HomeMy WebLinkAbout2017-02-28 VLHA Meeting Agenda
Vail Local Housing Authority Agenda
3:00 PM – 5:00 PM
Tuesday, February 28, 2017 Community Development Large Conference Room Town of Vail 75 South Frontage Road Vail, Colorado 81657
VLHA Attendees: Absent: Town Staff:
I. Approval of Minutes February 14, 2017
II. Deed Restriction Purchase Program FAQ’s
III. Draft EHU Guidelines
IV. Chamonix Vail Deed Restriction Recommendation
• Price Appreciation Cap Options
• Residential Real Estate Ownership Recommendation
V. Adjournment
VI. Next Meeting – March 14, 2017
PLANNING DEPARTMENT
970.668.4200 0037 Peak One Dr. | PO Box 5660
www.SummitCountyCO.gov Frisco, CO 80443
MEMO
TO: Board of County Commissioners (“BOCC”) FROM: Kate Berg, Senior Planner
FOR: January 10, 2017
SUBJECT: County Deed Restriction Provisions on Maximum Resale Price – Current use of Area Median Income (AMI) and Potential Alternative Methodologies
BACKGROUND / PURPOSE: Within the unincorporated county, there are a total of seven (7) deed-restricted affordable workforce housing
developments with deed restrictions limiting the permitted resale price of the homes. These include Hidden River Lodge, Melody Lodge, Monarch Townhomes, Ophir Mountain Village, Soda Creek Condos, Dillon Valley East
Condos, Unit 106, Building I, and Copper Point Townhomes. The table below outlines the resale calculation
methodology that is used in each of these seven deed restrictions.
Of these 7 deed-restricted developments, there are five (5) deed restrictions that tie the allowable resale price to the percentage increase in Area Median Income (AMI) - Monarch Townhomes, Ophir Mountain Village, Soda Creek Condos, Dillon Valley East Condos, Unit 106, Building I, and Copper Point Townhomes. Within these
five developments, there are currently a total of 77 deed-restricted housing units. For these 77 properties, in the event that AMI stays flat or decreases from the time of purchase to the time of listing the property for sale, the
owner is not allowed any appreciation in value and the owner must list the property for the same amount as the
purchase price paid.
Property Resale Calculation Methodology Implications of AMI decrease
Hidden River Lodge (16 units) The greater of: a) the purchase price plus 6% per year, or b) the purchase price plus the percentage increase in
CPI.
None, because the resale price is tied to CPI, not AMI, and the deed
restriction allows the greater of 6% or the increase in CPI.
Melody Lodge
(1 unit)
The greater of: a) the purchase price plus 5% per year,
or b) the purchase price plus the percentage increase in AMI.
None, because this deed restriction
allows the greater of 5% or the AMI increase.
Monarch Townhomes
(13 units)
The lesser of: a) the purchase price plus 5% per year,
or b) the purchase price plus the percentage increase in 100% AMI.
No permitted appreciation in home value. Maximum listing price is the
same as the purchase price paid by the owner / seller.
Ophir Mountain Village
(28 units)
The lesser of: a) the purchase price plus 3% per year, or b) the purchase price plus the percentage increase in
80% AMI.
Soda Creek Condos
(20 units)
The lesser of: a) the purchase price plus 3% per year,
or b) the purchase price plus the percentage increase in 100% AMI.
Dillon Valley East
Condos, Unit 106, Building I (1 unit)
The lesser of: a) the purchase price plus 3% per year,
or b) the purchase price plus the percentage increase in AMI.
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Property Resale Calculation Methodology Implications of AMI decrease
Copper Point Townhomes (15 units) The lesser of: a) the purchase price plus 3% per year, or b) the purchase price plus the percentage change in
AMI. There is a provision that the owner will not be
required to list the unit for less than the purchase price paid.
No permitted appreciation in home value. Maximum listing price is the same as the
purchase price paid by the owner / seller.
*Note – There are additional factors that affect the total resale price, including capital improvement allowances and real estate commissions, which are discussed in more detail in subsequent sections of this memo.
