Proposed budget cuts in Colorado are raising concerns among developers and housing advocates, who warn that reducing funding for affordable housing could significantly slow construction in the state’s high-cost mountain communities.
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Lawmakers are considering redirecting $130 million from Proposition 123, a voter-approved affordable housing fund, to help close a roughly $1.5 billion state budget shortfall. The move has drawn criticism from developers who say the funding has been instrumental in launching new housing projects across the state.
“Proposition 123 was such an exciting new tool for all of us in the affordable housing field throughout the state of Colorado,” said Kimball Crangle, Colorado market president for Gorman & Co. “To have that now be jeopardized is gut-wrenching.”
Approved by voters in 2022, Proposition 123 generates about $300 million annually to support affordable housing development. The funding has helped offset longstanding challenges in mountain towns, where high land costs, limited labor and short construction seasons make building particularly difficult.
Housing advocates say the proposed cuts could have immediate and long-term impacts on project pipelines, particularly in resort areas where affordability gaps are most severe.
“As soon as sources start to look more vulnerable and have a lack of predictability, it makes developers question whether to even begin the entitlement process for development or not,” Crangle said. “That could create a gap and a larger chasm in the number of affordable housing units that are built over the near term.”
Gorman & Co. has already paused projects that were expected to rely on Proposition 123 funding, citing uncertainty around future availability.
“We have put on hold projects that would have utilized Proposition 123 because we are not certain if that funding will be available or not,” Crangle said.
The funding has supported multiple developments across Colorado’s Western Slope, including rental and workforce housing projects in communities such as Keystone, Glenwood Springs and Frisco. One example is the Wintergreen Ridge development in Keystone, a 47-unit affordable housing complex that received $1.3 million in state loans.
Advocates warn that scaling back funding will directly reduce the number of units built.
“Less funding from Proposition 123 will translate into fewer units,” said Elyse Howard, vice president of community affairs and philanthropy for Habitat for Humanity Vail Valley. “I think there’s such a track record of success across the state that the funding was working. It’s unfortunate.”
State lawmakers say the cuts are part of a broader effort to balance the budget, which must remain deficit-free under Colorado law. The shortfall stems from rising program costs, increased spending and revenue limitations tied to the Taxpayer’s Bill of Rights.
Rep. Kyle Brown, a member of the Joint Budget Committee, acknowledged the difficulty of redirecting housing funds but said the move aligns with provisions built into Proposition 123.
“I, too, am committed to making sure that we adhere to the voter intent of this particular proposition and that we are supporting affordable housing,” Brown said. “The unfortunate thing about Prop. 123 is that it included no new revenue to the state, and because of that, it built in a specific mechanism for us to make transfers of this nature when the situation of the budget is as dire as it is today.”
While some portions of the program — including funding for down payment assistance and homelessness initiatives — are expected to remain intact, developers are particularly concerned about cuts to land banking grants. These grants help secure land for future housing projects, a critical need in mountain regions where developable land is scarce and expensive.
“I do think the loss of that resource will have a big impact on our mountain communities,” Howard said.
Local government leaders and housing advocates also warn that redirecting voter-approved funds could set a precedent for future reallocations.
“I understand the fiscal situation, but, as voter-approved funds, this is very, very upsetting,” said Kevin Bommer, executive director of the Colorado Municipal League. “Leave Prop. 123 alone, and if the state can’t keep its hands off it, now and forever, once this door is open, once the seal is broken, it’s gonna keep happening.”
As lawmakers finalize the budget, developers and communities across Colorado will be watching closely, concerned that reduced funding could further widen the state’s housing affordability gap.
Originally reported by Robert Tann/Vail Daily in vail Daily.
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