The rubber has met the road on a new system for creating affordable housing in Aspen, with the first sales of credit certificates that are used to meet the city’s inclusionary zoning requirements.
Approved in 2012, the city’s affordable housing credit program allows private developers to build employee units, and then sell credits to other developers who can use them to meet affordable housing requirements. The program is intended to encourage the private sector to build affordable housing on its own, without being required to do so by the city.
Peter Fornell, a local businessman who lobbied for the creation of the program, is the first and so far, the only person, to put it into practice.
He built an eight-unit building on Second Street and Hyman Avenue that opened in January, and houses 14 people, according to the city’s calculation.
Fornell got the revenue from selling the for-sale units, and he also gets paid when the credits sell on the open market. He said he is nearly sold out of the 14 credits.
Fornell in June sold six and a half of the credits to the developers building the project at Hopkins Avenue and Galena Street, the site of the former Gap building. He also sold a few in May to the owners of a building on Hyman Avenue who are seeking to add a third floor to their property. Fornell is under contract to another party to sell another credit.
The transaction amounts on the credits are not public records. Fornell declined to disclose the exact prices he was able to get for the certificates, but he said the dollar figures were higher than what the city charges for “cash in lieu” fees.
Cash in lieu is the amount of money the city requires a developer to pay to meet housing requirements; this method has been available to developers who can’t or don’t want to build actual housing.
For a “category 2” worker, or someone with a maximum income of $54,000, the cash in lieu amount is $237,000, which is supposed to be equivalent to the subsidy needed to build housing for that person. Fornell’s credits were for the category 2 level, and are worth more than credits for higher categories. This is because government officials are more inclined to approve projects by developers who have credits for category 2 units, which are more affordable to the employee, but require a higher government subsidy.
So, if Fornell sold six and a half credits for $250,000 each, that would equal a payment of over $1.6 million.
The city and county are contemplating increasing the cash in lieu amounts, which are widely seen as being lower than the actual cost of building housing. Because of the discrepancy, developers who wish to pay cash in lieu of housing for more than one employee must get special council approval.
While the only credits that have come on line to date are from the Second Street project, Fornell will complete another housing project at Fifth and Main streets this winter, which will give him 24 more credits to sell.
Fornell said he prefers to build housing at lower category levels, meaning it is more affordable to the people who live there, and results in higher prices for the certificates. However, he said the business model won’t be shored up unless the city raises its cash in lieu fees.
Another project is in the works that could result in the creation of about 80 credits. The Boomerang redevelopment at Fourth Street and Hopkins Avenue was initially approved in 2006 as a lodging project, but the developers in 2011 sought to convert it to affordable housing, enticed in part by the new credit program. The city approved the conversion, but neighbors who were opposed to the plan filed a lawsuit. A district court judge ruled in favor of the developers, but an appeal may be pending.