The unprecedented housing crisis in Colorado will soon see an equally extraordinary flood of cash. In Colorado’s high country, where affordable housing is a decades-long issue that exploded into a catastrophe last year, an army of developers on the front lines of a complex campaign to build workforce housing are ready to help guide the sudden influx of funding.
Their first tip: hurry.
“As a developer of affordable and workforce housing we are feeling the intensity of the timing here,” said Kimball Crangle, the Colorado market president of Gorman & Co., which is building neighborhoods in Summit and Routt counties. “We know if we can’t get it done right now, in two years the opportunity is likely to be gone. If we don’t get housing created and set aside for the workforce of these towns, the lights will be on but nobody will be home. These are going to become ghost towns.”
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State and federal money is coming soon. House Bill 1271 would provide $13 million to communities that adopt rules that promote affordable housing projects. The legislation would create three grant programs for housing development, planning and a “affordable housing guided toolkit” for communities, all managed by the Division of Local Government in the Department of Local Affairs.
The federal American Rescue Plan Act directs $3.8 billion to Colorado. The state’s Democratic lawmakers have identified affordable housing as a priority for that money with $150 million funneled toward housing projects in the coming weeks and much more in the 2022 legislative session. Details on how that money will be spent on housing are scant.
Once the governor signs HB 1271, which passed through the state Senate this week, “we will by far see the most significant investment in affordable housing by the state legislature probably ever,” said Rep. Dylan Roberts, a Democrat from Avon.
“We will be seeing hundreds of millions heading into housing in Colorado. My hope is that this will be very transformational for our state,” Roberts said. “I’ve always thought the state needed to be a better partner for people working on the ground for affordable housing, and after this legislative session, that will be the case.”
Developers, employers offer suggestions
An informal survey by The Colorado Sun of developers who have spent decades building attainable housing in mountain communities shows a similar wishlist across the Western Slope.
First, direct cash to local housing authorities to help locals stay in rental properties that owners are converting to short-term rentals. Then give those authorities and local governments the ability to buy land for future development.
Developers, local leaders and housing advocates agree that builders of affordable homes need land, either for free or deeply discounted, to make attainability possible in constricted mountain valleys where the dirt is rare and exceptionally pricey. Developers suggest municipalities should invest in infrastructure as well so builders are not on the hook for expensive upgrades to old sewer and water systems. And finally, adjust zoning to allow more locations for apartments or townhomes, which would help quell the local opposition that stalks virtually every affordable project that requires zoning changes in high country hamlets.
“Everyone is for affordable housing until it is built next to them,” said John O’Neal with Buena Vista’s Fading West Development, who suggests zoning and codes that allow for density would limit opposition that focuses on the rezoning process. “Entitling a project is costly and risky. The free market can build attainable housing, but it’s not easy, there are so many obstacles and so much risk. We won’t get there unless some of the obstacles are removed.”
Lee Boyle regularly surveys his employees at Centura Health’s St. Anthony’s Medical Center in Frisco. For years, housing has been the most troubling issue for the CEO’s team. They were leaving Summit County. They were commuting from far-flung communities, driving over mountain passes in winter.
So earlier this year Boyle demolished his former headquarters next to the medical center in Frisco to make room for 37 affordable apartments for his employees. The decision to shift into the landlord business came from the medical center’s ongoing struggle to recruit and retain employees who can’t afford to live in Summit County.
“We were fortunate that we owned the land,” said Boyles, who has 70 employees expressing interest in renting the new units.
The reason the rent is “very, very affordable” for the medical center’s employees is because the cost of the land is not part of the rent, Boyles said.
“That’s the way we were able to address our housing issue and make it affordable,” said Boyle, who plans to add more homes to the four-acre parcel that Frisco’s town council rezoned to mixed-use from light industrial to allow for residential space.
In the spring of 2020, Summit County’s updated housing needs assessment found that Summit, Eagle, Lake, Park and Clear Creek counties needed 2,400 housing units for its growing workforce and the regional gap would be more than 5,000 homes in the next few years. Summit County since 2018 has approved 532 affordable units that were recently completed or are under construction.
More on Colorado’s housing crisis
Eagle County’s 2018 updated housing assessment showed the Eagle River Valley — from Vail to Gypsum — needing 5,900 new affordable units by 2025 and almost 8,000 by 2030.
Crangle sees three tracks for spending on affordable housing in the high country.
First, she said, for immediate relief, fund a voucher pool for homeowners to bridge the gap between market rents or short-term rental income and what locals can afford to pay for long-term rentals.
That could pull some short-term rentals back into the long-term rental pool for local workers who have been displaced by investors, she said.
