County updating its housing linkage fees

Rates could go up for larger homes, down for locals

[  By Katherine Nettles  ]

Adjustments to new building project fees tied to affordable housing in Gunnison County may drive costs up in general, but new exemptions may also offer relief for local residents who are building modest homes or accessory dwellings. This week, county commissioners reviewed an initial set of changes proposed by staff to update the county’s housing linkage fees; these fees were created in 2006 to aid in building up affordable housing units in the Gunnison Valley based on new residential and commercial construction.

Commissioners had asked staff in March to develop options for developers to mitigate the housing impacts of new projects, based on size and with targeted exemptions for local residents and businesses. John Cattles, assistant county manager for operations and sustainability, gave an overview of the proposed updates on May 12 and asked for commissioners’ feedback. 

The recommendations included calculation changes, and adjusting several ways builders can be exempt from the fees. Cattles noted, “Any changes would still have to go through the formal process to amend the [Land Use Resolution].” That would include a public hearing process. 

Linkage fee calculation 

The linkage fee is calculated “based on survey information about the economics of this valley,” said Cattles. He said economic factors include how many households are in need (of housing), how many jobs are generated by development projects and then the gap between the need for housing and the cost of housing.

Cattles said new data showed that the cost of housing has continued to increase, and the gap between what people can afford and what a home costs has gotten bigger. He said the original assumption had been that the fee being calculated would serve those making 50% of the area median income (AMI) and below. “While we want to serve that community, the reality is that the projects we are doing… are serving higher AMIs.”

Cattles said a 100% AMI target was more realistic, as AMI levels below that generally receive federal funding. “Even people making 150% or 200% AMI struggle to afford a home in this valley,” he said. 

Therefore, the main change being proposed is around the mitigation rate used to calculate a project’s housing linkage fee. The mitigation rate is defined as a percentage of the number of essential housing units the new development would create, specifically within the construction industry.  

The current mitigation rate is 1% for commercial and 5% to 40% for residential buildings, depending on home size. For example, under the current fee structure a relatively large 4,000 square foot home would be calculated as generating .296 jobs and therefore the need for .067 essential housing units. The developer could choose to either pay $17,506 or to build at least .067 affordable housing units. 

The new proposal uses 100% AMI which means the affordability gap between what someone earns and what a home costs is smaller than it was at 50 or 60% AMI. However, county staff recommended a new calculation that increases the number of jobs created to include operating and maintaining residential properties. The 4,000 square foot home would, under the proposed changes, be calculated to generate .21 jobs and the need for .07 housing units; that would total a fee of $29,561.

Commercially, Cattles said housing units could be built to avoid a fee. “We are recommending raising the fees exemption only on larger developments,” said Cattles. “Small and medium size commercial properties will experience a lower or similar fee under the proposed rates depending on size but large commercial properties over 40,000 square feet would see a fee increase. That will probably capture most small businesses that are trying to build their own space.”

Other changes

Currently, the fee can be avoided for several reasons, such as deed restricting the property for essential housing use, including a secondary residence that is deed restricted or, for commercial properties, by building new essential housing as mitigation. Other exemptions include additions of less than 500 square feet, reconstruction of a pre-existing structure or households earning less than 120% of AMI. 

Staff proposed an amendment to the deed restriction exemption that would be a live-work requirement rather than the narrower definition of essential housing. The amendment would also require the unit be occupied at least 75% of the year by a qualified resident.

Staff also proposed eliminating the income-based exemption and replacing it with a looser exemption for at least one primary income earning household member to have lived and worked in the community for at least three years. 

Additionally, homes of more than 2,500 square feet (not including a garage) could not be eligible for any exemption, and fees would be calculated based on size (see graph.)

The idea is that established residents building moderately sized homes do not need to mitigate the cost of new workers or housing, as they already live locally and may actually be freeing up another residence.

Commissioners said they also liked being able to help locals who have scraped together the means to build something, and the current eligibility standards have made it cost-prohibitive for many trying to use some inheritance and sweat equity to build something for themselves. They did ask staff to make a few adjustments and revisit a few elements informing the policy. 

Commissioner Jonathan Houck cautioned that he wanted to make sure the fees made a difference, and that they were being accountable for how. He said he was generally comfortable with the proposal, but there was a bigger picture to consider.

“The linkage fee was developed at a time when there were very few revenue streams to support affordable housing projects and efforts and initiatives,” he said, acknowledging that in the time since other dedicated revenue streams and projects have been established. “If we’re going to propose these new fees and go through a public process, we’ve got to be able to speak to the public about how much will this actually generate, how much does that move the needle on housing and how does this complement other revenue sources. We haven’t really had to have that discussion yet.”

Commissioner Laura Puckett Daniels said she wanted to present people with information about how these linkage fees have contributed to Sawtooth, Whetstone and other housing projects. “What I’m interested in that contextualization,” she said.

Cattles said the fees are sustainable, predictable and helpful in leveraging for housing projects like Whetstone. County manager Matthew Birnie said that the county has pledged the linkage fee in entirety to Whetstone through the county’s housing authority, as a safeguard in case rents do not cover operations expenses there. But he said that at any point if Whetstone performs as hoped those funds could be freed up for other pursuits.

Puckett Daniels said she agreed with Houck about reflecting on their impacts. “I hope one of the narratives people are hearing as we come out with this is that we are very sensitive to the impact fees have on people’s lives here. We hear it over again that ‘you’ve adopted the WUI (Wildland-Urban Interface code) code and that’s made things more expensive, or you’ve adopted this…’so we’re proceeding with caution and a scalpel to try to figure out who exactly are these fees hitting, to what degree and how can we then use that money to really serve the people who are unable to make it in the free market?”

Houck also mentioned some increasingly common examples he wanted to allow for, like building an accessory dwelling for an aging family member to come live with or near their family, and although they have maybe already retired and might be new to the community they are connected to existing residents.

“I want to make sure we’re providing enough exemptions that you all are comfortable,” said Cattles. Commissioners said they were generally comfortable moving forward, and Cattles said he would work with the community development department to proceed.