High costs could slow down affordable housing projects

Balancing the obvious need and the financial realities…

By Mark Reaman

The Crested Butte council reviewed the draft 2024 budget for utilities and affordable housing, and it appears housing projects could slow down while utility bills would see a minimal increase.

High interest rates along with higher than expected construction cost estimates appear to have tapped the brakes on how fast some planned deed-restricted housing might come online. 

“While we are confident in the projected expenses in the Affordable Housing fund, the timing and possible revenues are still being examined by staff with help from financial advisors with Stifel (a bond company consulting with Crested Butte),” a staff memo to council stated at the November 20 meeting. “We plan to return to council in the coming months with some options to complete build out of Paradise Park and the TP parcels along Butte Avenue.”

The memo indicates that most of the funding in the 2024 housing budget is allocated for predevelopment expenses for Paradise Park and TP-3, the affordable lots along Butte Avenue, as well as the start of construction on nine deed-restricted units in the Paradise Park neighborhood.

Mayor Ian Billick again brought up his request to get a figure on the overall real costs for affordable housing. He has asked for years to see numbers showing the value of building new affordable housing units versus converting free-market units to deed-restricted units. He mentioned not just the construction or purchase costs but the broader costs to the community in terms of things like impact to schools and parks. Converting an existing unit has less impact on the community infrastructure than building new units that add to the population.

Town manager Dara MacDonald said the staff can estimate those numbers “but there is no cookie cutter solution.” She mentioned that sort of analysis is being conducted for the proposed 231-unit Whetstone affordable housing project south of town. 

“I would still love to get the numbers in general,” said Billick. 

Staff is still exploring how to reduce costs for Paradise Park units with developer John Stock of High Mountain Concepts who told council earlier this year that actual costs were about 60% higher than initial estimates. Councilmember Jason MacMillan mentioned that interest rates and inflationary costs were making the cost of building new units expensive. Given that, he indicated it might not be the time to rush into building major projects. Billick acknowledged the interest rate dilemma and said hopefully they would come down within the year. MacDonald said the interest rate and cost escalations made projects less financially doable but understands the need for the physical units. 

The Mineral Point apartment complex located at Sixth and Butte, which will service low-income residents in the same category as residents of Anthracite Place, is still expected to start construction next spring. Staff is exploring if there is interest in local government entities like the RTA and school district to purchase affordable housing to be built along Butte Avenue across from the Gas Café.

Staff was clear that the revenues for the Affordable Housing Fund come primarily from commercial building housing fees and a 7.5% excise tax on vacation rentals, but those funds will fall short of expenses. Given that, council should expect that some money might be transferred from the capital of general funds to supplement funding for housing initiatives. Town has received significant grant monies to help offset costs.

Utility bills

As for utility bills, the town is expecting to implement a 2% increase in monthly water and sewer fees. 

Town is coming off a major increase in its monthly charges for water and wastewater services. In 2023 the town was able to increase revenues to the needed 30% to balance the cost of operations including new debt service payments for the major Wastewater Treatment Plant project currently underway, but staff indicated there is still a funding gap. Given that, staff is recommending to continue slowly and incrementally adjust rates to facilitate the ability to absorb variables within future operational budgets and “discourage any need for large scale rate increases.”

The 2% suggested increase would take the base water rate from $46 to $46.92 and the base sewer rate from $59.50 to $60.69.

“I have always and continue to express my dismay at the ever-increasing utility costs but met with the staff and understand the need to keep our necessary infrastructure going,” said councilmember Mallika Magner. “I just want to be careful of the impact to our citizens.”

“I was just really glad it was only a 2% increase this year,” noted Billick. 

The council is expecting to adopt the 2024 budget at the December 18 council meeting.