The purpose of the January 10th BOCC work session is to review the current use of Area Median Income (AMI) in
the resale calculations in these five deed restrictions, discuss the pros and cons related to the current use of AMI,
and evaluate potential alternative methods for calculating permitted resale price. If determined to be appropriate by the BOCC, the County’s existing deed restrictions for the five affected developments could be amended to
adopt an alternative methodology for calculating the allowable maximum resale price, and the alternative
methodology could also be used in new deed restrictions for affordable workforce housing developments moving forward.
AREA MEDIAN INCOME (AMI)
Within Summit County, the County and town governments and the Summit Combined Housing Authority (SCHA) routinely reference the Area Median Income (AMI) in deed restriction covenants for affordable workforce housing. AMI is utilized as a measure of local income, and its value is obtained from the U.S.
Department of Housing and Urban Development (HUD), who estimates the AMI annually using the methodology described below. AMI is typically used to establish an initial sales price or rental rate that is affordable to a targeted income level. Most of the County’s more recent deed restrictions also limit annual appreciation to a
maximum of 3% per year or the percentage increase in AMI, whichever is less. Thus, the allowable resale price is directly tied to the annual percentage change in AMI. The intent of this regulation is to ensure that homes remain
affordable to the respective targeted income level over time (e.g., a home originally priced to be affordable to a
household earning 100% of the AMI remains affordable to 100% AMI households over time). The focus of this memo is to evaluate the use of AMI only in the context of calculating the allowable resale price.
How is AMI Calculated?
HUD uses the following methodology to calculate AMI for a specific year:
Step 1: First HUD uses the most recent U.S. Census Bureau American Community Survey (ACS) 5-year
estimate of Summit County Median Family Income
Step 2: HUD then adjusts the most recent ACS 5-year estimate of Median Family Income using the annual
percent change in the
as the starting point for the calculation.
national Consumer Price Index (CPI) Inflation Factor
from the end point of the 5-
year Median Family Income estimate to the current year.
For example, the 2016 HUD AMI estimate was calculated as follows:
Step 1: 2009 – 2013 ACS 5-year estimate of Summit County Median Family Income = $79,420
Step 2: Increase the 2009-2013 Median Family Income estimate by the annual percent increase in national CPI
for 2013 – 2016.
2016 HUD AMI estimate = $81,500 for a 4-person household
AMI estimates for all other household sizes are then adjusted based on this number.
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It is important to note that ACS data is collected annually for communities with populations over 65,000 people.
However, for smaller communities such as Summit County, the Census Bureau uses aggregated data from ACS
samples collected over a previous 5-year time period. Therefore, the Summit County ACS data being used by
HUD for the annual AMI calculation is outdated. There is a multi-year lag in the data (e.g., the 2016 AMI
calculation uses the 2009-2013 5-year ACS estimate as it’s starting point, while the 2015 AMI calculation used
the 2008-2012 5-year estimate).
Another factor affecting the accuracy of the AMI metric is that HUD uses the Median Family Income (MFI) in its
formula for AMI. Median Family Income is different from Median Household Income, which is also published
annually through the Census ACS. Although MFI is the measure required by many government housing
programs, MFI data excludes non-family households, and therefore does not take into account all segments of the
community. MFI is typically higher than Median Household Income, and therefore results in inflated income
values for Summit County households. For example, the 2009 – 2013 Summit County ACS estimates for these
two income values were as follows, representing a difference of $15,723:
• Summit County Median family income – $79,420
• Summit County Median household income - $63,697
The net result of this methodology is that year-to-year comparisons can become very erratic, since each year HUD
uses a different 5-year lagged moving average of Summit County Median Family Income, and then uses CPI, a
national price index (not an income index) to bring the number up to the present. The inflation factor utilized is
based on the Congressional Budget Office (CBO) forecast of the national Consumer Price Index (CPI) for a given
year. Because the national CPI is averaged consumer prices from around the country, particularly urban areas, it
does not necessarily mirror changes in a particular region, such as Summit County. When income changes
closely match inflation changes, the numbers will be reasonably consistent, but when they don’t (e.g., prices don’t
fall as much as incomes during recessions, and income gains may seriously lag price inflation during recovery
periods), changes in AMI estimates aren’t going to be very good reflections of economic reality.
In summary, HUD’s annual AMI estimates present some problems for smaller communities (with populations less
than 65,000 people), because the estimates do not always reflect present-day household income values for the
following reasons:
• The AMI estimates are based on ACS income data that is collected up to 3-7 years in arrears.
