Developer offers up plan to keep rents down
The Post Independent, Carbondale Creative District and Carbondale’s Third Street Center will hold a public housing forum from 6:30-9 p.m. Feb. 3 at the Third Street Center.
Topics will include housing affordability versus attainability; alternative housing projects; what’s working elsewhere and what’s possible here; and potential next steps. This meeting will focus on the Glenwood to El Jebel area; a similar event is planned for in Rifle in March.
How we got here.
Last of two parts.
Richard Myers wants to build nearly 90 new rental housing units in Glenwood Springs that, by their very design as smaller studio, one- and two-bedroom apartments, should help meet some of the worker housing demand in the lower Roaring Fork Valley.
But he says he needs the help of city government and the local school district to make the Lofts at Red Mountain project pencil out and keep rents down.
Myers, a former Aspen resident who is now managing partner for Dallas-based Realty Capital Management, proposes that his and other projects like it receive a 60 percent reduction in existing water, sewer, emergency services and school impact fees for the next five years as a way to spur development of more multifamily rental housing.
“High improvement fees have contributed to a stifling of the local housing economy and created a barrier to entry for builders attempting to construct multifamily rental housing in Glenwood Springs,” Myers wrote in a Dec. 11, 2015, letter to Mayor Mike Gamba and City Council members.
“The lack of locally available rental housing necessitates that much of the local workforce lives beyond city limits, which reduces community vitality, sales tax collections and increases traffic,” he wrote.
A 60 percent reduction in fees would significantly lower the cost to build his already-approved 88-unit project on Wulfsohn Road at Glenwood Meadows.
“The idea is to encourage affordable housing to be built in Glenwood Springs, not just our project, but any project that wants to get built,” Myers said in an interview with the Post Independent.
The Lofts is just the kind of development the community needs to address the shortage of housing for median-income workers, he said.
“There is no class-A rental housing in the Roaring Fork Valley, like you see in Denver or other places,” Myers said.
It’s a free-market, centrally managed rental housing development that’s a step up for median-income wage earners who don’t qualify for the various low-income tax credit rental units for which there is also a high demand in the area, or whose employers don’t provide affordable housing.
And, with 80 percent of the Lofts units planned as studios and one-bedroom apartments, he said it’s not likely to command the high rates one now sees for larger apartments, individually owned condos, townhouses, duplex units and single-family homes.
“If you want to house the workforce of the future, and you want to attract people to be your teachers, tech workers and newspaper reporters, you need to have this type of housing,” he said.
PAYING THEIR WAY
The idea behind impact fees is that new development pay its way.
For the city’s part, that means making sure the water and sewer system infrastructure is able to keep up with new demand, and that the fire department has the resources it needs.
The Roaring Fork School District, like most public school districts, has traditionally assessed a fee in lieu of land dedication for residential developments that don’t have land to give for a new school site.
The fees are meant to help the schools keep up with the demands associated with the anticipated increase in students new residential development can bring.
School district officials also acknowledge that a shortage of affordable, or attainable, housing to help it attract and retain teachers and other staff is a problem. In fact, the district just allocated $15 million of its recently approved $122 bond issue to buy and/or build teacher and staff housing.
The school board has been reluctant to reduce school impact fees for the Lofts project alone, preferring instead to re-evaluate its impact fees across the board. That could take some time.
To help make his case, Myers offered that the Lofts would prohibit school-age children. The small unit sizes are not conducive to families with children anyway, he pointed out when the project was approved last year.
The tougher sell could be the city, though some City Council members have indicated they would be willing give a break on fees in order to encourage new development of rental units in particular.
“At this point, I think we’re in a mode of needing housing in this community … especially housing that regular working people can afford,” Mayor Gamba said recently in light of the Lofts request. “And if that is negatively impacted by the user fees that we charge, then that needs to be addressed.”
The general rule of thumb for municipalities, though, is that impact fees are needed to offset demands placed on infrastructure and services by new residential development.
A recent study of the city’s water and sewer impact fees found that, while water fees charged to developers could be lower, sewer fees may even need to increase to keep up with system improvements.
“It is very common that impact fees are questioned by all new development … for residential, commercial and institutional land use,” the study, prepared for the city by SGM Engineers, noted. “It is also just as common that municipal water and wastewater providers are struggling to provide efficient and economical services in an age of new growth, changing regulatory climates, aging infrastructure and cyclical economic cycles.”
City Council plans to continue the discussion about impact fees in general, and is slated to consider Myers’ proposal at a Feb. 4 work session.
COST TO DEVELOP
The high cost to build any new housing in the valley, both as it relates to local impact fees and the rising cost of construction, makes it hard to create anything that can be sold or rented at an affordable price.
While financing for new development projects was tight in the immediate aftermath of the recession when the bottom dropped out of the housing market in 2009 and ‘10, that’s not as much of a problem now, said Scott Dillard, broker associate with Fleisher Real Estate in Glenwood Springs.
