Healthy Mountain Communities
 

Regional Affordable Housing Intitiative

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Sections:

Section I -
Introduction

Section II -
Definition of Need

Section III - Strategies

Section IV -
Legal Basis for Affordable Housing Programs

Section V -
Regional Administrative Recommendation

Tools & Resources:

Model Ordinances

• Residential

• Commercial

Implementation Briefs

Affordable Housing Summit

Local Ordinances

• Basalt

• Carbondale

• Aspen/Pitkin County

• Garfield County

Other Local Housing Reports

• Garfield County Housing Needs Assessment (2001)

 Organizations

• Colorado Housing & Finance Authority

• Metropolitan Area Research Corporation

Section I - Introduction

The purpose of the Regional Affordable Housing Initiative is to provide tools for local jurisdictions in the Basalt to Glenwood Springs area of the Roaring Fork Valley to augment and continue development of their affordable housing programs. A task force with representatives of Glenwood Springs, Basalt, Carbondale, Garfield County and Eagle County worked together from July through October 1999 to review options and provide direction in developing tools tailored to local housing needs.

The Regional Affordable Housing Initiative was funded by the Smart Growth Regional Partnerships Program with generous local contributions from the Town of Carbondale, City of Glenwood Springs, City of Aspen, and Garfield County. Healthy Mountain Communities, a regional nonprofit organization, administered the initiative.

The benefits of the work include:

• A grounded legal foundation for specific affordable housing programs
• A detailed analysis of survey data that quantifies the housing needs
• Model ordinances that can be used to supplement or establish standards for housing programs
• A framework for administration which all five jurisdictions in the area can use to manage the emerging housing inventory

The work developed by the task force includes two sets of tools for consideration by local governments. The first set provides model ordinances, with comprehensive legal underpinnings, that set standards for exactions and incentives. The standards are intended to increase the inventory of affordable housing as developers meet the requirements by constructing housing or paying in-lieu fees.

The second set of tools provides a framework to create a regional administrative entity to manage the affordable housing stock that is being developed at the local level. Options for new revenue sources to cover the costs of management are also included with this set of tools. Throughout the process, task force members requested a lean management program, due to limited funding and strong desires for an efficient operation.

The task force members, project administrator, and consultant team hope the tools described in the following sections help local governments further develop and implement their affordable housing programs. There has been significant collaboration by the local governments and concerned citizens in the region throughout this initiative. We hope the tools described in this report provide the groundwork for future cooperation to foster affordable housing and ensure the vitality and health of the region's communities. Detailed summaries of the task force considerations and decisions are included in Section I of this report.

Section II Definition of Need

The term "affordable housing" does not have one single definition; rather, it varies with the context. A widely accepted measure used the by U.S. Department of Housing and Urban is that housing is considered to be affordable if the monthly payments required to rent or own the housing do not exceed 30 percent of the income of the occupants. It can also be defined in reference to specific types of residents, such as employees, first-time homebuyers, renters, etc. In the Regional Affordable Housing Initiative, the term affordable housing has been used to refer to housing which is affordable to persons residing or working in the Basalt to Glenwood corridor, on the basis of the 30 percent cost threshold.

The central cause of the affordable housing problem in the Basalt to Glenwood corridor is that housing prices have been escalating at a faster rate than income in the past several years. As illustrated in the following chart, the average wage paid by Garfield County employers has increased by 32 percent in the 1990 - 98 period. During that same time period, the median price for rental housing in the Glenwood - Basalt corridor has increased by 47 percent and the median price of ownership housing in the Carbondale/Glenwood area has increased by 113 percent. In other words, over this period, rents have increased 48 percent faster than wages, and for-sale housing has increased roughly 2.5 times faster than wages.

The fallout from these patterns can be numerous. As discussed further below, many households end up devoting a high proportion of their income to housing, or move to areas further downvalley where housing is cheaper. Additional impacts, some more difficult to quantify than others, can include:

• increased traffic;
• loss of community;
• delayed homeownership
• overcrowding;
• high rates of households with unrelated roommates (to split housing costs);
• high rates of multiple jobholding;
• inability of employers to fill jobs;
• and turnover in the population due to a disadvantageous housing situation relative to other communities.