• The estimates are based on family incomes only, and do not take into account the large segment of the
community that lives in non-family households, resulting in inflated income values.
• The methodology uses national CPI data that is not representative of local prices or incomes.
• The methodology HUD uses to calculate AMI is subject to change from year to year, which creates
uncertainty and lack of predictability for deed-restricted unit owners. For example, HUD changed the
calculation methodology in 2008 and 2013, resulting in zero and negative percentage changes during
those years.
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How has AMI changed annually in recent years?
The table below shows the annual change in Summit County AMI for a 4-person household from 2009 – present. These numbers show that HUD AMI does not seem to accurately align with real-time income data for Summit
County, as it can be seen that during the 2008 – 2011 recession, the HUD AMI values continued to increase annually at 1.61 – 4.67%. Then, well after the economy had pulled out of recession, we began to see annual AMI decreases beginning in 2014 through 2016. AMI decreased approximately 1.4% from 2013 – 2014, 4.6% from
2014-2015, and 5.9% from 2015-2016. This represents a total decrease of 11.5% over the past 3 years, and AMI values are now approximately 4% lower than they were in 2009.
Year
AMI for 4-person
Household
Change from
Previous Year
Percent Change from Previous
Year
2009 $85,100 $3,800 4.67%
2010 $87,200 $2,100 2.47%
2011 $88,600 $1,400 1.61%
2012 $89,800 $1,200 1.35%
2013 $92,100 $2,300 2.56%
2014 $90,800 -$1,300 -1.41%
2015 $86,600 -$4,200 -4.63%
2016 $81,500 -$5,100 -5.89%
What problems does this create and for whom? A zero or negative change in AMI equates to a permitted 0% return on a homeowner’s investment, per the five
County deed restrictions which state that the property value may increase the lesser of 3% per year or the percentage increase in AMI. This means that, if a homeowner who originally purchased his/her home in 2009 listed the home for sale in 2016, he/she could not earn any appreciation above the 2009 purchase price when
listing the home for sale 7 years later. Example
:
The owner of a Soda Creek Condominium unit purchased in 2009 for $184,800, would be able to list his/her unit
for sale in December 2016 for the same purchase price paid in 2009 with no equity earned during their 7 years of
homeownership. The 20 deed-restricted units in Soda Creek Condominiums were originally priced to be affordable to 100% AMI households in 2003, with the initial unit prices calculated to be affordable to 2-person
households earning an annual income of $58,200 (based on 2002 HUD AMI data). Based on the current 2016
HUD AMI data, a 2-person household at 100% AMI earns an estimated $65,900 per year and can afford to purchase homes in the low $200k price range (up to a maximum price of approximately $240k).
Given the current situation, homeowners in Soda Creek Condominiums have requested that the County evaluate the current resale methodology to determine whether any changes can be made to allow for a reasonable amount
of annual appreciation / return on investment when listing these condo units for sale in today’s real estate market, while still ensuring that the units remain affordable to the targeted 100% AMI income level over time. What are future AMI estimates projected to be in the next few years? The Summit County AMI estimates for 2017 are projected to increase from 2016, given that the most recent 5-
year ACS estimate of Summit County median family income (2010 – 2014) has increased to $85,938, which
reflects an increase of $6,518 or 8.2%, from the previous 5-year ACS estimate of $79,420. If the 5-year ACS estimates of Summit County’s median family income continue to increase in the years ahead, we should see a steady increase in HUD’s annual AMI estimates moving forward over the next few years. Thus, the current
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situation facing these existing deed-restricted unit owners will likely correct itself over the next few years.
Although, as economic cycles ebb and flow over time, AMI decreases similar to those experienced over the past 3
years will present problems for deed-restricted unit owners in the future, when owners list units for sale during the years following periods of economic recession.
What are the towns in Summit County doing to address recent AMI decreases? Following is a summary of the approaches that are currently being used by the towns in the County for all existing
deed restrictions, which limit annual appreciation to a maximum of 3% per year or the percentage increase in AMI, whichever is less.
