City officials are contemplating a sixteen million dollar investment in the affordable housing program as a stop-gap for dwindling reserve accounts and deteriorating structures.
The city is proposing to create an account for all 1600 deed-restricted units and juice it with ten thousand dollars a piece. It’s like a capital-reserve starter kit... one that, in total, will require sixteen million dollars of taxpayer money to fund.
Assistant City Manager Barry Crook says it’s all about rational economics: what normal people do to keep money in their pocket.
“Nobody, deed-restricted or non deed-restricted, likes to spend money they don’t think they have to spend.”
In the free market, the reason homeowners might put money into an expensive long-term item such as a new roof is because it adds value to their home when they go to sell it. But in the Aspen deed-restricted housing market, there is a cap on the sales price of a home, and no shortage of people waiting in line to pay that price, regardless of the condition.
“In the deed restrictricted market... you almost always get the maximum price whether the unit is well kept or not”
The way big ticket items are purchased in a Homeowners Association set-up like those that the affordable housing units are part of, is through collecting dues monthly that get set aside in capital reserves. This is on top of the monthly dues that go to standard HOA expenses like snow removal and lawn maintenance.
Council member Adam Frisch has been on the Housing Frontiers board for years and sees that capital reserves are grossly underfunded for the type of projects that will all start hitting the fan at the same time as many housing communities reach their 15, 20 and 30-year marks.
“We saw that the average shortfall of capital reserves was about nine thousand dollars. But that nine thousand dollars was nine thousand dollars of an expense that was never part of any conversation in the sales process.”
There are laws that require HOAs to have an official capital reserve plan, but that’s it… and the plan can literally be “we have no plan.” Crook’s proposal to fund each unit with ten thousand dollars comes with a catch - one that he is hoping assures that this payment will be a one-time gift from the city.
HOA’s that elect to receive the ten thousand dollar accounts from the city must change their declarations to add a requirement to conduct reserve studies and keep 70 percent of required funds on hand.
Burlingame is one of the developments that stands to gain the most with this proposal. With a well-funded capital reserve and a policy already in place regarding reserve studies, the ten thousand dollar escrow account from the city is just icing on the cake.
Stefan Reveal is the Burlingame Master Association President. He has twice overseen a rise in capital reserve dues at the association.
“It is never a pleasant affair but it is a necessary affair, as you as an HOA board member have a fiduciary requirement to the current homeowners as well as the future homeowners”
On the other hand, some HOA’s capital reserves have been so poorly managed that even with a ten thousand dollar handout they will still need to increase dues.
So, why give money to someone with a track record of irresponsible saving? Frisch says that Aspen/Pitkin County’s affordable housing program is part of what makes Aspen such a desirable location. The mix of low income workers help make Aspen a vibrant and diverse city, which in turn raises quality of life - and real estate - for all homeowners.
And if you don’t buy that...look at how small 16 million looks, as compared to the current trajectory…. the potential to lose affordable housing units through negligence and then be faced with a bill for brand new buildings.
The bailout proposal needs to be vetted by the Pitkin County commissioners and the APCHA board as it moves forward. Proponents are banking on the funds to stabilize a precarious future of existing affordable housing units while rationalizing the give-away as a one time occurrence.