Block 11 A Planned Workforce Neighborhood

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1 Market Study Block 11 A Planned Workforce Neighborhood Breckenridge, CO Rees Consulting, Inc. PO Box 3845 Crested Butte, CO melanie@reesconsultinginc.com Rees Consulting, Inc.

2 Contents Introduction... 1 Purpose... 1 Concept Plan for Block Key Findings... 2 Rental Market... 2 Ownership Market... 3 Recommendations... 4 Owner/Renter Mix... 4 Income Targeting and Rents/Prices... 4 Rental Housing... 4 Ownership Housing... 5 Bedroom Mix... 5 Rate of Development and Absorption... 6 Workforce Housing in the Upper Blue Basin... 7 Definition of Affordable and Workforce... 7 Inventory of Affordable Workforce Housing... 7 Location within the Upper Blue Basin... 8 Owner/Renter Mix... 8 Bedroom Mix... 9 Capture Rates... 9 Workforce Projects in the Pipeline Rental Housing Rental Market Analysis Number of Renter Households Projected Growth in Renters Renter Household Incomes Renter Households by AMI Rental Availability and Market Rents Apartment Inventory in Summit County Workforce Rentals Upper Blue Basin Rental Capture Rates by AMI Need Compared to Units Developed Rees Consulting, Inc.

3 Ownership Housing Ownership Market Analysis Affordability of Market Housing Prices Home Prices Sales: Locals vs. Out-of-Area Buyers Availability Condominiums Single Family Homes Deed Restricted Ownership Housing Inventory Income Targeting Capture Rates Availability of Deed Restricted Homes Deed Restricted Sales per Year Resales of Deed Restricted Homes Rate of Absorption Local Ownership of Market Housing Homes Owned by Local Residents Number of Units Type of Units Owned by Residents Value of Locally-Owned Units Home Values Compared Loss of Units to Out-of-Area Owners Cover graphic courtesy Town of Breckenridge. Rees Consulting, Inc.

4 Introduction Purpose The purpose of this report is to provide up-to-date information on rental and ownership housing in the Upper Blue Basin for use when making decisions on the development of Block 11 in Breckenridge. Concept Plan for Block 11 The proposed Denison Placer project is guided by a Concept Plan adopted by the Town of Breckenridge in 2007 for Block 11, a long rectangular parcel along the Blue River owned by the Town of Breckenridge. The Concept Plan calls for the creation of a neighborhood with a mix of 180 to 350 residential units on 25.4 acres to be developed over an unspecified number of years into the future. Valley Brook, 41 townhomes that provide deed-restricted ownership for households with incomes no greater than 80% and 120% AMI, was the first phase of residential development governed by the Concept Plan when developed in 2011/12. It is shown in red on the far right side of the plan adjacent to the Upper Blue Elementary School. Denison Placer 1 and 2 represent the next phase of development with construction in 2016/2017. Master grading and utilities/infrastructure for the rest of Block 11 will also be completed in 2016/17. Construction of additional deed-restricted ownership housing will likely commence by 2017/18. Block 11 Concept Plan Source: Town of Breckenridge; residential development shown in red. Rees Consulting, Inc. 1

5 Key Findings Rental Market Describing the rental market in Summit County as a crisis is accurate. Rents are higher now and availability is lower than at any time in the past. Given population projections and the number of rental units planned for construction in the near term, the problem is likely to become worse. Summit County has a large renter population (about 4,500 households) with robust growth projected an increase of over 630 additional renter households between 2015 and About 37% of the county s renter households reside in the Upper Blue Basin. The county has a relatively small inventory of apartment properties, with only 611 units in eight complexes that house only 14% of Summit County s renter households and no surplus inventory to accommodate additional growth. The Upper Blue has approximately 850 workforce units that house 24% of the basin s households. Proportionately more renters live in workforce housing than homeowners (33% compared with 16%) but the number of units is closely spilt between ownership units (449) and rental units (400). Private developers have not been able to profitably build and manger apartment complexes having built only one property, a complex over 30 years old in Dillon Valley. With current rents, this may change; however, Summit County does not have an economically diversified rental population half are low income ( 80% AMI). Rents needed to cover current land prices and development costs are affordable to relatively few households. The median market rent countywide is now almost $1,900 per month. In the Breckenridge area the median rent has increased to $1,925, which is affordable for households with incomes at 117% AMI. Rents will continue to rise but the rate may not match the recent increases of over 10% per year when planned projects are completed in 2017/18. Rental availability is extremely low too low to measure. The rental market had rebounded strongly from the Recession by 2012 yet few new rental units have been produced to address demand. The 2013 Summit County Housing Needs Assessment projected that up to 370 additional rental units would be needed in the Upper Blue Basin within five years. A total of 167 units will be completed by 2018 addressing 45% of this projected need. The gap, however, is growing. Reports of the conversion of long-term rentals into short-term lodging are widespread (see Rees Consulting, Inc. 2