Breckenridge – The Town of Breckenridge has been using the same approach as the County, which is that the annual price appreciation is calculated as 0% (no increase) during years that AMI stays flat or decreases. Like the County, the Town has not been requiring unit owners to list their units for less than their purchase price, even
when AMI declined from their date of purchase to their date of listing. This is because the deed restriction language references the “percentage increase
in AMI”, so the percentage increase is zero in years that AMI stays flat or declines.
The Town Council plans to continue to review the AMI issue over the next year, as the 2017 AMI figures are
released and as the Town prepares to market the Denison Placer Phase 2 project, which will contain ownership
townhomes. According to Town staff, they plan to evaluate potential options for an alternative resale calculation methodology, which could be incorporated into the new deed restriction covenant for the Dennison Placer
townhomes, if determined to be more appropriate. Construction of the Denison Placer townhomes will begin in
spring 2017, with completion for occupancy anticipated around year end 2017. The Town may consider also applying the new methodology to existing deed-restricted properties, as part of their upcoming discussions on this
topic in 2017.
Frisco – The Frisco Town Council passed a motion in October 2015 indicating that annual appreciation will be
calculated as 3% per year for all time periods when AMI change is either zero or negative. The allowance for a fixed rate minimum amount or floor on annual appreciation during periods of AMI decrease is not uncommon; however, many communities choose to apply a lower fixed rate (most commonly 1%) during these time periods to
ensure that deed-restricted homes continue to remain affordable to the targeted income level over time. For example, the City of Boulder ties permitted resale price to the annual change in AMI or CPI (whichever is less), with annual appreciation of deed-restricted homes restricted to a range of 1.0 – 3.5% per year.
Silverthorne – The Town of Silverthorne has been enforcing the existing language in their deed restrictions,
which limit annual appreciation to a maximum of 3% per year or the percentage change in AMI, whichever is
less, with no special exceptions granted. The Town noted that there are a very small number of homes subject to this deed restriction within town limits. Only 8 townhome units at Solorado are currently subject to this
restriction, and the Town has not received any complaints regarding the current deed restriction language.
EVAULATION OF POTENTIAL ALTERNATIVE METHODOLOGIES FOR CALCULATING MAXIMUM RESALE PRICES
The purpose of this exercise is to research and evaluate potentially viable alternative methodologies for
calculating permitted resale price that would more effectively balance the two goals of the County’s affordable workforce housing program:
Goal #1: Maintain long term affordability of deed-restricted housing units. Goal #2: Allow some reasonable equity / return on investment to encourage maintenance of housing units, neighborhood stability, and upward mobility for local homeowners.
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RESEARCH ON ALTERNATIVE METHODS USED IN OTHER COMMUNITIES
Staff has researched the various methods used to calculate allowable resale price for affordable workforce housing units throughout similar mountain resort communities and throughout the U.S., and has identified the following
most commonly used methods, along with the pros and cons of each:
• Mortgage-based method
• Appraisal-based method
• Fixed-rate method
• Index-based method
Mortgage-based method – determines the allowable resale price at the time of sale by calculating the maximum amount of mortgage financing that a homebuyer at a targeted income level can afford at current interest rates.
Advantages : Assures affordable mortgage payments for all future homebuyers.
Disadvantages
: Causes problems for homeowners who must sell during times of increased interest rates. For this
reason, this method is rarely used.
Appraisal-based method - allows the initial purchase price to be increased by a specified percentage of the change in the home’s market value from the time of purchase to the time of sale. A market value appraisal is done at the time of initial purchase and at the time of resale, and the owner is permitted to list the home for a
percentage of the increase in the home’s market value. The most common percentage used is 25%. Advantages
: Allows homeowners a modest percentage of the increase in market value, which provides some
reward for maintaining and improving the condition of the home.
Disadvantages
: The reliance on third-party appraisals creates uncertainty and inconsistent appraisals lead to
disagreements, making the program difficult to administer. Also, in hot real estate markets, this method may not adequately protect affordability.
