The Longmont Association of REALTORS® retained Anderson Economic Group to conduct a study on the impact of metropolitan districts on housing costs in Colorado. Metropolitan districts are units of local government that have the authority to issue municipal bonds and provide government services. In Colorado, housing developers often establish metropolitan districts to finance public infrastructure and amenities in new residential subdivisions.
To determine the impact of metropolitan districts on housing costs, we randomly selected ten metropolitan districts around Denver and Northern Colorado and reviewed the development projections described in bond disclosure documents. We also reviewed metropolitan district financial statements, property tax data, and home sales prices in these districts. We constructed a housing cost model to estimate the typical down payment, mortgage, and bond debt service property tax costs in each of the ten selected metropolitan districts. We then compared the down payment, mortgage, and debt service property tax costs for the typical home in each metropolitan district to the costs a homeowner would have paid if that home was built outside of a metropolitan district. We quantified how these costs differed in each of the ten metropolitan districts.
We found that issuing bonds to finance metropolitan district infrastructure costs reduces the typical home buyer’s down payment by an average of 4% relative to a scenario in which that same home is built outside of a metropolitan district. We further projected that a homeowner’s long-term housing costs will be 2% higher over the course of a 30-year mortgage due to the debt service property taxes levied in metropolitan districts. Additionally, we found that a metropolitan district’s housing costs may be even higher when the district fails to repay its bond debt on time. Two of the districts we studied were not currently meeting their debt obligations. In these districts, we projected that home buyers’ housing costs will be 7% higher than if their homes had been built outside of a metropolitan district.
We summarized our findings and listed our recommendations for responsible metropolitan district governance in a report that was provided to the client in March, 2021. The report will be used to inform Colorado REALTORS® and policymakers about metropolitan districts’ impacts on the state’s housing market.
See the one-page overview document describing our findings.