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When mountain towns couldn’t find affordable housing for workers, they started building homes themselves.

Decades ago, Colorado’s mountain communities, struggling with sky-high real estate values, implemented “inclusionary” ordinances that required developers to set aside a share of the units they built at a lower price or lower rent.

In a nod to just how expensive things have become, the definition of affordable has risen to include households making above-average incomes, so that accountants, managers, and even doctors, not just ski lift workers and restaurant servers, can live near where they work.

As inclusionary rules have morphed into “workforce” housing requirements, more places now require commercial developers to build or finance units based on the number of jobs their projects will generate. Rather than waiting around for market-based solutions, more communities are building homes themselves.

“I very much like my job and I like Aspen very much, but I can tell you if I had to commute from Rifle, I would not be working here,” said Ben Anderson, community development director in Colorado’s most expensive place to live.

Seeking housing solutions

From the mountains to the prairies, Colorado’s housing crisis is squeezing state residents in ways that make drastic choices an all-too-common part of their cost-of-living calculus.

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Anderson purchased a 550-square-foot condo built near the police station five years ago for $200,000. Comparable-sized market-rate units next door go for $2 million, or 10 times as much. He can live there as long as he works for the city. And he avoids a 136-mile roundtrip commute.

Matthew Owens, who lived in a ski resort subsidized apartment for 17 years, was about to relocate to another state because of a lack of affordable housing options for his young family.

Three years ago, he put his name in a lottery, literally, and his ball was drawn, giving him the right to purchase a deed-restricted three-bedroom condo that the town had built for $650,000. A similar property would have cost $4 million at the market rate.

“We wouldn’t have been able to stay. It is a total game-changer,” said Owens, who runs a property management company in Snowmass Village and has two children.

Aspen leaders first started thinking about smart growth policies and making development pay its way back in the 1970s, implementing rules in the 1980s, Anderson said. As the down valley communities of Basalt and Carbondale became more expensive, they adopted inclusionary ordinances in the early 2000s.

Even Glenwood Springs, which implemented an inclusionary ordinance in 2001 only to suspend it in 2011, brought it back in 2021.

Inclusionary housing policies haven’t prevented home prices from skyrocketing — the median sales price for a single-family home was $11.9 million last year in Aspen, according to the local Realtor board.

But over time, when combined with other policies, they have allowed more workers to live there. Aspen has been able to preserve seven in 10 units of year-round occupied housing units as affordable, according to the Workforce Housing Report from the Northwest Colorado Council of Governments.

Aside from Boulder County, inclusionary ordinances have remained mostly confined to the mountains, especially after the Colorado Supreme Court in 2000 ruled that Telluride’s inclusionary ordinance was a form of rent control, which is prohibited in the state.

Legislation in 2021, however, clarified that inclusionary requirements don’t constitute rent control, and opened the door to more programs, chief among them Denver’s Expanding Housing Affordability Ordinance.

“It seems like the Front Range communities are starting to face the same kind of affordability pressures that the resort communities have faced for years,” said Lance McDonald, a program manager with Telluride and one of the architects of the town’s original inclusionary housing ordinance in the 1990s.

More isolated than Aspen and Vail, Telluride couldn’t count on workers commuting in from long distances to fill open jobs and started taking a hard look at its housing shortfall in the 1980s. If it was to survive, it had to house its workers.

When the typical household in a community can’t make enough to buy or rent a home in that community, then there is a serious problem, he said. Building more units at the market rate by itself won’t boost affordability.

“Not one approach will work. It will take multiple approaches,” he said.

Inclusionary rules traditionally are based on two ratios. One defines what is affordable, as a share of the area median income. The second tells developers what must be set aside as affordable, based on either the number of units or square footage.

The set-aside for affordable ranges from 10% in towns like Eagle and Hayden to 30% in Aspen, but 20% is typical. A developer wanting to build 20 condos in Carbondale, for example, would need to make sure four were affordable, said Jared Barnes, the town’s planning director.

In Basalt, the requirement is based on square footage, with 25% of the footage required to be affordable, said James Lindt, assistant planning manager in Basalt. It also requires commercial developers to provide “mitigation” or affordable housing units based on the number of jobs their projects will generate.

Redefining affordable

At the core, inclusionary ordinances represent a realization that the free market, left to its own devices, won’t supply enough affordable housing to lower and even middle-income workers in expensive real estate markets.

“Housing is inextricably tied to economic success and our community can’t exist without a strong housing program,” said Betsy Crum, housing director for Snowmass Village. “People need to be able to live close enough to where they work, or the town will face an existential crisis.”

An influx of high-earning remote workers during the pandemic caused housing costs, already high, to surge even more in desirable places to live.

