Aiming to pin down housing's moving target

By JOHN STROUD
Western Slope Sunday
Sunday, July 25, 1999

For as long as affordable housing, or the lack thereof, has been a concerning issue for communities in the resort-driven real estate markets of western Colorado, the term affordable has been one of the most nebulous words to define. What to do about the problem has been an even bigger dilemma.

Lacking a clear definition of the issue, local governments have been slow to respond, often recognizing that there is indeed a problem, but with no real consensus on how to address it.

Some have been content to go along with the private sector argument that, if the housing supply is allowed to keep up with the demand to live here, the free market system will take care of the affordability issue.

Others counter that, as long as profit from lucrative markets targeting second-homeowners and wealthy newcomers serves as the primary motive in home building, there's no way to ensure affordability without some level of government involvement.

Jody Allbaugh stands outside her home at Thompson Corner in Carbondale, a neighborhood of 60 deed-restricted homes that was required of the developers of River Valley Ranch and serves as Garfield County's only example of appreciation-capped, deed-restricted housing. "It's a really nice, quiet neighborhood," Allbaugh said. DEVON MEYERS

Until fairly recently, the bedroom communities that sit on the fringes of the resort areas of Aspen and Vail, where affordable housing mitigation has been a way of life for some time, have taken a back-seat approach.

But a new effort to address the issue from a regional perspective aims to provide a range of solutions, or a "tool kit," that governments in those communities can use to tailor various solutions to meet their housing needs.

Sponsored by Healthy Mountain Communities (HMC), a non-profit organization working to address issues of common interest to communities in Garfield, Eagle and Pitkin counties, the "Regional Affordable Housing Initiative" will analyze housing needs from Glenwood Springs to Basalt and come up with model affordable housing regulations and other tools that can be adopted by counties and municipalities throughout the larger region.

"The analysis will include items such as the nature and extent of housing need, the current and prospective housing supply, and the 'gaps' or inconsistencies between need and supply, which are causing housing affordability problems in the region," according to a statement outlining the scope of the study prepared by RRC Associates, the consulting firm that's coordinating the study.

The initiative will also investigate the legalities of various regulatory measures, identify alternatives to new regulations, provide guidelines for governments to implement affordable housing strategies and avoid excess bureaucracy, and even determine how to pick a location for affordable housing projects.

The first in a series of four public workshops to begin developing the plan will be held this Tuesday from 10 a.m. to 2 p.m. at Carbondale Town Hall. A task force has been formed that will explore the issue in detail and come up with solutions, but the general public is also invited to participate.

Problem identified

Anyone who has kept track of area real estate and housing costs over the last 10 to 15 years knows there's something wrong with the current mix of free market theory and government regulation when it comes to housing.

During that period, residential development has boomed throughout the region, but even in places previously deemed "affordable," such as Basalt and Carbondale, the average home now sells for well over $200,000 and rents for a three-bedroom apartment or townhouse are around $1,200 a month.

According to the standard applied by the non-profit Carbondale Affordable Housing Corporation (CAHC) and used as a basis for the recent adoption of Garfield County's new affordable housing regulations, the average cost to buy a home in the area is about 50 percent more than a family making the median household income for the county, currently about $45,000, could reasonably afford.

The same "affordability" standard can be applied to rents, but the biggest problem with rental housing is that vacancy rates for existing apartments are next to 0 percent and virtually no new rental housing is being built.

"Developers have decided that there's an advantage to building big, expensive single-family houses," observed Colin Laird, executive director of HMC.

On the flipside, restrictive land-use regulations that aren't necessarily conducive to creating affordable housing often steer developers toward less-dense upscale developments, rather than allowing them to compromise a bit to create a broader mix of housing, he noted.

One result has been that long-time residents who desire to continue living, working and contributing to communities like Carbondale, Basalt, Glenwood Springs, Rifle and Eagle have become priced out of the market.

"Profit drives the housing market, but profit doesn't always drive the needs and desires of the community," Laird said, pointing out that the people who are being priced out are typically the teachers, police officers, firefighters, civic leaders and community volunteers who form the fabric of the communities they live in.

"Markets are really good at certain things, but we can't always rely on the market to serve our community needs. That's why we're here."

Common ground

The regional housing initiative is being funded by a $45,000 grant from the state's Smart Growth Regional Partnerships Program, begun under former Gov. Roy Romer, with matching funds from Carbondale, Glenwood Springs, Aspen and Garfield County. Basalt and Eagle County are also supporting the effort.

Originally, the Town of Carbondale had sought the grant on its own, hoping to build on the work of the CAHC, which was established last year to develop housing projects and partner with the town government to create an affordable housing policy.

The initial grant request was denied, but grant officials suggested broadening the scope to involve other area communities that are dealing with the same issue, so that solutions could be identified from a regional approach. With the assistance of Laird and HMC to line up support from the other entities, the grant was approved.

"So much has happened with affordable housing just since we got the grant," Laird said, pointing to efforts such as a unique employer-sponsored housing project that CAHC is trying to develop in Carbondale, where businesses would actually put up the money to build housing for their workers, as well as Garfield County's adoption of affordable housing mitigation standards for developers.

Serving as the only physical model for deed-restricted affordable housing in Garfield County is also Carbondale's Thompson Corner, a neighborhood of 60 homes that was recently completed, and which the developers of River Valley Ranch were required to build when the larger project was approved in 1994.

Homes in the neighborhood sold starting at about $80,000 up to $190,000 to qualified buyers who met income and asset guidelines. Priority was given to local workers and residents in a lottery in which about two-thirds of the homes were reserved before they were even built.

