Steamboat Springs — In the absence of buyers, Michael Hurley has found another use for some of the six affordable condominiums he vainly is trying to sell at Trappeur’s Crossing.

He’s turned them into offices.

Hurley, sales manager at Trappeur’s, is one of many in the Steamboat Springs development community chalking the city’s affordable housing policies up as a failure – and hoping for relief.

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“Certainly, the development community – we’re all talking to each other. I think there’s a general consensus among the development community that the ordinance, it doesn’t work,” Hurley said. “At what point in time do we say it hasn’t worked, and we need to look at another option?”

At a time when the city’s affordable housing regulations are coming under heavy scrutiny, people such as Hurley do have some sympathy among policy makers. But others say developers are overstating a situation that is not the result of city policies but major economic shifts for the worse.

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“I disagree that the inclusionary zoning and the community housing plan is a complete failure,” said Nancy Engelken, the city’s community housing coordinator. “The forces impacting it have nothing to do with the program. : It’s a reflection of where the free market is, not just what’s happening with the deed restrictions.”

Resolution of the issue could begin in February. That’s when the Steamboat Springs City Council has scheduled a work session to conduct a comprehensive review of its affordable housing strategy.

Ken Brenner was president of the Steamboat Springs City Council when the body first unanimously decided it wanted to make affordable housing one of its policy priorities. In 2006, inclusionary zoning was adopted. In 2007, the affordable housing ordinance was heavily revised and commercial linkage was added to the mix. Brenner said the council attempted to mimic the best practices of other communities, but council members knew they would make mistakes.

“The fact that council wants to revisit this is appropriate,” the former councilman said. “But to go in and scrap the ordinance would be the wrong solution.

“The No. 1 thing that’s affecting the affordable housing program right now isn’t the regulations. It’s the same thing that’s affecting the entire real estate market: a worldwide recession. : These are extraordinary times. You don’t have to be a financial wizard to understand our economy and our housing market are struggling right now.”

Tough sell

At a City Council meeting last week, Wildhorse Meadows developers failed in their bid to relax the affordable housing requirements at First Tracks, where only 14 of 47 affordable units scheduled for completion in June 2009 are under contract.

Just two days after City Council rejected the First Tracks proposal, Hurley submitted a revised community housing plan of his own, one that would allow him to take his affordable units to the free market immediately rather than waiting 12 months as prescribed by the city’s exit strategy for deed-restricted units.

“Maybe we sell these. Maybe we don’t,” Hurley said. “My worry is, I don’t want to wait 12 months : to test another hypothesis.”

Developer Brian Olson isn’t trying to sell any affordable housing units of his own right now, but when he submits plans later this month for a development called Trailside Village at City South, it will include a community housing plan that doesn’t acknowledge current city policies.

“I think there’s sort of a general consensus that it’s not working the way it is,” said Olson, who plans 230 condominiums as part of the development. “We’re going to be proposing a completely different housing plan than the city ordinances.”

As with First Tracks, any proposals to amend or depart from current affordable housing policies will have a tough time winning the approval of city staff. Engelken said such changes must fit within the flexibility built into the current ordinance.

The pertinent part of that policy states that an alternative compliance method may be accepted “so long as the value of that consideration is equivalent to or greater than the payment-in-lieu contribution required : and that the acceptance of an alternative form of consideration will result in additional benefits to the city.”

While this policy and others within the city’s affordable housing ordinance could be up for changes beginning in February, developers insist that is too long to wait because carrying costs, interest payments and other risks drain their resources with each passing day of unsold units.

“We can’t wait 2 1/2 or three months. We need some sort of change now,” Brent Pearson, a principal and chief financial officer of Resort Ventures West, developer of Wildhorse Meadows, said to City Council on Tuesday. “There is clear and present danger in the development world right now.”

Engelken, however, thinks the situation is being exaggerated.

“I think there’s this misconception that there’s hundreds of these things sitting out there empty,” she said.

