In 2019, Four Points Funding, based in Steamboat Springs, set out to address the housing shortage that had become obvious across the state. Since then, the pandemic, which spurred a significant increase in migration across the U.S., has exacerbated housing availability across Colorado, especially in the rural markets.
“Although workforce housing is the #1 topic today, towns outside of the Front Range have especially been in need of more housing for the last decade,” says Stephanie Copeland, Partner at Four Points Funding. “It’s traditionally hard to attract investment for workforce housing outside of a metro area. We knew we would need a critical mass of capital to address this need.”
The answer to raising the capital: Opportunity Zones. In 2019, Four Points Funding launched their first OZ Fund attracting investors who were both aligned in the belief of the investment case into Colorado and the benefit of the OZ legislation. Opportunity Zones have garnished plenty of negative feedback as a Republican-inspired tax break. In reality, Opportunity Zone legislation is a bi-partisan supported section of tax legislation co-authored by Senator Cory Booker (D-New Jersey) and Senator Tim Scott (R-South Carolina).
“The intention of OZs was to stimulate investment in areas that would not see the investment otherwise,” says Chris Montgomery, Partner at Four Points Funding. “I think that there are funds and states out there that are not following the spirit of the legislation. However, in our case, without this legislation, it would have been a lot harder if not impossible to build workforce housing across Colorado. The economics simply do not work most of the time. Rents typically need to be more expensive to cover the high cost of labor, land, and materials.”
Since 2019, Four Points Funding has secured over $75M in equity, which will invest in over a $200M of developments, with potentially more in the pipeline. Their focus has been middle-income housing while also investing in outdoor hospitality, such as campsites, hot springs and cabins adjacent to outdoor recreation. They have invested in Grand Junction, Glenwood Springs, Buena Vista, Durango, Estes Park, Gunnison, Idaho Springs, Meeker, Florence, Craig, Montrose and Naturita with more communities to come. They are seeking to have conversations with more Opportunity Zone communities across Colorado and adjacent states that are in need of housing.
“Growth is scary for locals,” says Copeland. “We understand because our team all lives in and cherishes the same types of communities in which we are investing. Once you realize how potentially inevitable the growth is, the mindset shifts to how we can ensure these communities benefit from the growth while retaining their workforce and culture.”
Population growth in Colorado has been in the headlines non-stop for the last couple of years. More than $15 billion in property sales in 2020 across the main Colorado mountain counties marks a 61% increase over 2019, the largest increase ever. The Mountain Migration report, a first-of-its-kind survey of thousands of Colorado mountain town residents has delivered the clearest look at the impact of the pandemic on housing, rentals and lifestyles in the high country to date. Rents have spiked 20-40% across the six main Colorado mountain counties in less than one year. The even larger problem than the increase in pricing is the lack of availability. Often, even full-time employed people willing to pay $1200 or more for a room in a two or three bedroom home cannot find housing.
Although the housing shortage seems to be heightened in smaller communities, it is felt across the state. At the end of 2020, there were fewer than 9,000 homes and condos available to Colorado buyers, in a state of 5.8 million people. This marked just over a 3 week supply of single family homes and a 1.1 month supply of condos and townhomes, the lowest on record. For a housing market to be considered balanced between buyers and sellers, there is typically a 4 to 6 month supply of homes.
Potential solutions across Colorado are starting to take shape. Some towns, such as Crested Butte and Frisco, are planning to or already have declared a Local Disaster Emergency, providing the town more power to combat the housing crisis. “Crested Butte’s resolution allows the town to bypass provisions in the municipal code. It can allow for speedy approvals of residential use in the tourism district. It can allow the council to suspend the requirement demanding two parking spaces per residential unit. The declaration also removes limits on camping and RV occupancy on private property inside the town limits. The emergency declaration also allows the town to ‘be more creative’ when securing private partners to develop affordable housing,” Crested Butte administrator Dara MacDonald said.
“Our mission at Four Points Funding is only part of the solution,” says Montgomery. “More private investment focused on workforce housing is surely an essential piece to the capital dilemma, but that alone accomplishes only so much. There is the need for cooperation from town leadership with zoning, desire from residents with ballot initiatives, and ensuring that the quality of life that has existed for decades remains intact.”