A 28-unit affordable housing project that’s been in the works since 2014, but has appeared in doubt at times because of the developer’s concerns about the viability of the city’s affordable housing credit certificate program, is likely to start construction in May.
That is according to Peter Fornell, who helped launch the credit certificate program in 2010 and under it has since built three housing projects. The program allows a developer to build affordable housing to generate credits, which can then be sold to other developers in order to meet housing requirements for separate projects.
Fornell’s project at 404 Park Ave. would replace two buildings containing free-market units that are affordable because of the buildings’ run-down condition. The new units would house 67 “full-time equivalent” employees, per the city’s calculation, thus giving Fornell 67 credits to sell. Each one nets around $330,000 for a category 2 unit, or less for higher categories, he said.
Fornell is planning to pick up his building permit — which has been in the works for 17 months — on the nearly $20 million project this spring. Residents living in the buildings are being told they have until May 1 to find a new place to live. Demolition would follow after that.
Prior to the establishment of the credit program, housing requirements had to be met either by developers providing their own housing or payment of “cash in lieu” of such housing. The cash-in-lieu number is widely seen as too low compared to the actual cost of building housing, and city hall has become less likely to accept the fee for large-scale projects.
Fornell has been a consistent voice in council chambers over the years, arguing for the number to be raised, which happened when it went up 7 percent earlier this year. That is still not enough, Fornell has said, and city council is discussing raising the fee more. When the fee in lieu of housing is too low, it dampens the markets for his credits, he said.
Fornell said earlier this month that 404 Park was again in jeopardy when the city’s planning office and the Aspen-Pitkin County Housing Authority board of directors recommended that the developer of a downtown project be required to replace lost housing on site, instead of using the credit certificates to meet the requirement as the developer requested. The city’s Historic Preservation Commission, however, voted to allow developer Mark Hunt to use credit certificates, overruling the planning office and APCHA recommendation that affordable units at 517 E. Hopkins Ave. be replaced onsite when the building is redeveloped. Aspen City Council could call the decision up at a meeting next month for further review.
HPC’s decision was an important signal to the credit certificate program, Fornell said, adding that he could develop four free-market townhomes on the 404 Park lot by right. Doing so would be more lucrative and less complicated than building housing for credits, he said.
“The reason I am in business is to provide mitigation for developers,” Fornell said. If the city takes a hard line when a developer seeks to use credits, instead of replacing lost housing on the site as has traditionally been required, it depresses the market and makes it harder for projects like 404 Park to go forward, he said.
Fornell added that he sees space for commercial business, as opposed to housing, as more appropriate for the downtown core, noting his calculation that 1,000 square feet of affordable housing generates only $300 in taxes annually, while the same amount of commercial space nets government coffers $15,000.
As for the market for the credits that would come on line with 404 Park, Fornell said he has a no-obligation option with the developers of the Gorsuch Haus, an 80,000-square-foot hotel planned for the western base of Aspen Mountain. If the hotel developers can’t find their own land to build their required housing, they could purchase some of the credits generated.
Fornell noted that his partnership’s investment in the housing project may take a long time to pay back, requiring him to sit on unused credits for years or more.
He is also still considering whether the units in the 22,600-square-foot building will be sold to qualified buyers, operated as rentals, or sold to businesses, which could then rent the units to their employees. A mix among those options is possible, he said.
Fornell and his business partner have previously developed housing at 301 W. Hyman Ave., which resulted in 14 credits; 518 W. Main St., which created 25 credits; and a property at the Aspen Business Center that netted 24 credits. That brings the total housing created to date to 62 units for full-time employees, a number that will be surpassed with 404 Park Ave.