Also, immediate funds coming this month form the state and federal stimulus can be used to help the developers finish projects that are approved and under construction but facing steep increases in the costs of building materials.
“The change orders we are seeing for lumber are astonishing,” Crangle said, describing prices that are increasing three-fold and even more for wood, which combines with a critical labor shortage related to the housing crisis as the primary threats to underway projects.
Gorman & Co.’s 196-unit Wintergreen apartment complex in Keystone is 100% full with a waiting list of locals. The company is building 90 units at the Sunlight Crossing complex in Steamboat Springs in partnership with the Yampa Valley Housing Authority. Gorman & Co. also is building the 80-unit solar-powered Alta Verde complex, in partnership with the Town of Breckenridge.
For midterm solutions to the mountain community housing crisis, Crangle suggests directing more funding to the Colorado Housing and Finance Authority, so more developers can access low-income housing tax credits and low-interest financing. Crangle said the authority could relax its rules and allow developers to use the program more than once a year.
And in the long-term, she pointed to regional housing authorities to help lure more developers into building deed-restricted, for-sale houses. If she had the ears of lawmakers directing money into affordable housing, Crangle would suggest deeper support for housing authorities so they can go out and buy land.
“Get the money into the hands of housing authorities and they will know what’s right for their community,” she said.
And most important, make all deed-restriction rules on new homes last forever, not just a couple of decades.
“It has to be forever because the housing problem is not going to get better,” she said. “For these communities in the high country to thrive, they have to know they have a housing solution that will be sustained over the long term.”
When developers Jean Coulter and Jim DeFrancia acquired a modest mining cabin in the East End of Aspen in 2019, they expected it would take 53 months for them to secure approval and build five affordable apartment units on the property. The project incorporates the historically designated cabin into the redevelopment, which would offer 12 bedrooms in a three-story, 5,000-square-foot complex. The city’s Historic Preservation Commission denied their application in February after neighbors complained the project would house too many people.
In April the city council sent the project back to the commission for review, determining the board considered criteria beyond historic preservation in its initial consideration.
The developers now are 18 months into the project “and we are not even halfway through the first lap,” Defrancia said.
A group of Aspen homeowners is battling the project, as well as a recent proposal to adjust the city’s zoning to allow for higher-density development on smaller residential lots.
“Today, 150 years of who we are and what Aspen represents are under assault,” reads the SaveAspen.org website.
The group and an Aspen condo association last month filed two lawsuits against Aspen over the city council’s decision to send the application back to the city’s Historic Preservation Commission. The complaints ask the court to reinstate the commission’s denial of the project.
DeFrancia said developers need guidelines that outline how local opposition can fight a project.
“In Aspen, you are going to get opposition if you put up a fire hydrant. People will always sue,” the longtime real estate developer said. “But to the extent that local municipalities can create protective boundaries that will inhibit precipitous, precocious and selfish motivations from citizens, I think that can expedite this process from what right now is six years.”
DeFrancia also suggests municipalities can also waive fees for sewer and water taps and move affordable projects to the front of the line for local review.
And parcels that could be used for affordable housing — like, say, a historic miner’s cabin in a town where the average home costs more than $8 million — are not typically zoned for the density needed to make affordable construction economical.
Coulter said the gap between articulating the need for affordable housing and actually building it is too great. Rezoning a single-family home lot for apartments can draw opposition from neighbors. It’s happening in nearly every mountain community, where high-density affordable and attainable projects are mired in lawsuits, opposition and years of review and planning.
“We hear it all the time, that these projects will harm the charm of the community … and that housing development will impair neighboring property values. But affordable housing will improve property values because it protects the charm of the community,” Coulter said. “Having a diverse population creates vibrancy. These communities are part of the overall fabric of the state and if they become exclusive and rarified, then you have lost the vibrancy that is part of the Colorado we all love.”
Coulter and DeFrancia said a good role for the government in public-private partnerships would be to help developers cover the cost of land. More than half the cost of affordable housing projects in mountain communities is tied to the price of land. The Aspen Pitkin County Housing Authority is one of the first of its kind in the country, with more than 2,900 deed-restricted units for sale or rent. The authority has no available homes for rent and has three affordable homes listed for sale, including a 350-square foot tiny home listed for $110,000 and a $1.8 million home.
The supply of homes flowing into the affordable pool has been slow in recent years, DeFrancia and Coulter said. Even their five-unit plan can help, they said.
“Ideally, the government can tell us the policy and the goals and then contribute with planning and land acquisition, but then sit back and let us go to work and we will get it done for you. But it’s not working that way,” DeFrancia said. “Aspen has been doing this for 50 years and they still don’t have it right. It should not be this hard to build local housing.”
