Costs of development leave Carbondale projects in limbo
Glenwood Springs correspondent
Aspen, CO Colorado
ASPEN – A bare concrete foundation surrounded by weed-laden mounds of dirt and rocks sits in an otherwise vacant lot next to a half-empty row of new townhouses on Carbondale’s Main Street – a monument of sorts to the new economic reality.
After gaining approvals from the town of Carbondale three years ago, before the downturn in the housing market, the developers of the Mountain Sage Townhomes built the first 14 of the 26 approved units.
They hit the market just as the bottom fell out, and sat empty for nearly a year until a couple of units finally sold late last year. A decision to make some units available for rentals also helped keep the bank happy.
But construction on the remaining 12 units – including four deed-restricted affordable housing units that were mandated to be part of the overall mix – is in a state of limbo.
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A soft real estate market and tighter lending rules is mostly to blame. But another complicating factor has to do with the amount of public costs, in the form of affordable housing, park and open space requirements, design standards and off-site infrastructure improvements, that have become extra burdensome for developers, especially in a tough economy.
Mountain Sage is just one example of the many stalled real estate development projects in the valley that earned approvals from local governments before the economy tanked.
Construction was halted at the Ironbridge housing subdivision between Glenwood Springs and Carbondale when its parent company went into bankruptcy. Construction never did start at the bankrupt Roaring Fork Lodge in Glenwood, or the Cattle Creek development near Carbondale, which fell into foreclosure at the end of 2009.
And the housing component at the Glenwood Meadows development has yet to break ground, despite the relative success of the commercial portion of that project.
The situation has also provided a new landscape for the development review process, as proponents of new projects such as Carbondale’s Overlook, Thompson Park and the Village at Crystal River negotiate a delicate game of taking care of public needs while trying to ensure there’s at least some profit margin.
“There simply needs to be a fair profit for any undertaking,” said Robert Macgregor of the Glenwood Meadows LLC. “Nobody is going to proceed without that profit. And when it comes to public costs, we either pass that cost along, or we don’t develop.
“These exactions sound good on paper, but it’s a challenge,” he said. “At the end of the day, we need to be able to balance the books and proceed with development. And there’s a misperception that there’s some great, hidden pot of money in the equation. The deal is, the more that’s asked of developers, the more we need to charge for the end product.”
Altering the housing plan
Mountain Sage developers Ken Williams and David Mork, both longtime locals who’ve done numerous other projects in town, did get a reprieve in November of last year when Carbondale Trustees agreed to suspend payment on a more than $486,000 letter of credit for an extra year. The money is intended to pay for a range of public improvements, such as sidewalks and parkland dedication fees.
But the housing mitigation requirement is another matter.
Originally, Mountain Sage was required to build four income-restricted units, one each targeted at home buyers earning 80 percent, 100 percent, 120 percent and 150 percent of the Area Median Income (AMI).
In addition, partly as a way to achieve greater density, the developers voluntarily offered to put a resident-owner occupied (RO) requirement on three units. They also established a 1 percent Real Estate Transfer Assessment (RETA) on the sales of the 19 free market units to go into a town affordable housing mitigation fund.
Given the new economic realities, the developer offered a revised proposal last month. Instead of four AMI units at the higher income levels ranging in price from $236,917 to $451,378 (2009 prices), they proposed to build two deed-restricted units at 65 percent AMI, at a maximum 2009 price of $191,693.
The single RO unit that has already sold in phase one would be the only such unit under the new proposal. And the 1 percent RETA would remain but would include four additional free market units.
It was a plan Carbondale town staff supported.
“Higher priced AMI units do not seem to provide the desired program benefits,” Carbondale Housing Planner Kay Philip wrote in her recommendation at the time. “Sixty-five percent AMI housing, plus dedicated funding for housing [through the RETA] seem more aligned with the goals of the housing program.”
The revised plan was also more in line with what the town had been negotiating with the developers of the Overlook project, she noted.
But some Carbondale trustees balked, concerned at losing two AMI units, and also concerned that the 65 percent AMI units could be as small as 400 square feet.
“Essentially, what was proposed was what staff, and what we thought the trustees, would agree to based on what they did with the Overlook project,” Mountain Sage’s Williams said in a recent follow-up interview. “It makes no sense, because the town’s own guidelines allow for units in the 65 percent AMI category as small as 400 square feet.
“We thought that would be a good entry level product for someone,” he said. “Now they’re saying, ‘We’re not only going to set the price, we’re going to set the size.’ How do we operate under a regime like that?”
Trustees had asked that the developer continue to work with town staff and come back with another plan.
“Quite frankly, we haven’t been inclined to respond,” said Williams, who has offered other solutions in the past, such as a price cap approach and fee credits, to help jump-start stalled housing projects.
“Everybody ought to be living in the same world … today’s reality, versus living in yesterday’s reality,” he said.
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