Land banking is the acquisition and holding of land for future affordable housing development. This is particularly helpful in high-cost and fast-appreciating markets like Lake County.

Instead of scrambling to assemble land when a project is ready, a nonprofit, housing authority, or local government can:

• Purchase land now
• Hold it while planning, designing, and securing financing
• Develop affordable housing later

Proposition 123 dedicates 0.1% of state income tax revenue annually to affordable housing. The state very cleverly avoided a tax-raise and TABOR issues by simply allocating existing tax revenue. CHFA runs competitive funding applications for these dollars.

A portion of those funds is allocated specifically for:

• Land acquisition
• Predevelopment activities
• Infrastructure improvements tied to future affordable housing

Eligible applicants typically are:

• Local governments
• Housing authorities
• Nonprofits
• Certain joint ventures (public/private)

Applicants must demonstrate:

• Capacity to develop affordable housing
• A realistic development timeline
• Alignment with local housing needs

The acquired land must ultimately support income-restricted housing.

Generally:

• Rental units must serve households at or below specified AMI levels (often ≤80% AMI, sometimes lower)
• There are long-term affordability requirements (paired with LIHTC requirements, often a 30-year window)
• Development must occur within a defined timeframe (commonly 5–10 years, depending on award terms)

If development occurs as planned, the loan is forgiven, which is why we call this a grant — it doesn’t need to be repaid as long as the project is completed within the allowable timeframe. If development does not occur as promised, repayment provisions may apply.

The land banking funds can be used for:

• Land acquisition
• Option agreements
• Closing costs
• Site prep
• Infrastructure

They do not cover ground-breaking and construction, which comes later and can be funded by:

• Low-income housing tax credits (LIHTC)
• Loans from Colorado Housing and Finance Authority (CHFA)
• Grants from Colorado’s Department of Local Affairs (DOLA)
• Local funding
• Private fundraising

Projects like this one strengthen future applications. Land control is one of the most powerful signs of readiness in competitive funding applications, like awards from the Colorado Department of Local Affairs (DOLA) and Colorado Housing and Finance Authority (CHFA). 

Having land already secured:

• Demonstrates local commitment
• Improves readiness scoring
• Prevents cost increases

For rural communities like ours, this can be the difference between being competitive and being hypothetical or speculative. Operating from speculation, rather than certainty, is not effective when it comes to developing affordable housing.

In places like Lake County:

• Developable land is limited
• Infrastructure costs are high
• Construction is expensive due to short the short building season
• Housing shortages are severe (particularly rentals)
• Speculative land purchases drive prices up quickly

Land banking allows communities to:

• Compete with private investors
• Lock in affordable land costs before the market spikes
• Plan intentionally rather than reactively

Every project is unique — and projects in Lake County are especially unique because of our climate and remote location. Here’s a typical timeline for a land banking project:

Year 0–1

• Apply for Land Banking funds
• Acquire property

Year 1–2 or 3

• Conduct feasibility studies
• Secure zoning and entitlements
• Line up infrastructure funding

Year 2 or 3–5

• Apply for LIHTC or other construction financing
• Begin vertical development

Year 5-10

• Build infrastructure
• Construct the building(s)
• Finalize the project and secure occupancy permit(s)
• Get community members into their new affordable homes

Once we’re farther along in the process, we’ll update this page with the timeline for our actual project rather than this general timeline.

LIHTC refers to federal tax credits created under the Tax Reform Act of 1986 to incentivize private investment in affordable rental housing. Each year, the federal government allocates tax credits to states based on population. In Colorado, these are administered by the Colorado Housing and Finance Authority (CHFA). States create an allocation plan that sets scoring priorities (e.g., rural housing, supportive housing, proximity to services, deep affordability, etc.).

A nonprofit or for-profit developer proposes an affordable housing project and applies for LIHTC funding through the state.

The application includes:

• Site control
• Development budget
• Financing plan
• Income targeting
• Community support
• Long-term compliance plan

Projects compete for credits under the state’s allocation scoring system.

If awarded, the developer does not receive cash. They receive an allocation of federal tax credits.

There are two main types of credits:

9% Credits (“Competitive” Credits)

• Cover roughly 60–70% of development costs through equity.
• Very competitive.
• Often used for new construction in rural communities.
• Best for projects without other large federal subsidies.

4% Credits (“Non-Competitive” Credits)

• Paired with tax-exempt bonds.
• Cover a smaller portion of costs.
• Often used for larger or mixed-finance projects.

Developers can sell credits to investors on the open market — usually banks or large corporations who want tax breaks. They reduce the investor’s federal tax liability dollar-for-dollar over 10 years.

Sample Scenario

• Project awarded $1,000,000 in annual credits
  • Investor claims $1,000,000 per year for 10 years
  • Total = $10 million in tax reduction
• The investor pays upfront equity (usually 85–95 cents per credit dollar).
• That equity becomes part of the project’s construction financing.

Requirements fall into two main categories: rent restrictions and income limits. In exchange for tax credits, the property must do the following:

• Rent units to households at or below 60% of Area Median Income (AMI)
• Restrict rents based on AMI limits
• Remain affordable for at least 30 years (often longer in Colorado)
• Comply with federal Section 42 regulations and state monitoring

There’s a compliance period for deed restriction/rent limits:

• 15-year initial compliance period
• Extended affordability period (usually 30+ years total)

If rules are violated, the IRS can recapture credits from investors.

Without LIHTC:

• Rents in most rural Colorado communities would need to exceed what working households can afford.
• Construction costs far exceed what restricted rents alone can support.

LIHTC fills the financing gap between what it costs to build vs. what low-income tenants can reasonably pay. The bottom line is that free markets will never result in housing abundance. We’re seeing this in real time every day in Lake County as our housing crisis continues to worsen.

LIHTC is a lot of things, but here’s what it’s NOT:

• It’s not a direct government grant to renters or landlords.
• It doesn’t pay operating costs forever.
• It doesn’t automatically guarantee deeply affordable housing unless structured intentionally in the application.