City Council votes to purchase affordable housing units to ease burden on owners
September 15, 2009
ASPEN – The Aspen City Council on Monday agreed to buy two affordable housing units and absorb nearly $170,000 in special assessments in order to provide relief to owners facing increased costs by their homeowners’ associations, which are making capital improvements to the buildings.
But the council denied a recommendation from the city’s real estate broker to use nearly $300,000 in public funds to make capital improvements to the units so they can be sold at a higher price on the free market.
Council members said they don’t want the city to get into speculative real estate development, and said it would put public funds at risk by putting money up front and hoping that the units will sell for a higher price.
“As a developer, I don’t support the city getting into for-profit activities,” said City Councilman Dwayne Romero.
Because the deed-restricted units are an extreme minority in their buildings’ HOAs, which are dominated by free-market units, the current owners can’t afford the special assessments levied upon them.
The more extreme case is at 104 W. Cooper Ave., where the owners are facing assessments of $165,000 for a unit that’s worth $152,730 under Aspen-Pitkin County Housing Authority (APCHA) guidelines.
Recommended Stories For You
“The owners can’t handle the mortgage now, are under the gun and in trouble,” said APCHA Executive Director Tom McCabe, adding the couple has moved and is living in temporary housing. “The burden is on the couple to pay up, and we hope to take the pressure off of them.”
The homeowners’ association is undergoing a renovation of the Cooper Avenue building, prompting the special assessment, as well as additional costs of renovating the unit’s interior.
The garden level unit, across from Koch Park, is being increased from 878 square feet to 1,000.
The city’s broker, Greg Hunter, recommended that the city buy the property and put $226,500 into the unit so it can be sold for more than $1 million – if the appropriate level of finishes are completed in the condo.
“I don’t think we should be in the business of finishing these units out … to fetch this price,” said City Councilman Derek Johnson. “But I fully support buying them.”
Mayor Mick Ireland said the city should make only safety improvements to the unit and sell it for a lower price.
“We have an opportunity to go through a public bidding process to take it off our hands for $500,000 rather than getting in the real estate business,” he said.
The council asked for more information on different scenarios, including allowing the units to remain unfinished and put them out for public auction, or bid.
That way, either a developer could finish them and sell them at market price, or a would-be homeowner could purchase it at a lower amount as a fixer-upper.
Scott Miller, the city’s capital asset director, said the city has an offer from the Cooper Avenue building’s superintendent to buy the unit at a lower price with no improvements made, and the government could make a small profit.
Based on Hunter’s estimates, if the city chose to make the premium upgrades to the two units, the government’s housing development fund could potentially be infused with $753,205 for new projects.
The money used to buy the units and pay the owners’ assessments will come out of the city’s housing fund in 2009. Whatever revenue is received from their sale will be put back into that fund for future affordable housing development.
The financial dilemma at the other unit is not as extreme as what the Cooper Avenue owners were facing.
Located at 910 W. Hallam Street, the owners are facing a special assessment of $5,600 by the HOA, which replaced the roof on the building in 2004. The HOA also charged a $3,615 assessment to renovate the interior common area. Those costs, combined with monthly HOA dues of $426, make it unaffordable for the current owners.
The capital improvement assessments make it nearly impossible to maintain them as affordable, Miller noted.
The Hallam Street unit was built as a free market in 1972 and then deed-restricted in 1987 as part of mitigation for development. It’s the only affordable, deed-restricted unit out of 12.
The Cooper Avenue unit was built as a free-market unit in 1972 and then deed-restricted as an affordable housing unit in 1991. The unit is the only affordable dwelling out of six.
It’s likely that the city will purchase other deed-restricted units under the same scenario since there are many of them facing the same realities.
Recognizing that, the council in July approved new housing guidelines that allows APCHA to determine if a deed-restricted unit located in a condominium or subdivision that includes free-market units is rendered unaffordable, and therefore can be purchased and resold.
“There are several units that are the extreme minority in buildings,” Miller said. “As these buildings age, they are faced with some rather large assessments. These are the first two units that have come up under this situation.”
Here is a breakdown of the city’s costs to buy the units mentioned in the main story and the profit it stands to gain. The numbers are based on what the city’s broker, Greg Hunter, proposed, but the plan has not been approved yet. (The council on Monday only chose to buy the units and pay the owners’ special assessments).
104 W. Cooper Ave., unit 5
Buy back of unit: $152,730
HOA assessment: $165,000
Capital improvements to unit: $226,500
Total purchase cost: $544,230
Selling price: $950,000
Sales costs (broker fee, closing costs): $54,000
Net selling price: $896,000
Net proceeds to city: $351,765
910 W. Hallam St., unit 11
Buy back of unit: $145,945
HOA assessment: $3,615
Capital improvements to unit: $60,000
Total purchase cost: $209,560
Selling price: $650,000
Sales costs (broker fees, closing cost): $39,000
Net selling price: $611,000
Net proceeds to city: $401,440