Housing tool a method for protecting public investment
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Chris Rourke

(Editor’s note: This article is the first in a two-part series that examines the use of deed restrictions for affordable housing.)

Over several decades, Crested Butte Mayor Jim Schmidt has given countless hours serving his community. He’s done so not by working a high-paying job, but by writing for the local newspaper, working at a sandwich shop and driving for Mountain Express.

His first job in the Gunnison Valley in 1976 paid $2.93 per hour, and he averaged about $1,000 monthly. But since then, he’s spent many of his evenings at a Town Council or other community meeting.

“There’s a saying — the only way to make a small fortune in Crested Butte is to start with a large one,” Schmidt quipped.

Nearly two decades ago, Schmidt moved into a deedrestricted affordable housing unit in the Poverty Gulch neighborhood. He credits that move for allowing him to remain in the Gunnison Valley and have the time to give back to the community in which he lives.

“It’s enabled me to not live paycheck to paycheck,” said Schmidt, who was picked for his unit through a lottery. “That’s the best part of it. Because I’ve been able to devote a lot of time to the town.”

Affordable — or workforce — housing historically has been the means to equalize market forces which drive workers with lower incomes farther from the community in which they work. Such properties are maintained in affordable ranges through the use of deed restrictions, also known as restrictive covenants.

According to a 2016 housing needs assessment for the Gunnison Valley, 443 such units existed in the county. The document suggests that by 2020, 336 “catch-up” units must be built along with another 625 “keep up” units. A gap of 420 units has been identified as the number which will not be provided by the free market — 235 owned homes and 185 rentals.

Yet, between 2010 and 2016, only 77 deed-restricted, affordable units were added in Gunnison County. With only two years from the 2020 deadline, housing experts say filling the housing will take a dedicated funding stream to finance projects.

Issue 6A on the November ballot is intended to boost available funding for such projects. The 1.5 mill property tax — the majority of which would sunset in 10 years — is estimated to generate $880,000 annually for affordable housing.

Yet, housing experts say that with greater subsidy comes greater responsibility to protect the public’s investment and maintain affordability, and that’s where deed restrictions come in.


Taylored to a goal

Deed restrictions are a common method of making and keeping properties affordable, preserving them for the local workforce and preventing them from becoming second homes. They are utilized throughout the country but are particularly prevalent in resort communities where the gap between wages and property values is particularly wide.

There are several different elements which go into a deed restriction, depending on the goal. A deed restriction intended to provide housing for lowincome workers may be based on area median income (AMI). For example, a qualifying factor in renting an apartment may be 50 percent AMI, or perhaps for those purchasing a home, 100 percent AMI.

Also, to maintain affordability, a deed restriction may cap appreciation on the value of the home at resale. An allowance for three percent annual appreciation is a common restriction. That means the value of the home is not subject to large increases in price should the real estate market spike.

Yet, another element which could be restricted is occupancy. A “live-work” restriction means the property is reserved for those who work in the county, make the home their primary residence and earn, say, at least 80 percent of their income here. It is designed to keep a property from becoming a vacation home or a short-term rental.


Protecting public investment

Gunnison Valley Regional Housing Authority (GVRHA) Executive Director Jennifer Kermode said deed restrictions can combine several elements to accomplish a specific purpose. One of those aims — perhaps the most important — is to ensure public money is best utilized.

“The deeper the amount of subsidy in a home, the more requirements should be in a deed restriction,” Kermode said.

Gunnison County and the City of Gunnison, Kermode said, follow a universal template drafted by GVRHA for deed restrictions. The Town of Mt. Crested Butte is working on following that standard. The Town of Crested Butte has several different types because of the number of years the town has offered them.

Yet, Kermode cautioned against deed restrictions including language that inadvertently strays from their purpose. For instance, in a recession, a homeowner may have to commute out of the county to stay employed, but a deed restriction may prohibit this due to a live-work requirement.

If the deed restriction instead reflects requirements on where a homeowner works based on the housing authority’s guidelines, the condition could be adjusted in the guidelines without altering the deed restriction.

“In this instance we will allow people to work outside the county for 12 months and will review in a year,” Kermode offered as an example of such flexibility.


(Chris Rourke can be contacted at 970.641.1414 or at chris.rourke@gunnisontimes.com)