Housing Divided, Part 9: Deed-restricted housing helps locals become homeowners
November 16, 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 ninth in a 13-part series. Installments will appear each Thursday in the Summit Daily.
In October 2014, Teresa Zube bought her first home. For those squarely in the middle of the American working class, that milestone would be seen as a major accomplishment — no matter the community. But in Summit County, where the average price of a single-family home is more than $500,000, home ownership is a particularly noteworthy achievement.
Still, Zube, a housekeeper and single mom of two children, had to fight to buy a deed-restricted home in the Valley Brook neighborhood.
"I had to jump through hoops to even get a mortgage," she said.
Deed-restricted housing allows people to purchase homes at a price that isn't determined by the fluctuations of the free market. Along with a discounted price point comes a set of rules specifying how the property can be used and for how much it can be resold. For many working families in Summit County, deed-restricted housing has become the only option to carve out a long-term niche in the community.
This type of housing has been around for decades in Colorado, making a quiet entrance into the market in the '70s. However, it wasn't until the '90s that deed-restricted housing started gathering speed, as many communities, particularly those in the state's prosperous resort areas, made workforce housing a priority.
"The benefit is we can try to ensure that our workforce can live in the communities where they're working," said Laurie Best, the long-range planner for workforce housing in Breckenridge. "We have a diverse community with a variety of demographics represented, … that's why the public investment in workforce housing is so important; it's to preserve a community and also to support the economy."
Within Summit County, there are 1,165 deed-restricted units. Melanie Rees, a housing consultant who works with mountain communities, said that Summit County is unique because instead of placing deed-restricted homes or units randomly throughout the community, the towns here have made an effort to create entire neighborhoods around the model.
Breckenridge, which offers most of the deed-restricted housing in the county, has also taken strides to ensure that multiple income levels are served. On the lower end, there are restricted townhomes that sold for $165,000. In places like the Wellington neighborhood, properties went for $300,000 to $400,000.
"We have different projects that we've strategically planned," Best said. "We believe we made workforce housing in all segments or demographics of our workforce."
The demand for these units has only increased over time. The Summit Combined Housing Authority (SCHA) keeps an "interested list" made up of people throughout the county who were at one time interested in purchasing a deed-restricted home. In 2012, there were 525 people on that list. The list has more than tripled over the last four years, and now has 1,660 names on it. While some of those people have been on the list for years, 394 signed up in 2016 alone.
The wait list has been addressed in different ways. In Breckenridge, a lottery process has determined those who get first bite at the apple. The housing authority, on the other hand, will send an email blast to their interested list as properties become available. They go through applications on a first-come, first-served basis. One application can take between two to four weeks to process.
In general, potential buyers face a confusing set of rules for each deed-restricted development. That's why the housing authority has aggregated information on each neighborhood online. Some requirements run across the board. For example, a buyer must work 30 hours or more a week in Summit County. However, some developments include additional requirements such as prohibiting the buyer from owning any other property in the county and from renting the deed-restricted property.
Zube said that when she began to look at buying a house, her broker said her salary greatly reduced the number of houses she could possibly qualify for. It was about finding a balance — having a salary low enough to qualify for deed-restricted housing, but still high enough to qualify for a mortgage.
"Applying for a mortgage on my salary alone, it was very, very stressful and difficult," she said.
The all-important acronym
One crucial factor for deed-restricted homeowners is area median income (AMI). Buyers have to make sure that their total income falls at or below a certain percentage of the average, which is determined by the federal government. The preferred percentage of AMI varies by development.
AMI is particularly important when owners of deed-restricted housing want to sell. The AMI in Summit County has been dropping consistently over the past several years. In 2014, the AMI for a family of four was $90,800. That dropped to $86,600 in 2015, and dropped again in 2016 to $81,500. That's a $9,300 difference in just two years.
The drop isn't because people in Summit County are making less; the change came from the way the government calculates AMI. It is partly based off of the American Community Survey, which is similar to the U.S. Census. While the ACS is performed annually in more urban cities, it is only done once every five years in Summit. This can leave gaps in what the local economy actually looks like now.
Joy Klein, a program director at the housing authority, said that the appreciation value of a deed-restricted home compares the AMI from now to when the person bought it. For many homeowners this means that they have lost some of the value in their home. There are rules in place from the housing authority that ensure deed-restricted housing will go on the market at or above the purchase price. But this is often not the return people expect on their investment.
After more than a year of living in her house, Zube came home to a flood of water raining down from the second floor. The plumbing issue was deemed a construction error. Zube and her family temporarily lived in Silverthorne for six weeks while the water was cleaned out and her Home Owners Association worked with insurance. Even though insurance covered much of the damage, the impact of dealing with construction at the same time as raising her children and working made her consider selling the home.
"I'm a single mom, I'm trying to work and take care of this and it's just not working," she said.
When she looked into it, she realized that her house, which she purchased for $196,000, had not accrued any value because of the drop in AMI.
Rees said that the drop in AMI blindsided people in the housing industry. However, she added that it should not deter people from buying deed-restricted housing.
"No one anticipated that the whole way of calculating AMI would be changed, and that it would result in an actual decrease in income when in fact the economy is growing," Rees said. "Deed restrictions are still a very valid and appropriate method for preserving affordability over time."
Another issue that the housing authority runs into is that while many people will go to the organization to sell their house, they are not required to do so. Nicole Bleriot, the interim director of the authority, said that there have been talks of trying to make sure the organization is a "one-stop shop" for people interested in deed-restricted housing, but people can still list their homes individually or through other real estate agents. Right now, the authority does not have any deed-restricted housing available, but individuals may be selling outside of the organization. She added that as new developments are built the housing authority has been working to make sure that some of the requirements for deed-restricted housing become more streamlined. It will be difficult for all of Summit County to fit into one set of rules, but it is the county's goal to continue offering deed-restricted housing.
"We want to preserve as many deed-restricted units as possible," Berliot said. "It is of upmost value in everyone's opinion to provide this service to the community."
Starting in September, the housing authority begins a monitoring process to make sure that people living in deed-restricted housing fall into the appropriate compliance. It may take a few reminders, but most of the community responds. People are rarely removed from deed-restricted housing, but the monitoring ensures that people are not taking advantage of the system. Since these locations are often restricted to locals, the housing authority wants to prevent owners from renting their properties on Airbnb or VRBO. Because for some, it is the only way that the workforce can afford a home of their own.
"Often it's the only choice. The private market is not building new homes that are anywhere near the median income," Rees said. "Deed-restricted housing is really the only home-ownership opportunity for many of the county's residents who want to move into ownership."
Although Zube's first experience with home ownership was not an easy one, she has decided to stick with it. Without assistance, she may not have been able to find a place that worked with her salary. She also added that the community around her is a bonus.
"I would never have been able to afford to live here," she said. "It's awesome because all of the people in this neighborhood, they have kids my kids' age, and they all play and I think that's really unique in this town."