More talk, no action on affordable housing

“Things are different…”

The debate over how much developers should contribute to affordable housing in Crested Butte continues. Despite a three-and-a-half hour Town Council work session last Monday, no definitive council direction was given toward adjusting the affordable housing mitigation fees for commercial development in town. While the council is directing staff to investigate some more comprehensive elements of an affordable housing plan, they couldn’t find much common ground on how much to charge developers of new commercial projects. The council continues to debate the philosophy of how to obtain affordable housing in Crested Butte.

A year ago, the affordable housing mitigation fee for commercial projects was $2.09 a square foot. The last council changed the fee to essentially $83 a square foot last April. That council started to change the fee to $63 per square foot in November but the new council hasn’t acted to approve the changes. The changes are embodied in Ordinance 19 and the current council has held several meetings to reshape that ordinance.
At the January 30 meeting, town affordable housing consultant Melanie Rees of Rees Consulting Inc. gave some history of the town’s affordable housing program. “Affordable housing is crucial to preserving community,” she told the council. “It is one key to economic stability.”
She explained that while some real estate prices have dropped in Crested Butte, incomes have gone down as well, still making it very difficult for working locals to purchase a free market home.
Affordable housing committee chairperson Margot Levy told the council that at the moment, there are 186 permanent deed-restricted units in town. She said the overall plan developed in 2010 provided a variety of strategies to enhance the town’s affordable housing program. She said taxes were not part of the recommendation given the current economic climate. She said the housing committee has been busy discussing the current situation and has brought forth further recommendations. “There are a number of tiered strategies that have been explored and the committee has recommended,” she said.
The hot button recommendation is to charge developers a 25 percent mitigation fee on every project if they don’t build actual housing for employees. The 25 percent relates to the number of employees owners expect to hire as a result of a commercial project. As it stands, the fee would cost developers $83 per square foot of their project.
“The goal of the council is to implement a functional and workable ordinance and an ordinance that lasts,” said mayor Aaron Huckstep. “Can we do that while implementing a mitigation fee of less than 25 percent, which is what the committee is recommending?”
 “Yes,” responded Rees. “But there needs to be a focus on the other tools in the tool box. You need to start thinking about some of these other opportunities.”
Rees said that given the current economic times, the town should be realistic about implementing fees. She said other resort communities are also re-evaluating their affordable housing rules. Even Aspen, which is normally pretty strict, is now looking at providing incentives to provide units. “We are in very uncertain economic times,” Rees said. “The economics probably don’t really work right now to have a 25 percent fee. Just because the big fees implemented in places like Telluride worked five years ago, doesn’t mean they will work there now. I’d urge more caution than aggression in these economic times.”
Rees emphasized the need to partner with developers to get something actually accomplished. “Flexibility and adaptability are important,” she said. “We don’t have a new normal. I would encourage less strict regulations and more guidelines that give the town an opportunity to negotiate and partner with developers to get units built.”
Asked if that opened the door to potential charges of discrimination, Rees said the council had to be professional and objective and apply any guidelines equitably.
“It is a downtime for everyone,” Rees said. “Construction is falling off everywhere. A lot of mountain communities are stepping back to re-evaluate their housing programs.”
“I appreciate trying to set up a broad plan that’s workable but it has to find a balance point for both the community and the developers,” said councilperson David Owen. “I am very interested in seeing what incentives can be brought to the table but if we cut back the mitigation rate, we ultimately set back even putting in infrastructure to our affordable housing lots in Paradise Park. I can’t support lowering the mitigation rate because it pushes back our plan.”
“You won’t get any revenues if the fees make projects impossible,” responded Rees. “We need to be realistic. Ordinance 19 won’t produce a lot of revenue.”
“This linkage fee is a mitigation for something that occurs,” said Owen. “I’d rather see no commercial units built in Crested Butte than commercial units with no mitigation. It doesn’t make sense to me to encourage commercial units to the detriment of the community. I can’t support building ourselves out of our own community.”
“Other places have gotten there in other ways,” said Rees. “There are lots of ideas out there. There’s more that can be done but slowing growth and waiting for growth to return won’t get the town very far. I think people who feed their families through the construction world would disagree with waiting.”
“That’s a red herring,” said Owen.
