Colorado ski towns are amazing places to unwind from the stress of life in the city. They're also great places to live and maybe raise a family  if you can afford it.

For the most part, only the very wealthy can afford it these days. And that’s forced mountain-town workers farther away and has priced out even relatively well-paid professionals.

It's an issue that is on the minds of local and state officials representing Colorado mountain towns  but answers are complex and slow in coming.

The lack of both adequate workforce and middle-income housing has reached crisis levels in ski towns, forcing governments to make tough choices about intervening in a sector typically dominated by market forces.

“Everybody's got a housing story, whether it’s the struggles they went through [to find a home] or the fact that they got kicked out of their lease because the property sold and the new owner put it in short-term rental [units] or they left the valley because of the cost of housing or they can't grow their business because they can't find good, quality employees,” said George Ruther, housing director for the town of Vail, during the U.S. Mountain Community Summit, held last month in Vail.

In Vail, where the most recent U.S. Census data show more than two-thirds of the owned units are second homes, Coldwell Banker Real Estate says the current median asking price for 311 listed homes is $2.995 million, rents have skyrocketed to San Francisco rates, and Airbnb and VRBO have turned family ski condos into short-term cash cows.

There’s a shrinking pool of private land to build on in most ski towns because they’re for the most part located in narrow mountain valleys surrounded by federally-owned public lands. So relatively low-paid service-sector workers from baristas to bartenders are increasingly required to live farther and farther “down valley,” which creates its own set of infrastructure headaches around transportation, parking and ski-burban sprawl.

“There is a unique pressure there, specific to undevelopable boundaries. They're all geo-fenced by nature, these resort communities,” said Natalie Spencer, organizer of the Mountain Community Summit, which attracted investors, policymakers, developers and business owners to Vail from 26 ski towns around the West.

Spencer is the founder of APX1, a company that combines development in mountain areas with an impact-investment network and says its goal is creating "livable mountain communities." Spencer, who holds a master's degree in architecture, also founded several nonprofits working on infrastructure and refugee issues in Asia and Africa.

“I’ve done a ton of infrastructure development overseas. [APX1] is a culmination of that, but in my own backyard. Now that I have a 3-year-old and a domestic life, I can't be hauling her to these refugee camps in the middle of South Sudan, so it's a very practical project,” added Spencer, who found that when she returned to her native Idaho and tried to find affordable and family-functional housing in Sun Valley, it simply didn’t exist.

Adam Ducker, who directs the urban real estate group at RCLCO Real Estate Advisors, said government intervention in the form of subsidies, regulation and intervention may be the only way to create affordable workforce rental housing in ski towns.

Beyond workforce housing, developers also want to better understand how to build ski-town homes in the $500,000 to $1 million price point that executives, telecommuters and retirees can afford, he said.

     

'The top pain point'

In the short term, though, finding enough workers to staff restaurants, retail stores and local lodges hinges in part on having enough rental housing, say experts. It’s become even more of a determining factor for hiring than health insurance, which has surged to astronomical rates in Colorado’s mountain communities.

“Workforce housing is consistently listed as the top pain point for local businesses with regards to business growth and employee retention,” said Chris Romer, president and CEO of the Vail Valley Partnership, the local chamber of commerce.

Romer points to Eagle County's cost of living index as reported by the Arlington, Virginia-based Council for Community and Economic Research: A staggering 176.30 compared to the national average of 100. Housing is an off-the-charts 340.

Romer said a recent Eagle County housing assessment shows a shortfall of 4,500 units to meet current employment needs.

Ruther, the Vail housing director, backs up those numbers anecdotally.

“We're seeing such labor shortages; businesses are really struggling to find enough staff,” Ruther said, recalling a market study during the planning of Chamonix Vail, the ski town's new affordable-housing project.

“The one thing I was hearing over and over again was, 'We are no longer getting our ones, twos and threes in the hiring process. We're now hiring sixes, sevens and eights,’” Ruther said, referring to employers' ranking of job candidates. “Meaning the top candidates, those people who have choices, are no longer choosing to come here. Just think about the economic impact that's going to have.”

