Colorado to Establish Nation’s First Middle-Income Housing Tax Credit

More state and local programs are being designed to address middle-income housing.

As a result of state legislation passed in May 2024, Colorado is creating a pilot program to help spur the development of rental housing for middle-income families. The legislation defines middle-income as annual household incomes between 80 percent to 120 percent of the area median income (AMI), or 80 percent to 140 percent for rural resort counties.

The state’s middle income housing tax credit (MIHTC) is modelled after the federal Low Income Housing Tax Credit program. The five-year pilot program will allow Colorado Housing Finance Authority (CHFA) to award $5 million annually in 2025 and 2026 and $10 million for 2027, 2028, and 2029. Developments supported with MIHTC will have a minimum 15-year affordability period and the tax credits can be recaptured if the number of middle-income units is reduced.

There has been increasing attention paid to state and local programs designed to address middle-income housing. Recently, the Harvard University Joint Center for Housing Studies (JCHS) released a white paper titled “Subsidizing the Middle: Policies, Tradeoffs, and Costs of Addressing Middle-Income Affordability Challenges.” The paper looked at 11 state and local programs aimed at addressing housing needs for middle-income households amid the ongoing affordability crisis. The paper highlighted concerns that middle-income programs may overshadow the needs of the most cost-burdened renters.

In the paper, researchers found that these middle-income housing programs are primarily focused on “expanding the supply of housing affordable to middle-income households through new development, though many projects also fund rehabilitation, adaptive reuse, or acquisition and conversion.” Researchers note that many of these programs are relatively new, so it’s difficult to determine their full impact. The state programs the researchers examined include:

• Florida: Missing Middle Property Tax Exemption
• Georgia: Rural Workforce Housing Initiative
• Michigan: Missing Middle Housing Program
• Colorado: Middle-Income Housing Authority
• Rhode Island: Middle Income Loan Program
• California: CSCDA Workforce Housing Program
• Minnesota: Workforce Housing Development Program
• Massachusetts: Workforce Housing Initiative
• Kansas: Moderate Income Housing Program

And the local programs covered include the following:

• Philadelphia: Workforce Housing Credit Enhancement
• Breckenridge, CO: Workforce