The rapid growth in prices of for-sale units is documented further in the following graphs. The median price of single family homes has reached $329,000 in Basalt/El Jebel (1999 through May), $294,000 in the unincorporated Carbondale/Glenwood area (1998 through August), $216,750 in Carbondale (1998 through August), and $208,000 in Glenwood Springs (1998 through August). The median price of condominiums/townhomes has reached $193,000 in Basalt (1998), $143,500 in Carbondale (1998 through August), $151,750 in Glenwood (1998 through August), and $196,500 in the unincorporated Glenwood/Carbondale area. In most regions of the valley, the surge in prices began in 1992 – 93, and has continued unabated since then.

In this context of rapidly increasing housing prices, a significant proportion of Glenwood-Basalt area residents are experiencing housing affordability problems. As stated before, housing is generally considered to be affordable if households pay no more than 30 percent of monthly gross income for a mortgage or rent payment. According to the combined results of the 1998 Healthy Mountain Communities and Aspen Valley Improvement Association surveys, approximately 32 percent of households residing in the corridor pay in excess of 30 percent of their income for housing. Households at lower income levels are particularly likely to face a housing "cost burden," as illustrated in the following table. Virtually all households with annual household incomes below $14,400 (i.e. households earning less than 30 percent of the median household income for the region, which is $48,000) are cost burdened, as are 61 percent of households earning $14,400 - $28,800 and 61 percent of households earning $28,800 to $38,400. Renters are somewhat more likely to be experiencing a housing cost burden (35 percent) than current owners (30 percent).

In an additional measure of the problem, a significant number of persons who work in the Glenwood - Basalt corridor (or further upvalley in Pitkin County) live in downvalley communities such as New Castle, Silt, Rifle and Parachute. The combined results of the AVIA/HMC surveys indicate that 27 percent of workers employed in the Glenwood - Basalt corridor live in these communities downvalley from Glenwood Springs. In excess of half of these workers (roughly 60 percent) indicate that they would prefer to live in upvalley communities (primarily in the Glenwood - Basalt corridor), but do not or cannot, presumably in large part because of high housing costs.

In summary, the data suggest that there is a need for additional affordable housing at a wide range of levels in the Lower Roaring Fork Valley. Over half of low-income households (i.e. households earning less than 80 percent of the median household income for the region) are experiencing a housing cost burden, suggesting a clear need to target these groups. Additionally, a high proportion of moderate-income residents earning 80 – 120 percent of the median income are also experiencing a housing cost burden (26 percent), indicating affordability problems at higher income levels. Moreover, for moderate-income households, first-time homeownership is also a pressing issue, as the stock of available housing that is within their price range dwindles. The needs are demonstrated in both the rental and ownership sectors. Additional analyses of the needs of the region are provided in Section II and the Nexus Analysis in Section IV.

Section III Alternatives Considered & Programs Selected

The Regional Affordable Housing Task Force reviewed 22 alternative programs that could be developed to address the housing need. The range of alternatives included incentives and exactions as well as programs that were based on production, financial opportunities and zoning standards. Each of these alternatives is described in detail in Section III. The purpose of presenting the full range of options was to provide the opportunity to select programs with the greatest potential to address the local needs.

The task force selected four of the 22 options, which are described below:

• Commercial-Industrial-Lodging Linkage: A zoning provision that requires developers to provide funds or housing to mitigate a portion of the housing needs created by new development. The rationale for the program is that the new uses are a direct source for most permanent and seasonal employees and the developers should be required to provide housing in proportion to the additional need that is generated.

• Inclusionary Zoning: A set of standards that requires the inclusion of affordable housing, or a financial setaside, in proportion to the size of new residential development.

• Density Bonus: A program that provides an incentive whereby projects are granted additional residential density over and above the maximum limit with the provision that the housing (or a portion thereof) be deed restricted as affordable.

• Two related programs: 1) An Affordable Housing Overlay Zone District and 2) An incentive program providing flexible development standards and significant density increases, with a requirement that 50% of the development be deed restricted for affordable housing.

The programs considered were presented as pieces of a larger affordable housing strategy to be developed by the communities in the region. Two of the selected programs are mitigation-based and two are incentive-based. The programs tie production or provision of affordable housing to approval of free-market development. The consultant team researched the programs and documented the legal basis for each. Based on the research, model ordinances have been written for each of the programs and are provided in Section III.