Staff research found that two affordable housing programs that previously used the appraisal-based method (with resale price calculated as 25% of the increase in the appraised value from time of purchase to time of sale) have
since modified their resale calculation methodology in favor of a simple 1.5% per year fixed rate. Both of these
programs, City First Homes in Washington, D.C. and Homestead Community Land Trust in Seattle, WA, found that a fixed 1.5% formula produces a very similar return to their appraisal based formula, but is much easier to
administer and improves marketability of the homes. (Source: 2015 Cornerstone Homeownership Innovation Program (CHIP) Publication, The Balancing Act: Resale Formula Options for Long-Term Affordable Homeownership Programs)
Fixed-rate method – allows the initial purchase price to increase annually by a fixed percentage, most commonly between 1 – 2% per year.
Advantages
: Easy to understand and administer; provides predictability and certainty in terms of future return on investment; allows for a slow and steady increase in value; avoids possible complications resulting from changes
to the methodology for generating and publishing indexes.
Disadvantages: Appreciation is not tied to changes in household income; therefore, over time home prices may
not continue to align with the prices affordable to the targeted income levels. Also, fixed rate formulas do not establish any relationship with current market conditions or the homeowner’s efforts to maintain and/or improve
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the condition of the home.
Index-based method – allows the initial purchase price to increase over time by the percentage change in a published index. The most common indexes used are Area Median Income (AMI), Consumer Price Index (CPI),
and Average Weekly Wage.
AMI: The most common index used is AMI. Since affordable housing programs often strive to
keep homes affordable to households earning the same percentage of the AMI over time, tying the permitted resale price to the change in AMI is viewed, in theory, as an appropriate strategy to help accomplish that goal. The use of AMI is consistent with federal housing programs and
multiple funding sources, and figures are published regularly and available online. However, the AMI index in particular tends to be very erratic, remaining flat or decreasing for several years and then increasing substantially in other years.
Consumer Price Index (CPI): CPI is another index used by some affordable housing programs. CPI generally changes more steadily than AMI, but this index measures changes in consumer
prices of goods and services, not incomes. Also, for Summit County, the closest geographic region for which published CPI data is available is the Denver-Boulder-Greely metropolitan
statistical area, which does not reflect data on local prices. Over the past 8 years (2009 – 2016),
the annual change in CPI has fluctuated from 0.7% - 3.0% with an average annual change of 1.7%.
Average Weekly Wage: The average weekly wage for individual counties is published by the U.S. Bureau of Labor Statistics by quarter and annually, and is available on the U.S. Bureau of
Labor Statistics website. Local wage data is based on actual wages by occupation reported by local employers. Over the past 8 years, the annual change in Summit County wages has fluctuated from -2.3% - 5.7% with an average annual change of 1.8%.
Comparison of Annual Percentage Change in the Alternative Indexes Historical Changes 2009 - 2016
Year Annual Percent
Change in Summit County AMI Annual Percent change in CPI
Annual Percent Change in Summit
County Wages
2009 4.7% 2.7% -2.3%
2010 2.5% 1.5% 1.6%
2011 1.6% 3.0% -0.8%
2012 1.4% 1.7% 0.2%
2013 2.6% 1.5% 3.3%
2014 -1.4% 0.8% 2.4%
2015 -4.6% 0.7% 5.7%
2016 -5.9% 1.7% 4.2%
Total Percent
Change 2009 - 2016 0.7% 13.6% 14.3%
Average Annual
Percent Change 0.1% 1.7% 1.8%
Advantages: Index-based formulas tie home price to changes in median income, consumer prices or wages,
which theoretically keeps homes affordable over time; these formulas are easy to administer and may be
calculated at any time.
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Disadvantages
: Unpredictable and erratic; changes in the calculation methodology can result in unpredictable
spikes and dips in the index from year to year; also index-based methods may not provide adequate incentive for
maintenance and repairs, and may not provide a reasonable return on investment for homeowners, particularly in the case of AMI based formulas.
Index Evaluation: The following questions are relevant for evaluating which, if any, of these indexes are potentially appropriate:
Evaluation Questions AMI CPI Local Wages
Does the index accurately measure annual
changes in the incomes of Summit County households?
Theoretically but the
index contains flaws described in this
memo
No Yes, but only provides
data on average weekly wage, not all
sources of household income
Is the index relevant for the Summit County
area and local population?
Yes No Yes
Is the index consistent from year to year? No Yes Index varies from year to year, but seems to
track with current economic conditions
Is the index published with enough frequency
and reliability to be available and current when needed?
