KEY STATUTORY REQUIREMENTS

Middle-Income Housing Authority Act

Section 29-4-1101, C.R.S., et seq.

Project Requirements Related to Financing

• Affordable Rental Housing Project

means property that has the primary purpose of providing rental housing for middle-income individuals and families, which property is selected by the Authority in accordance with the provisions set forth in section 29-4-1107 and is owned by the Authority or is owned and operated pursuant to a public-private partnership. Section 29-4-1103(1.5).

• An Affordable Rental Housing Project may include commercial space if the Board determines that it is incidental to the housing component of the project.
• Affordable Rental Housing Projects selected by the Authority for the initial pilot program must have geographic, income, and project-size-diversity and be from a variety of developer entities. Section 29-4-1107(1)(a).

• Middle-income individuals and families

means, for purposes of the Act:

• In general: individuals and families with annual income of the household between 80% and 120% of the area median income (“AMI”) of the households of that size in the county in which the Affordable Rental Housing Project is located.
• Rural resort counties: the annual income of the household shall be between 80% and 140% AMI.
• Special Circumstances:

• An applicant may, at any time, request that the Board grant the proposal an exception to the upper limits of the AMI levels for middle-income individuals and families based upon demonstrated unique economic and housing cost attributes in the local community in which the housing project is proposed to be located. Section 29-4-1107(2)(c).
• If required by a local community in which a proposed housing project will be located, an applicant may request that the Board grant them the ability to provide a limited number of units in the housing project below 80% of AMI, only as is required by local ordinance, zoning incentives, or similar rules and regulations.
• A proposed housing project that receives a waiver by the Board must still have a primary purpose of providing rental housing for middle-incoming individuals and families. Section 29-4-1107(2)(d).

• Transition Period: For any acquisition of a multifamily housing project with tenants at the time of acquisition with annual incomes higher or lower than the area median incomes for middle-income individuals and families set forth in Section 29-4-1103(7) of the Act, the sponsor shall submit a plan to the Authority to bring the project into compliance with the area median income requirements such that the project will have the primary purpose of providing rental housing for middle-income individuals and families. The details and duration of any transition period will be set forth in the applicable project’s regulatory agreement and declaration of restrictive covenants or other land use restriction, the form of which shall be approved by the Board in connection with the applicable project financing.  During any such transition period, the failure to satisfy the set-aside requirements for area median incomes for middle-income individuals and families will not cause the project to not be an affordable rental housing project under the Act.  Any such transition period will constitute an exception to the upper and/or lower limits of the area median income limits as permitted by Sections 29-4-1107(2)(c)-(d) of the Act.  See Resolution 2024-07.

• Rents and Terms:

Income-restricted rental units must be affordable middle-income workforce housing, and rents for units must remain as stable as is financially feasible. Section 29-4-1107(4)(10)(a).

• To determine rent, the Board shall consider information from market studies prepared in connection with the project and other available information as the Board deems appropriate, with a goal of not exceeding 30% of the individual’s or family’s income.
• Rent set by the Authority must be at least 10% below market rental rates and shall not exceed maximum rents for households of a given size and income level.
• Rental units shall not be rented on a short-term basis. Section 29-4-1107(4)(10)(b).

Eligibility

• A successful application may come from any organization working to achieve the purposes described above, including but not limited to: Section 29-4-1107(1)(b).

• Local governments
• Housing authorities
• Nonprofit developers
• For-profit developers

Proposal Requirements

• A proposal must:

• Include a comprehensive plan of finance to finance the Affordable Rental Housing Project from the proceeds of bonds issued by the Authority and sold by approved underwriters identified in the proposal and other sources, with all bonds issued by the Authority being payable solely from revenue generated by and secured solely by the Affordable Rental Housing Project using initial restricted rents and with no upward trending of rents, except as otherwise allowed under the Act, with no financial obligation or other liability of the state;
• Show how the development aligns with the identified needs of a community where the proposed Affordable Rental Housing Project will be located, as defined in the community’s housing needs assessment, where available;
• Include an estimate of the rent savings to income-restricted tenants, an estimate of the tax savings resulting from the Affordable Rental Housing Project’s exemption from state and local taxes, a comparison of the estimated rent savings and estimated tax savings, and a description of how the tax savings will be used to produce rent savings or other benefits to income-restricted tenants;
• Limit private sector development fees to an amount less than the private sector development fees that are customary for LIHTC projects (see also Section 29-4-1107(1)(b)); and
• Include an explicit disclaimer that the state has no liability for any obligations of the Authority, that the bonds, contractual, and other obligations and liabilities of the Authority are special limited obligations of the Authority and are not bonds, obligations, or liabilities of the state, and that the state shall have no obligation or liability with respect to any of the bonds, contractual, or other obligations or liabilities of the Authority. See Section 29-4-1107(2)(a)(I-VI).

