Aspen developers can now buy affordable housing credits
The Aspen Times
Aspen, CO Colorado
ASPEN – Affordable housing can now be bought and sold as a commodity on the free market by developers who don’t want to pay the city’s fees or build it themselves, the Aspen City Council decided Monday.
The council voted unanimously to approve an amendment to the land-use code that allows for affordable housing credits to be transferred. As a result, a developer can purchase a credit for affordable housing that has already been built and occupied.
Just how much the credits could be worth is dependent on what the market will bear, and will be influenced by supply and demand.
Under the new program, a developer would likely explore the market for affordable housing credits to find out if they could negotiate a lower price than the cost of constructing new units or buying down existing free-market units, according to Ben Gagnon, the city’s special project planner.
Essentially, the local government has created a new commodity that places a cash value on the development of affordable housing. The price is set between the buyer and seller.
“This is a concept that will allow more in-town housing,” said Mayor Mick Ireland.
Stan Clauson, a local land-use planner, also voiced support for the program.
“I think this is an excellent proposition,” he told the council.
The program, introduced last year by Aspen resident Peter Fornell, is similar to the city’s transferable development rights (TDRs) strategy, which was established as part of Aspen’s historic preservation program. Under certain cases, the government issues development rights to homeowners who are limited on their properties. TDRs can be sold so others can build on their lots.
The city requires developers to provide affordable housing for 60 percent of the employees generated by their projects, either by paying a cash-in-lieu fee, or providing it on site or elsewhere. Officials estimate that it costs about $200,000 to build an employee housing unit.
Fornell, who owns property at 301 W. Hyman Ave. with his brother-in-law, John Cooper, has asked the council to rezone the parcel and approve a land-use application to demolish the building, which contains four free-market units, and replace it with eight affordable housing apartments.
Fornell is seeking the ability to sell those units as credits to other entities who want them for affordable housing mitigation required for their development projects.
Fornell has said he’s limited on what he can do with the Hyman Avenue property because of how it’s zoned, so building affordable housing is the best use for it.
The council will review Fornell’s land use application and is expected to vote on it next month.
City officials have asked Fornell to modify the proposed building’s architecture before the next public hearing. They also point out that the 3,600-square-foot lot can only accommodate seven one-bedroom units and adding an eighth would require the lot to be 400 square feet larger.
Councilman Derek Johnson said he wants to make sure there is enough parking in the neighborhood to support four additional units. That issue will be addressed at the next public hearing.
Gagnon told the council there is a limited opportunity for developing affordable housing, and it would likely be multi-family housing if it is built. But the city’s regulations regarding redeveloping multi-family housing are perceived by developers as an obstacle, he said.
“For free market multi-family parcels that are owned by one entity and rented out, the certificate program would be an option to explore, especially if the property is ripe for development,” Gagnon wrote in a memo to the council.
And developers who don’t want to pay the cash-in-lieu fee or build an accessory dwelling unit can pursue buying credits, especially if they are less expensive than the other options.
Only developments approved in the future can be eligible for housing credits.
City officials who brought the amendment forward say the credit program will encourage the private sector to develop affordable housing, although it will likely be limited to converting some of the more dilapidated multi-family buildings that already exist.
Officials also say the credits are a better form of mitigation than cash-in-lieu payments because the payments don’t immediately translate into affordable housing. The money goes into a fund that might not be drawn down for years, so the impacts of redevelopment can be felt in the community for a long time before any housing is created, Gagnon said.
And building an accessory dwelling unit can result in a rental unit, but occupancy is not mandatory, Gagnon added.