Section IV Legal Basis for Programs

A detailed analysis of the legal authority for affordable housing programs, for both the mitigation methods and the inclusionary zoning rationale, is contained in Section IV. The model ordinances establishing commercial linkage, inclusionary zoning and requirements for an affordable housing overlay district have been designed to satisfy the principles identified in the analysis which are required for programs such as these to be legally defensible.

The linkage and inclusionary programs rely on private developers to provide or subsidize the affordable housing in connection with new development. The provisions of each ordinance are based upon authority specifically granted to local governments, or reasonably and necessarily implied from specific grants. If local governments properly adopt and implement the ordinances, the requirements of each ordinance will not result in violation of the constitutional rights of the developers and land owners who are required to comply with those requirements.

The commercial linkage program is based upon the theory that new development creates a demand for affordable housing and can therefore be required to mitigate the impacts that it creates on an identified need for affordable housing. Such a program will be upheld under the law if its requirements are based on the following:

1. Duly adopted standards;
2. A rational nexus between the impacts of the development and the requirements of the program; and
3. If the extent of housing required is roughly proportional to the housing needs that will result from the development.

The model commercial linkage ordinance is based upon and supported by a detailed analysis of the housing needs of the region and the job generation characteristics of new commercial development in the region. The Regional Affordable Housing Initiative Nexus and Affordability Analysis which is contained in Section III provides the essential foundation for the nexus and proportionality requirements of a valid mitigation program.

The inclusionary residential program provided in the model ordinance relies on a local governments' authority to control land use rather than on mitigation theories. Inclusionary zoning requires, or provides incentives, for developers to set aside housing units for low or moderate-income households. This technique may be, but is seldom, justified by mitigation principals. However, mitigation studies such as the nexus analysis serve to bolster the local governments' legitimate justification for set aside requirements. As a use restriction, the inclusionary set aside requirement will be upheld unless a land owner can establish that the requirements deprive him of nearly all economic use of his property or that the amount of the set aside is unreasonable in relation to the identified housing needs of the jurisdiction. The analysis conducted in this initiative confirm that many households in the region require assistance, that currently other local governments in the region are imposing set aside requirements ranging from 10% to 60% without seriously impacting property values and that, based upon the concept of regional public welfare, requiring set asides will advance a legitimate public purpose.

Section V Administrative Options & Recommendation

Based upon input from the Task Force, it appears that there is substantial support for a cooperative regional effort in the Basalt to Glenwood Springs to administer local affordable housing programs. Such a regional approach will need to balance the following:

• Ensure that the affordable housing is going to the intended user;
• Protect the investments made by local communities to produce the housing; and
• Provide information that can be used by regulatory agencies and the private sector to better understand potential market needs and to make program adjustments.

As the work of the Regional Affordable Housing Initiative has progressed, the communities in the area have taken actions independently to create housing solutions. Some communities in the area, Garfield County and the Town of Basalt, adopted mitigation standards in the recent past. In addition to adopting standards, other efforts undertaken recently include annexation agreements and fee wavers to incent or require the private sector to generate affordable housing. As a result, the local inventory of deed restrict affordable housing is growing with approximately 200 units in the planning or construction phase of development. As a result, as the housing is completed and becomes available to residents, there is a unique opportunity to establish regional management. The management structure could serve the housing that is under development as well as future housing to be created by the regulatory programs discussed in Section III.

A. Roles and Responsibilities at the Regional Level

There are three key entities which each play a role in the development of affordable housing. These include the regulatory agency, the development community and the administrative entity. The task force as part of the process for evaluating administrative options reviewed each of these entities. The following summary describes the outcome of these discussions:

1. Regulatory

Regulatory tasks should remain within existing local governments. While there would be a great deal of interface between the regulatory entity and the administrative entity, it was important that they be separate to avoid duplication of effort throughout the area. Each community would establish local policies and guidelines for administration. This would include establishing affordable housing mitigation rates and defining cash-in-lieu and off-site mitigation standards. Each community would also identify the priority for distribution of the housing, allocation methods, pricing structures and re-sale approaches.

