Colorado voters were split on a ballot measure that would set aside nearly $300 million each year in existing tax revenue to help local governments and nonprofits increase affordable housing units across Colorado.

Proposition 123 was too close to call. As of Wednesday morning, the measure was passing 51.03% to 48.97%.

In Montezuma County, it lost 55.36% to 44.64%. In La Plata County, it won 58.45% 41.55%.

Anna Stout, the mayor of Grand Junction, and a staunch supporter of the proposal, said she was shocked the election results were so close four hours after polls had closed.

“The sentiment that I was getting from people that I know from across the state was that this seemed to be a no-brainer,” she said by phone. “It’s a little nerve-wracking to see that it’s this close, but I think it really is illustrative of our state’s issues. This is a statewide problem. We’re all experiencing a housing crisis in some way or another, but some people feel it very differently than others do.”

Proposition 123 would set aside up to 0.1% of taxable income each year for affordable housing. That’s estimated to be $145 million in the current fiscal year – which ends June 30, 2023 – and $290 million in 2023-24 and subsequent fiscal years.

The ballot measure landed on the November ballot at a time when affordable housing is one of the most pressing problems in Colorado and across the country. For example, Denver’s homeless population grew 12.8% in the last two years, according to a recent local survey, and a gap between Black and white homeowners in Colorado has continued to widen since 1970. A Colorado Health Foundation poll also recently found that 86% of Coloradans think the cost of housing is an “extremely serious” problem.

The politics surrounding Proposition 123 were complicated. It was endorsed by a number of prominent nonprofits and a host of Democratic state lawmakers and politicians. But it also had a bipartisan group of skeptics who wanted voters to think long and hard before weighing in on the measure, especially given the growing risk of a recession stemming from high inflation and rising interest rates meant to tamp down consumer costs.

The measure, if passed, could help ensure that teachers, nurses, firefighters and other essential workers could afford to live in the communities they’re serving and it could help address a full continuum of housing needs by serving people who are homeless as well as first-time homeowners, said Mike Johnston, a former state senator now leading Gary Community Ventures, the philanthropic organization bankrolling the committee that is worked to pass Proposition 123.

“It’s past time to do something, and this offers a chance to do that without raising taxes,” Johnston told The Colorado Sun in early October, as the committee working to pass the measure, Coloradans for Affordable Housing Now, also known as Yes On Prop 123, was holding town halls, news conferences and roundtables all over the state. The group includes more than 180 organizations, advocates and elected officials who feel the affordable housing crisis needs to be addressed promptly, Johnston said.

The measure would give grants and loans to local governments and nonprofits to acquire and preserve land for affordable housing development. Funds from Proposition 123 could help develop affordable multifamily rental units, increase homeownership rates in the state and provide down payment assistance for first-time homebuyers. It could also address homelessness by providing rental assistance and eviction defense programs, proponents said.

Opponents of the measure said it wouldn’t address the underlying causes of high housing costs and that pumping money into the housing market could distort it further.

State budget writers, both Democrats and Republicans, also expressed concerns about the measure potentially diverting money from the state’s budget in years when the Taxpayer’s Bill of Rights cap on government growth and spending, which is calculated based on inflation and population growth rates, isn’t exceeded. The legislature would still be on the hook to find $290 million in its budget to allocate to affordable housing, they said.

In the years where state revenue is below the TABOR limit, the measure could reduce the amount of money available for the state budget.

In years where state revenue exceeds the TABOR limit, the measure reduces money returned to taxpayers. If Proposition 123 passes, it’s expected to decrease the amount of money returned to each taxpayer by $43 in tax year 2023, according to nonpartisan legislative staff, and $86 per taxpayer in tax year 2024.

“There’s no free lunch,” said state Sen. Chris Hansen, a Denver Democrat and the incoming chair of the Joint Budget Committee, which drafts the state budget. “K-12 and higher education (are) where the marginal dollar is in our state budget. So $1 less means $1 less for education,” Hansen said in late September.