Help at the state level could be on the way this legislative session, with some Western Slope lawmakers eying bills to address the affordable housing crisis.

State Rep. Dylan Roberts, D-Avon, confirms he’s in talks on a housing bill but said he can’t give details because of ongoing negotiations.

“It’s a very broad idea -- creating a fund within the state government that will act like a grant program for public-private affordable housing projects across the state to apply to get assistance from,” Roberts said, promising to offer more information later in the legislative session.

State Rep. Jim Wilson, R-Salida, has been trying to incentivize employee housing in rural areas pretty much since he joined the legislature in 2013. For the first time, a version of his bill to create a state tax credit pilot program for donations made to certified housing authorities focused on employee housing made it out of the House Finance Committee earlier this month and is now in Appropriations.

“The reason I keep bringing this up is I’ve been here all this time and we keep talking about ‘affordable housing, affordable housing,’ and people come up with some ideas and so forth, but the bottom line is that if someone doesn’t donate labor, materials or land, or a combination thereof, it ain’t going to happen,” Wilson said.

His House Bill 1075 would allow for a 20 percent state tax credit on donations to nonprofit housing authorities developing workforce housing in rural areas.

“In the rural areas in particular, if you’re  a business person and you want to expand that business, there’s no housing there, so if we can give some incentives to rural areas and employers to have some kind of a tax credit, albeit very small, let’s at least see if it’s going to work,” Wilson said.

     

Missing middle

One of the reasons Vail landed the recent housing summit was because of its Vail InDeed program, launched in 2017. The program involves deed restrictions that prohibit short-term rentals of housing units and require that occupants work locally.

Vail’s deed-restriction program is unusual because it has neither an appreciation cap or an income limit.

Using town funds, the program is an attempt to deed-restrict another 1,000 units by 2027, bringing the total number of deed-restricted housing units to 1,700. Ruther said that even without a dedicated long-term funding source, the program is on course to meet its goals, but now there’s an effort to lock in that consistent funding source.

The town recently pumped $4.2 million into the teardown of 24 aging units at the Solar Vail condos owned by the Sonnenalp Hotel, allowing the ongoing reconstruction to increase capacity to 65 units of workforce housing. In exchange, the town got 65 deed restrictions keeping those new units in the workforce housing pool.

The town’s Chamonix Vail project was aimed at addressing a problem parallel to housing for lower-income service workers: The lack of “missing middle” inventory -- for-sale, middle-income housing. It provided homes for some young families, health care workers, highway maintenance workers, real estate agents and others.

But it was the first deed-restricted town housing project in two decades – underscoring the difficulty of municipalities, even wealthy ones like Vail, actually being the developer.

“It appears that communities that are serious about addressing the housing affordability challenge need to find ways to lay down with the lions of the development community,” Jon Stavney, executive director of the Northwest Colorado Council of Governments and a former Eagle County commissioner, wrote in a NWCOG blog post, providing his takeaways from the Vail summit.

Public-private partnerships and rewriting the regulatory playbook will be key, he added.

With that 4,500-unit Eagle-County-wide deficit just for workforce housing, the problems impacting the local business community seem almost insurmountable to some observers.

But the town of Vail is forging ahead in partnership with the ski company, Vail Resorts, and a third-party developer on a controversial workforce housing project in East Vail that’s already generated its share of NIMBY (not in my back yard) opposition.

Hence the theme of the final day of the Vail housing summit, entitled the YIMBY (yes in my back yard) Jamboree.

Once people have purchased their slice of paradise, they’re often loath to see more densely populated projects wedged into the ever-shrinking pool of available private land in ski towns.

And developers acknowledge that public pressure and even the resistance of some public officials can make an already costly construction environment even more prohibitive.

Modular construction -- building pieces of homes elsewhere and then assembling them on site -- can reduce some of those costs, but developers in the workforce and affordable housing sectors also look to local governments to ease some of the tax burdens and even waive things like tap fees or parking requirements.