2. Production

Non-profit and for-profit organizations would define the response to identified housing needs and would match need to production. This would entail constructing units and/or acquiring units to meet the program requirements. Developers would initially market the units. They would also provide feedback regarding the performance of the administrative entity.

3. Administration

The third key entity is the administrative branch. While the previous two entities are well established, the administrative entity does not exist at this time in a regional form. Individual communities are addressing their management needs differently as the inventory of deed restricted housing emerges. There are two critical priorities for administration:

• Monitoring housing needs – this includes maintaining information on market conditions as they relate to household incomes, sizes and types. It also includes keeping track of the types of housing sought by different households, maintaining information on current rents and sales prices of housing offered in the area, and conducting or contracting for periodic studies of housing needs in the area.

• Facilitating the rent and/or sale of affordable housing – this involves maintaining waiting lists, conducting lotteries as needed, performing income verification, and offering community-wide educational forums for Realtors, lenders, employers and prospective program participants.

B. Administrative Board Structure

Two approaches for providing administrative services were selected by the task force for further consideration. Both options reflect a desire to have a board with regional representation and to utilize the services and/or staff of an existing entity. The staff of the Garfield County Housing Authority was identified in both scenarios as a good resource for staffing services. This agency has experience working with regulatory requirements, income verification and overall program management.

Newly Established Non-Profit

This option would create a new non-profit agency that would contract with the Garfield County Housing Authority to provide administrative services. The new board could also contract with other organizations to provide information about local market conditions and to monitor housing needs.

• A nine-member board of directors would be named that had regional representation. Elected officials could name or approve one board member. The following jurisdictions would be represented: Garfield County, Glenwood Springs, Basalt, Carbondale and Eagle County.

• In addition to the five members that would be named or approved by local officials, four at-large members would be named. At least one of these members would be from El Jebel.

• At least one at-large member should be living in housing that has been produced as a result of the affordable housing initiatives.

Expansion of the Existing Garfield County Housing Authority

This option would involve expanding the current housing authority board from five members to ten members to include representation from communities that are not currently represented on the board.

• At this time, the Garfield County Housing Authority has representation from Parachute, Rifle, Glenwood Springs, Castle Valley and Silt.

• The current board could be expanded to include El Jebel, Carbondale, Eagle County, Garfield County and Basalt. Again, elected officials would either name or approve representatives to this board with the exception of El Jebel. Because El Jebel is not incorporated and lies between various counties, it was felt that a special effort would need to be made to recruit an at-large volunteer from this community.

C. Staffing

In both cases, task force members anticipated that the staff for the regional administrative entity would be contracted from the Garfield County Housing Authority. The funding for the additional staff is discussed in the following section under revenue options.

The options for staffing the administrative entity include the following:

1. Allocate time and resources for a half-time Administrator, who would be assisted by a full time Housing Specialist. The Administrator would be responsible for the operations, budget development and administration and interfacing with local planners about program requirements and up-coming projects. The Housing Specialist would be responsible for facilitating the rental or sale of the affordable housing inventory. This would include conducting income verification, lotteries, hosting information fairs and forums and maintaining on-going program compliance.

2. Combine the duties and salaries of the administrator and housing specialist into one full-time position. Due to the high cost of living in the area, it was suggested that the budget and duties of the two positions be combined into one and efforts made to fill the position with someone with good experience in the area of affordable housing.

3. A variation on Option #1 is to maintain two positions but increase the salary of the Housing Specialist. This could be done by reducing the amount of time allocated for an administrator and transferring the savings into the salary of the Housing Specialist. This option is suggested to address the different skill-sets required for an administrator and a person who would perform the duties of the Housing Specialist.

D. Budget

An annual operating budget was developed for the administrative entity. It is estimated that the initial budget will be $137,000. The following table provides a summary of the costs:

Administrative Budget

A more detailed budget is provided in Section V.

E. Revenue

There are potentially five jurisdictions that would participate in the administrative program. The goal is to have each entity make a contribution to cover the administrative costs. While the contribution could be provided from existing funds, one of the tools developed in this initiative provides the option for creating a new revenue source.