• A proposal may provide that a portion of the bonds issued by the Authority to finance the Affordable Rental Housing Project be sold to investors identified in the proposal.
• For any acquisition of a multifamily housing project with tenants at the time of acquisition with annual incomes higher or lower than the area median incomes for middle-income individuals and families set forth in Section 29-4-1103(7) of the Act, the sponsor shall submit a plan to the Authority to bring the project into compliance with the area median income requirements such that the project will have the primary purpose of providing rental housing for middle-income individuals and families. See Resolution 2024-07.

Local Government Notice and Veto Rights

• The Authority must provide and deliver written notice of a proposed affordable rental housing project to the county and municipality where the project is proposed to be located within 14 days receiving a formal project proposal.
• The county or municipality may object to a project within 90 days after receipt of the notice. The Authority’s Board shall not formally select a proposed affordable rental housing project if the county or municipality in which the project is to be located objects.
• During the 90-day notice period:

• Each county and municipality in which a proposed affordable rental housing project will be located must solicit feedback from other local governmental jurisdictions in the area in which the project will be located to determine the impact of the proposed affordable rental housing project on the other local governmental jurisdictions.
• The Authority shall use best efforts to work in cooperation with overlapping local governmental entities for any proposed affordable rental housing project. If after negotiations, a county or a municipality, or both, within which boundaries a proposed affordable rental housing project will be located and that has opted into the pilot program provides written notice to the Authority that the proposed affordable rental housing project is not feasible as proposed, with the reasons why the project is not feasible:

• The Authority shall not select the proposed affordable rental housing project, or
• The Authority shall request that the proposal be resubmitted for reconsideration by the Authority and the applicable county or municipality, or both, and shall take into account feedback received from the local governmental entities. Nothing in the Act precludes a local government from objecting to a project proposal that is resubmitted to the Authority.
• If the proposal is approved by the county or municipality, or both as applicable, or if no feedback is received by the Authority from the county or municipality, or both as applicable, then the Authority may select the affordable rental housing project.

• If a county or municipality has not approved or objected to the project within 75 days of the date the Authority delivers its first notice regarding the proposed project, the Authority must deliver a second notice reminding the county or municipality that any objections to the proposed project are due within 90 days after receipt of the first notice.
• A county or municipality may approve a proposed affordable rental housing project at any time, which approval ends the 90-day objection period. The Authority may offer incentives to obtain such approval.

• The Authority may agree to make payments in lieu of property or sales and use taxes to the state, a county, a city and county, a city, any political subdivision of the state, or local government entity.
• See Sections 29-4-1107(4)(b)(I-V) and 12(a), and Resolution 2024-08.

Selection Criteria

• The Authority shall give preference to proposed Affordable Rental Housing Projects that promote one or more of the following goals and objectives:

1. Increase the supply of affordable workforce housing in urban, rural, and rural resort communities across the state that responds to each community's demonstrated need for middle-income projects in which at least 60% of units within a particular development are available to rent or are actively rented to middle-income individuals and families.
2. Create opportunities to build intergenerational wealth for families.
3. Meaningfully contribute to the alleviation of housing pressures the local workforce faces.
4. Provide for the long-term affordability of rental units.
5. Have minimal negative impact on existing or planned affordable housing projects in the state, which impacts shall be evaluated by the Authority in consultation with other housing authorities, nonprofits, local governments, or any other applicable entity.
6. Target a diverse range of income levels within the income restricted housing component for middle-income individuals and families and proposes at least 30% of the rental units for individuals and families with annual income of the household at 80% of the AMI of households of that size in the county in which the housing is located or demonstrably targets the lowest possible AMI for middle-income individuals and families given the proposed scope of the development.
7. Promote mixed-income development where a percentage of units, proportional to the local demonstrated housing needs within a particular development, have restricted availability to households at the income levels for middle-income individuals and families. The percentage of restricted units and affordability levels must comply with any local laws promoting the development of new affordable housing units. See Section 29-4-1107(1)(c)(I-VII).

