Transit-Oriented Communities Bill Targets Housing Access through State Intervention
See all Insights

Transit-Oriented Communities Bill Targets Housing Access through State Intervention

Co-Authors, Brownstein Client Alert, March 1, 2024

House Bill 24-1313 was introduced by Colorado House Reps. Steven Woodrow (D-Denver) and Iman Jodeh (D-Arapahoe) along with state Sens. Chris Hansen (D-Denver) and Faith Winter (D-Adams). HB24-1313 represents a “top-down” approach to targeting housing affordability across the state. The bill requires certain cities and counties to increase density near transit—providing rewards to those who do and penalties for those who don’t. The bill authorizes the Department of Local Affairs (“DOLA”) to require that local governments that qualify as “transit-oriented communities” establish increased residential densities in transit areas and meet housing opportunity goals to achieve greater housing affordability.

HB24-1313 closely reflects some similar concepts to those included in last year’s omnibus land use bill, Senate Bill 23-213, which was ultimately defeated (discussed in a previous client alert). Many municipal and county governments opposed SB23-213 because of its wide-ranging state preemption of local land use regulation and for the various penalties it imposed on local governments that did not comply with the proposed requirements. While less wide-ranging, HB24-1313 still preempts local government authority by establishing transit-adjacent densities at the state level and includes significant penalties for local governments that do not comply.

Key provisions of the bill include:
 

REQUIREMENTS FOR “TRANSIT–ORIENTED COMMUNITIES”

HB24-1313, in part, would add a new article 35, “State Land Use Criteria For Strategic Growth” to title 29 of the Colorado Revised Statutes. This article would establish a new category of local government, the “transit-oriented community” (“TOC”), estimated to apply to approximately 30 jurisdictions and defined as:

A municipality that:

  • Is either entirely or partially within a metropolitan planning organization;
  • Has a population of 4,000 or more; and
  • Contains at least 75 acres of transit area; or

A county that contains either:

  • A part of a transit station area that is both in an unincorporated part of the county and within one-half mile of a transit station that serves one or both of a commuter rail or a light rail service; or
  • A part of a transit corridor area that is both in an unincorporated part of the county and fully surrounded by one or more municipalities.

Housing Opportunity Goals

Among other provisions, the bill would require TOCs to create, meet and report on a “housing opportunity goal,” which is a zoning capacity goal calculated by multiplying the total amount of transit areas within the jurisdiction (minus exempt parcels) by an average zoned housing density of 40 units per acre. Residential density of this nature would be a dramatic change for local governments that do not have similar densities reflected in their land development codes or existing zone districts. For example, this increase would double the density of the densest residential district in the City of Greenwood Village, from a maximum allowed 20 units per acre to the required 40 units per acre under this bill.

The bill would require each TOC to meet its housing opportunity goal by Dec. 31, 2026, or risk being designated as “nonqualified.” In order to meet the housing opportunity goal, TOCs would be required to:

 (1) designate areas within the TOC as transit centers according to C.R.S. § 29-35-206; (2) ensure total zoning capacity for all transit centers within the TOC is greater than or equal to the TOC’s housing opportunity goal; and (3) submit the housing opportunity goal to DOLA for approval or revisions. TOCs would also be required to identify housing affordability strategies and displacement mitigation strategies that would assist the TOC in implementing its housing opportunity goal. By no later than Dec. 31, 2026, the TOC must submit a housing opportunity goal report to DOLA that includes the TOC’s goals, evidence the TOC has met its goals, maps of the TOC’s transit centers and the TOC’s implementation strategies. Finally, the bill would also require TOCs to submit updated progress reports to DOLA every three years that confirm the TOC’s housing opportunity goal, that the goal is still being met, and any updated information about the goal or residential development projects being built in the TOC.

Related DOLA Activities

The bill would also require DOLA to conduct a variety of related activities to assist TOCs in creating and achieving their housing opportunity goals. These include: (1) creating a transit areas map (no later than July 31, 2024); (2) creating models and guidance for TOCs to establish housing opportunity goals (no later than Dec. 1, 2024); (3) creating standard and long-term affordability strategies menus for local governments (no later than June 30, 2025); and (4) creating guidance for TOCs to conduct displacement risk assessments and implement displacement mitigation strategies (no later than June 30, 2025).

Finally, the bill would require DOLA to review housing opportunity goal reports and progress reports submitted by each TOC. DOLA would have the authority to either approve the report and affirm that the TOC is “qualified” by having satisfied the housing opportunity goal requirements or provide direction for amending and resubmitting the report within 90 days. Any TOC that does not provide a report, or does not amend a report as directed by DOLA, would be deemed a “nonqualified” TOC. The bill would impose stringent penalties on nonqualified TOCs as outlined below.
 