6 White Paper Impacts of Short-Term Rental or Workforce Housing). Rents are now much higher than in 2013; the free market is no longer adequately addressing rental needs as low as 80% AMI. The countywide projected gap of up to 960 rental units will impact the Upper Blue. Elsewhere in Summit County only 64 apartments at Villa Sierra Madre have been built and no others are planned for construction by The 167 units in Breckenridge combined with the 64 units in Silverthorne will address 24% of the 960 unit gap. Ownership Market The homeownership market is strong, although it recovered more slowly than the rental market. Availability is limited and prices are rising. Locals are being increasingly priced out of the market and losing ground relative to out-of-area owners. The maximum affordable price for a household earning 100% AMI is $244,300, yet home prices are far above this level. An income of approximately 290% AMI is needed to afford the average 2015 home price. Even condominiums are no longer affordable with the average 2015 sales price being equivalent to 190% AMI. Locals are still very interested in owning homes and purchased 22% of the free market residential units sold in the Upper Blue Basin in They have not able to maintain their historical relationship in competitive with second home buyers. In 2015, 28% of all units owned in 2015 were owned by Summit County residents. This will decline if the percentage they are able to purchase continues to be lower. Locals still prefer and have been able to purchase more single family homes than any other unit type. The deed restricted market is well established, buying on average 36 homes per year since In years when construction of new homes increased the number of units available, 50 to 60 homes per year were purchased. Restrictions that limit income and price appreciation are acceptable and have functioned reasonably well all homes listed for sale have sold. Loss of homes to second home and investor buyers is decreasing the number of homes owned by local residents. These was a net reduction in local ownership of 45 units in the Upper Blue between 2012 and March A local census of housing occupancy is needed to more accurately determine how many total units including long term rentals are being converted from primary homes into other uses. Rees Consulting, Inc. 3

7 Recommendations Owner/Renter Mix Between 50% and 60% of the homes developed on Block 11 should be for ownership. This recommendation is based on several considerations: Preserving the historic relationship between owners and renters (2016 estimate 62% owners/38% renters) will help preserve community character as Breckenridge grows. The current inventory of workforce housing disproportionately serves renters. Rental availability is extremely limited now yet 167 rental units are under construction or will be built by 2018, addressing between 45% and 94% of the five-year need for rental housing projected in Availability of homes at prices affordable for the workforce is very limited. As of March, no deed restricted homes were listed for sale and only three condominiums were listed in the Upper Blue Basin at prices affordable for 100% AMI. The location with proximity to the elementary school, recreation center and child care centers makes it ideal for families with children; owners are more likely than renters to have children. Income Targeting and Rents/Prices Analysis of the market supports the policy established in the adopted Concept Plan Block 11 calling for diverse housing that serves a wide range of incomes. Rental Housing Rental housing should primarily target up to 100% AMI with rents around $1,650. Development should target under-served income groups to preserve the community s character and add diversity to the workforce housing inventory. The 60% to 80% AMI range is under-served by existing and planned rental units relative to other income categories. It is particularly difficult to develop rental housing for this group since their incomes are too high for state and federal housing programs and too low to afford market rents. While the 80% to 100% AMI category has a relatively high capture rate due to the 40 rental units planned for Stan Miller, households in this category are now being displaced from market rentals yet have incomes too high for most existing and planned workforce rentals. By 2018, the vast majority of these households will likely not find rents they can afford. The schedule for development of the Stan Miller rentals should be considered when determining which phase of Block 11 targets renters with incomes at 100% AMI. Rees Consulting, Inc. 4