Communities need to be committed, said APX1’s Spencer, but the key to solving the housing crisis in ski towns is impact investing, which she describes as essentially philanthropic investing in a community for a secure, long-term, lower-yield return than a typical development investment in order to improve the community, Spencer said.

     

Opportunity zones

“There is this growing movement on the private sector side around impact investing, which is really kind of focused on double-bottom-line investing, meaning you’re investing for financial return, but you're also investing for social or environmental good or purpose,” said Jeremy Keele, senior advisor to Maycomb Capital, a multi-fund impact investing firm in New York City.

The former deputy mayor of policy for his hometown of Salt Lake City, Keele is currently raising a national opportunity fund for real estate and small business investing in low-income communities, and he helped push for the opportunity zone legislation that passed as part of the Tax Cuts and Jobs Act that Congress passed in 2017. That law resulted in 126 opportunity zones in Colorado.

One of those zones is along the Vail Valley floor in Avon, about 10 miles west of Vail along Interstate 70. Avon sits at the base of swank Beaver Creek Resort, but it has a fairly large number of for-rent workforce housing units, including a mobile home park. Those lower-income residents actually put Avon into the area median income sweet spot for opportunity zones.

“The whole sort of impetus and idea and rationale for the legislation was that this would ... help certain deals in these kinds of communities pencil that might otherwise not have,” Keele said. “And I think investors are going to be thinking along those lines.

“Are there going to be opportunities to do something like workforce housing in a place like Avon because of this incentive that wouldn't have otherwise worked?" Keele said. "And if the answer is yes, then the tax incentive has ... done its job, because you're effectively bringing in new incremental capital that wouldn't have come into these communities otherwise.”

The administration of Colorado Gov. Jared Polis recently announced the formation of an office within the Office of Economic Development and International Trade solely focused on facilitating investment in the state’s designated opportunity zones.

“What's interesting about this incentive is that it is entirely a private capital incentive, so that's both exciting and scary from the government point of view in the context of people can go out and make investments without ever telling anyone in government besides the IRS on their tax returns and we won't necessarily know about that,” said the state's newly named Opportunity Zone Program Director Jana Persky.

That structure keeps development moving at market speed and the flow of capital hopefully moving at that same pace, she added. But Persky’s office, in that framework, can't dictate where money goes or how it’s spent.

“But our theory is that if we create a support structure at the state that helps communities understand this incentive and be proactive and grab a seat at the table as these investment discussions are happening, then the capital is more likely to go towards things that will actually benefit communities and their residents and not just be a tax break for investors,” Persky said.

Investors with capital gains today who put them into an opportunity fund that invests in qualified opportunity zone properties get to defer their initial capital gains and get a basis increase on that under current tax laws.

If they hold their investment for five years, the basis increases by 10 percent, and if they hold it for seven years, it increases an additional 5 percent to 15 percent. If they hold their investment for 10 years, they won't pay any capital gains tax on the additional appreciation.

“So it's designed to bring long-term patient capital from the places and people in this country that are seeing tremendous wealth creation and redirect that into more distressed communities in a way that really builds and enhances communities,” Persky said.

Avon Mayor Sarah Smith Hymes said the town’s staff has been actively exploring all the possibilities with the opportunity zone designation, including holding a recent informational meeting for developers where Persky did a presentation. There are still some outstanding issues on the types of project that qualify under the tax code, said Hymes.

“One of the difficulties is that we don’t have a lot of land. We have a very small parcel of town land that we're looking at for trying to do some sort of a public-private partnership in terms of a very small employee affordable housing [project] – probably the missing-middle side,” Hymes said, referring to for-sale, middle-income housing.

“That's sort of our focus, because we do have so much affordable rental housing in our town, so we really want this other kind of product to be available for people to with families to have an opportunity to buy a place,” Hymes added.

There are several large tracts of undeveloped private land in town, and Hymes noted that some of those landowners attended the opportunity zone meeting.

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