will automatically receive a link to fill out a full application.
- Businesses fill out a full application, which will require a description of the innovative manufacturing method and submission of financial statements, among other components.
- An OEDIT representative will visit the manufacturing facility in-person to confirm that it is operational. Businesses will present to an interagency panel and answer questions about the manufacturing method as well as their growth trajectory and financial stability.
- If approved, businesses will work with the IHIP program manager and OEDIT’s procurement department to create a multi-year contract and statement of work that will reimburse a portion of operating expenses and give awards for units produced and installed in Colorado.
- Reimbursements will be processed on a monthly basis. Every month, the business will complete a worksheet detailing their qualified operating expenses. Businesses will be required to submit some form of receipt (including payment method) for each expense. Recurring expenses such as lease payments will not require receipts if a lease contract is provided. For the per-unit incentive, the business will submit building plans and purchase orders/receipts.
- Businesses may continue to utilize the incentive until they reach the lifetime limit per business, or until the three-year contract period ends, whichever occurs first. For some smaller and startup businesses, the three year contract period may be extended. Businesses must submit certificates of occupancy (COs) for all units incentivized before the contract is closed. No funds will be withheld, but OEDIT reserves the right to recoup funds for any units for which COs are not submitted.
Eligibility and review
To be eligible for the grant and incentive, businesses must first meet all requirements described above. They must also have a facility in Colorado that has produced at least one prototype (defined below).
If a manufacturer has under 500 employees but is a subsidiary of a company with over 500 employees, then the manufacturer will be eligible for the per-unit incentive, but not the working capital grant.
As mentioned above, each business is required to present to an interagency panel that will assess whether a business is eligible and whether grant/incentive funds would be managed responsibly. This panel consists of members of the DOLA Division of Housing, the Colorado Energy Office, the Governor’s Office, and OEDIT.
Pathway for early-stage businesses |
Early-stage businesses with 5 or fewer employees are eligible to participate in the IHIP grant program. They will generally follow the same process as larger businesses, but will have some additional requirements. As noted above, a prerequisite for participation is having produced at least one prototype in a Colorado facility. A prototype is defined as a physical demonstration of the innovative housing manufacturing method, but not necessarily a liveable unit. Early-stage businesses may also be required to have had their business plans reviewed by a local Small Business Development Center and pass a more in-depth interagency panel review. Grant funds for early-stage businesses come from the working capital grant component, which is a reimbursement of operating expenses (described further below). Early-stage operating expense reimbursement grant funds are limited to up to $100,000 in three years of operation. After three years or $100,000 disbursed, the company would be eligible to re-apply for a full IHIP grant for up to $250,000 from the working capital grant and the full eligible amount for the per-unit incentive. |
Guidelines for operating expense reimbursement grant
The working capital grant will have a lifetime limit of $350,000 per business (not including affordability bonus), unless the business is located in a Tier 1 Just Transition community.* Participating businesses have up to three years to reach the lifetime limit, though OEDIT will reserve the right to extend contracts beyond three years if grantee does not meet the limit.
The grant is a reimbursement of up to 20 percent of an innovative housing business’s operating expenses over a given time period. Statute indicates that operating expenses include, but are not limited to, payroll, inventory, and materials. Only operating expenses incurred after the start of the contract period are eligible for reimbursement.
Businesses may receive up to 50% of the base contract amount in a given contract year. For example, a business that has a two-year, $350,000 grant contract may receive up to $175,000 in each contract year, not including the affordability bonus.
Other categories of expenses that are considered as operating expenses are rent, utilities, marketing, research & development, and payments toward leased equipment.
Costs that are ineligible for reimbursement include, but are not limited to, startup/capital costs, purchased equipment, food and liquor, costs related to IP (patents, copyrights, trademarks), taxes, and other government fees.
Businesses that sell over 10% of homes manufactured and installed in Colorado to deed-restricted affordable housing developers will be eligible for a $50,000 affordability bonus beyond the $350,000 base contract amount, for a total of up to $400,000. Businesses that sell less than 10% of units for affordable housing will still be eligible for up to $350,000. The $50,000 will be divided across each year of the contract period. If over 10% of units in any given contract year are sold to affordable housing developers, the bonus will be disbursed at the end of the contract year.
* Tier 1 Just Transition communities: The West End of Montrose County, Moffat County, Rio Blanco County, Routt County, Morgan County, and Pueblo County. Businesses in these communities have a $450,000 working capital grant limit (not including affordability bonus).
Guidelines for per-unit incentive
As with the grant, per-unit incentive awards are be reserved and then disbursed on a monthly basis. For each unit incentivized, the innovative housing business must submit receipts or purchase orders, architectural or construction drawings, and a Certificate of Occupancy.
Only units that have not yet begun construction at the start of the contract period are eligible for the per-unit incentive. If a unit has been ordered and paid for but the unit has not begun being assembled, it will still be eligible.
There is a 150-unit limit per year, with a lifetime award limit of $1,000,000 per business. OEDIT will retain the option to increase the limit if a given manufacturer exceeds expectations in terms of affordability, sustainability, workforce development, and community impact.