Long-term affordability of the units was assured through deed restrictions limiting their appreciation to between 3 percent and 5 percent per year, based on a formula using the region's Consumer Price Index.

"One of the goals of this study is to take advantage of what various entities have already done or are doing, and to provide a strong foundation for government to use and expand on," Laird said. "It's like a tool kit. We want to provide as many useful tools as possible for governments to decide which of those tools might work for them."

Molding the models

It's not a one-size-fits-all issue, but there are numerous models already available. Thompson Corner was modeled after Aspen and Pitkin County's affordable housing program, which requires developers to provide a certain percentage of affordable housing using deed restrictions.

Pitkin County also collects a 1 percent real estate transfer tax that supports a public affordable housing program to oversee pricing and resales of units through a lottery system.

Although the real estate transfer tax is no longer an option for funding due to changes in state law, the housing initiative could identify other resources for governments to use to create public housing programs.

Carbondale didn't have an affordable housing requirement on its books at the time Thompson Corner was created and still doesn't, but the town's trustees still required River Valley Ranch to build the homes as a condition of annexation and approval of the 650-home, 500-acre golf course development.

Eagle County has also never adopted standard affordable housing regulations, but dating back to the 1970s and continuing today has worked with developers on a case-by-case basis to create employee housing and deed-restricted units reserved for local buyers at certain income levels, said David Carter, housing coordinator for the county.

In 1998, Eagle County, in cooperation with the Vail Board of Realtors, local banks, the Northwest Loan Fund and state and federal programs, also established a down-payment assistance program for first-time homebuyers who work in the county. And just this month, the county, with help from the Colorado Division of Housing, purchased a 73-unit apartment complex in Eagle-Vail in order to preserve it for affordable housing.

The Town of Basalt also recently came up with its own standards, as have other communities in Eagle County. But the missing piece of the puzzle has been to establish some kind of uniformity between the county and the municipalities, which is where the regional initiative could be beneficial, Carter said.

"The Board of County Commissioners has been meeting with all of the towns in the county to discuss regional housing needs," he said. "Part of that discussion has been to establish uniform development requirements to limit jurisdictional shopping."

Carter said it's commonplace that developers will shop around to find the least-restrictive regulations and pursue their projects in the town or county that has the fewest requirements.

But, if local governments could come up with some fairly standard guidelines for affordable housing, developers would know what expect and communities could meet their housing needs in a more uniform fashion without one community being unfairly burdened, he said.

Work in progress

Garfield County Housing Authority Executive Director Sheila Smith agreed with Carter than the playing field has to be level.

"We need a regional playing field, so that everyone is even and developers know what to expect," said Smith, who along with Carbondale's affordable housing group, members of the grassroots citizens' group the Roaring Crystal Alliance and others, worked to develop the county's new affordable housing regulations.

Garfield County's land-use code now requires that developers set aside 10 percent of the total number of housing units in their projects as deed-restricted affordable housing, with starting prices that families or individuals making the median income for the county, or below, could afford.

The model assumes a 5 percent down payment and means monthly housing payments and homeowners association dues cannot exceed one-third of a single wage earner's or multiple-income household's monthly income, based on the median income.

County commissioners are still working on an implementation plan for the program, since the creation of deed-restricted units will require that an entity, probably the housing authority, be designated to oversee resales and income guidelines for buyers.

However, Smith noted that if the municipal jurisdictions in the county don't adopt similar regulations or some other type of standard, the county's mitigation efforts will be less effective.

"If Rifle, Silt, Parachute, New Castle, Glenwood Springs and Carbondale don't all come forward and say, 'these are our rules, too,' then developers are going to shop around to find the least restrictions," she said.

Is that legal?

Garfield County decided to join in on the study, in part, to answer some legal questions it has had about requiring developers to provide affordable housing.

In fact, a key focus of the study will be to establish a legal foundation for the mitigation standards that will be developed, including a review of "takings" issues, case law, types of regulatory devices, common principals to employ and a checklist detailing the legal risks.

The most notable case law had to do with government rent controls in Telluride, which were challenged by a developer and are now before the Colorado Supreme Court.

"That particular example may be limited to the facts of that case, but it is a problem that we will have to deal with," said Aspen attorney David Myler, who is one of the consultants working on the study and who has also been advising the CAHC on its employer housing project.

For that reason, it may be difficult to include mitigation standards for rental housing as part of the regulatory model.

"It's possible that rental programs required of the private sector by governments are simply too problematic to even pursue. That's not to say that rental projects are impossible, but there appears to be an extent to which you can control rents," Myler said.

What's working to the advantage of affordable housing mandates is that there is more of a justification for them, based on a so-called rational nexus which has been the basis of court rulings regarding such things as impact fees and other regulatory tools.

The rational nexus says that, as long as a clear impact can be shown, then fees or other regulatory measures to mitigate that impact are justified.

"The main difference between the era of Pitkin County-style regulations and the affordable housing requirements that are being talked about now is that the rational basis for what governments are doing has increased," Myler said.

"It's always been my feeling that housing is not a one-dimensional issue," he added. "There are basically three sides to it.

"There's the regulatory side -- what and how much to require out of new development, and whether there's a legal and practical justification for it. There are the direct public-sector housing programs, where government builds housing and fills a need that's not met by the private sector.

"And then there is the public/private approach, where governments work with private interests to solve a problem," he said. "You need that balance, so that everyone who has a stake pays their share and no sector of the community has too much of the burden."

John Stroud is a staff writer for the Valley Journal in Carbondale.