“Nest, Not Nest Eggs”

Inside the Workforce Housing Struggle in Colorado’s Mountain Towns

8 min read

Over the last two decades, a workforce housing shift has occurred in the many resort towns and communities across the United States. “Ten-plus years ago, the classified section of the newspaper was full of cheap, free-market rentals, but it was tough to find a job,” says Lauren Koelliker, executive director of Valley Housing Fund, an organization that supports the affordable housing landscape in Colorado’s Gunnison Valley. “Now,” Koelliker says, “it’s the opposite. There are pages and pages of job listings, but there are almost no rentals advertised. Those that are advertised are sometimes priced at double what someone with a local wage can afford.”

Koelliker’s experiences in the Gunnison Valley—an area in the Rocky Mountains known for its remote beauty, historic architecture and, of course, its ski resorts—mirrors a nationwide trend. According to an analysis from Bloomberg CityLab, in 2021 and 2022, proportional population increases in non-metro areas outpaced urban growth for the first time in over 30 years.

Though those non-metro economies have grown, allowing for more steady job and wage increases, prices for land, homes and rents surged in kind, often outpacing and rendering negligible regional pay boosts for workers. “The market has gone so far out of whack from the local workforce that we really need some type of below-market program for folks up to 180 percent, even 200 percent, area median income (AMI),” says Erin Ganser, housing director for the mountain town of Crested Butte, CO.

This contrasts with the urban struggle to house workers, where even in the most rent-challenged cities, middle-income workforce housing commonly targets those falling within 80 to 120 percent AMI. That these resort towns have such a wide income gap for housing-burdened workers means not only that there is a greater housing need, but that a sizable number of prospective renters can’t even qualify for existing subsidized housing—like Low Income Housing Tax Credit-funded units—because their income is too great. “About half of our employees can’t fit into LIHTC units” because their incomes are too high, says Ganser. However, “it’s not as though they can get into market-rate housing either.”

Ganser and other advocates say that the region has struggled with the issue for a decade at least. That history, coupled with the acute severity of workforce housing in Colorado’s resort towns, has pushed innovative solutions across the state, and put Colorado “on the forefront of working to meet the housing needs of the missing middle,” says Lynn Archuleta, commercial loan officer, Colorado Housing and Finance Authority (CHFA).

Below are some of those approaches that have had past success and which industry leaders in the area hope will ensure healthy, affordable workforce housing for years to come.

Colorado’s Middle-Income Access Program
Though many workforce housing needs are specific to resort towns, providing affordable housing for middle-income families is a widespread issue, says Archuleta. “We see it all over our state. This isn’t just a mountain—specifically rural—town issue.”

To help address the gap, CHFA (which administers the state’s LIHTC program) launched the Middle-Income Access Program (MIAP) in 2018. The program, which is aimed at providing financing and feasibility for middle-income multifamily developments, has already seen widespread use throughout the state, says Archuleta, who notes that MIAP-assisted projects can be found in mountain towns and urban areas.

MIAP provides low-cost mezzanine debt for middle-income projects in exchange for at least ten years of rent restrictions, which is one piece of the compliance requirements. A few key technical components provide the structural backbone of the program. First, MIAP meets the Freddie Mac/Fannie Mae Non-LIHTC Forward product requirement for Public/Mission-Driven Investment, unlocking security for future funding sources from those agencies. Second, MIAP has a second deed of trust component so that CHFA serves as a subordinate lender (a loan that’s paid after the senior lien is paid), operating as a junior lien along with others in the capital stack.

Generally, this relationship means that CHFA can provide the developer more flexibility in its project without sacrificing funding security.

However, seemingly the most enticing piece of MIAP—particularly in today’s challenging interest rate environment—is that it allows CHFA to offer a competitive rate. Archuleta says interest rates on recent deals have been around six percent but are subject to change and are deal specific. Not only, of course, does this make CHFA’s portion of the funding less expensive for a developer, but this also can affect the interest rates for senior lenders involved with the project. “We try to be collaborative with senior lenders on how they’re structuring things so that we match,” says Archuleta.

Though it really “depends on the timing of the market and rate lock,” Archuleta says, CHFA always endeavors to communicate early and often with senior lenders, “because we’re all here for that common goal, to get more units on the ground.” Though everything has gotten more difficult—from rate increases to construction costs to continued supply chain disruption—“we’re still trying our best to stay as competitive and as collaborative as we can.”

If these pieces fall into place, MIAP can be a powerful tool in the effort to get workforce housing built, says Archuleta. Where used, “MIAP has been instrumental” in providing year-round workforce housing, “because we’ve been able to fill gaps where there’s not been another funding source.” MIAP has already been used to finance eight deals; Archuleta says another four to six are materializing, with four in underwriting and a few more in the conceptual stage. “We’re definitely busy and seeing a lot more requests for MIAP, because of those gaps that we fill.”

Crested Butte’s Local, Holistic Approach
State agencies can only do so much, and ultimately it is often on local municipalities to encourage the growth of long-term workforce housing. In Crested Butte, Ganser says that it is clear that the town has a focus on carving out space in the housing market for individuals looking to work and live there year-round, as opposed to part-time residents who—while still important to the community—may be looking at their property primarily as an investment. “We are building nests here. We are not building nest eggs,” says Ganser.

To achieve this, Ganser says that the town has recently taken a wide-ranging approach. “We talk a lot about housing plans and housing strategies and all these things, but we are actually backing up even further than that to create a really solid runway.”

This begins, Ganser says, with a recently adopted comprehensive plan that “lays out and identifies the values of the community and gives us a framework to help have hard conversations at the political and policy level.” From there, the town is engaged in several critical studies—transportation, parking, historic preservation and an infill study—to determine what the availability of the land is today, and what can be done to utilize the small amount of buildable land to provide affordable workforce housing and critical commercial and governmental services. Ganser estimates that the town is about 85 percent built out; that, coupled with a set of stringent design guidelines “that are one of the main elements of our community identity,” makes new construction and conversations about density difficult.

Thus, every parcel going forward needs to count, and ultimately these studies will result in a resiliency and housing plan that will guide the town’s development efforts going forward. “Recognizing that we are a community first and a tourist town second, these integrated planning efforts will help us identify what we need for critical governmental services, commercial space, housing and where we should be focusing on developing those,” says Ganser.

Coupled with changes from the town’s approach to housing is the way that housing is built in the region, where nationwide construction challenges are multiplied by the many ways that make building in a mountainous environment difficult. One unique effort for achieving this precious new construction that is already gaining local traction is the use of modular prefabricated housing. Valley Housing Fund’s Koelliker notes that this approach “can cut labor and material costs through economies of scale.” Improvements in technology and quality have made this an increasingly popular option as folks around the county continue to search for cost-saving measures.

Though many resort towns have relatively stringent design guidelines and unique environmental needs, today’s modular home companies seem to offer more opportunities for customization than they have in the past, says Koelliker. Particularly, she points to a company called Fading West, which opened in 2021 and has already provided hundreds of prefabricated modular homes to communities around the region. The company’s locality is central to its regional success, says Koelliker, as “having a local manufacturer who understands the unique design requirements for a mountain climate, including snowshed management and sufficient insulation, is a huge asset.”

Innovation from local companies blended with the town’s reoriented planning policies and existing state programs are exactly what the region needs, says Ganser. “The burden isn’t entirely on the town to try to build ourselves out of this problem. We need to use every tool available to us.”  

Abram Mamet is a freelance writer based in Washington, DC, whose work focuses primarily on the social histories of the community. He currently works as the assistant editor for CapitalBop.