The Problem
For many in Colorado, the dream of owning a home is just that – a dream. The harsh reality is that homes here – in the urban, suburban, and rural areas of Colorado – are not being built quickly enough to turn the tide on costs or availability. Essentially in many rural areas, there is no housing available, whether affordable or not.
Our Governor and legislature have taken notice and there are a variety of legislative efforts to address this shortage in 2024. And, although more money has been approved by voters (Proposition 123 in 2023) for building more housing and some of that money has been directed to new housing projects, the reality is that very few homes are being built, especially in rural Colorado. Why is that?
Oddly enough, this isn’t a case where more money is needed. The money is there, but the processes are not. In rural Colorado, we primarily fund and subsidize housing projects through the Department of Local Affairs (DOLA) and the Office of Economic Development and International Trade (OEDIT). Those agencies have many grant and loan programs to incent local communities and local governments to build workforce and affordable housing, yet there are two significant barriers in the way of accomplishing that:
- Building “stick-built” homes (the traditional method of building a home) in rural areas is difficult – it’s hard to “lure” a developer for a small number of homes and difficult to get a construction company and subcontractors to actually build it when they can make much more money in urban and suburban areas.;
- Housing approved on a project-by-project basis means that homes built by manufacturers (see Fading West, Oakwood Homes ON2 Homes, Simple Homes) that are high quality, energy-efficient, and fast to build, don’t reach a scale that allows the factory to cut costs, build efficiently, and ultimately stay in business.;
The Analysis
In 2023 our Foundation joined with Rural Homes, LLC (a nonprofit developer) to build neighborhoods in three rural Colorado towns in southwest Colorado: Norwood, Ridgway, and Ouray. Completed homes in Norwood (24) and Ridgway (16) and planning for the 2024 construction of homes in Ouray (21) have led to significant learnings on how to scale this work statewide.
In late 2023 the social impact engineering team at Prosono was hired to do just that: lay out a statewide rural expansion strategy, based on these three pilots, for rural Colorado. Their work has been impressive and is captured here in a website of data, analysis, and recommendations.
The Reality
Their key finding was that Colorado’s goal for new housing units is already at risk. It’s at risk because of the way projects come into the state agencies, the way they are funded, and the resulting lack of orders and capacity at our manufacturing sites. How can a manufacturer of quality homes stay in business with a full workforce when their orders come in lumpy? Six houses here, twenty houses there. What orders will come in next week? Next month?
A manufacturing facility needs to run 24/7 with one or two shifts, to build efficient and thus, lower-cost housing units. Without large orders that can be relied on, most housing manufacturers can’t stay in business and they certainly can’t reduce the cost of the houses.
Here’s a peek at what projects have been approved and their expected completion dates:
As you can see from the bar chart, many projects have been approved or funded, but actual homes are still a long ways off from being built. Long lag times with state agencies, complicated local permitting and approval processes, exploding construction and material costs, a lack of contractors and subcontractors in rural Colorado, and factories that received “lumpy” orders.
The Solutions
The Solutions Outlined by Prosono include:
- The creation of a nonprofit developer who can lead planning across the State in rural areas.
- Off-site manufacturing that has guaranteed orders each year en masse.
- Creation of a dedicated Rural Area Fund using existing State dollars.
- Ensuring sustained affordability for low-income households by building energy-efficient and high-quality homes.
Check out this website, built by Prosono, for detailed information, not only about the problems and barriers but also about solutions. A quick two-pay summary is here.
Stay tuned for more on housing and our progress!
