Thousands of apartments designated as affordable are standing vacant across major American cities, including in Colorado, while the people most desperate for housing cannot qualify for or afford them — a paradox rooted in how the federal government finances affordable housing construction.
The National Low Income Housing Coalition's most recent annual report found roughly 4 million affordable rental units available nationwide for 11 million extremely low-income renter households — people whose earnings fall either below the federal poverty line or under 30% of local median income, whichever is greater. This population, which makes up about a quarter of all U.S. renter households, includes low-wage workers, seniors, and people with disabilities on fixed incomes. Nearly three-quarters of these households devote more than half of everything they earn to rent and utilities, leaving almost nothing for other basic needs.
Despite that acute need, units reserved for this group represented only about 12% of what was financed through the Low-Income Housing Tax Credit in 2024, according to the National Council of State Housing Agencies. That federal program gives developers tax credits in exchange for holding rents below market levels for a minimum of 30 years, yet most of what it produces targets households earning at least half of an area's median income. In Austin, a household at 50% of median income earns roughly $47,000, while someone classified as extremely low-income earns under $28,000. The program has underwritten nearly 4 million units in the four decades since it was established.
The Colorado dimension of this national problem is concrete. The Colorado Housing and Finance Authority reported a 13% vacancy rate for tax-credit units serving households at 60% of area median income in Denver, and a 21% vacancy rate for units at the 80% AMI level — while the city simultaneously has far too little to offer its poorest residents. This pattern is not unique to Colorado; cities nationally are recording rising vacancies as rents in income-restricted buildings edge toward what market-rate apartments charge, so that the units sit unfilled because even subsidized rents exceed what the lowest-income renters can pay.
A burdensome application process is compounding the vacancy problem. Some prospective tenants are choosing to pay somewhat more for market-rate apartments precisely because those landlords demand far less documentation and move applicants through approval far more quickly. One affordable housing developer described requiring applicants to produce every bank statement, paycheck, utility bill, and peer-payment transaction, and acknowledged that while a market-rate applicant might be approved in two minutes, the affordable housing process takes considerably longer.
Policy experts disagree on the right remedy. Cato Institute economist Chris Edwards told Congress that the tax credit program's complexity "spawned" an industry of legal and accounting firms just to manage its rules, driving up construction costs; he maintained that subsidy dollars should flow directly to tenants rather than to developers. Others counter that the two tools complement each other, since tax-credit properties must accept housing vouchers whereas landlords renting at market rates in many states face no such requirement. The debate is complicated by a severe voucher shortfall: analysts estimate only one in four qualifying families ever receives one, and those who apply can wait years.
Developers say the arithmetic of serving the very poorest is nearly impossible without extraordinary outside subsidy. One Washington, D.C.-area affordable housing company illustrated the problem: a unit rented to a household at 60% of area median income generates $1,715 a month, but mortgage and operating costs consume $1,575 of that, leaving $140. An extremely low-income tenant would pay only half the rent, and as that developer's chief executive put it, expenses make it "really not possible to create a 30% AMI unit, unless there was this extraordinary amount of subsidy that just doesn't exist."
Whether Colorado's state housing finance authority or local developers move to address the widening gap between vacancy rates at upper-tier affordable units and the near-total absence of options for the lowest-income renters remains to be seen.