A plan for the first apartments in Manitou Springs to be built since the early 1970s has secured a competitive tax incentive through the state of Colorado.

The Colorado Housing and Finance Authority awarded over $2 million in tax credits to the developers of the former La Fun Motel property. In exchange, the project will need to follow affordable rent pricing requirements.

Of the 50 units, 10 will be at 30% of the area median income. Four units will be at 40%, 10 will be at 50%, and 26 will be at 60%.

“I could not be more excited by this opportunity,” said Manitou Springs Mayor Natalie Johnson.

The 2-acre vacant property on the city’s east edge has been in limbo for years. Mid-century signs remain for the La Fun, which fell into disrepair at the end of its life as a roadside motel. In 2022, Indiana-based Paragon Realty bought and demolished the motel with the help of a $2.1 million investment from the Manitou Springs Urban Renewal Authority.

URA Executive Director Electra Johnson said the La Fun had become a public safety hazard.

“It was basically a blighted hotel,” she said.

Plans have evolved for the property, shifting from a renovation of the historic motel, which was deemed too run-down, to commercial development, to mixed use, Electra Johnson said.

Paragon Realty eventually settled on the idea of apartments, but its original plan for 78 units was rejected by the Manitou Springs Planning Commission in 2024. The reason then was density: The plan would have required an exception from the city’s zoning limits on how many units could be built per acre.

To make a project with few apartment units commercially viable, Paragon turned to the state’s competitive tax credit program for affordable housing. The company partnered on the application with TWG Development, also based in Indiana and specializing in senior and affordable developments.

The first application was unsuccessful, said Paragon President Rich Block. The second try, with a few tweaks on the design, was the charm.

“I think it was some persistence from us, truly,” Block said.

The project is one of only 14 other developments awarded tax credits in this cycle statewide.

The La Fun project will still require approval from the city, but it is not requesting a zoning variance. Block said his company was hoping to be cleared to start by the end of the year.

Electra Johnson said the URA, which includes Manitou Avenue from the U.S. 24 overpass to the historic Manitou Springs arch, has been sparsely populated historically. The apartments could create foot traffic and activity in the area, she said.

“It creates the beginnings of kind of a neighborhood,” she said.

Within walking distance of the Dillon Mobility Hub, the project may also create the opportunity for people who work in Manitou to live in the community while cutting down on traffic, she said: “It’s going to make a huge difference.”