Poorhouses, also known as poor farms, for paupers were created in Victorian England as the first publicly financed housing. The system came to the United States in the early 19th century as workhouses. Since then, housing for lower-income people in the English-speaking world has been called, among other things, low-rent housing, public housing, subsidized housing, council estates, social housing, council flats, association housing, dominion housing, and affordable, attainable, workforce and available housing. To quote Shakespeare:
“What’s in a name?
that which we call a rose
By any other word would smell as sweet.”
In the broadest sense of the term, all housing is affordable to someone; in present usage, housing rented or sold to people of lower incomes is that for which, among other things, the need/demand far exceeds the supply and presents an economic, societal and political challenge.
In this issue, the Colorado Real Estate Journal introduces a section of its Multifamily Properties Quarterly that will appear regularly to bring a focus on the various aspects of that challenge. Articles will examine the organizations and individuals who work to meet that challenge, innovative projects and financing structures designed to meet the need, and laws and programs created at the local, state and federal levels to continue the work begun in Victorian times.
The shape of the problem depends on the person describing it: What you hear is not unlike the fable of the nine blind men describing an elephant. The independent and influencing variables are many and complex, and there is no simple one size fits all solution – each problem is unique and requires intelligence, creativity and flexibility to solve. For example, are you dealing with:
- Homeownership or rental?
- Family, elderly, homeless or special needs populations?
- Service enriched or independent?
- Rural, urban, suburban or resort?
- New construction or acquisition and rehabilitation?
- Low rise, midrise or high rise?
- Stick built, modular or concrete and steel?
- Prevailing wages or not?
- Taxable or tax-exempt financing?
- Site costs, water and sewer tap fees, impact fees and building codes?
- School, fire and special improvement district fees?
- Legal costs? Local, state and federal tax codes?
- Interest rates, Treasury rates and investment yield expectations?
- Grant funds from local, state, federal and private sources like foundations and corporations?
- For-profit, nonprofit or government entity?
- Local and state sales taxes?
- Area median incomes and market rents?
The list of the variables and their impact on each other is extensive and the analysis of them is what keeps consultants, attorneys and accountants employed.
Development of affordable housing is not for the faint of heart, nor is it easy. If it were, everyone would be doing it. To fully meet the need, there would have to be greater resources committed from public sources to entice more players into the game. It is not a game that makes economic sense for people to play on a one-off basis. To gain the knowledge and expertise to participate requires the dedication of significant personal and economic capital and acknowledgement that return of and on that capital necessitates a long-term commitment to pursuit of opportunities by those who would play. In addition, patience, flexibility, a high tolerance for risk and the ability to turn on a dime are important attributes. Deep pockets and the willingness to see them go empty also helps.
The limitations from federal and state legislation and appropriations, however, impose constraints on how much affordable housing can be produced. Those limits combine to create an environment in which those who have made the commitment and invested the time and energy and funds to play the game are forced to compete for the scarce pool of funding that is available.
Fortunately for the state of Colorado, the playing field for that competition is relatively level and the competition has forced the players to become more creative and innovative, resulting in better finished products. Colorado is blessed with a superior state housing finance agency in the Colorado Housing and Finance Authority, a quasi-governmental entity created by an act of the General Assembly that raises funds within the bounds of its enabling statute, the financial markets and its own finances. The corporate culture of CHFA, thanks in large part to the leadership of Cris White and Jaime Gomez and their board of directors, is open and transparent and the organization has maintained insulation from political forces and influences to the extent possible.
Colorado also is blessed by the presence of a lot of good, thoughtful people who function openly in the competitive world of affordable housing where the transparency of CHFA and their processes has led to friendly competition, in most cases, and the creation of working partnerships in many others. There are some tricks of the trade that each player employs but there are not many trade secrets.
There are no simple and quick answers or solutions. Over the coming months, we will highlight the ones that have been produced in Colorado. We welcome your thoughts, comments and ideas.