In its 2022 voter guide, the libertarian-leaning Independence Institute, a political nonprofit, recommended a “no” vote on Proposition 123. Rather than using taxpayer money to address the affordable housing shortage, the group said, politicians should focus on reducing government regulations that create barriers to new housing supply, including local zoning regulations and strict building codes.

For projects to qualify for funding, local governments would have to commit to increasing affordable housing by 3% each year and would have to create a fast-track approval process for such projects. If a local government chose not to meet these requirements, or if it failed to achieve its affordable housing goals, projects in that municipality or county would be temporarily ineligible for funding.

The measure defines affordable housing based on two factors: household income and housing costs. For a housing unit or project to qualify as affordable housing under the measure, housing costs such as rent or mortgage payments must not exceed 30% of the household’s income.

The measure requires that the funding add to, and not replace, existing state money spent on affordable housing.

The affordable housing programs developed under Proposition 123 would be administered by the Colorado Housing and Finance Authority and the Division of Housing within the Colorado Department of Local Affairs.

Proponents of the measure said it would create a new source of funds to tackle housing issues without raising tax rates. It also would give local communities the flexibility to respond to their specific needs.

Housing prices in Colorado are making it too hard for many households to afford rent or buy their own home. The new programs proposed under Proposition 123 could help Coloradans participate in the housing market now and in the future. Creating more homes will allow residents and essential workers to remain in their communities, proponents said.

Grand Junction Mayor Anna Stout in early October said Proposition 123 was designed to keep affordable housing funding in Colorado neighborhoods and would offer local leaders control when trying to address housing challenges facing their residents. In Mesa County, the average cost of buying a home has increased 30% in the last two years, she said. Simultaneously, Grand Junction has an apartment vacancy rate of about 2%, meaning people looking for an apartment have few options for housing in town, she added.

If Proposition 123 passes, local governments such as Grand Junction could apply for funding to ensure more affordable housing developments are created and that they stay affordable, Stout said. An affordable housing equity program outlined in Proposition 123 would also give renters a path to homeownership while they’re still renting and could help them build equity and generational wealth, Stout added.

“Only about one-third of 1% of the state budget goes to housing right now, so, this is a solution that actually relieves pressure on the general fund because it finds a way to fund the state’s most urgent priority right now by funding it out of refunds and not funding it out of the general fund,” Johnston said in early fall.

Four voters who cast their ballots at Nova Church in Denver’s Capitol Hill neighborhood on Tuesday morning said they voted for Proposition 123.

Bailey Johnson, a 25-year-old nurse and registered democrat in Denver, said she voted in favor of Proposition 123, in part, because of the city’s growing homeless population and few resources to address the affordable housing crisis.

Tanner Stogsdill, a 30-year-old democrat who also voted at the church on Tuesday morning, said the amount of money set aside for Proposition 123 seemed minimal, especially because all Coloradans, even those who aren’t in need of financial assistance, receive refund checks from the government during TABOR surplus years.

“It just makes sense, especially with it getting colder,” he said of Proposition 123. “Why would you not want to vote for more affordable housing? … I would want it if I were in that position.”

Andrea Keppers, a 46-year-old democrat, was more skeptical. She voted for Proposition 123 but said she doesn’t think $300 million will be enough money to make a dent in the state’s affordable housing problem.

Coloradans for Affordable Housing Now had spent nearly $5.6 million advocating for Proposition 123, through Oct. 26, while raising $6.7 million through Nov. 5. Gary Ventures contributed nearly $2.1 million to the committee, according to campaign finance data.

Habitat For Humanity Metro Denver gave the committee $250,000 and Action Now, a nonpartisan human service organization in Houston, has given $500,000 to support the ballot measure.

The Association of Realtors also donated $276,000 to support the measure in July, according to campaign finance records.

The conservative political nonprofit Advance Colorado Action is against the measure, senior adviser Michael Fields has said.

No on Prop 123, a small-scale issue committee opposed to the initiative, but did not report any spending nor fundraising to oppose the measure.

Colorado Sun reporters Jesse Paul and Sandra Fish contributed to this report.