A joint report by Colorado Futures Center at Colorado State University and the Piton Foundation, released in December 2014, researched housing affordability’s impact on local government finance in Adams County, and found that the county faced $170 million in crowded-out spending due to a lack of affordable housing options.
Households that are cost-burdened have a dampening economic impact on sales tax revenues, and in the case of Adams County it led to $6 million in lost revenue impact to the municipality.
- Read the full report: Housing Affordability’s Impact on Local Government Finance: A Case Study
“Too often affordable housing is considered only for its social benefits,” said co-author Dr. Phyllis Resnick, lead economist for the Colorado Futures Center at CSU. “However, as this study shows, there are fiscal benefits as well. This study, by identifying the fiscal benefits, will add to a more complete conversation about the true impacts of building affordable housing in Colorado.”
This study explores one of the societal impacts of the decline in housing affordability; the fiscal impact to local governments that are home to the increasing numbers of housing-challenged households. While it was beyond the scope of this study to explore every county in Colorado, it was decided to conduct a pilot of one county, Adams County. While the results of this study can only be considered illustrative, it can be inferred that other counties in the state face similar pressures.
The major trends discovered in Adams County are:
- There is a structural imbalance in county fund reserves to provide the required match for basic human services. This is a situation that cannot be sustained forever. * Historically, counties have served as the vehicle for pass-through funding and administering human services. Recent demand has prompted spending on human services at the county and municipal levels.
- Municipalities have been exposed to increasing pressure to enter the human services funding game by outsourcing those services to community-based organizations via philanthropic grant making with general funds.
- Related, some municipalities have decided to forego revenues in the form of development incentives in an attempt to mitigate the affordability issue on the front end by encouraging developments for lower-income households.
- There is approximately $170 million in crowded out spending, translating to $6 million in lost revenue impact to municipalities. Households that are cost-burdened have a dampening economic effect on sales tax revenues, the major source of general funds revenues for municipalities. These findings ultimately require further investigation to better understand the dynamic across different counties in the state. In the end, this study intends to deepen.