“I don’t think it’s a challenge to get financing nowadays,” he said. “But building something that’s affordable is the problem.
“You can get financing all day for projects now, but we can’t sell them for a price that’s affordable.”
Dillard agrees with Myers that one way to do that is through public-private partnerships, where local governments agree to give discounted tap and permit fees.
“Things of that nature can help the developer bring the costs down,” Dillard said. “Otherwise, there’s no way to build anything affordable with the construction costs we have today.
Myers also said he hasn’t had a problem obtaining financing for the Lofts project, which has a tentative approval from First Bank.
“They believe in the market, and so do our investors,” he added. “But with construction costs and fees incredibly high, and an approval process that’s cumbersome, it starts to not be viable.”
One of the initial hurdles with obtaining financing, Myers said, is that there wasn’t a comparable rental housing market in the entire mountain resort corridor.
“That right there tells you there is probably a problem,” he said.
Add greed to the equation, says Lynn Kirchner, owner of Amoré Realty in Carbondale and a longtime advocate for affordable housing,
“People got greedy,” she says of the longstanding shortage of affordable worker housing in the valley, and the housing bubble that burst when the recession hit.
From property owners to builders to construction contractors and subcontractors, people saw an opportunity and took advantage of when the market was at its peak, and continuing through the recession, Kirchner said.
“It came in a multitude of ways,” she said. “Buying someone’s home for less than market value, then instead of keeping the rents reasonable, they raised the rents. Only a few landlords saw fit to keep the rent the same and keep the good tenants they had.
“Builders got greedy, service providers got greedy, and prices went up,” Kirchner added. “Everyone kept saying they had to do it to pay for the ‘higher cost of something else.’”
Until everyone agrees to control costs, from government to the private sector, it’s not likely to change, she said.
As the affordable housing problem began to rear its head in the lower valley in the 1990s, local governments started to follow the Aspen model.
For more than 40 years, Aspen and other ski resort communities in Colorado have been building a stock of deed-restricted units that could be sold or rented to middle-income earners at below-market rates.
The Aspen Pitkin County Housing Authority, through financing from a real estate transfer tax, now administers some 2,600 housing units that are set aside for local workers.
Units either have rent subsidies or are kept affordable for buyers through the use of below-market price points for people earning certain income levels. Owners are required to live in the units, and can rent them out only in emergency situations for short periods of time. Appreciation caps, typically ranging from 3 to 6 percent per year, are meant to keep the units affordable over time.
Though there is not a dedicated funding source to create such housing in Garfield County, some municipalities and even the county have adopted so-called “inclusionary housing” requirements. That means developers must provide a certain percentage of deed-restricted units, typically 10 or 15 percent of the total number of housing units, as part of their overall project.
The Garfield County Housing Authority now oversees 215 such units, mostly between Carbondale and Glenwood Springs, plus a handful of units in the Basalt area that are not in Pitkin County.
But some elected leaders have begun to question the value of the inclusionary housing requirements, especially after the recession and with the heightened need for rental units as opposed to houses for purchase.
Glenwood Springs, which was able to generate only seven deed-restricted units since the program was adopted in the late 1990s, has suspended the rules indefinitely.
Garfield County commissioners considered writing affordable housing requirements out of the county land-use code a couple of years ago, except for a legal opinion that they needed to remain on the books in order to continue administering the units that already existed.
Dozens of undeveloped lots in the unincorporated parts of Garfield County between Glenwood Springs and Carbondale are also set aside for deed-restricted units, but have not been developed.
As the housing crunch has resurfaced following the recession, it’s clearer this time around that deed restrictions are only one solution and may not necessarily be the best remedy.
“We need to understand the full suite of options,” said Clark Anderson, director of the new Community Builders, a Glenwood Springs-based nonprofit that grew out of Anderson’s long association with the Sonoran Institute.
“We have to recognize that solutions vary from market to market, and what we do in Glenwood Springs might be different than what happens farther upvalley,” he said.
STUCK IN THE MIDDLE
Anderson refers to a “missing middle” in terms of price and housing type in the lower valley, between the low-income rentals and deed-restricted units targeting those earning less than the area median income, and the higher-end single-family homes and townhouses that are out of the price range of most middle-income wage earners.
“These are people who are making an OK income, but they’re still struggling,” he said. “Right now, everybody is competing for a small pool of available housing, whether it’s rental or ownership.”
The other reality is that Glenwood Springs in particular is short on space to build, which is one reason it hasn’t benefitted from a large number of deed-restricted units in the same way Carbondale and the unincorporated areas have.
That means higher-density development needs to enter the discussion, Anderson said, which is an issue Glenwood Springs will be grappling with as it looks to redevelop the river confluence area west of the existing downtown.
And it means creating policies that encourage infill and redevelopment of older properties.
“We have to find a comfortable balance between density and community character when we start to talk about those things,” Anderson said.
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