PENALTIES VS. INCENTIVES TO COMPLY

Penalty: Withholding Highway Users Tax Fund Distributions

The most striking provisions of HB 24-1313 are the penalties imposed on local governments that do not comply with the housing opportunity goal requirements. The bill’s primary enforcement mechanism is for the state to withhold funds from the state’s Highway Users Tax Fund (“HUTF”) from jurisdictions that do not comply. The state has never imposed this type of penalty, especially in the land use arena, and the linkage between HUTF funds and land use density upon which the legislation relies is tenuous.

The HUTF was created in 1953 and is primarily funded through motor fuel taxes, vehicle registration fees, driver’s license fees and traffic penalty assessments. The largest source of revenue is the motor fuels tax. During the 2022-2023 fiscal year, the HUTF generated a total of approximately $1.11 billion, with $147.5 million distributed to municipalities and $210.3 million distributed to counties. Each municipality receives a share of the HUTF based on a formula that considers the number of vehicles registered and the miles of streets in each municipality relative to other municipalities. The HUTF funds must be spent on new construction, safety, reconstruction, improvement, repair and maintenance, and capacity improvements of streets and roads.

The bill would designate all TOCs that fail to comply with the housing opportunity goal requirements, including by not submitting the initial and subsequent progress reports, as “nonqualified” TOCs. Beginning Dec. 31, 2026, and every month thereafter, DOLA would submit a list of nonqualified TOCs to the state treasurer, which would in turn withhold all HUTF funds that would otherwise have been allocated to the nonqualified TOC. The withheld funds would be put into an account for 180 days, and if the nonqualified TOC did not come into compliance within that time, it would lose its allocated HUTF funds and DOLA could distribute the withheld funds to other qualified TOCs through the TOC grant program discussed below.

Finally, if a TOC does not submit a housing opportunity goal report to DOLA by Dec. 31, 2027, DOLA may seek an injunction from a district court requiring the TOC to comply.

Local governments rely on HUTF funds to maintain roadways within their boundaries; loss of these funds would be a major blow to most local government budgets. This enforcement provision is anticipated to garner significant attention and opposition from local governments unless it is modified.
 

INCENTIVES: TRANSIT-ORIENTED COMMUNITIES INFRASTRUCTURE GRANT PROGRAM

The reward for compliant local governments, however, is the potential for additional funds in the form of grants. HB24-1313 would create the Transit-Oriented Communities Infrastructure Grant Program (“TOC Grant”), from which qualified TOCs would be eligible to receive infrastructure-related grants. The TOC Grant serves as the only nonpunitive incentive for local governments to comply with the provisions of the bill. While the TOC Grant provides a useful incentive to qualified TOCs, there is still a question as to whether this incentive is proportionate to the stark penalty of losing HUTF funds for noncompliance.

The bill would appropriate $35 million from the state general fund to the TOC Grant Fund. Grants awarded from the fund could be used for a variety of on-site and public infrastructure projects that are within, or that primarily benefit, the TOC or regulated affordable housing projects within the TOC. The TOC Grant would also create a separate “account” within the fund, which would consist largely of the HUTF funds withheld from nonqualified TOCs. Because HUTF funds are restricted to transportation and infrastructure uses, grants awarded from the account could only be used to fund the following:

  • Public infrastructure projects that benefit regulated affordable housing in a transit center or neighborhood center;
  • Activities related to determining where and how best to improve infrastructure to support a transit center or neighborhood center; and
  • Infrastructure project delivery, planning and community engagement.

STATE INTEREST AND POTENTIAL CHALLENGES

HB24-1313 includes a lengthy 13 pages of legislative declaration throughout the approximately 51-page bill, which together generally state that the bill covers matters of mixed state and local concern. In Colorado, when a matter is of mixed state and local concern, a local home rule ordinance may coexist with a state statute, so long as there is no conflict, but must give way to the state law if a conflict arises.

The declarations work to establish support for the state’s position that the correlative negative effects of low-density housing extend well beyond a local government’s borders. The declarations posit that local government regulations imposing low-density housing near transit areas correlate to higher housing prices, disbursed employment, increased vehicular travel and emissions, and increased regional and statewide costs to maintain infrastructure. The declarations cite numerous studies related to land use, housing and transportation infrastructure to support these claims.

Essentially, the state’s argument is that because increased infrastructure costs are in part caused by low density, withholding HUTF transportation-related funds is a reasonable penalty for noncompliant governments, allowing those funds to be spent on infrastructure projects elsewhere. However, due to the stark penalties imposed by the bill and the tenuous correlation between the housing opportunity goals and HUTF funds, it seems likely that local governments would challenge the legislation if it were enacted. In reviewing any challenges to this bill, Colorado courts will look at several factors to determine whether the matters are actually of state concern, such as impact beyond municipal boundaries, whether the matter is one traditionally regulated at the state or local level, and whether statewide uniformity is important regarding the matter (see City and County of Denver, 788 P.2d 764 (Colo. 1988)).


THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING HOUSE BILL 24-1313. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.

Recent Insights