No easy deed
Developer struggles to sell affordable housing, may give up
December 17, 2006
Steamboat Springs — A local development firm that had taken affordable housing into its own hands hasn’t been able to sell any of its deed-restricted units and may give up that effort next year.
Steve Barwick, Ren Martyn and Rob Van Deren are partners in Mountain Valley Communities, a Steamboat Springs company that is developing the Red Hawk subdivision on Sagebrush Circle in Stagecoach. Red Hawk includes 29 single-family homes.
The trio voluntarily placed deed restrictions on eight of the homes last January to make the homes permanently affordable for low- to moderate-income buyers. But the developers said they haven’t found any buyers for the affordable homes, and as a result, they have ended their association with the Routt County Board of Commissioners and the Yampa Valley Housing Authority. Commissioners finalized Red Hawk’s withdrawal from county and Housing Authority oversight Tuesday.
“They are now basically on their own,” Housing Authority board president Kathi Meyer said.
The developers first questioned the effectiveness of the deed restrictions, which they placed on the homes according to Housing Authority policies, several months ago.
“We can’t find a buyer that qualifies for this,” Van Deren told commissioners in August, citing restrictions that required buyers to earn 120 percent or less of the county’s area median income, spend no more than 30 percent of their annual income on housing, have no more than $250,000 in total assets, work in Routt County and live in the home as a primary residence.
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Van Deren’s statement proved prophetic.
“We didn’t have one bite,” Martyn said Friday. “To this date, we have not sold a deed-restricted unit.”
Martyn said buyers fear that deed restrictions create limits to “appreciation,” or increases in home value, making eventual resale difficult or less profitable.
Red Hawk’s 21 market-rate homes are sold out.
“We had all of them under contract by August,” Martyn said. “We start closing on those units next month.”
In August, commissioners allowed the developers to raise Red Hawk’s required income percentage for buyers of affordable units to 150 percent of the area median income and to remove the 30 percent and $250,000 restrictions.
But the Housing Authority, a multi-jurisdictional public entity created in 2003, could not oversee affordable units with such reduced restrictions.
“Those (lesser) restrictions are inconsistent with our bylaws,” Meyer said.
Martyn said Mountain Valley Communities will now ensure that potential buyers are qualified for the affordable units. But if the units remain unsold through next summer, he said, the developers will petition county commissioners to remove the deed restrictions and allow the homes to be sold on the free market.
“The city of Steamboat is about to realize this same scenario, but with a much greater impact,” Martyn said. “Anyone who looks at the available land and the cost of available land within the city, very quickly wakes up and realizes that inclusionary zoning and deed restrictions are not going to work. You can’t do it without partnerships.”
The Steamboat Springs City Council is working to create a housing plan to address Steamboat’s shortage of housing for low- to moderate-income residents.
Martyn said strategies such as land banks and high-density housing units, which could reduce demand and market price, have a better chance of success than the city’s current inclusionary zoning ordinance, or a possible plan to attach affordable housing requirements to new residential and commercial development.
“It’s absolutely destined for failure,” Martyn said about a housing policy based on deed restrictions.
The high end
Routt County Planner Mary Alice Page-Allen, who plans Stagecoach projects and also is secretary and treasurer of the Housing Authority, said Red Hawk developers could have done more – such as increasing the firm’s subsidy – to sell the affordable units.
“If they had wanted to make it work, they could have made it work,” Page-Allen said. “They made choices, as far as their marketing aspects, that made it difficult for them to turn these units and sell them in the (affordable) market.”
Barwick acknowledged that the affordable units at Red Hawk are on “the high end” of affordable housing in the county. The single-family homes have three bedrooms, two baths and a garage, and are priced at $335,000.
“We built too big and too nice of a house,” Martyn said. “We thought, going in, that there were financial incentives for buyers. We could have investigated that more.”
Realtors for West End Townhomes, adjacent to West End Village within Steamboat city limits, also have had difficulty selling deed-restricted, affordable units.
Martyn said Mountain Valley Communities is now building primarily upscale, market-rate homes. If he could begin the Red Hawk process again, Martyn said he likely would not propose the inclusion of affordable units.
But county officials probably would not by amenable to such a proposal.
“It’s been a learning experience for both the county and the developer,” Page-Allen said. “Until the county has developed specific housing regulations, if they do at all, we probably won’t do anything like this again. If a developer wants to come in and voluntarily do it, that’s fine, but it’s probably not going to involve the county as the entity that gives oversight.”
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