Showdown over Basalt’s affordable-housing program
October 1, 2012
BASALT – In an effort to help five financially strapped homeowners, the Basalt Town Council majority is contemplating assistance that the town attorney warns could undermine the entire affordable-housing program if not done properly.
The owners of five condominiums at the Market Street Lofts in Willits Town Center asked the council to remove their deed restrictions. Each of the units is designated “resident-occupied.” The buyers have to meet residency and work requirements but – unlike other affordable housing – there are no income caps on buyers or appreciation limits on sales of the units.
The value of the condos has plummeted, like most midvalley property, since the recession. The homeowners owe significantly more than their units are worth, they have said at meetings. They contend that the deed restriction is preventing them from refinancing now that lenders have tightened rules in the aftermath of the mortgage meltdown.
The request Thursday night split the council 4-3. The majority said they want to try to help constituents in a time of need. The council minority countered that lifting deed restrictions for the five Willits homeowners would jeopardize the town’s humble affordable-housing program. There are 56 affordable housing units, 34 in the rental pool and 22 for sale. Of those for sale, 13 are designated resident occupied, including the five at Market Street Lofts.
Town attorney Tom Smith warned the council that lifting deed restrictions for some of the units would require equitable treatment for all, Councilwoman Anne Freedman said.
“In other words, it would kill the program,” Freedman said.
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Freedman and Councilman Herschel Ross said they didn’t believe the deed restriction is the problem for the Willits homeowners. There are a lot of owners of free market homes who cannot get refinancing right now because their property values have dropped so severely, they said.
“As bad as I feel for these people, we’re in no position to do it,” Ross said of the request for help.
Freedman said she would have to be a “bad guy” and not support the request to lift deed restrictions.
“I’m not a heartless person. I’m really not,” she said.
Smith is an expert in affordable-housing law and regulations. He has served as the attorney for the Aspen-Pitkin County Housing Authority for years, and he is the Basalt town attorney. He was on vacation and couldn’t attend the Town Council’s meeting Thursday.
Mayor Jacque Whitsitt said some of Smith’s memo to the board was confidential, but she released the portion specifically pertaining to the Willits homeowners’ request.
Smith wrote, “I am very concerned about the precedent that would be set by revoking the deed restrictions on the Willits (resident-occupied) units.”
There is a constitutional right to equal protection, Smith explained in the memo. Therefore, “if the request before you is granted, you may be obligated to revoke deed restrictions on ownership housing in any case where the deed restriction limits financing options or otherwise influences financing.”
Councilmen Glenn Rappaport and Rick Stevens discounted the legal advice.
“I’m not convinced we’re going to throw our whole program into the drain,” Rappaport said.
Basalt’s affordable-housing program “from the beginning was flawed,” Rappaport said. One such flaw, he indicated, is when a program is so rigid that it’s designed to help people in the future obtain affordable housing but not flexible enough to help people in the present remain in affordable housing.
“I think we absolutely have to do something,” Rappaport said, referring to the five Willits homeowners.
Stevens said trying to help the five Willits homeowners stay in their homes outweighs removing deed restrictions and taking five units out of the affordable-housing pool.
“I don’t see that there’s a big risk there,” Stevens said. “Let’s give it a shot.”
Karin Teague agreed that as council members in a small town, they should try to help their constituents. The risk of potentially being forced to remove deed restrictions on a handful of other units is something “I’m not going to lose sleep over,” she said.
Whitsitt countered that the council’s obligation was to maintain an affordable housing program that will benefit the town and its residents far into the future. She said she isn’t convinced that the affordable housing rules are preventing the five Willits homeowners from refinancing, therefore she didn’t want to lift the deed restrictions.
“We will be sorry if we put this program at risk, and I will not be voting to do that,” Whitsitt said.
Rappaport repeated his interest in modifying the program to address new challenges.
“I don’t want to throw the program away,” he said. “I want a program that works.”
Rappaport didn’t comment on whether there is a place for deed restrictions in his vision of the program.
Bill Kane, the former Basalt town manager who is now working as a consultant until his replacement is hired, suggested a compromise. He suggested that the town explore getting a right of first refusal to buy the condos of any of the five Willits homeowners who sell. That way, he said, the town could acquire a unit, place the resident-occupied designation back on if desired and resell it. The idea wasn’t fully discussed, and it wasn’t clear why a future Town Council would vote to purchase a housing unit to replace a deed restriction that had earlier been removed.
Stevens made a motion to direct the staff to prepare an ordinance that will remove the deed restriction on the five Willits units and to explore the idea of inserting a right of first refusal onto the deed. Rappaport seconded the motion, which had the support of Teague. Whitsitt, Freedman and Ross opposed it.
Councilman Rob Leavitt, the swing vote, went with the majority without a great deal of comment. He said he felt they should explore trying to help the Willits owners.
The proposed ordinance will come back to the council for review on a date to be determined.