Vol. 30, No. 3
Legal Services News
Stretching the Limits in the Colorado Housing Crisis
by Augustine Hernandez
Colorado is experiencing a vibrant and booming economy. As one of the most desirable places in the country to live, this state has become the destination of more and more people who are migrating nationally and internationally. The Denver metropolitan area is expanding in all directions, with a record number of new homes being built and burgeoning commercial development. At the same time, the City of Denver is redeveloping areas that were, at one time, considered to be "ghettos." Also, new stadiums, convention centers, and exhibition halls have been built recently. Because business is booming, Colorado’s unemployment rate is at an all-time low. Real property values are rising to extraordinary levels, rents are increasing, and the vacancy rate in the Denver metropolitan area is low. Colorado has never seen better days.
However, Colorado’s booming economy does not have the same effect on all segments of the population. For the low- and moderate-income people of Colorado, the economy has merely widened the gap between the poor and upper classes. This group of low- to moderate-income people often includes single parents with children, mentally and physically disabled persons, and seniors, as well as the working poor. Additionally, because of the drastic increase in rents, the number of homeless people in the Denver metropolitan area has increased. According to a study conducted in June 1998, as many as 5,792 persons are homeless in the Denver metropolitan area on any given day.1 Fifty percent of these are persons in families with children.
"Section 8" Housing
Because of the increasing value of real estate, most, if not all, low-income and many moderate-income people cannot afford to buy a home. Therefore, the need for affordable housing is greater than ever. Nevertheless, at the same time, thousands of existing low-income housing units are being lost nationally and locally each year because of expiring contracts between the owners and the U.S. Department of Housing and Urban Development ("HUD"). These so-called "Section 8" project-based contracts run for a fixed period of time, usually between five and twenty years.2 On expiration of the HUD project-based contract and absent other use restrictions, owners have the choice of renewing their participation in the program or "opting out."
Congress and HUD have established rules and policies governing the amount of the government’s contract renewal offer. Some owners will renew their contracts at current rents, some will renew at lower or higher market rents, some will have to restructure their debt and subsidies, some choose to "opt out," and others will face disqualification for prior program violations. Unfortunately, HUD has little in the way of incentives it can offer an owner to keep an apartment complex in the program. With higher rents and the low vacancy rate in the Denver metropolitan area, many owners simply can make more money by renting in the private market or by selling to a private developer who may convert the apartment complexes to high-priced condominiums or lofts.
Even if the owner decides to renew the contract with HUD and continue to provide low-income housing, the owner must maintain a waiting list for applicants. It may take years for an applicant’s name to reach the top of the waiting list. Nonetheless, whenever an owner indicates a plan to prepay their HUD mortgage, terminate the HUD project-based contract, and sell the property, HUD can inform local governments and other local housing sponsors that the project may be available for purchase. In this way, it could attract a prospective owner to buy the apartment complex with state or local resources and keep it available for rental to low-income tenants.
Unfortunately, as of December 31, 1998, thirteen properties in Colorado have "opted out" of contract renewals. This constitutes a loss of 1,441 low-income housing units.3 Throughout Colorado, 9,727 units of subsidized housing have contracts that expired at the end of 1999.4 Since then, a number of other apartment complex owners in the Denver metropolitan area have opted out, thus further reducing the number of available low-income housing apartments. At the same time, very few low-income housing units have been built in Denver over the past few years.
Where project-based assistance is not renewed and the owner chooses to opt out, most tenants will receive Section 8 vouchers administered by a local public housing authority. Tenants who live in the apartment complex that is opting out have the right to continue living in their apartment, provided the owner continues to make the apartments available for rent and HUD makes a determination that the rent is reasonable given the local market. However, once the tenant either moves out voluntarily or has the tenancy terminated for a breach of the lease, the owner will have no further legal obligations to continue to rent the apartment to a low-income family. The end result will be that, eventually, the apartment complex will be removed from the ever-decreasing low-income housing stock.
If the tenant chooses not to continue living in his or her apartment, or the apartment complex is being demolished or substantially rehabilitated, the tenant will be displaced. If this happens, the tenant will have to apply for a Section 8 voucher. A Section 8 voucher will allow the tenant to enter into a lease with a private landlord. Pursuant to this program, tenants will pay approximately 30 percent of their income for the rent. HUD will pay the balance of the contract rent in the form of a monthly rent subsidy.
Threat of Homelessness
Section 8 voucher recipients usually have 120 days to locate new housing. If they do not locate new housing within that time, they could lose their Section 8 voucher and become homeless. Because of Denver’s high rents and low vacancy rate, this happens often. Section 8 vouchers have a fixed value and, due to the increasing market rents, many of the units available rent for more than the value of the Section 8 voucher. When this occurs, tenants have to pay 30 percent of their income for rent up to the value of the voucher and then pay 100 percent of the rent that exceeds the value of the tenants’ Section 8 voucher. This problem results in tenants paying more than 30 percent of their income for their portion of the monthly rent. HUD regulations allow tenants to pay no more than 40 percent of their income for housing costs.
