Is affordable housing no longer affordable in Aspen?
October 14, 2018
The future of 28 new affordable-housing units coming into the rental pool hangs in the balance while the city of Aspen figures out how much developers ought to pay to mitigate for the amount of employees their projects generate.
Peter Fornell, along with his financial partner, plan to tear down the existing building at 404 Park Circle and replace it with 28 units that can house as many as 68 people.
The low- to middle-income units would be sold to business owners who would in turn rent them to their employees.
But that plan may blow up if Aspen City Council doesn't increase development mitigation fees called "cash-in-lieu" before the spring, when Fornell plans to break ground.
Fornell went before council Oct. 8 and told the board that the lot will get developed into free-market condominiums if it doesn't pencil out to build affordable housing.
Fornell created what's called the Certificate of Affordable Housing Credits Program in 2010. It allows a developer to build affordable housing and get a credit for each unit that comes online. That credit can then be sold to another developer who uses it to fulfill employee mitigation requirements on a separate project.
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Fornell has been selling them for around $330,000 a credit, which is too low since building a low- to middle-income unit costs between $380,000 and $425,000, he said.
"When I go out and sell my certificate and ask for more than the cash in lieu for housing mitigation to cover my costs of development I look like a villain, and for no reason because the cash-in-lieu has no basis," Fornell told council.
The city's cash-in-lieu fee ranges — depending on income category — from $111,438 to $381,383 for each full-time employee created by a development.
That mitigation money has historically sat in the city's coffers for years before any housing comes online.
Earlier this year, council raised the fee by 7 percent, but hadn't made any adjustments to account for escalating construction costs for the past three years, Fornell said.
He added that the city was supposed to be increasing the fee annually by 3 percent but that hasn't been happening.
"The cost of construction is so far out of control and my ability to sell credits is based on an arbitrary number," Fornell said late last week.
He also argued that the city itself uses a 10 percent construction cost inflation number when it budgets for its projects.
Council members agreed that the cash-in-lieu fee needs to be adjusted, but using which index and how to calculate it is what's holding them up.
"Cash-in-lieu as housing mitigation does not come anywhere close to providing a housing unit," Councilman Ward Hauenstein said via email last week. "I want cash-in-lieu as an absolute last resort for housing mitigation. The sooner that is our policy the less chance there is of workers being shorted on mitigation by allowing cash-in-lieu as mitigation."
Hauenstein said he asked to have a discussion on the issue later this month but he didn't get any support.
Time is ticking, Fornell said, adding that the city administration has to "address it immediately."
"(My partner) will not finance 404 Park (Circle) unless it's dealt with by spring," he told council Oct. 8. "I do not have time to wait."
Mayor Steve Skadron said Friday via email that council is due to revisit the cash-in-lieu fee next year.
"It's a little more complicated than just raising fees," he wrote. "A fee must reflect a reimbursement rate for the city's cost of building housing. So it can't be raised simply because a private developer wants it to be, to better reflect their cost of doing business. That's not to say the fee won't be raised but we have to establish a nexus between a fee and our costs."
Fornell said all of the units in the Park Circle project have been reserved by employers and are quoted at the cash-in-lieu rate.
"If it isn't high enough I will have to sell," he said. "I either need to get started building housing or do something else."
He added that a developer recently asked the Aspen-Pitkin County Housing Authority board to give its blessing for the option to provide mitigation through cash-in-lieu fees instead of building a complex or buying credits.
"The developers can't do it for that price or they wouldn't be asking, and if they can't do it, you can't either," he told council, saying the cash-in-lieu fee doesn't work for anyone but the developers right now. "It represents complacency and inaction by government."
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