Plunging area median income rates hinder Summit County home sales

Frisco's Peak One workforce housing development was completed last December. People who purchase deed-restricted homes are currently faced with stagnant or depreciating values in many instances because of AMI calculations.
Elise Reuter / |

As private developers and municipalities team up to build more workforce housing, the units disappear almost as quickly as they’re put on the market. Everyone wants their own little piece of the mountains, and finding properties to support local families is becoming more difficult than ever as demand continues to grow.

Longtime local Cory McAlpine is one of many bidding on Breckenridge’s newest workforce housing development, Lincoln Park, an extension of the Wellington Neighborhood.

McAlpine and his wife moved into Wellington five years ago and are looking to upgrade from their two-bedroom home to a three-bedroom space.

“You can’t buy a three-bedroom house in Breckenridge for under $500,000,” McAlpine said. “We were looking in Blue River, at houses built in the ’60s, ’70s and ’80s, and all of those homes were about $500,000.”

Back when the McAlpines first bought their home, they were offered $5,000 in free upgrades as an incentive to purchase the property. Now, the McAlpines are one of three families bidding on the same home, including not one, but two earnest money deposits.

“They’re not doing it this time because there are 50 families going after 12 homes,” he laughed. “It is what it is.”

If the McAlpines win the “lottery” and are able to move into Lincoln Park, their deed-restricted Wellington home will go on the market. Of course, they’re not worried about selling.

“It’s nice that we have a single-family home in Breckenridge,” McAlpine said. “We should have no problem selling that to a local.”

For that neighborhood, a home’s value appreciates a maximum of three percent per year, or by the difference in Area Median Income (AMI) between the current year and the year of purchase, whichever is greater. But some homeowners looking to sell their deed-restricted homes are faced with no appreciated value, or a hypothetical depreciation, based on recent changes in AMI calculations.


For unrestricted units, it’s a seller’s market in Colorado, as low inventory and high demand push sales prices skyward. In Denver, Clear Capital forecasted home prices would grow 7.7 percent in 2016, compared to the 11.7-percent annual growth seen in 2015.

But for deed-restricted homes, changes to AMI models don’t reflect the current market. To compare market-rate prices with workforce housing, Keystone’s Hidden River Lodge Condo hosts both types of units. An income-restricted 836 square-foot condo with three bedrooms was listed at $219,900, while a slightly smaller two-bedroom market-rate condo built in the same year was listed at $343,000.

In 2013, HUD changed the methodology used to determine AMI using American Community Survey (ACS) data. Since HUD designates Summit County as a rural community, ACS data is only collected every five years, unlike urban areas, where it is collected annually.

In short: current AMI figures are based on recession data, when Summit’s housing market took a big hit.

“It has caused AMIs to go down during a period where we have seen an amazing increase in economic activity,” Summit Combined Housing Authority executive director Jennifer Kermode said. “It’s huge. It’s huge.”

In the last three years, AMI rates have dropped more than 10 percent. This year took the largest dip, down 5.98 percent. Last year saw a 4.6-percent decrease, and in 2014, just a 1.4-percent dip.

For this year, the area median income for a one-person household was set at $57,700, putting HUD’s low income standard at $46,000. For a family of four, this translates to $86,600 for 100-percent AMI, and $65,800 for the low-income threshold.

“It’s holding home prices down for deed-restricted owners,” Kermode said. “For a lot of deed-restricted owners it has been so significant, that if they wanted to sell this year, they would not be able to sell it for more than what they purchased it.”

While the point of a deed-restricted home is for the price to appreciate more slowly than market rates, there comes a point where the equation falls apart. Many jurisdictions offer homeowners the greater or lesser of two options: a three-percent appreciation rate, for example, or a formula based on changes in AMI. For jurisdictions that only allow the latter, there is no counterpoint to the bad math.

“If there is no increase in AMI, that formula just doesn’t work. You want to have a check and balance,” Kermode said. “I’m not saying deed-restricted owners should get the same appreciation as market-rate owners, but an expectation that you should have some appreciation when you own a property.”

Homeowners in jurisdictions that favor AMI-based appreciation models won’t necessarily be forced to list their properties at a depreciated rate, but they won’t see any profit this year.

“We don’t know what we’ll do for people who want to sell this year and live in jurisdictions who just want to use one side of the formula,” she added. “It’s a serious situation.”


With this issue in mind, a taskforce has been created to find another, more current metric than AMI as an option for deed-restricted properties.

“We want to find an index we can use where pricing and resale formulas more accurately reflect the current time and current place,” Kermode said. “We’re still in the process of identifying what index that may be.”

The taskforce includes one representative for each jurisdiction, and a group from the advisory board to model the long-term impacts of each index.

“(They) are wicked smart with statistics and math, and helping with the modeling,” she said. “We want to let the jurisdictions know so they can make an informed and positive decision for current homeowners who might want to sell.”

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