Yes Yes Yes
Is the index published by an objective, reputable
public or private agency?
Yes Yes Yes
Can the average person easily understand the index? Moderately well Yes Yes
METHODOLOGIES USED IN OTHER MOUNTAIN RESORT COMMUNITIES Staff research has found that other mountain resort communities use a variety of methods, ranging from simple
fixed rate formulas to combination index-based / fixed-rate formulas tied to the percentage increase in the various metrics described above (AMI, CPI and local wages).
Community Resale Calculation Methodology Pros Cons
Eagle County Annual appreciation is calculated based on the annual percent change in Eagle County wages, as published by the U.S. Bureau
of Labor Statistics, with a fixed maximum of 6% per year. Eagle County continues to use HUD AMI for establishing initial
sales prices and rental rates affordable to targeted income levels, and for income qualifying households for eligibility to purchase or rent.
Aligning the annual change in home prices
with the annual change in local wages keeps sales prices in line with
changes in local income, and results in most homes remaining
affordable to the targeted income level over time, while still allowing
owners a reasonable rate of return (Average rate of return is 1.8% per year).
Local wage data does not provide
information on overall household income, and does not
account for persons holding more than one job. Using this
index may not adequately represent changes in the buying
power of county households and could result in deflated
housing prices.
Aspen/Pitkin County Annual percent change in the Consumer Price Index (CPI) or 3%, whichever is less. The most recent annual change (from November 2015 – November 2016) was 1.5%, so deed-restricted
homes will be allowed 1.5% appreciation from 2015 - 2016.
CPI has historically fluctuated less drastically than AMI with annual
changes ranging from 0.7% - 3.0%, and averaging 1.7% per year.
The CPI index is not reflective of local incomes, and the
annual change has gone up and down unpredictably over
the last few years.
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Community Resale Calculation Methodology Pros Cons
Boulder Annual appreciation is based on the annual change of the Area
Median Income and the Consumer Price Index (whichever is less), and is restricted to a range of 1.0% - 3.5% per year.
This method ties resale price to changes in local income and consumer prices, while allowing a reasonable rate of return of 1.0 -3.5% per year.
None identified
Teton County Fixed rate 2.5% appreciation per year Simple, predictable, and easy to calculate and understand.
Does not tie resale prices to income. A fixed rate as high as
2.5% can result in price creep and loss of affordability to the
targeted income level over time.
Telluride / San Miguel
County
The percent change in the Consumer Price Index (CPI) along with a maximum of 3% annual appreciation, whichever is less.
Telluride looks at both the Denver-Boulder-Greely CPI and the national CPI (U.S. City Average) and uses the lesser of the two indexes.
AMI is still used to set original purchase prices and qualify applicants.
CPI typically does not increase an average of
3% per year, so CPI increase is generally the limiting factor,
effectively restricting appreciation to an average 1.7% per year.
The CPI index is not reflective of local
incomes, and the annual change has gone up and down
unpredictably over the last few years.
EXAMPLE RESALE CALCULATIONS – CURRENT METHODOLOGY AND ALTERNATIVE OPTIONS
To determine which, if any, of these alternative methodologies may be appropriate for Summit County deed-restricted properties, Staff has provided example calculations for the following alternative methods in
Attachment A
:
1. Current methodology – Combination index-based / fixed-rate formula using the lesser of 3% per year or
the percentage increase in AMI 2. A similar combination index-based / fixed-rate formula using the lesser of 3% per year or the percentage
increase in the following alternative indexes: a. Percentage increase in Summit County Wages b. Percentage increase in CPI
3. The options above with the addition of a 1% floor and 3% ceiling, to ensure annual appreciation will always be between 1-3%:
a. Percentage increase in AMI with a fixed 1% - 3% range b. Percentage increase in Summit County Wages with a fixed 1-3% range
c. Percentage increase in CPI with a fixed 1 – 3% range
4. Fixed Rates of 1.5%, 1.75%, and 2% annual appreciation
The example calculations provided in Attachment A show that any of these alternative options would provide homeowners with an improved opportunity to earn a reasonable rate of return (averaging between 1.3 – 2% per
year), compared to the current methodology. So the question then becomes, which option will also most appropriately control price creep over time?
