A downtown Colorado Springs apartment project that would provide affordable living and work space for local artists received a $5 million state grant Thursday, a significant piece of its funding puzzle that proponents hope will help them launch construction this year.

Colorado Creative Industries, a division of the state Office of Economic Development and International Trade, awarded a Community Revitalization Grant for Artspace COS Lofts, a 51-unit, mixed-use project that would be developed at 315 E. Costilla St. The site is the former home of Rocky Mountain PBS and, before that, headquarters for the Gay and Lesbian Fund for Colorado.

Artspace, a Minneapolis-based nonprofit, has proposed the project in partnership with the Downtown Development Authority, a Springs quasigovernmental agency that promotes downtown’s physical and economic growth.

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The authority purchased the site in 2019 and contracted with Artspace, which eventually will own the property and manage the project.

The project’s concept has been in the works for at least five years, initially proposed by a group of community volunteers; it’s already received financial support, in part, from the Springs-based GE Johnson and John and Margot Lane Foundations, which helped the authority buy the property.

The state grant for Artspace was one of six announced Thursday; a total of 26 projects have received $49.2 million in funding through Colorado Creative Industries. State lawmakers created the agency, whose grants support creative industry workforce housing, commercial spaces, performance and community gathering spaces and child care centers, among other projects.

With the state grant, Artspace and the DDA have secured or expect to receive a total of $18 million in cash and other funding, putting them about two-thirds toward their goal of financing the estimated $26 million project, said Lucas Koski, property development director for Artspace.

As a cash award, the state grant was key, in part, because it doesn’t carry debt that must be repaid, Koski said. At the same, Artspace and the DDA believe the grant will help them leverage other resources — such as additional state funds and philanthropic gifts — that will close the project’s funding gap, he said.

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“This is an important  piece of money,” Koskki said. “It allows us to move forward with confidence that the other pieces can kind of fall in place.”

Susan Edmondson, president and CEO of the Downtown Partnership advocacy group and who holds similar roles with the Downtown Development Authority, said the state grant was an encouraging sign that the project can become a reality.

“Like any affordable housing project, it takes lots of different pots of resources,” Edmondson said. “And this was an essential piece of this.”

The Artspace project calls for demolition of a 3,245-square-foot portion of a two-story building on the Costilla Street site, according to plans submitted to city government officials last fall. A 1920s-era, Spanish-style 2,500-square-foot portion of the existing building, meanwhile, would be preserved, renovated and combined with a newly constructed, five-story building.

In addition to 51 one- and two-bedroom rental units, the project would provide 7,000 square feet of ground-level commercial space that could serve as artist studios. The project also would have 58 on-site surface parking spaces.

In a best-case scenario, and as additional funding sources are secured, Koski said the Artspace project could begin construction in the summer, with completion in late 2023 or early 2024.

As an affordable housing project, Artspace would offer rents for lower-income households, tied to area median incomes, Koski said.

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For example, and based on U.S. Department of Housing and Urban Development housing income guidelines in 2021, a single-person household earning $35,000 annually would have paid $920 a month for a one-bedroom apartment in the Artspace project, he said.

A household of two making $39,000 a year could have rented a two-bedroom unit for $1,100 a month.

Those rents would be several hundred dollars less than the average monthly rent in Colorado Springs, which soared to a record high of just over $1,495 in the third quarter of 2021, according to a University of Denver study.