Summit County explores deed-restricted housing formula for improvements |

Summit County explores deed-restricted housing formula for improvements

The Copper Point Townhomes at Copper Mountain are one of seven housing developments in unincorporated Summit County where a new formula for calculating annual appreciation is under consideration. The 15-unit complex, seen here under construction last October, was recently finished.
Tripp Fay / Copper Mountain Resort |

AMI (Area median income):

Set of calculations commonly used nationwide to determine what a household, based on size, can afford on a lease or mortgage per person

The formula for figuring the allowable annual appreciation of deed-restricted homes that Summit County government oversees could soon be changing.

The issue cropped up in the last few years as a residual effect of the recession that started in late 2007 and lasted through parts of 2009. The county’s current calculation, known as area median income, or AMI, is one used across the nation, but suffers inherent drawbacks, particularly for smaller communities like Summit. As such, leadership is attempting to find a better method for balancing affordability of these for-sale units over time with providing some predictable, reasonable rate of return based on the realities of the economy and housing market.

“We used this, and it sort of worked for a number of years,” said County Commissioner Thomas Davidson, at a Tuesday county meeting. “As long as the economy was chugging along, things were going up, so people were, I guess, content, even if they couldn’t understand the calculation. But yeah, the recession points out to us, in painful reality here, this isn’t so good. So what do we do?”

There are presently seven developments, of which five are impacted by these deed guidelines, in unincorporated areas of the community. That accounts for 77 properties at complexes like Keystone’s Hidden River Lodge, Soda Creek Condos and the new Copper Point Townhomes at Copper Mountain. Meanwhile, the housing located in other areas of the county in town boundaries remains governed by the municipality where it resides, though each town is also said to be reviewing its own templates.

The problem, according to county staff, is that AMI for communities with fewer than 65,000 residents — Summit registers a year-round population of about 30,000 — has less reliable data based on the use of a five-year estimate for median family incomes. National surveyors, in the meantime, update larger cities every year, which grants more accurate ingredients for tallying present conditions.

“The 2016 number is being generated based on income data from as far back as 2008-12,” explained Kate Berg, county senior planner. “There’s a lag and this doesn’t really reflect what’s happening now with our incomes. We’re expecting that the current situation is likely going to correct itself over the next few years, but this issue with how AMI is calculated for our community given our small population isn’t going away.”

By relying on figures from five years back, not only are the circumstances very different under present market conditions, but it forces those who bought, say, a unit at the Monarch Townhomes in 2009, into a scenario where they are unable to see any return at all due to the association with AMI. That’s because since 2013, the AMI has fallen three consecutive years for a total of almost 12 percent. As a result, four-person household incomes are calculated as about $4,000 less than they were in 2009. That produces a ceiling for potential sellers at no more than what they originally paid. That’s a tough pill to swallow, especially when the county’s housing market only continues to tick up.

“When it runs counter to the market, it creates all kinds of emotional distress for those owners,” said county manager Scott Vargo. “It’s one thing when the whole market is going down, and the property value in the deed-restricted unit is also flat, or going down. But when it’s opposite of what’s happening in the market, it becomes very confusing.”

To fix this stumbling block long term, the county is now looking at a variety of options, taking special note of what neighboring and like communities use to guarantee an acceptable rate of return in positive years for those are looking to build equity through the traditional mainstay of home ownership. Staff made recommendations for better incorporating fixed rates, other computations like the national Consumer Price Index and the average of local wages, or some derivative and mixture of each. In Aspen, the government allows the lesser of the change in the CPI or 3 percent gain; in unincorporated Eagle County, the county’s annual percent change in wages, at a fixed ceiling of 6 percent.

A document circulated by staff showed that under current AMI conditions, the buyer of a two-bedroom Soda Creek Condo at $185,000 will possibly lose value if their home sold today. Under the Aspen method, however, that owner could plan for a max sale price of about $203,500, or 10 percent appreciation. A model similar to Eagle’s, based on Summit numbers over that course of time, imagines 16 percent appreciation, and a sale price of $214,000. Importantly, those prices also keep the homes in the appropriate range for purchase based on area household incomes.

The other benefit of a simpler formula is that it makes the process easier for deed-restricted owners to calculate and understand. That’s good for all parties, officials said.

“Making sense of all of this and how this works is fairly challenging,” acknowledged Davidson.

The county board will proceed in deciding what’s best for Summit over the coming months, and plans to forge ahead as the local trial balloon with prospects for the towns to follow. Breckenridge staff present at the meeting suggested their council would pay close attention as they plan for the kickoff of the next phase of its Denison Placer for-sale workforce project this summer.

“We’ve been communicating to them, and I’m keeping them in the loop with what we do,” said Berg. “They’re all kind of excited that we’re leading the charge in a little bit more of an organized way than anyone else seems to be. They’re looking to us, and we want to share info.”

Quipped Davidson: “I hope there aren’t any mistakes then.”

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