Steamboat Springs The developers of the First Tracks affordable housing project were turned down by the Steamboat Springs Planning Commission on Thursday night, yet they still deemed it a successful hearing.
"We heard what we needed to hear," said Brent Pearson, a principal and chief financial officer of Resort Ventures West, which is developing resort housing in Wildhorse Meadows near the base of the ski area.
As part of its development permit with the city of Steamboat Springs, Resort Ventures West is required to build deed-restricted affordable condominiums within the project. The company has named its affordable housing complex First Tracks.
But Resort Ventures West Development Manager Marian Ishida and her staff have struggled to find buyers for the affordable condos, and her company has asked for the deed restrictions to be relaxed. They'd like for anyone working in Routt County to be able to purchase a unit regardless of their income level and without having annual appreciation being capped at 3 percent.
Although the Planning Commission rejected their proposal, Pearson was at least partially satisfied with the thoughtful debate that preceded the rejection, as well as the opportunity to take his case to City Council on Dec. 2.
"We believe we can sell these homes to locals, and we believe they could also be rented to locals," Pearson said. That would allow the project to "provide the housing it was intended to. : We believe this is simple and can actually solve the problem."
The 47 units in the first phase of First Tracks are due to be completed in June 2009. However, after Resort Ventures West worked with 400 prospective buyers and spent $150,000 marketing First Tracks, they have been able to put just 14 condos under contract. And there are worrisome signs that even those 14 buyers may have difficulty arranging financing.
That's the set of circumstances that brought Pearson and Ishida before the Planning Commission last week. They asked that the deed restrictions be relaxed to help them get the condos in the hands of Routt County residents.
"We've come to realize the deed restriction is too strict and the actual market isn't willing to buy," Pearson said. "We were hoping to have a huge over demand for this product, but there isn't a demand."
Planning Commission, as a recommending body that does not have the authority to make policy, was limited in its ability to recommend approval of the request to alter the deed restrictions.
Steamboat Springs Community Housing Coordinator Nancy Engelken said City Council could vote to accept alternative methods of complying with the city's inclusionary zoning ordinance if the alternatives provided a public benefit equal to or greater than paying cash in lieu of building the mandated affordable housing. In Engelken's own analysis, the request by Resort Ventures West did not meet that difficult standard.
However, individual planning commissioners had plenty to say about the request by the developers of Wildhorse Meadows.
Commissioner Sarah Fox asked Pearson to address the question of whether removing the 3 percent annual appreciation limit would undermine the community goal of providing a permanent stock of affordable housing.
Pearson responded that by imposing the new deed restriction of limiting purchasers simply to people who work in Routt County, the market is "impaired." In effect, the market is made smaller, putting some downward pressure on prices, he said.
"The first person who buys it typically gets some sort of appreciation," Pearson acknowledged. "But we believe there will always be some level of affordability depending on the (prevailing) gap (between the price of market-rate housing and affordable housing)."
Pearson said he can provide documentation of cases in the Vail Valley and in British Columbia where the place of employment restriction has succeeded. However, he also acknowledged that in markets such as Aspen, where the gap is a factor of three or four, the price of affordable units with a local employee restriction will only move up in price.
Planning commissioner Rich Levy said he thinks Resort Ventures West should have proposed waiving either the income or the appreciation cap on deed restrictions before asking for both.
"I'd like to see something closer to the intent of the ordinance," Levy said.
Commissioner Tom Ernst said he empathized with Resort Ventures West's challenges but said he is wary of opening the door to overnight speculation at First Tracks.
"I don't want to see people buy them, turn around and sell them and make $50,000," Ernst said.
For that reason, he asked: "Have you considered a one-year moratorium?"
"Yes, and we're open to it," Pearson replied.
Commissioner Cedar Beauregard said Pearson's proposals to amend the deed restriction appealed to him.
"It would pull the social engineering out of the project and force developers to create units of a size that is affordable," he said.
However, he said he would support a motion to deny the request on the technical considerations.
Pearson said the banks his company is working with to obtain financing for the contracted buyers for First Tracks, including Alpine Bank and FirstBank of Avon, are expressing hesitancy.
"The financial institutions are worried about their own exit strategy," Pearson said.
He explained the banks look at financing the affordable units as though they were buying them themselves, and they are worried that in the event they wound up acquiring them in a default, they might not be able to find new buyers.
Ernst, who is in the mortgage lending business, amplified Pearson's concerns, only in blunter terms.
"Lenders will not be lending on units that have deed restrictions," he said.
Pearson said his company sincerely wants to put the condominium homes at First Tracks in the hands of local people who need affordable housing. However, he said they have reached the conclusion that the point at which the gap between market rate and affordable homes in Steamboat widens sufficiently to spur sales remains years in the future.
"We've been in the affordable housing game here for 2 1/2 years, and we're experiencing huge resistance from the deed-restricted side," Pearson told the Planning Commission. "As the guinea pig and the most cooperative developer you could hope for, we're going to be increasingly penalized by a faulty deed restriction and a faulty inclusionary zoning ordinance."