Housing Divided, Part 8: Summit County remains majority second-home owners
November 9, 2016
About this series
Housing Divided is a 13-part series from the Summit Daily News taking an in-depth look at our regional housing crisis. We’re exploring the subject from every angle, featuring stories on seasonal workers, government and nonprofit solutions, homelessness, the impact of short-term rentals, the prevalence of second-home owners and deed-restricted housing.
Editor's note: This is the eighth in a 13-part series. Installments will appear each Thursday in the Summit Daily.
Sharon Cole and her husband Tom bought their condominium in the Dillon Valley East complex in July after they were unable to locate a second home in their price range closer to Eagle County, where they've been longtime residents.
"We're as bad off over there as it is here," said Sharon. "We've got people in Vail who drive down from Leadville. I feel so bad that there are so many people desperate out there."
The Coles bought the 760-square-foot unit through their individual retirement account (IRA) as an investment property. They soon got set up with a new Summit County pilot program that finds local workers to rent the condo long term, and it wasn't but two days after closing on the two-bed, two-bath condo that the new family moved in.
The purchase is just one example of umpteen second-home owners in Summit County. Many buy for an assortment of reasons, be it as a long-term leasing asset, to function as a short-term rental cash cow via outfits like AirBnB or VRBO, or as a true second home kept for occasional vacations from out of town or out of state.
But given the ongoing battle to house the county's growing population of year-round residents, the sum of homes that either sit vacant or are occupied intermittently throughout the year can be difficult to reconcile. While local governments are mostly busy trying to bring additional housing online by the year, some have pointed out that more buildings are not necessarily the solution — enough physical addresses already exist to house everybody in the community.
"There are more housing units in Summit County than there are residents," explained Wendy Sullivan, principal at community planning firm WSW Consulting. "Every man, woman and child could be placed into their own home and there would still be vacant units in the county."
According to the American Community Survey, an annual study produced by the U.S. Census Bureau on the nation's varied communities and economic health, there were more than 30,000 total housing units in Summit as of 2014, which is the most recent year of available data. Nearly 66 percent of those residential properties were defined as second homes, the highest total over a five-year span and up about 2.5 percent from the prior year.
Sullivan confirmed that the majority of buyers do not make their living within the local community here in Summit. That removes countless homes from the stock almost as quickly as they hit the market, in turn driving up — or at the very least maintaining — home prices due to a consistent supply shortage.
Meanwhile, those homeowners demand services (restaurants/bars, retail, tourism amenities) when they visit, which requires a stable staff of workers to offer them. And yet, those jobs don't pay at a level that allows employees to live where they work. It's a consistent dilemma in mountain communities like Summit and Eagle — one with no apparent solution.
'A Golden Goose'
It's a catch-22. Often those who own from either out of state or the Front Range — those who enjoy all that Summit has to offer on the weekends or just the occasional ski trip — are also largely responsible for the region's financial success. Todd Rankin, a co-founder of Cornerstone Real Estate in Breckenridge, acknowledged it can be a difficult topic.
"Folks are wanting to be here, and it's made our economy flourish," he said. "But it's kind of this golden goose that's now in this challenging spot, where businesses can't hire employees, which makes it a tough issue. I'm thankful to people who visit our community, or visit and live, because it drives our economy, keeps our restaurants full and our retail shops thriving."
With no place to live, many potential employees are forced to turn down service or ski industry jobs due to wages that don't meet heightened housing costs — if places to stay can even be found. In some cases, businesses are unable to expand hours due to a lack of sufficient staff to keep up with peak demand.
"Often the bulk of the workforce is in service-oriented jobs to support tourism," said Sullivan, "but they're also among the lowest salaries. So locals earning between $33,000 and $35,000 on average are competing with second-home owners, and with pricing now over $500,000 per (single-family) unit, it definitely skews things."
She also noted that populations with less than 50 percent local occupancy — like Summit, Steamboat Springs and the town of Vail — frequently reach "a pivot point." Once that occurs, the dynamics of the community can shift significantly.
"When the vacancy in homes becomes more prominent," Sullivan added, "it becomes harder for locals to really maintain community and keep the life and keep it thriving when you drop below that point. It's kind of an eye-opening moment, and you can really start to see it more in the fabric of the community when it happens."
