Colorado Low-Income Housing Tax Credit (LIHTC) Program

The LIHTC Program addresses the affordable housing crisis in Colorado. In fact, LIHTC is a tax credit program that encourages developers and investors to build and preserve affordable rental housing for low-income families. CHFA administers the LIHTC program in Colorado, and in conjunction with LIHTC, federal tax credits make housing projects more financially feasible for developers and renters.  

 

Constituent	Details
State	Colorado
Program	Colorado State Affordable Housing Tax Credit
Administering Agency	Colorado Housing and Finance Authority
Amending Legislation	H.B. 1465; SB 18-007; H.B. 1051
Related Statutes and Documents	2019 Colorado Revised Statues Section 39-22-2102  2019 Colorado Department of Revenue Private Letter Ruling PLR 19-004   2018 Colorado Revised Statutes Section 39-22-2102  2018 Colorado Revised Statutes Section 36-22-2101   2014 Colorado Revised Statutes Section 39-22-2101  2013 Colorado Revised Statutes Section 39-22-2101
Annual State Cap	$10 million
Credit Description	Credits can also be allocated to counties impacted by federally declared disasters, and they do not count against the annual state cap if used to leverage disaster relief funds. Program sunsets on December 31, 2031.
Bifurcated from Federal LIHTC?	Yes (The state LIHTC is separate from the federal program)
Credit Period (Compliance)	Six years (Compliance required for 15 years)
Recapture	Same as federal (Recapture provisions apply if compliance conditions are violated)

 

 

History of the Colorado LIHTC Program  

LIHTC is the acronym for the Low-Income Housing Tax Credit. It was part of the Tax Reform Act that passed into federal legislation in 1986. Affordable housing tax credit was revived in Colorado when back in 2014, House Bill 14-1017 was passed and re-established the program. The program, therefore, made affordable housing possible through tax credits from investments from the private sector. The developers as well as investors will be allowed to obtain credit for their state income or insurance premium tax liabilities on their capital investments in those affordable housing projects. 

 

LIHTC in Colorado is an additional utilization of the federal 4% and 9% tax credits, which also aid in financing affordable housing. An annual allocation of the Connecticut Housing Finance Authority (CHFA) selects those projects through the competitive process of serving the state’s housing priorities. 

 

How the Colorado LIHTC Program Works 

Under the Colorado LIHTC program, developers get a tax credit based on the number of affordable units built or rehabbed. These tax credits are sold to investors, thus providing equity to reduce the debt burden on the development. This allows developers to provide lower rents while keeping the project financially feasible. 

 

CHFA competitively dispenses tax credits each year. QAP considerations include projects that most benefit low-income populations and are closest to public transportation, among other criteria. Credits are capped at $1 million per project per year for six years; the statute caps total annual credits issued at $10 million. 

 

Economic and Social Impact of LIHTC Program in Colorado  

The new shift toward increasing the economic impact of the LIHTC Program emerged when LIHTC in Colorado was reauthorized in 2014. From 2015 to 2020, the program supported 70 projects that created more than 6,800 affordable housing units across the state. Tax credits frequently provide between 50% and 58% of the total project cost when combined with federal incentives, making them a critical component of financial feasibility for affordable housing developments. 

 

Beyond providing shelter, the program has triggered economic growth. In 2020 alone, LIHTC-supported projects generated about $483.3 million in the local economy, creating jobs in construction and other affiliate industries. The program also saves low-income families money on housing. On average, the LIHTC-supported unit rents $636 less per month than market-rate units, which is a good saving for qualifying families. 

 

Future of the LIHTC Colorado Program 

The analysis of the LIHTC challenges shows various issues affecting the LIHTC program to date. These factors that will broadly present problems in the future include the depletion of the tax credit pool, decreasing taxpayer morale, decreasing motivation among investors, increasing pressure on Congress, and a need for novel sources of funding. 

 

Despite its success, the LIHTC program has still faced many challenges. The largest is credit supply relative to the demand for affordable housing. As housing costs continue to rise in Colorado, a continuous urgent demand for affordably priced units arises. To respond to this issue further, the Colorado legislature passed House Bill 22-1051, extending the LIHTC program through 2034. 

 

In 2024, it initiated a new program Middle-Income Housing Tax Credit (MIHTC) targeting residents earning between 60% and 120% Area Median Income (AMI). This program targets middle-income earners, though they can’t afford LIHTC housing due to not being qualified. It all plans to curb Colorado’s housing crisis from all income level angles.  

 

The Application Process for the Colorado LIHTC Program 

Low-income housing tax credits in Colorado have the most strict and competitive application. Developers must be able to confirm the feasibility of the project, the community’s requirements, and its relation to state priorities.  

 

For this, developers are required to submit extensive documentation including financial statements, reports on public hearings, environmental reports, and cost estimates. Other required proof is that credit is necessary to establish the creditworthiness of the project.

 

Projects that receive credits must adhere to tight guidelines for affordability level. For example, the apartments will reserve 20 percent of the units exclusively for low-income families earning 50 percent or less of the area median income. Second, 40 percent of units must be reserved for people with incomes equal to or below 60 percent of AMI. These affordability requirements guarantee the program serves the intended low-income population directly. In addition to this, developers who receive credits are also supposed to ensure that they keep the rents affordable for at least 30 years, and most projects have committed to spending even more time from affordability. 

 

Conclusion 

The LIHTC program in Colorado is central to the state’s strategy to improve and enhance its affordable housing stock. By partnering state and federal tax credits with other revenue streams, the LIHTC has allowed thousands of affordable units to be added to Colorado’s communities while lowering the burden of rent on low-income families. Moreover, it generates jobs and leaves prints on the local economies through construction and development projects. 

 

Although the program suffers from constraints caused by a deficiency of available credit and increasing demand for affordable units, its legislative efforts continue to seek further extension and expansion. Increased implementation of new programs, such as MIHTC, will help middle-income groups in a progressively squeezed-out housing market. 

 

Given the growing population in Colorado, the LIHTC and MIHTC would be major factors in ensuring that this population is housed safely and affordably regardless of level of income.