Deed debate begins anew

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Deed restrictions put into place several years ago to create affordable housing are being tested this spring.

How well they do on that test could affect future affordable-housing projects.

The deed-restriction debate has resurfaced, spurred by new affordable-housing projects and by the first listings for sale of deed-restricted homes in West End Village.

This spring, two projects dubbed as affordable housing have come before the Steamboat Springs City Council -- Overlook Park and a proposal for 33 modular homes in the Copper Ridge subdivision.

In both cases, Planning Commission and City Council members have asked the developers to provide deed-restricted units.

"If 20, 15, 10 years ago, we built the groundwork and said we will have deed restrictions, we will have a pool of affordable housing, where would we be today?" Councilman Steve Ivancie asked at a council meeting. "That is what we are talking about today: creating a pool."

Also this spring, two deed-restricted West End Village homes were put on the market. One sold for $250,000, and the other still is on the market for $387,000.

The homes are the first with deed restrictions to go on the market in Steamboat and will give the community its first chance to see how they work.

"They are being tested right now," said Elizabeth Black, executive director of the Yampa Valley Housing Authority.

The main objective of deed restrictions is to ensure that a house remains affordable for low- to moderate-income families, Black said.

The problem with affordable housing in Steamboat, and many other Rocky Mountain resort towns, is that the exponential growth of housing prices compared to the moderate rise in income levels makes it difficult for families to buy their first homes, Black said.

"We have a disparity between income and real estate. We didn't have such a disparity 15 years ago," Black said. "And that is the challenge. That is the need for deed restrictions."

Not everyone agrees.

During Tuesday's council meeting, Mitch Clementson, developer of the Copper Ridge parcel, argued to keep his 33 proposed modular lots free of deed restrictions. He hoped the two-bedroom, two-bathroom homes would sell for less than $200,000.

Clementson said he started out in a trailer in Dream Island and was able to sell that and build equity for his climb up the housing chain.

"That is part of why I got to where I am today. I was able to buy and sell," Clementson said.

He worries that homeowners would take a significant loss if they were to sell the homes in less than three years and that every time someone wanted to sell a deed-restricted unit, the housing authority would become involved.

He also is concerned that government-regulated appreciation on the homes will not exceed the cost of living. That leaves no room for the homeowners to build equity.

Six of the seven council members said they would like to see deed restrictions in place. They noted that although $200,000 is an affordable price for a two-bedroom home, the price could escalate quickly.

"They are going to rapidly become difficult for the working force to obtain," Councilman Ken Brenner said.

Council President Paul Strong said he believes in deed restrictions but does not think they should be applied to projects generated by the private sector.

"I don't think they need to be deed-restricted," Strong said. "I think a segment of the community is providing housing that is not being provided now, and that is a very difficult thing."

Yampa Valley Housing Auth--ority President Kathi Meyer said the debate about deed restrictions is not likely to end soon.

"I think we, as a community, are going to have a very lively discussion as we move forward with these next projects," she said.

Effects on pricing

Deed restrictions were a hot topic during the planning process for West End Village. Some community members were dead-set against the restrictions, and others thought they should come with a more restrictive price cap.

The West End Village units that the Regional Affordable Living Foundation -- the nonprofit precursor to the housing authority -- helped homeowners purchase came with deed restrictions. However, the deed restrictions did not set a limit on the resale price of the homes.

Instead of a price cap, the West End Village deed restrictions limited who could qualify to purchase the homes. If a deed-restricted house is for sale, only someone who works in Routt County, makes 120 percent or less of the area's median income and has less than $260,000 in assets can purchase it.

Structured this way, the deed restrictions target keeping homes in an attainable price range for people living and working in Routt County, Black said. That is exactly what the housing authority wants to see, she added.

Although the sale price is not specifically limited, the price of a deed-restricted home has to be such so that someone who meets the income criteria can afford it. For 2005, the area median income for a Routt Couny family of four is $72,000.

"You have to work backward," Black said. "This is how much they earn, this is how much realistically they can buy their home for and that is how you determine the cost of housing."

Taking the area median income and the qualification that a family spend no more than one-third of their income on housing, Black said the maximum price for a deed-restricted home in West End Village should be no more than $329,000.

That maximum number would be for a family at 120 percent of the area median income and include a $54,000 down payment. Someone at 80 percent of the area median income with a $40,000 down payment could afford a $240,000 home.

Although the buyer's income is taken into account, Black said sellers could ask less or more for the home, depending on how fast they want to sell it.

Meyer said the housing authority is waiting to see whether the deed restrictions work.

"I don't think we can declare the deed restrictions in West End Village a success or a failure until we really see whether there actually is a cap in price over time," Meyer said.

Effects on the future

The deed-restricted home in West End Village that sold for $250,000 was a good sign, Meyer said, noting that someone would not be able to buy land and build a home for that amount. Meyer and Black also pointed out that the West End Village house listed for $387,000 is yet to sell.

"I think it is unfortunate when someone puts something on the market and people immediately assume deed restrictions don't work," Meyer said.

The housing authority has not determined what kind of deed restrictions should be put in place for Fox Creek Village, the housing authority's next project. Part of the determination will depend on the construction costs of the project and the amount of state and federal grants the housing authority can acquire. The housing authority plans to build 30 townhomes off Hilltop Parkway.

The grants, which could require that a certain number of homeowners make 80 percent or less of the area's median income, also would come with deed restrictions, Meyer said.

The possibility exists for a number of deed restrictions to be placed on the units, depending on who qualifies for which grants.

"I think it is a great opportunity for us to look at a variety of deed restrictions in one project," Meyer said.

-- To reach Christine Metz call 871-4229 or e-mail cmetz@steamboatpilot.com

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