Statute suggests that OEDIT incentivizes housing units based on affordability and sustainability factors. However, the ultimate cost and efficiency of the unit for the end-user depends largely on the developer, the site on which the home is built, and on the quality of the on-site installation. Because the manufacturers for whom the program was designed have little influence on these factors, and because verifying the cost and sustainability performance of each unit would be unnecessarily onerous, OEDIT’s guidelines prioritize elements within the manufacturer’s control.
With this in mind, OEDIT has created multiple pathways for verifying the sustainability and affordability of each unit incentivized. Manufacturers may verify affordability through either a deed-restricted or per square foot cost path, and they may verify sustainability and energy efficiency through either a certification path or an insulation and electrification path.
Kit homes, tiny homes, accessory dwelling units, and minimally finished or unfinished panelized homes will not be eligible for the affordability and sustainability criteria, but may still receive the base $1,500 per-unit and $500 density bonus, if applicable.
Tiny home producers must attest that any incentivized unit will not be used primarily for hospitality purposes.
Below is a summary table of per-unit bonuses available for innovative housing businesses, followed by a description of how each category will be managed.
Category | Dollar amount | Requirements for each level |
Base | $1,500 | Must meet one sustainability or affordability criterion (except for kit homes) |
Affordability and attainability | $1,000 - $2,000 | Deed-restricted: Level 2: $1,500 = <80% AMI Level 3: $2,000 = <60% AMI -OR- Per square foot (400+ square feet): Level 1: $1,000 = <$175/sf** Level 2: $1,500 = <$150/sf ** Per square foot amounts will be adjusted annually to reflect changes in the Consumer Price Index (CPI). |
Sustainability | $1,000 - $2,000 | Certification path Level 2: $1,500 = HERS score under 50, Zero-energy ready, NGBS Gold, OR LEED Gold Insulation/Electrification path Level 1: $1,000 = Floor R-value at or above 30, Exterior Wall R-value at or above 21, Ceiling R-value at or above 40, Window glazing U-Factor under 0.34* Level 2: $1,500 = Unit meets above benchmarks and will be installed with an electric heat pump Level 3: $2,000 = Unit meets $1000 and $1500 level requirements and includes or will be installed at least two of the following: |
Density | $500 | $500 for all units built at density |
Maximum total | $6,000 |
* For insulation Level 1: Floor R-value may be waived if floor is not insulated in-factory. Conditioned crawl spaces that meet state requirements will be accepted as well. Grantees may also submit Rescheck performance-based standards in lieu of R-values.
- Affordability and attainability
Manufacturers can follow one of two exclusive paths — deed-restricted affordability or per-square foot affordability — for verifying the affordability of each unit produced. With the following assumptions, the maximum affordability bonus per unit is $2,000.
If a unit is sold to a housing authority or housing developer and will be rented or sold to the end user with a deed restriction, the innovative housing business can follow the deed-restricted path for the per-unit incentive. This path awards $1,000 for every deed-restricted unit rented or sold at an attainable level (80-120% area median income), $1,500 for every unit rented or sold at an affordable price for under residents at or under under 80% AMI, and $2,000 for every unit rented or sold at or under 60% AMI.
Participating businesses may instead choose to follow the per square foot path, which will award $1,000 per unit sold for under $186 per square foot and $1,500 per unit sold for under $159 per square foot. Costs per square foot do not include shipping and installation costs. These amounts were adjusted for inflation in November 2024 and will continue to be adjusted for inflation (based on the Consumer Price Index) on an annual basis.
Proper supporting documentation for either path is required.
- Sustainability/Energy Efficiency
Given the logistical limitations of verifying the on-site energy performance of each home produced, OEDIT accepts past demonstration of a specific model’s sustainability and energy performance in Colorado as evidence of the sustainability capacity of other units of that model produced in the future.
If a unit is custom-designed or if a model has not previously had a unit certified to meet a given standard, then the manufacturer is be required to have the unit rated and certified to receive the per-unit incentive. If local building code exceeds the requirements of a given certification, then OEDIT will assume that it meets the standard.
Producers of custom or model homes may also opt for the insulation/electrification path. The insulation/electrification path will recognize builders whose models have not been certified or HERS-rated based on the materials and features of the home. Buildings whose floors, walls, and windows meet insulation and heat gain standards will be eligible for a $1,000 per-unit bonus. Those that meet these standards and also will be installed with electrification improvements such as heat pumps, solar panels, and electric stoves will be eligible for an additional $1,000 per-unit.
With the following assumptions, the maximum sustainability bonus would be $2,000 for both the certification path and the insulation/electrification path.
- Density
Given the importance of density for achieving sustainability and affordability goals, an additional $500 will be awarded for each unit that is one of multiple units on a given parcel. Essentially, any installed unit that is not zoned single-family will be eligible for the $500. Parcels that include an residential accessory dwelling unit will also be considered eligible for the density bonus.
Factory Loan Program guidelines
CHFA Program Administration
OEDIT has contracted with the Colorado Housing & Finance Authority (CHFA) to administer the factory loan program. Information about the factory loan program is available on CHFA’s factory loan webpage. This includes a factory loan program guidelines document.