Controlling Price Creep: When deciding on the most appropriate methodology, it is important to recognize that the resale calculation is not the only factor that impacts the affordability of deed-restricted units over time. Other factors that contribute to overall price creep include:
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• Capital improvement allowances – most of these County deed restrictions allow certain qualifying
capital improvements to be added to the permitted resale price, typically up to a maximum 10% of the initial purchase price
• Real estate commissions – some of the County’s deed restrictions contain allowances for real estate
commissions and other sales costs to be added to the permitted resale price, with amounts ranging from an additional
during each 10 year period of ownership.
2-7%
• HOA dues – monthly HOA fees typically increase gradually over time, and must be accounted for when evaluating whether the resale price will result in an affordable monthly housing payment for future
homebuyers at a targeted income level (i.e, less than 30% of the household’s gross monthly income).
.
• Interest rates – interest rates change over time and substantially impact the total loan amount that a
household at the targeted income level can afford.
Given the potential for these additional factors to incrementally increase affordable home prices over time, Staff
recommends selection of a resale calculation methodology that will provide a reasonably low rate of annual return
(not exceeding an average of approximately 1.5% - 1.75% per year), especially in cases where the deed restriction allows for capital improvements and resale commissions to be added onto the permitted resale price.
Based on staff’s analysis, an approximately 1.5% fixed rate per year would be the simplest solution. As noted in this memo, the primary concern with a fixed annual rate is that fixed rate formulas do not establish any
connection to the homeowner’s efforts to maintain and/or improve the condition of the home. To address this, staff recommends ensuring that the respective deed restrictions establish appropriate maintenance / health safety
standards to be met at the time of resale. Alternatively, using one of the identified combination index-based/fixed
rate formulas (with or without the addition of a 1% floor and 3% ceiling on annual appreciation) could achieve a similar result, with annual appreciation rates of 1.3 - 1.8%, while still continuing to tie home prices to a published index.
RECOMMENDATION AND NEXT STEPS:
Staff requests that the BOCC review the information outlined in this memo and Attachment A, and provide input and direction on these potential alternative options for calculating allowable resale price. If determined to be
appropriate by the BOCC, the County’s existing deed restrictions for the five affected developments could be
amended to adopt one of these alternative methodologies for calculating the allowable maximum resale price, and the alternative methodology could also be used in new deed restriction covenants for affordable workforce
housing developments moving forward. ATTACHMENTS:
• Attachment A: Example Resale Calculations for Current Methodology and Alternative Options
cc: Jim Curnutte, Community Development Director
Thad Noll, Assistant County Manager Don Reimer, Planning Director Jeff Huntley, County Attorney
Keely Ambrose, Assistant County Attorney Nicole Bleriot, Summit County Housing Director Laurie Best, Senior Planner, Town of Breckenridge
Cindy Christensen, Deputy Director, Aspen/Pitkin County Housing Authority
Page 1 of 4
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
AMI Lesser Amount
AMI Affordability Level at
Resale
2009 3.0%4.7%3.0%
2010 3.0%2.5%2.5%
2011 3.0%1.6%1.6%
2012 3.0%1.4%1.4%
2013 3.0%2.6%2.6%
2014 3.0%-1.4%-1.4%
2015 3.0%-4.6%-4.6%
2016 3.0%-5.9%-5.9%
$184,800 *80% AMI
$0.00
-0.8%
-0.1%
Calculation 2.a: Lesser of 3% per year or percentage increase in Summit County Wages
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
Wages Lesser Amount
AMI Affordability Level at
Resale
2009 3.0%-2.3%-2.3%
2010 3.0%1.6%1.6%
2011 3.0%-0.8%-0.8%
2012 3.0%0.2%0.2%
2013 3.0%3.3%3.0%
2014 3.0%2.4%2.4%
2015 3.0%5.7%3.0%
2016 3.0%4.2%3.0%
$203,464.80 90 - 100% AMI
$18,664.80
10.1%
1.3%
Calculation 1: Current methodology – Combination index-based / fixed-rate formula using the lesser
of 3% per year or the percentage increase in AMI
ATTACHMENT A:
Example Resale Calculations for Current Methodology and Alternative Options
Average Annual Percent Appreciation
Maximum Resale Price in Dec. 2016
Total Appreciation in 8 years
Average Annual Percent Appreciation
Total Percent Appreciation
Maximum Resale Price in Dec. 2016
Total Appreciation in 8 years
Total Percent Appreciation
*Allow owner to list unit for purchase price paid since total percent increase in AMI was zero.
