The city of Aspen has hired consultants to assess the cash-in-lieu fees collected from developers who are required to mitigate for affordable housing.
The cash-in-lieu option is discouraged by city officials, with the preference being on-site mitigation. In order to use the cash-in-lieu option, developers of substantial projects must receive approval from the Aspen City Council. Yet, the option still occurs frequently because it is most desirable to developers’ bottom line.
“A cash-in-lieu payment is a convenience to a developer and a burden on the community,” said Peter Fornell, who develops affordable housing in Aspen.
Fornell is the only developer who uses the affordable housing credits program, meant to encourage private developers to build affordable housing instead of free market residential projects. His program is intertwined with the cash-in-lieu payments, because developers will logically choose the cheaper of the two options when weighing out how to mitigate for housing.
Ben Anderson, a planner with the city, wrote an update to council this month explaining the need for a reevaluation of the current fees. The city has hired consultants White & Smith LLC and TischlerBise, Inc. to analyze the current rates and provide recommendations. The scope of work is expected to cost $68,720 and completion is expected by February.
“Some of the criticism of past calculations are that it wasn’t really reflective of the reality on the ground here,” Anderson said.
The city’s current fees are structured around suggested annual updates from a 2015 analysis of the cash-in-lieu program. That study relies on state and national numbers, along with costs the city had incurred when developing new affordable housing in the past. Anderson pointed out that national numbers, even those coming from nearby metropolitan areas such as Denver, might not fully reflect the building climate in Aspen.
“This ultimately is an effort to try and get a current reflection of what Aspen’s context is,” Anderson said. “In terms of land costs, in terms of construction costs, the cost of a yard of concrete, what it costs for labor. Architecture here is expensive, land-use planning here is expensive.”
In 2018, the city raised the rates on cash-in-lieu options by 7 percent, but Fornell said the payments are still a developer’s cheapest option. Anderson also echoed that if the cash-in-lieu payments are not pegged at the right amount, it skews builders away from programs the city would prefer, like the affordable housing credit program.
“It really takes away the incentive of the credit program,” Anderson said.
Fornell is the only developer so far to take advantage of the affordable housing credit program. There are no fee waivers for developers who voluntarily build affordable housing, but they are able to sell credits based on the units they build to other developers who need to offset their own new construction.
“If the cash-in-lieu number doesn’t keep up with building costs in Aspen, If they don’t make a compensation package to a developer of affordable housing as lucrative as free market development, no one will build affordable housing,” Fornell said.
He said if the scales were more balanced, he would not be the only one in the business.
“They should be hoping that I’m getting rich doing this, because if I was, there would be nail guns out,” Fornell said. “Anybody with a piece of vacant land, we want them to think first about building affordable housing, not last.”
Fornell said that developers are given an estimate from the city’s planning department that lists all the potential impact fees assessed on their projects. When those estimates include the cash-in-lieu number, it undermines Fornell’s ability to negotiate a price for his credits on the free market.
“They should never be putting a cash-in-lieu number in front of a developer,” he said. “Immediately I have to fight to defend myself against a number that no one can do business under.”
Once a developer sees the amount they would have to pay the city for housing mitigation, they do not have incentives to pay any more than that for credits, or to build their own new affordable housing.
“The cash-in-lieu number is also really important to the private developer of affordable housing because [it] basically serves as a benchmark for the value of the credits that they generate when they build a unit,” Anderson said.
The consultants will meet with stakeholders, research annual construction costs in Aspen, and review the current code requirements. An updated cash-in-lieu assessment will be provided to the city, including calculations to better keep up with the growing development expenses from year to year.
“We want to have some good information about how to calculate this and how to update it, so that we can continue to stand on firm ground … around the affordable housing mitigation program,” Anderson said.