Steamboat City Council to hear request to lift deed restriction on downtown condo


— The Steamboat Springs City Council on July 10 will consider a request to release a deed restriction on a downtown condo that was built under the city’s previous inclusionary zoning regulations.

City staff has recommended that the restriction not be lifted on the 496-square-foot, one-bedroom unit in Waterside Village, but the issue would have to go before the City Council for a final decision in any scenario.

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“The decision of the management team was that we did not have good cause to remove that deed restriction,” City Planning Director Tyler Gibbs said. “The intent of creating such a small unit was to keep it in the affordable pool.”

The unit currently is listed for $180,000, and Colorado Group Realty agent Jon Wade, acting on behalf of the condo’s owners, said the unit is not saleable with the deed restriction intact.

After the recession, Wade said, people saw how hard it was to sell deed-restricted units and now are warned off by the concept.

“It’s just that any restriction is hard,” Wade said.

The restriction on the unit stipulates that the buyer must be a full-time resident of Routt County or have worked in the county for five of the six years before retiring, and the buyer’s income can’t exceed 120 percent of the area median income, which for one person is $65,160 in 2014.

The restriction does not cap how much the unit can appreciate in price per year.

“The deed restrictions are pretty simple and not overly restrictive,” Gibbs said, adding that the city management team did not think removing the restriction was necessary to facilitate the sale of the unit.

City councils have released restrictions in West End Village and, more recently, in Sunray Meadows. In each instance, a settlement was reached where the owners of the deed-restricted units agreed to pay back a portion of the subsidy that went into making the units affordable.

Deed restrictions on units in Steamboat also have been lost through the foreclosure process, where none of the subsidy is paid back.

Gibbs said he contacted three lenders in Routt County about the availability of conventional financing for the unit, given the price and income restrictions. All three said financing would be available, he said.

Josh Kagan, of Cornerstone Home Lending, said he’s helped a few people find financing for deed-restricted units in the past but none recently.

The most important thing the lender wants to know, Kagan said, is that in the event of a foreclosure, it won’t be left with the restriction still in place.

The Waterside Village deed restriction, like most others, has a clause that allows for the restriction to be removed through foreclosure.

“As long as that is in there, we haven't had an issue,” Kagan said.

Kagan calculated the costs for a 30-year conventional fixed mortgage (using a 4.5 percent rate) with a 20 percent down payment and for a USDA-guaranteed loan for 100 percent of the purchase price.

In both scenarios, the unit would be affordable at its current list price of $180,000 for someone making well below 120 percent of area median income with good credit and a low debt-to-income ratio.

Wade said the owners of the Waterside Village unit have moved to another location in Steamboat without being able to sell the deed-restricted condo.

The deed restrictions aren’t practical, he said, and can hurt the people they were meant to help.

“On a base level, housing for housing, you still need to be able to sell it to do something else whether you’re making money or not,” Wade said.

“It’s good people that are trapped by a program,” he said. “Does it make sense to penalize them and possibly the next person?”

To reach Michael Schrantz, call 970-871-4206, email or follow him on Twitter @MLSchrantz


Scott Wedel 2 years, 10 months ago

Ah, the folly of trying to use a deed restriction to counteract free market housing prices.

That the restriction can be removed via foreclosure shows the stupidity of this program. So if free market value ever significantly exceeds restricted value then a qualified buyer teams with a friendly lender and they agree to let it go to foreclosure to remove the deed restriction. And then they can resell and pocket the profits.


Dan Hill 2 years, 10 months ago

The words "I can't sell my property" should always, always, always be followed by "at the price I'm asking."

There is some price at which this condo will sell with the deed restriction in place. Let us say for the sake of argument that price is $160,000 instead of $180,000. How does that notional $20,000 penalty compare to the difference between the original purchase price and the open market value at the time? We can probably calculate that by looking at the price per square foot the non-restricted units in this development fetched vs the restricted unit. If it was purchased when the market was hot, my bet is the implicit subsidy at the time was greater than the penalty is now, meaning the now seller is still coming out ahead. OK, they aren't going to make the capital gain they might have expected, but nobody who bought in that market will.

For future reference, if we ever try this deed restricted housing nonsense again, the implicit subsidy ought to be calculated at the time of purchase and considered the housing authority's share of the equity. Then on subsequent resale the option of selling without the deed restriction and paying the housing authority its share can be offered to the seller. Right now, this seller is trying to have it both ways.


Bill Dalzell 2 years, 10 months ago

Scott, I believe most to all deed restricted housing is set up that way ( restrictions lifted in the case of foreclosure) so they can be financed. It has little to do with the administration of the program. It's the only way to sell a unit at all.


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