This displacement often results in additional hardship to families. Even if they are able to locate additional housing under the Section 8 voucher program, they must pay for the cost of moving, transferring utilities, and paying a security deposit. This often is equal to or more than the cost of the fair market monthly rent, even though the majority of Section 8 tenants receive small and fixed incomes through public assistance.
To compound this problem, the recent increase in utilities by Xcel Energy further increases tenants’ total cost for housing. Although a utility allowance is given to tenants when their portion of the rent is computed, this allowance may not equal the actual cost of utilities. Due to the higher rents and low vacancy rates, Section 8 tenants often have to settle for homes that are marginally liveable and that are in neighborhoods with high crime rates.
A Call for Attorney Volunteers
In conclusion, legal services attorneys are beginning to spend much of their time working on the preservation of low- and moderate-income housing for the poor. These cases require an enormous amount of work and time spent on coordinating the work of city governments, developers, and federal initiatives to maintain housing for such low-income families, particularly in areas where there are also jobs. As a result, legal services attorneys, whose numbers have not grown, are seeing more of their time expended on preserving existing housing than on cases they have typically handled in the past, such as the prevention of evictions and defense of foreclosures. This phenomenon also is true for Colorado’s rural areas, where the value of property also is soaring. Therefore, it is more important now than ever before that private attorneys volunteer to work on cases historically handled by legal services staff.
Attorneys who offer to take on some of these cases will be welcomed and greatly appreciated by legal services attorneys currently volunteering, as well as by the many clients who need help. To volunteer to assist with the Colorado housing crisis, practitioners may call their local pro bono office. A list of such offices follows.
1. Statistics reported by the Colorado Coalition for the Homeless (1998): (303) 293-2217.
2. A HUD project-based contract is a contract entered into by the apartment complex owner and HUD, which requires the owner to rent a certain number of apartments to eligible low-income persons for a specified number of years. In return, the owner receives benefits such as low-interest loans for rehabilitation or new construction, tax benefits, and guaranteed payments from HUD for rental subsidies.
3. Supra, note 1.
Colorado Local Pro Bono Programs
Boulder County Legal Services
Phone: (303) 449-7575
Counties served: Boulder
Delta County Bar Association
Pro Bono Program
Phone: (970) 874-4451
Counties served: Delta
Garfield Legal Services, Inc.
Phone: (970) 945-8858
Counties served: Garfield
Heart of the Rockies Bar Association
Pro Bono Program
Phone: (719) 539-5375
Counties served: Chaffee
Larimer County Bar Legal Aid
Phone: (970) 490-6082 (Ft. Collins)
(970) 667-4939 (Loveland)
Counties served: Larimer
Mesa County Pro Bono Project, Inc.
Phone: (970) 244-3816
Counties served: Mesa
Metro Volunteer Lawyers
Phone: (303) 830-8210
Counties served: Adams, Arapahoe, Denver, Douglas, Gilpin, and Jefferson
Northeast CO Legal Services
Phone: (970) 522-6391
Counties served: Kit Carson, Logan, Morgan, Phillips, Sedgwick, Washington, and Yuma
Northwest CO Legal Services
Phone: (970) 668-9612 or (800) 521-6968
Counties served: Clear Creek, Pitkin, and Summit
Northwest CO Legal Services
Phone: (970) 641-3023 or (800) 521-6968
Counties served: Gunnison
Northwest CO Legal Services
Phone: (719) 486-3238 or (800) 521-6968
Counties served: Eagle and Lake
Northwest CO Legal Services
Phone: (970) 879-2073 or (800) 521-6968
Counties served: Routt
Colorado Legal Services/El Paso County Bar Pro Bono
Phone: (719) 471-0380
Counties served: Chaffee, Custer, El Paso, Fremont, Park, Pueblo, and Teller
Pueblo County Bar Pro Bono Panel
Phone: (719) 554-6686 or (800) 395-2465
Counties served: Pueblo
San Luis Valley Bar Association
Pro Bono Project
Phone: (719) 589-5532
Counties served: Alamosa, Conejos, Costilla, Mineral, Rio Grande, and Saguache
Southern Colorado Bar Association Pro Bono Project
Phone: (719) 846-3334
Counties served: Las Animas and Huerfano
Southwest Bar Volunteer Legal Aid
Phone: (970) 247-0266
Counties served: Archuleta, La Plata, San Juan, Dolores, and Montezuma
Uncompahgre Volunteer Legal Aid
Phone: (970) 249-7202
Counties served: Delta, Hinsdale, Montrose, Ouray, and San Miguel
Weld County Legal Services
Phone: (970) 351-7300, ext. 4514
Counties served: Weld
Augustine Hernandez is the Managing Attorney for the Housing Rights and Homelessness Prevention Unit for Colorado Legal Services in Denver. He has worked in legal services litigation since 1982, specializing in federal subsidized housing law, fair housing law, foreclosure defense, and bankruptcy. Readers are encouraged to submit article and topic ideas for this Department to Sally Maresh, (970) 356-9221; e-mail: email@example.com.
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