The model funding source is intended to have minimal fiscal impact on the community. The concept links the need for administration of the affordable housing to the employment base, as employees are the primary source of the demand for affordable housing. Employers have the potential to benefit from the program, as it will oversee an increasing supply of affordable housing targeted to employees.

The funding model has been developed with the combined goals of simplicity and equal distribution of cost. Revenue would be generated from fees that range from $50 to $150 per year, based on the size of the business. Based upon information provided by the Colorado Department of Labor and Employment, there are 1248 employers in the region. Applying a graduated fee schedule to these employers, as shown in the table below, could generate $88,600 annually.

Potential Revenue, based on Size of Business

There are at least two other new revenue sources that could be used to cover the costs of the administrative entity.

1. Application Fees of $25 could be charged to households seeking an affordable housing unit. It is estimated that this would generate $2,500 annually after a sizeable inventory has been constructed.

2. Transaction Fees of 2.25% could be charged on all re-sales of restricted housing. This option is projected to raise $136,677 annually when there are 150 units in the program. The amount of revenue generation is dependent upon the number of units that are in the affordable housing pool and the turnover rates. It is important to note that these transaction fees assume that units are sold through the administrative entity.

As the inventory of affordable housing grows, the revenue generated by application fees and transaction fees is intended to be sufficient to cover all administrative costs. The goal is to establish fee structures that enable the entity to become self sufficient over time.

Given the approach that each jurisdiction in the area would contribute to cover the operating expenses, there are three potential methods that can be used to determine the proportional share for each jurisdiction.

1. The proportional share can be based on the distribution of employers. This rational recognizes the benefit that accrues to the employers as the housing programs increase the availability of affordable housing for employees. This concept works best when using a regional perspective. The data shows that a majority of the employees in the Basalt to Glenwood Springs corridor also live within the corridor (73%). While the housing to be generated may not be located within the same jurisdiction as the jobs, it is important to note that a majority of employees both work and live within the corridor.

2. Base the proportional share on the distribution of the affordable housing stock. The rational for this approach is based on housing instead of employment. Communities with the largest share of the housing inventory would also be responsible for the largest share of the administrative costs.

3. A third alternative would incorporate both the proportional demand (employment) with the proportional supply (housing stock). Both would be used to determine the financial contribution from each jurisdiction. The advantage to this approach is that it takes into account both the communities with the potential to generate the most revenue and those with the potential to generate the most housing.

Success will be dependent on maintaining the regional perspective and recognizing that some communities are better suited to provide housing locations and others to provide the financial resource. The two work in conjunction with each other and are not inconsistent with the existing demographic patters, noted earlier, as 73% of the Basalt to Glenwood Springs workforce lives within the same area. It is suggested that the proportional contribution levels be revisited periodically. This would allow for adjustments based on the change in the distribution of both housing and employers. More importantly, it would shift the funding from the jurisdictions in the area to the administrative entity, as income from fees grows with the inventory. The long-term goal for the administrative entity is to be self-sufficient.

Section VI Legal Basis for Model Funding Ordinance

As discussed in the previous section, the regional administrative entity would ideally be funded by a contribution from each of the jurisdictions in the region. A fee-based revenue generation source has been included as one of the tools provided as part of this initiative. Section V includes a model ordinance that may be adopted by jurisdictions to establish this revenue source. Ultimately each jurisdiction may choose how to cover its share of the costs.

There are several options available to municipalities and counties for the purpose of generating funds to carry out various functions. The most common are ad valorem taxes, excise taxes, special assessments and special fees. The first two require voter approval and the third, special assessment, is inappropriate for the intended purpose. For those reasons, the focus has shifted to the fourth option, the so-called "special fees." As discussed in more detail in Section V, a special fee can be authorized and imposed by each of the municipalities and counties within the region, without the necessity of voter approval, which will provide an adequate and reliable source of revenue for regional administration. Furthermore, the special fee envisioned here is not a development exaction, which must satisfy the rational nexus and rough proportionality tests.

It is possible for each of the local governments in the region to impose a fee upon any entity operating within its boundaries which has employees. Such a fee would be justifiable, both legally and politically, since those employers will specifically benefit from the efficient and consistent administration of programs that provide housing for the region's work force. As in Bloom v. City of Ft. Collins, liability for the fee would be based upon the status of the payer; namely the employment of individuals who will potentially benefit from the program being administered. And, as long as the revenue generated by the fee is used only to defray the cost of providing for the administration of housing programs, it should be upheld in a court of law.

