Deed restriction buyout proposal illustrates economic shifts | SteamboatToday.com

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Deed restriction buyout proposal illustrates economic shifts

West End Village in Steamboat Springs is the target of a new proposal that would ease deed restrictions because of a real estate market devastated by the Great Recession. The plan would keep requirements that potential buyers work in Routt County and live in the home as their primary residence.

— Local affordable housing advocates say a proposal that would reduce deed restrictions on some West End Village homes is not a death knell for their efforts and results — rather, they said last week, it indicates the need to periodically change policies to suit ever-changing markets.

"As economies go up and economies go down, there are repercussions for all the decisions we make on one end or the other," said Steamboat Springs businessman Ed MacArthur, a former president and current treasurer of the Yampa Valley Housing Authority's board of directors. "I don't know how you find the perfect scenario to fit all the people, all the time."

When the framework for West End Village was created a decade ago, "perfect scenario" is a sentiment that may have been in the air. Steamboat Springs City Council approved

the development on the city's west side in December 2000, through collaboration with the Regional Affordable Living Foundation, the initial iteration of the Housing Authority. The city and Routt County helped subsidize the project.

RALF initially had a waiting list of 75 people interested in West End homes, but — in perhaps a forecast of unforeseen economic fluctuations to come — the project stalled in 2001 as some investors lost interest during an economic slowdown worsened by the events of Sept. 11.

Connell Resources closed on the 30-acre property off Downhill Drive in January 2002. The development plan stipulated that RALF would buy half the property and, along with other deed restrictions, offer homes to people who earned less than 120 percent of the area median income. In 2002, that amounted to $67,200 for a family of four.

In 2010, for comparison's sake, $67,200 was 120 percent of the area median income for a household of one. For a family of four, 120 percent was $95,880, according to Housing Authority data.

Kathi Meyer, a past president of RALF as well as former longtime member of the Housing Authority's board and current vice chairperson of the Steamboat Springs Planning Commission, was very involved in the creation of West End Village as an affordable, socio-economically diverse community for the local work force.

She said she knew at the time that housing markets would change — just not as much as they have in the past couple of years.

"I would have never thought that we'd have the real estate recession that we did, but I've seen the local market go through two very dramatic corrections," Meyer said, referring to the recent recession and a market downturn in the '80s. "My crystal ball wasn't that good, but I knew that ultimately there would be a correction, that things wouldn't go up forever."

They didn't.

Amid a real estate market devastated by the recent recession, city officials now are considering a plan that would enable West End Village homeowner Rebecca Roof to buy out of two deed restrictions — the income requirement and a $250,000 net worth cap — for potential buyers of her home at 2357 Penny Lane.

In order to maintain the community character instrumental to development of West End Village, though, the plan would keep requirements that potential buyers work in Routt County and live in the home as their primary residence.

The Steamboat Springs City Council gave initial approval to the plan April 5 and could give final approval May 3.

Councilman Jon Quinn said he hasn't heard much from residents potentially concerned about the removal of deed restrictions. Quinn called West End Village an example of homebuyers who become "trapped by a deed restriction as opposed to being saved" by it.

"I think it's another indication that perhaps some of the policies of the past did not account for the huge potential downturn. … This policy only works when the market continues to work upward," he said. "It seems to be a pretty good argument, in my mind, that a free market has to solve these problems."

'Million-dollar question'

Meyer said the removal of some West End Village deed restrictions would in no way make the overall project a failure. She noted that homes there have no limit to their appreciation, as do homes in some other affordable projects such as Fox Creek Village, a Hilltop Parkway development built by the Housing Authority.

"In the case of West End Village, because there was never a price restriction, I would view it as a success … and the neighborhood that was built achieved its goal," Meyer said.

Meyer and her husband own a West End Village duplex, which Meyer said they rent to long-term locals.

"What makes it attractive is the neighborhood," she said.

Mary Alice Page-Allen, asset and program manager for the Yampa Valley Housing Authority, said 41 of the 72 West End Village lots have deed restrictions. Although Roof's request arose out of the special circumstances involving a job transfer, Page-Allen has said the process could set a template for future requests from other homeowners. Costs to buy out of deed restrictions could vary significantly depending on the home and the neighborhood.

Page-Allen acknowledged that when the economy rebounds and local housing prices again climb out of reach for some local workers, the Housing Authority could find itself again implementing affordability measures.

"When the marketplace comes back, I think we're going to have to pull out a different set of tools," Page-Allen said.

Since the market's plunge, the Housing Authority has focused on scaled-down efforts including property management and its down payment assistance program.

"It just depends on what the need is and what the dynamic is today," Page-Allen said.

MacArthur said whether the Housing Authority will need to re-implement affordability policies in the future is uncertain.

"I suppose that's probably the million-dollar question," he said, before citing the inevitability of housing bubbles and bursts. "The unfortunate part is that history has shown this kind of thing happens all the time."

That could mean local housing policies in coming years will rise and fall with housing markets.

"I think that over time, we'll have to continuously look at and adjust these regulations," MacArthur said. "We've now interfered with the market, so we'll have to continue interfering with it in some fashion."

To reach Mike Lawrence, call 970-871-4233 or email mlawrence@SteamboatToday.com