“The goal is to get the units built,” emphasized councilperson John Wirsing. “That is more important than collecting money.”
Councilperson Jim Schmidt reiterated that he thought the 25 percent was far too high. “It’s a heck of a leap,” he said. “I think we should start at 10 percent and raise it to perhaps 20 percent over three years. That still might be too high. We aren’t like Aspen and Telluride. Zero percent of 25 percent is still zero and if no one is building, that’s what we’ll get.
“We’ve had people tell us they are putting off even small projects because of these fees,” he continued. “Let’s see if they’ll come to the table with the knowledge the fees will be going up.”
Schmidt also said the town should look at all options, including taking a sales or property tax to the voters. “If the town truly believes in affordable housing, they’ll vote for it,” he said.
“We do need to pursue other avenues but it’s not an either/or,” said Owen. “It’s a this and that.”
“For me, the balance is to look at the whole picture for the town,” said Schmidt.
“The important thing is to end up with a mitigation rate appropriate to the impact,” said Owen.
“We are looking at the ability of the developer to absorb these fees,” said councilperson Glenn Michel. “I’m looking for a larger mix of opportunities to bring the burden down on the developer. Again, zero percent of 25 percent is zero. I think a fee that high constricts the ability of the developer to go ahead.”
“I think we’re grasping at straws,” added Huckstep. “We don’t really have a clue. I’d prefer to see an analysis of how the fee really impacts developers. How can we put more legs on this stool and not just make it a burden on a developer? It seems some here think developers will make a profit no matter what and do a project no matter what. That’s a heck of an assumption.
“Every day people are calling me about getting their homes foreclosed on and having to leave the valley because they don’t have work,” Huckstep continued. “Are people leaving the valley because they can’t find housing or because they can’t find jobs? We are trying to find the sweet spot.”
Owen pointed out that the one developer who applied for a project under the increased fees paid them. “There is a history that a developer will put up the money,” he said.
Town finance director Lois Rozman said that developer called the town the day of the work session looking for some fee relief. He told her he was halting the project because he was running out of money. His 500-square-foot addition cost him $21,000 in affordable housing fees.
“I don’t think the fees are the obstruction in the big picture,” said Wirsing. “We have a ton of information showing large fees don’t stop development. Look at other towns. To say it is not feasible isn’t true.”
“All of us have looked to the past and seen what’s worked,” said Rees. “I was at those tables. I was arguing for the big fees because they made sense at the time. It feels odd to be arguing this side tonight. But what worked then will not work now. It’s a gigantic economic downturn. There are giant changes we have to deal with. You guys are raising the fees over three years with the idea the economy will be back by then. You are optimists. I’d be careful of being too aggressive with a program that has worked well here. If it slows down the economic recovery, it will have large impacts.”
“We are losing population and this waters down the ability to keep people here,” said Wirsing. “We’ll never be Aspen if we can keep the people here. To let developers in and not take some of the burden, will turn us into Aspen.”
“I’ve been involved with affordable housing in Crested Butte for a lot of years,” said Schmidt. “I’ve walked the walk. It’s always a balance. We aren’t walking away like John and David say. Even with a 10 percent mitigation fee, we’re raising it 12-and-a-half times over what it was a year ago. That’s significant.”
Rees suggested the council consider starting at a lower rate and then raising it when certain “trigger points” are reached. That could be something like the rental rate of commercial space in town. She admitted using triggers would be more complicated than raising fees based on a timeline.
Huckstep noted that four of the seven—Schmidt, Michel, Mason and himself—seemed to prefer a three-year phase-in of a mitigation fee starting at 10 percent and ending at 20 percent. But he noted that could change.
“Let’s take some more time to think this over and discuss it more. Let’s let the staff do some investigation and we’ll continue this discussion.”
The council also directed the staff to investigate details of several incentives. Among them would be a credit certificate program that would operate like transferable development rights. If someone built a deed-restricted unit without being required to do so, they could be given a credit that they could sell to a developer needing affordable housing credits.
The staff will also look at reducing the mitigation fee if units are built into the development. That could mean allowing for larger buildings within a project.
“We need to have a full discussion over some of these items,” suggested town building director Bob Gillie. “There are a lot of dominoes to all these issues.”
The council didn’t even touch on whether or how to provide breaks on the fees for government or non-profit building development.
The philosophical discussion will continue. It is on the agenda for the Monday, February 6 meeting.