Colorado REALTOR® Organizations Seek Clear Answers to “What is a Metro District?”
The number of metro districts in Colorado has increased by over 70 percent in the last decade, raising questions in the real estate industry. How do metro districts impact housing costs for homebuyers?
Commissioned by the Fort Collins Board of REALTORS®, Greeley Area REALTOR® Association, Longmont Association of REALTORS® and Loveland-Berthoud Association of REALTORS®, This first-of-its-kind study explores this question.
Metro Districts in Colorado
The Anderson Economic Group was commissioned to analyze the impact of metro districts during the home buying and home selling process. This infographic provides a quick summary of the study’s results
Metro District Impacts on Housing Costs Report Summary
Commissioned by the Fort Collins Board of REALTORS®, Greeley Area REALTOR® Association, Boulder/Longmont Association of REALTORS®, and Loveland-Berthoud Association of REALTORS®, AEG analyzed the impact of metro districts on housing costs across ten districts in Metropolitan Denver and Northern Colorado. AEG’s analysis compared housing costs for a typical home in each district to what housing costs would have been if the same home was built outside of a metro district.
Metro District Impacts on Housing Costs
A growing number of new homes built in Colorado are being built in metro districts. Metro districts
are governmental entities that have the authority to issue debt and levy property taxes to repay
outstanding debt. Developers that build new subdivisions often form these districts to issue bonds
to cover a new subdivision’s infrastructure costs. The metro district then levies property taxes on
homeowners in the district to repay the debt. The proliferation of these districts has led to
increased scrutiny over the impact that districts have on housing costs.
AEG analyzed the impact of metro districts on housing costs across ten districts in Metropolitan
Denver and Northern Colorado. AEG’s analysis compared housing costs for a typical home in each
district to what housing costs would have been if the same home was built outside of a metro
district.
Metro districts present home buyers with cost trade-offs. Metro districts offer home buyers lower
up- front costs in exchange for higher housing costs over the long term. The metro districts AEG
reviewed reduced the amount needed for a 20% down payment by an average of 4% ($5,800) per home,
since shared infrastructure costs are not capitalized into metro district home sales prices. If
these same homes had been built outside of metro districts, infrastructure costs would have been
included in the home’s selling price, making the home more expensive.
However, metro districts also levy higher property taxes on homeowners in order to repay the debt
they issue. These property taxes typically result in higher long-term housing costs compared to
non-metro district homes. The districts AEG reviewed saw an average increase in long-term housing
costs of 2% ($16,200) over 30 years. This trade-off may appeal to some buyers for whom saving enough
for a down payment may be a challenge
When metro districts fail to make scheduled debt payments, homeowners pay higher costs. In metro
districts where homes are not built or sold as quickly as planned, districts may not generate
enough prop- erty tax revenue to pay down the debt they issue. This unpaid debt can accrue
additional interest and increases the amount home owners must pay to the metro district. AEG found
that two of the ten districts reviewed were not currently meeting their debt obligations. AEG
estimates that homeowners’ long-term housing costs in these districts will be 7% ($50,000) higher
on average than if those homes were built and sold outside of a metro district.
Metro district property taxes could take homeowners by surprise. In 2020, debt service property
taxes constituted 28% of the average tax bill in the metro districts AEG studied. The typical metro
district tax payment increased by 10% per year during the first four years of homeownership. These
rapidly-rising costs may place increased financial pressure on home owners in each district. AEG
found no evidence that these costs have led to higher foreclosure rates or depressed home values in
these districts.
Metro district best practices. County and municipal governments can reduce risks to homeowners by
carefully scrutinizing proposals to form new metro districts and denying those applications with
overly aggressive development schedules. Local governments should also utilize their oversight in
existing dis- tricts by monitoring the financial health of districts in their jurisdictions.
Policymakers should consider requiring developers to disclose a metro district’s debt service
schedule and anticipated future property tax liability to prospective home buyers as early as
possible in the transaction process in order to educate buy- ers about the risks and ramifications
of buying a home in a metro district.
About the Study’s Author. Anderson Economic Group is a research and consulting firm specializing in
economics, public policy, finance, business valuation, and industry analysis. The firm has offices
in East Lansing, Michigan and Chicago, Illinois.
For more information on metro district impacts, see the full report, “The Impact of Metropolitan
Districts on Housing Costs in Colorado,” March, 2021.