In reality, Engelken said, only 16 such units have been built since the first affordable housing ordinance was adopted in 2006, and seven of those are bought and occupied. An additional two or three, Engelken said, are under contract. Engelken said the six unsold units at Trappeur’s received their certificates of occupancy and got priced correctly just two weeks ago. And as for First Tracks, Engelken notes that the 47 units there aren’t even built yet.

Possible changes

Some council members are likely to seek a housing overhaul at the February work session.

“When we come out of this (recession), our need for affordable housing will be as great, if not greater. I’m not anti-affordable housing. I never was. I’m just concerned that it’s not meeting the needs of the community,” said Councilwoman Cari Hermacinski, who has been calling for the repeal of commercial linkage for more than a year and voted against the city’s current ordinance as a city planning commissioner. “I think that ordinance needs a major, major rewrite.”

Others will support a more modest approach.

“We spent a lot of study and time developing these strategies,” Councilman Steve Ivancie said. “To say, ‘Oh, let’s get rid of it’ – that’s the easy way out. It doesn’t deal with the problem, and we still have the problem. People are still going to want to live here. People want to move here. I don’t want to see this turn into a one-faceted community. We’ve got to have a diverse group of families.”

Suggestions likely to be discussed at the February work session include:

– Basing affordable housing requirements on a percentage of square footage rather than a percentage of units. The problem with basing developers’ housing requirements on a percentage of units, Engelken said, is it results in the construction of a number of small units to satisfy the requirement – a doomed strategy given the results of a recent housing demand analysis.

That analysis, released in September, shows the Yampa Valley’s largest demand is for affordable rental housing and affordable purchase opportunities that are larger than what exists in the current housing stock.

“Buyers are more likely to invest : time, energy and money in the deed-restricted process for a larger unit as it alleviates fears of becoming ‘trapped,’ particularly as their space/family needs evolve over time,” reports the study, performed by Robert Charles Lesser & Company.

A requirement based on square footage would provide more incentive for developers to build the type of housing they think is most likely to sell.

“It really provides more flexibility for the developer,” said Engelken, who called this approach the most critical of the changes she will recommend to council in February.

– Mortgage-based deed restrictions. Under this approach, deed restrictions would not restrict the amount a home is allowed to appreciate each year – currently 3 percent – but would require that when the owners of deed-restricted homes sell them, they must be sold to a buyer at the same AMI. Such deed restrictions are used in West End Village and Fox Creek Village.

“I think if there is a receptivity at looking at that kind of deed restriction : that’s something I can live with,” Engelken said.

– Payment in-lieu by right. This would allow developers citywide to satisfy the entirety of their affordable housing requirements with a payment to the city. Currently, this is allowed only in zone districts at the base of the Steamboat Ski Area.

– Employer-assisted housing. If there is only one thing that everyone seems to agree on, it is that employers need to get more involved. Employer-assisted housing could take many forms. Many would love to see more employers provide housing for their employees like Steamboat Ski & Resort Corp. does. Also, employers could purchase units being built under city regulations and rent them out to their employees on a long-term basis.

– Lease to own. Under this form of affordable rental housing – a major need identified in the housing demand analysis – a portion of a tenant’s rent would go toward a savings account for eventual down-payment assistance on the purchase of a home.

– Development incentives. Perks such as density or height bonuses that would be given to developers who build affordable housing.

– Shifting the target AMI range. The city’s affordable housing ordinance requires housing to be built for individuals and households earning 80 to 120 percent of the AMI. With the weakening of the housing market, the gap between free market and affordable housing is shrinking, and units aimed at the higher end of this range are the ones developers are finding the most difficult to sell. Brenner said it might be appropriate to slide the target AMI range lower, perhaps to 50 to 80 percent of the AMI.

“Our approach of using only 80 to 120 may not be hitting the target, especially looking at unit prices going down right now,” Brenner said. “Maybe there’s another strategy we can discuss.”