Steamboat City Council votes to keep deed restriction in place
July 2, 2014
Steamboat Springs — After some discussion Tuesday night, the Steamboat Springs City Council decided, by a vote of 4-2, not to lift a deed restriction on a unit at Waterside Village in downtown Steamboat.
The circumstances of how the unit came to be and its current list price were cited by members of the City Council as factors in their decision to keep the restriction intact.
In the past, City Council member Sonja Macys said, the council has considered lifting deed restrictions when there were truly no other options and pointed out that the unit's $180,000 list price represented 16 percent appreciation since it was purchased in 2005 for $155,000.
"It seems like there are other options," Macys said. "It's not like you sell for 16 percent in appreciation or game over."
The unit in question is a 496-square-foot, one-bedroom, one-bath condo that was designated as employee housing by the developer in return for a reduction in the project's overall parking requirement of two spots. The restrictions on the unit stipulate that its occupant must either work in Routt County (or be a qualified resident) and can't make more than 120 percent of the area median income. For an individual in 2014, that's $65,160 per year.
"It is not a heavily deed restricted unit, for sure," said Colorado Group Realty real estate agent Jon Wade, who is representing the owners.
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But despite being shown 23 times by other agents and at least eight times by himself, Wade said, the unit has yet to find a buyer.
City Planning staff member Rebecca Bessey said her department reached out to the three lenders and all confirmed there would be conventional financing available for the unit at list price.
The issue, Wade said, lies in potential buyers' general unease with deed restrictions, as they've seen or heard of others' struggles to sell units.
The owners moved to a larger home in town and now are in distress on the deed restricted property, Wade said.
"They've already borne a significant financial burden by carrying a property that’s extremely different to sell," he said.
Wade told the City Council that the owners have been trying to do the right thing by not letting the home go through foreclosure, but if that were to happen, the restriction would be removed through the process. Clauses that allow the restriction to be shed through foreclosure are common in deed restrictions and are key in securing bank financing.
"So I'm asking you is it better to penalize someone for trying to maintain their payments in good faith or recognize the situation and remove it," Wade said.
Wade offered to pay $3,000 into the city's community housing fund at the time of closing if the deed restriction were removed.
Past agreements to lift deed restrictions have required the subsidies used to make the units affordable be paid back into the community housing fund, but as this unit was created through a voluntary trade by the developer, it is different from most deed restrictions in the city.
"In every case, we've had the opportunity to know the value of the subsidy and been able to calculate a mathematical number to be paid into the community housing fund in order to lift the deed restriction," City Manager Deb Hinsvark said. "It's been up to now a much easier issue to make a mathematical decision to lift the deed restriction."
City Council member Kenny Reisman said that without that number, it was hard to make a comparison between the value of the restriction and what Wade had offered. He made a motion to table the issue until Sept. 2 to give city staff time to come up with a formula to value the restriction. He said the postponement also would give the sellers time to make their list price more competitive.
That motion to table the request failed and the 4-2 vote to keep the restriction in place immediately followed.