• To incentivize quality Affordable Rental Housing Projects that will operate consistently and efficiently, in evaluating proposals the Authority shall favor proposals that include an agreement from the developer and the operator identified in the proposal to continue as developer and operator of the Affordable Rental Housing Project for a period of at least 10 years, subject to the Authority’s right to remove them. Section 29-4-1107(3).
• The Authority reserves the right to establish additional criteria from time to time.
• Limitations:

• The Authority’s overall portfolio of Affordable Rental Housing Projects must maintain that 80% are new build construction projects.  See Section 29-4-1107(1)(b) and Resolution 2024-07.
• The Authority shall not use any funding available to it to acquire existing properties supported with the federal LIHTC, Colorado state affordable housing tax credits, or United States Department of Agriculture 515 rural rental housing loan program subsidized properties. Section 29-4-1107(13).

Contract with the Authority

• When an Affordable Rental Housing Project is selected, the Authority shall enter into a contract with the person or group that submits the proposal based on the terms set forth in the proposal and any additional terms deemed appropriate by the Authority.
• The Authority may establish additional restrictions on developer fees, including caps on operating fees and other markups, which shall be set forth in the contract. Section 29-4-1107(5).

Ownership

• All interests of the person or group whose proposal for an Affordable Rental Housing Project is selected will be transferred to the Authority or transferred as otherwise provided in a public-private partnership;

• Subject to approval by the Authority, a housing authority whose proposal is selected may retain a portion of interest in the Affordable Rental Housing Project.

• The person or group of a selected Affordable Rental Housing Project shall not retain or otherwise be entitled to any interest in the Affordable Rental Housing Project or any right to payments from the revenues from the Affordable Rental Housing Project transferred to the Authority or otherwise transferred in accordance with a public-private partnership, except for the person’s or group’s right to compensation and to reimbursement for expenses, which shall be clearly detailed in the contract between the Authority and the person or group.

• A public-private partnership may also provide for a person’s or group’s right to compensation and to reimbursement for expenses in connection with an affordable rental housing project.

• The ownership requirements of the Act permit public-private partnerships pursuant to which the sponsor, a third party or a partnership between the sponsor and/or a third party and the Authority has/have a ground lease leasehold interest or other ownership interest in the Affordable Rental Housing Project as part of the interests to be allocated among the parties pursuant to public-private partnerships. Notwithstanding the foregoing, the Authority reserves the right to evaluate ownership structures on a project-by-project basis and to approve or deny such ownership structures based on the best interest of the Authority.  See Section 29-4-1107(6) and Resolution 2024-06.

Reporting Requirements

• On a quarterly basis, the Authority is required to submit a report to the State.  
• Any Developer or operator of an Affordable Rental Housing Project must provide the Authority the following: (1) the number of units developed and for income-restricted units, at what AMI levels; (2) the number of units occupied; (3) the average AMI being served; (4) the actual rents charged for each unit; (5) actual incomes of households residing within the units and length of occupancy; (6) the average market rent for a unit of the same type, size and amenities prior to the development of the Affordable Rental Housing Project; (7) the average market rent for a unit of the same type, size and amenities after one year of occupancy of at least 50% of the units developed in the Affordable Rental Housing Project, and each year thereafter; (8) the amount of middle-income rental savings accrued to the local community from the development; (9) the amount of tax exemptions accrued; and (10) the rents charges and occupancy rates of non-income restricted units of housing. See Section 29-4-1104(4)(14)(b).

Disposition

• If the Authority desires to voluntarily sell an Affordable Rental Housing Project, it shall notify in writing relevant public entities, including state agencies, local governments, and public housing authorities in the area in which the project is located. Notice must include a description of the property to be sold.
• Notified public entities have 90 days after the date of notice to submit a proposed purchase and sale agreement, and obtain binding commitment for any necessary financing or guarantees.
• After the 90-day period has elapsed, the Authority may broadly advertise the sale, and favor buyers that agree to maintain the project as affordable housing, provided that the financial terms of the purchase are sufficient to satisfy all of the Authority’s obligations with respect to the project. See Section 29-4-1104(12)(c).