Officials mull major change for housing
Aspen Times Staff Writer
A decade after RO housing was introduced so local professionals could take advantage of the affordable housing program, housing officials believe it’s time to bring the pricey housing back.
The Aspen-Pitkin County Housing Board is contemplating a return of RO, or resident occupied, housing as it was originally introduced – with no initial price cap. In addition, the board hopes to add new, higher-priced categories of housing to the four categories that currently exist.
All of the pricier, deed-restricted housing is necessary to fill in the gap between subsidized, affordable housing for local workers and the ultra-expensive, free-market homes that have become the norm in Aspen and Pitkin County, board members say.
RO was introduced in the early 1990s to provide deed-restricted housing for full-time working residents who made too much money to qualify for affordable housing, but couldn’t afford to buy on the free market. Households of higher-income professionals and business owners fled downvalley to buy homes.
Local officials responded with the creation of RO housing – with no limit on the initial price, and no cap on income and assets for buyers. To qualify, the RO purchaser had to live and work full time in Pitkin County.
But when a local resident bought an RO lot and built a home valued at $800,000, elected officials recoiled.
People building $800,000 RO homes under the “affordable housing” program made headlines, recalled Tim Semrau, a city councilman and chairman of the Housing Board.
“To this day, there is an incredible line in the sand. It’s $500,000,” he said.
Officials clamped down on RO. It went from an unrestricted initial sale price set by the developer or owner/builder to a price cap of $450,000. This year, the price limit was boosted to $465,800.
RO also now comes with a confusing formula limiting a buyer’s income and assets. It currently caps a household’s purchasing power to a $621,100 home.
“That doesn’t make any sense,” said Cindy Christensen, operations manager for the Aspen-Pitkin County Housing Authority, noting the discrepancy between the price cap and the income/assets cap.
In a discussion last week, Housing Board members agreed there’s a need for pricier options in deed-restricted housing for several reasons. But they directed housing office staffers to tweak the proposals before they take the recommendations to the City Council and Board of County Commissioners. New rules for RO and the new categories would require the approval of the elected officials.
Currently, the Housing Authority guidelines include Categories 1-4 and RO, with rising prices and income/asset caps at each level, Category 1 being the least expensive.
Housing officials have debated the need for additional categories for several years. Last week, the Housing Board looked at proposed price ranges for Categories 5-7 as well as the new, less-restrictive RO, but agreed the jump from Category 4 to Category 5 was too large, and asked staffers to readjust the prices of the proposed new categories.
@ATD Sub heds:New RO, just like the old RO
@ATD body copy: It was the new RO, billed as a return to the old RO, however, that received most of the board’s attention.
Shellie Roy, a county commissioner and board member, said she’s worried that the complete lifting of income and asset caps for RO will allow longtime local workers who own free-market homes to sell them for a couple of million dollars, buy an RO unit and pocket the difference.
“I am concerned that we will avail people of the opportunity to cash out,” she said.
When RO was first introduced, that was considered an acceptable outcome, Semrau responded.
“We didn’t mind that they were going to create their nest eggs because they deserve it for living here,” he said.
Nonetheless, board members indicated they’d like to see some limit on assets for RO – $900,000 was suggested.
The rationale for allowing more expensive RO limits, however, appeared to have general support on the board. Both the higher categories of housing and the new RO will help the housing program on several fronts, according to Semrau.
First, the higher-priced housing will help make infill projects possible, he said. In-town redevelopment that brings new deed-restricted housing has been dubbed “infill” because it fills in the town instead of sprawling outward.
It will also make public projects, like the proposed Burlingame, easier for the city to tackle, as the higher-priced units help subsidize the lower categories, which are sold for less than it costs to construct them, he said.
Finally, the new categories could help stimulate the so-called 70/30 projects that private developers used to build before the clampdown on RO made the projects losers, said Semrau, who is a developer himself.
In a 70/30 project, a developer receives an exemption from growth-management regulations if 70 percent of a project is deed-restricted housing and 30 percent is free-market. Of the 70 percent that is affordable housing, up to 30 percent can be RO, and the remaining 40 percent must average a price between Categories 2 and 3.
Changes in the housing guidelines have effectively eliminated 70/30 projects, noted a recent housing master plan written by outside consultants. The plan recommended changes to make the projects viable again.
“What I like about putting back the no price cap is it puts back the incentive to build a better product,” Semrau said. “The government isn’t going to create higher-quality housing. The only way we’ll get it is if private developers do it.”
The higher-priced categories allow developers to throw some pricier studios and one-bedroom units into the mix that single professionals could qualify to buy, added board member Marcia Goshorn.
“For a lot of singles in these categories, nothing is built for them,” she said.
Board member David Guthrie voiced hope that allowing new upper-end units will finally give homeowners a way to move up in the deed-restricted housing market, freeing up some lower categories units for new buyers.
Nonetheless, Guthrie admitted he is “struggling” with reopening the door to RO with no price cap.
“I don’t want to have 600 RO units. It’s critical we don’t let it seem like it’s open season for $600,000 subsidized units,” he said. “We just can’t have a bunch of these units. We can’t.”
“If 50 of these things get built, we’ll shut it down,” Semrau predicted. “We are absolutely masters of shutting it down in 30 seconds.”
Only about 25 unrestricted RO units were built initially before the Housing Board and elected officials panicked and put on the brakes, he said.
That reaction is likely again, Semrau said.
“This is going to create a lot of heat,” he warned the board. “If we want this to go into effect, we’re going to have to explain it to the council and the commissioners. We’ve got to sell it to the public.”
Although the new proposal for RO would lift the price cap, the guidelines will still restrict the size of the unit, presumably capping its value.
The maximum size of an RO residence would be 2,200 gross square feet. In addition, a garage of up to 500 square feet and a basement of up to 800 square feet are permitted.
And, annual appreciation would still be capped – at 3 percent or the Consumer Price Index, whichever is less, theoretically making the deed-restricted unit a less enticing buy for someone who can afford a free-market condo.
“Why would you pay over a million, if you had the money, for something that can only appreciate by a certain amount a year?” said Christensen. “I think that was the philosophy a long time ago.”
The most expensive RO that has ever changed hands recently sold at Alpine Cottages – for about $600,000, Christensen said.
Years after the $800,000 Lacet Court RO home that got all the attention was built, a lot buyer at North 40 recently constructed a home assessed at more than $800,000, according to Christensen. (The approvals for North 40 deviated from the current Housing Authority guidelines).
Whether the owners of either home could find a qualified buyer to pay what they put into building their houses is the unanswered question, she said.
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