Page 2 of 4
Calculation 2.b: Lesser of 3% per year or percentage increase in CPI
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
CPI Lesser Amount
AMI Affordability Level at
Resale
2009 3.0%2.7%2.7%
2010 3.0%1.5%1.5%
2011 3.0%3.0%3.0%
2012 3.0%1.7%1.7%
2013 3.0%1.5%1.5%
2014 3.0%0.8%0.8%
2015 3.0%0.7%0.7%
2016 3.0%1.7%1.7%
$209,932.80 90 - 100% AMI
$25,132.80
13.6%
1.7%
Calculation 3.a: Percentage increase in AMI with a fixed 1% - 3% range
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
AMI
Annual appreciation
allowed within 1-3%
range
AMI Affordability Level at
Resale
2009 3.0%4.7%3.0%
2010 3.0%2.5%2.5%
2011 3.0%1.6%1.6%
2012 3.0%1.4%1.4%
2013 3.0%2.6%2.6%
2014 3.0%-1.4%1.0%
2015 3.0%-4.6%1.0%
2016 3.0%-5.9%1.0%
$210,856.80 90 - 100% AMI
$26,056.80
14.1%
1.8%
Total Appreciation in 8 years
Maximum Resale Price in Dec. 2016
Total Appreciation in 8 years
Total Percent Appreciation
Average Annual Percent Appreciation
Total Percent Appreciation
Average Annual Percent Appreciation
Maximum Resale Price in Dec. 2016
Page 3 of 4
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
Wages
Annual appreciation
allowed within 1-3%
range
AMI Affordability Level at
Resale
2009 3.0%-2.3%1.0%
2010 3.0%1.6%1.6%
2011 3.0%-0.8%1.0%
2012 3.0%0.2%1.0%
2013 3.0%3.3%3.0%
2014 3.0%2.4%2.4%
2015 3.0%5.7%3.0%
2016 3.0%4.2%3.0%
$214,368.00 95 - 100% AMI
$29,568.00
16.0%
2.0%
Calculation 3.c: Percentage increase in CPI with a fixed 1% - 3% range
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI
Year
3% annual
appreciation
Percent change in
CPI
Annual appreciation
allowed within 1-3%
range
AMI Affordability Level at
Resale
2009 3.0%2.7%2.7%
2010 3.0%1.5%1.5%
2011 3.0%3.0%3.0%
2012 3.0%1.7%1.7%
2013 3.0%1.5%1.5%
2014 3.0%0.8%1.0%
2015 3.0%0.7%1.0%
2016 3.0%1.7%1.7%
$210,856.80 90 - 100% AMI
$26,056.80
14.1%
1.8%
Average Annual Percent Appreciation
Maximum Resale Price in Dec. 2016
Total Appreciation in 8 years
Total Percent Appreciation
Average Annual Percent Appreciation
Maximum Resale Price in Dec. 2016
Total Appreciation in 8 years
Total Percent Appreciation
Calculation 3.b: Percentage increase in Summit County Wages with a fixed 1% - 3% range
Page 4 of 4
2BD Soda Creek Condo unit purchased Jan. 2009 for $184,800; resale calcuation requested Dec. 2016
Targeted Income Level = 100% AMI 1.5% fixed rate 1.75% fixed rate 2% fixed rate
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
1.5%1.75%2.0%
$206,976.00 $210,672.00 $214,368.00
90 - 100% AMI 90 - 100% AMI 95 - 100% AMI
$22,176.00 $25,872.00 $29,568.00
12.0%14.00%16.0%
1.5%1.75%2.0%
2016
Max. Resale Price in Dec. 2016
Year
2009
Total Appreciation in 8 years
Total Percent Appreciation
Average Annual Percent
Appreciation
2010
2011
2012
2013
2014
2015
AMI Affordability at Resale
Calculation 4:Fixed Rates of 1.5%,1.75%,and 2%annual appreciation;simple interest,not
compounded annually