“A permanent fight requiring permanent effort”
Scott Cox, a longtime home building and development consultant based in Crested Butte, said municipalities need to invest in infrastructure to support density. And they need to identify where — and how much — density they want.
Too often, mountain governments ask developers for ideas and then dismiss those ideas during costly review, he said. For example the 156-unit Corner at Brush Creek project in Crested Butte recently died after years of planning work that pushed down unit numbers and parking density to levels where the developer could not break even.
“We need to stop letting perfect be the enemy of good. I wonder if that is fully appreciated and talked about enough,” Cox said. “Do we want 30 people to have adequate housing or do we want 12 people to have perfect housing?”
Cox suggests mountain towns pave the way for affordable housing developers, of which there are zero in Gunnison County, with detailed descriptions of what kind of affordable housing they want to see. And Cox sees “a staggering need” for housing for residents making close to the region’s median income, which for one person is about $50,000 and about $71,000 for a household of four. Developers of homes for those workers don’t easily qualify for federal or state tax credits so maybe municipalities can find ways to provide low-interest loans to help subsidize housing for residents who earn a good wage but still can’t afford a home or rent, said Cox, who works with Gunnison County communities on housing plans.
Cox has an idea of marrying short-term rental units with attainable housing units. Like, say, a four-story complex on the edge of downtown Crested Butte with short-term rental condos up top that help subsidize apartments below for locals. And maybe that would lessen short-term rental demand for other homes in Crested Butte’s core, which could then return to the long-term rental market.
It’s time for small town governments to embrace creative and innovative ideas to help deflect a housing crisis that is worsening with each passing month, Cox said.
“You can’t do these projects fast enough,” he said. “And let’s be clear here. This is never going to be resolved; it’s going to be mitigated. Once you get to this point, no one has ever been able to go backwards ever, anywhere in the country. This is a permanent fight requiring permanent effort.”
A secondary real estate market for locals
Michael O’Connor spent two years vying to develop 5 acres zoned for local housing in East Vail. The property, a snowball’s toss from Interstate 70, included 18 acres preserved as open space and a mix of 72 apartments and townhomes. The Booth Heights project, which did not require any government subsidy thanks to 12 market-rate townhomes in the plan, was heavily criticized by East Vail residents who worried about impacts to winter habitat for Rocky Mountain bighorn sheep.
O’Connor, the chief operating officer for Triumph Development, canceled the deal in December. The company, which built 32 deed-restricted townhomes in the Chamonix neighborhood in West Vail in 2018 in partnership with the Town of Vail, now is planning 72 units with the town across the interstate from the Vail ski area.
In order for developers to make affordable projects work in mountain towns, they need free land, O’Connor said. The land for the Booth Heights project belongs to Vail Resorts, which is still pushing to have the parcel developed as workforce housing. The land for the Chamonix project was provided by the Town of Vail, which has enabled housing lottery-winning locals to buy the deed-restricted townhomes for as much as $524,000 for a two-bedroom. The pioneering Miller Ranch community in Edwards involved land provided by the country.
“The most effective things we can do as a community starts with buying land for development of affordable housing,” said O’Connor, who suggests communities look not for small acreage but parcels that can anchor a community of locals.
“Finding a way to build 50 units is fantastic, but if communities in the mountains are going to survive and thrive, they need entire neighborhoods,” he said.
That means creating a secondary real estate market of deed-restricted homes just for local residents. That’s the only way locals can compete with buyers from across the world who are hunting for homes in mountain towns, O’Connor said.
And communities need to do more than just provide the land. They need to install the water, sewer, roads and other infrastructure so developers can build units they can sell or rent at below-market rates, he said.
“Until you have a canvas to build that neighborhood, the hole is just too immense,” said O’Connor, who lives in the Vail Valley. “We have to find a way to build thousands of units, not dozens. To do that takes a big bet, but it’s a bet we need to make.”
Eagle County Commissioner Kathy Chandler-Henry agrees that land is the linchpin to affordable housing development. She sees a critical lack of options for locals earning a healthy $20 to $30 an hour, which may seem like a lot but does not get far in former worker-friendly communities like Eagle, where the median home price of nearly $750,000 is up 23% in the past year.
Chandler-Henry is not keen on tying affordable projects to the federal Area Median Income because in Eagle County, that number can be skewed by the growing number of high-earners who work remotely from their homes. Look at local W2 earnings and Eagle County’s workers are below the state average, she said.
She’s willing to talk about “buydowns,” like offering private developers money to be able to sell a home for $400,000. It’s reached a critical point, she said.
“We are in danger of losing our communities and turning into wealthy enclaves without any workers,” she said.