That percentage has been the case for a while in Summit, so leadership in the government, and otherwise, has had some time to negotiate through what can be a serious challenge. Through the years, however, the county and towns have worked to construct and sustain important features such as a high-achieving school system, effective public resources and accessible emergency services that make a place livable.
Aside from nickel-and-diming the problem in attempts to solve the second-home riddle, though, local officials are approaching the lack of more affordable housing for the year-round workforce by buying land and building more deed-restricted properties. Other agencies in the community are also chipping in with creative efforts and strategies to make all the pieces fit.
As the population of Colorado continues to grow — the Denver metro area, for instance, adds more than 1,000 new residents per week — so too do the demands on the state's limited environmental resources. That's particularly true of the High Country and Summit County.
"As traffic gets worse and the (Eisenhower) tunnel gets busier," said Rankin, "that Front Range demand (for second homes) increases. Folks just want to get out of traffic. When they're half a tank from the Front Range — just one pass away from a couple million people — that helps out tremendously in sales when you compare Summit to, say, Aspen or Telluride, even with the price run-up in the last couple years."
Throw in the benefits of its proximity to five ski resorts, recreation on Lake Dillon and seemingly infinite open space trails, as well as increasing options on the main drags of the four principal towns, and the popularity of Summit broadens year-over-year. As the economy has improved from the recession post-2009, Rankin also said he sees fewer and fewer second-home owners who either need to or are willing to rent their properties short term. Improvements in technology with telecommuting and video conferencing and the evolution of the workplace also allow second-home owners more opportunity to spend time in their formerly vacant units.
All that has contributed to limiting year-round residents from finding adequate housing options. As one tactic to aid the situation, the nonprofit Family & Intercultural Resource Center (FIRC) and the Summit Combined Housing Authority have partnered on a modified master-lease program to rescue present housing stock from the non-rental or short-term rental markets for area tenants.
The Housing Works Initiative, backed by an annual $50,000 grant from The Summit Foundation, has already converted 10 units in the county over to long-term leases, with plans to have another three occupied in the next month. The initial goal was for 15 properties in the first year of the trial program, and in just six months it will approach that target.
"I don't think we possibly could have imagined it being as successful as it's proven to be," said Tamara Drangstveit, executive director of FIRC. "For us, the next challenge is to take the model and move it out of the pilot phase and into a program that's more readily available for everybody."
The properties that have been filled, or soon will be, include a studio, three one-bedroom and eight two-bedroom units, and one three-bedroom. Misty McMillian, the real estate services program director on the housing authority's end, said she gets a lot of calls from curious second-home owners who might otherwise be intimidated about leasing their units long term. Only those who are not currently renting their property or are doing so short term with AirBnB or VRBO are eligible for the service, which grants free property management and a monthly check-in with the tenant after a thorough vetting process.
The advantages of the local housing initiative are why Sharon and Tom Cole settled on purchasing their condo in Dillon and are now one of the program's property owners. Since being introduced to the approach, Sharon now wishes something similar existed in Eagle County. Even if short-term renting might mean slightly more profits per month, she said the hassle's not worth it.
"It's just such a great avenue for people like myself who just want an investment property as part of a retirement plan," said Sharon, "because it's stable income. And literally I don't do anything. It's just a win-win. My husband and I both feel very good that we're doing some small part over here in finding a local, long-term tenant, because you're going to lose your quality workers unless everybody pitches in."
Other concepts that incentivize second-home owners to sell or rent their homes to locals exist in parts of the nation, in locations that face similar population disparities between year-round residents and once-in-a-while vacationers. They include capital gains tax reductions and two-tier tax systems that provide more favorable rates, and resorts simply giving landlords free season ski passes for renting their properties a certain number of months out of the year. All remain under consideration as Summit County persists in coming up with formulas to offset so much out-of-town ownership.
"There's a lot of opportunity here," said Drangstveit, "but we really have to find a strategy that works for everyone in the community. It's definitely not elimination (of second-home owners), but a strategy that works for those homeowners, and also those who need housing."
For more information about the Housing Works Initiative, please visit: summithousing.us/new-housing-works-initiative-program.