About 75% of remote workers in Colorado’s mountain resort areas in 2021 were making $150,000 or more a year, while only 30% of locals were making that much, according to the Mountain Migration Report from the NWCCOG.

In a fight for housing, locals were the ones who lost out to newcomers. In Snowmass Village, home prices have risen 81.5% in the last four years, in Steamboat Springs, they are up 81.5% and in Basalt, they are up 76.3%, according to Zillow.

Although it isn’t the norm, Aspen has a deed-restricted home valued at $2.5 million, in part so it can attract doctors to work in the city, Anderson said.

Along the Front Range, and across most of the U.S., affordable units target those earning between 30% to 80% of the area median income or AMI, with 60% as a common definition.

That range reflects federal rules for using Low-Income Housing Tax Credits, and Denver adopted that definition in its inclusionary ordinance. But in resort areas, 80% up to 200% is more typical in inclusionary ordinances.

“You can be in the workforce earning 150% of the AMI and be nowhere close to being able to afford a home,” lamented Hannah Klausman, director of economic and community development for Glenwood Springs.

That 150% number works out to an income of $104,250 a year for a single person and $148,800 for a family of four in Garfield County. The median price of a home in Glenwood Springs is $862,500, according to the Zillow Home Price Index.

And things only get more expensive the further up the Roaring Fork Valley someone goes. In Carbondale and Basalt, someone making double the area median income will struggle to find a home or apartment, she said.

Glenwood Springs tried inclusionary zoning in 2001, but developers largely said pass, especially during the soft years of the housing market downturn. By 2011, the rules were suspended and by 2017 they were repealed.

But a 2019 Regional Housing Study found that the city of 10,000 people and 4,500 homes and apartments was short about 2,000 housing units, Klausman said. Between 2019 and 2021, both rents and home prices rose 42%, while incomes only rose 16%.

“It was a staggering number to come out of the study and it was a catalyst for realizing we need to implement tools, including inclusionary zoning to handle that,” she said.

By 2021, an inclusionary zoning ordinance was back on the books, requiring any developments with 10 or more rental units to set aside 20% of units as affordable to those earning 100% of the area median income. For-sale projects had to set aside a tenth of units as deed restricted and make sure 20% went to those working in the area.

The pandemic delayed things, but the first project built under the new rules, MountainView Flats, will soon provide 40 units, of which eight are affordable, she said. That is more than the prior ordinance did in 16 years.

In 2019, Glenwood Springs tightened the rules on short-term rentals and a year later it loosened rules on accessory dwelling units, which had been in place since 2013. Last year, the city created rules that made it easier for hotels to convert to residential units in exchange for deed restrictions, and this year it is considering rules to make it easier to add density.

But Glenwood also faces a balancing act. If it makes things too difficult, development could flow to areas with lower requirements and costs like New Castle, Silt and Rifle.

A criticism of inclusionary zoning is that it can make private development too costly or push it toward areas without requirements, an issue Denver will likely have to deal with. And like a big champagne powder day, the conditions have to be right.

“Whenever you introduce a subsidized component to a development project, it puts pressure on the upper price point to carry that,” acknowledged Tim Belinski, president of IND Ventures and a developer in Basalt.

Higher interest rates and higher construction costs have only added to the difficulties developers face in trying to make projects pencil out financially.

But Belinski said inclusionary rules have been part of the equation for so long in the mountains, and the math mostly works, assuming land is available. Resort residents also are acutely aware that the economy needs to have enough workers to function, and housing is a key part of that happening.

Several communities, facing critical shortages, have put on their hard hats and started building housing themselves from dedicated revenue sources, like a portion of sales taxes, fees on deed transfers and short-term rentals. Colorado is also setting aside a share of state income tax revenues for housing.

“Local governments getting involved in building housing has increased since the pandemic. The need is very great, to what some communities were calling crisis proportions,” said Rachel Tuyn, director of the Northwest Colorado Council of Governments.

The city of Aspen recently completed 79 units in the third phase of its Burlingame Ranch project and up next is Lumberyard, which will provide 277 deed-restricted units on an 11.3-acre parcel near the Aspen Airport Business Center.

Avon is looking to annex 100 acres of state land to build 700 deed-restricted units and 60,000 square feet of commercial space. Winter Park Resort, with the support of the Town of Winter Park, is looking to build dorm-style housing with 330 beds. The Yampa Valley Housing Authority has a 10-year plan to build 1,100 housing units for those earning the median income in the Steamboat Springs area.

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The name of the developer of the Burlingame Ranch project and Lumberyard projects was corrected. Is is not the Aspen/Pitkin County Housing Authority but the city of Aspen.

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