The special fee contemplated herein is not a tax that requires voter approval under Article X, Section 20 of the Colorado Constitution (TABOR). However, the revenue generated by the fee will need to be considered by each local government in determining annual spending limits. As with all revenue increases, voter approval may be required in order to spend such increased revenue.

Section VII Other Tools

The task force considered two other tools that could be used in conjunction with the other programs. The first involves the issue of siting affordable housing in the Basalt to Glenwood Springs corridor. As part of that analysis, a complete inventory of current and historical affordable housing developments was provided and is included in Section VI. The inventory shows over 200 affordable housing units that are in the planning or construction phases of development. In addition, there is one development in Carbondale, Thompson Corner, which is complete but also in need of a long-term management solution. Other affordable housing developments in the corridor include two rental projects developed by the Archdiocese which are managed internally.

As part of the work done on siting affordable housing, criteria were developed and shown graphically, using the Garfield County GIS mapping system. These are included in Section VII. The criteria include proximity to transit, commercial centers, and schools. Maps were also based on the exclusion of certain land use designations such as natural hazards, open space, and low-density areas. Three scenarios were mapped applying broad, general and narrow parameters to these criteria. This exercise shows how to use multiple criteria to evaluate the suitability of certain areas or sites for affordable housing.

Section VII Conclusion

The high level of involvement on the task force from the communities in the area reflects not only the recognition that affordable housing has become an important issue in the region, it also reflects that desire to foster more affordable housing. In the interest of moving from analysis to implementation, this report includes the following suggested next steps:

Next Steps: Regulatory Standards

Regulatory standards are the basis for each community’s housing program. The standards, when applied to development proposals, will increase the housing inventory overtime. The tools that have been created allow the latitude for communities to set the standards for the housing programs independently. Suggested next steps for each community include:

1. Review the legal rationale and the nexus study as they relate to the regulatory standards.

2. Based on the community priorities, set mitigation levels and incentive standards that can be supported politically and economically.

3. Tailor the model ordinances to fit the local land use regulations.

4. Adopt mitigation and incentive standards

Next Steps: Administrative Entity

As noted previously, given the similar needs of the local communities to administer existing and potential affordable housing stock, there is an opportunity for the local communities to pool their resources and gain an efficiency that cannot be achieved independently. Steps toward creating a regional administrative entity are listed below. (Note: Obviously, creating a regional administrative entity for affordable housing makes sense only if enough of the governments in the Basalt to Glenwood Springs adopt ordinances and regulations to foster affordable housing.)

1. Focus the Dialogue with Regional Representatives

2. The work of the task force has provided a framework for an administrative entity. The need at this time is for a group of community members to volunteer to discuss the recommendations with local jurisdictions. The proposed framework can be refined, as needed, but can be used as a starting point for the discussions.

3. Create the Administrative Entity

4. After local jurisdictions have considered the options, they can determine which board structure best reflects the needs of the region. The volunteer group formed as part of the first step can then shift the focus to establishing the regional board, with all the necessary documentation. Separating discussions of board structure from the discussions on funding will enable action to be taken sooner. Once the board has been organized, it can further define the vision for the administrative entity. Significant time may be required to work with local jurisdictions to refine the scope of services, the appropriate staffing levels and the associated budget needs. The board can become a centralized voice for the communities as these issues are finalized.

5. Develop funding commitments

6. The next step involves developing commitments from the jurisdictions in the region for financial contributions. The proposed budget provided in the recommendation may require adjustments as the board prioritizes specific needs. The board may also need to assist with regional efforts to adopt the model funding source, as individual communities express interest. Once jurisdictions are able to define their financial commitment, an inter-governmental agreement should be executed.

7. Hire staff

With the necessary funding in place, the regional administrative entity can become more effective by filling the staff position(s). Staff is seen to be critical to the long-term success. The sooner the board is able to hire the staff, the more effective it will be. The staff can play key roles with day-to-day interface with the different jurisdictions as well as addressing the primary role of managing the inventory of housing.

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Last update 10.11.06