8 Income targets and recommended rents may be higher, however, for future phases of rental units depending upon the rate at which rents continue to escalate. SCHA s rent survey can be used to adjust targets depending on the schedule for development. Ownership Housing Development of deed restricted homes for sale on Block 11 should be pursued soon as demand is strong and market conditions all indicate that opportunities for residents to purchase housing are far too limited. The incomes of owner households suggest that targeting households on either side of the middle range that existing deed restricted homes primarily serve would be responsive to market demand and in line with the adopted Concept Plan. Capture rates (the percentage of households living in deed restricted housing) are low at all income levels yet highest in the 80% to 120% AMI category. This suggests that low income households ( 80% AMI) and households with incomes in the 120% to 150% AMI range should be priorities, taking into consideration affordability creep among existing deed restricted homes. A few homes might serve as high as 200% AMI since the market provides very little opportunity for residents with incomes at this level to purchase homes that meet their needs. Only 36 units were listed for sale under $500,000. Of these, 30 were condominiums, many of which are not well designed or managed for year-round living. Bedroom Mix Block 11 should offer a mix of units from studios through three-bedroom homes. The mix should have more small units (fewer bedrooms) than in the existing workforce housing inventory. Currently 41% of workforce units have three or more bedrooms yet only 32 of households have three or more members. The imbalance between need and the potential number of units at Block 11 creates flexibility to base bedroom mix on site design, financing and policy issues. While there is flexibility given that demand far exceeds supply, the overall bedroom mix for rental and ownership units combined should be roughly as follows: Unit Type Percent Units Studio/1 BR 25% 2 BR 45% 3+ BR 35% Rees Consulting, Inc. 5

9 Rate of Development and Absorption Given the lack of deed restricted and market homes listed for sale, the price of market homes and the differential between market prices and deed restricted prices, sales of new homes at Block 11 should equal or surpass Maggie Placer s absorption rate of 4.1 per month. Exceeding the 2002 peak of 63 sales per year should be readily achievable. If resales continue at two per month, it follows that at least 40 new homes could be sold in the first year, provided that variety in product and pricing are provided. Rees Consulting, Inc. 6

10 Workforce Housing in the Upper Blue Basin Definition of Affordable and Workforce Housing is considered to be affordable when the payment is no greater than 30% of a household s gross income. Household incomes are typically expressed as a percentage of the Area Median Income (AMI) to allow for applicability among various programs and across geographies. Figures vary by household size and are published annually by the Department of Housing and Urban Development (HUD). Currently, a household in Summit County earning 100% AMI could afford to spend about $1,650 per month for rent or could buy a home priced at approximately $244,000. Affordable Housing Costs by AMI, 2016 Year % 80% 100% 120% 150% AMI for 2-person households $32,950 $52,600 $65,900 $79,080 $98,850 Maximum Affordable Rent $824 $1,315 $1,648 $1,977 $2,471 Max Affordable Price* $122,200 $195,000 $244,300 $293,200 $366,500 *Assumes 5% down, a 30-year fixed-rate mortgage at 5.5% with 80% of the monthly payment covering principal and interest and 20% covering HOA dues, property taxes and insurance. Complete calculations are in the appendix. Workforce is typically defined as a household with at least one member who works 30 hours or more per year in Summit County. Residential units are generally considered to be affordable workforce housing if they have deed, income or some type of occupancy restriction and the monthly rent or mortgage payment is no greater than 30% of income. There are many exceptions. For example, the affordability standard for Low Income Housing Tax Credit rentals is based on 40% of household income towards rent and utilities. Inventory of Affordable Workforce Housing Nearly 850 residential units in the Upper Blue Basin are designated as workforce housing through some type of income, deed, employment and/or price restriction. This figure includes projects under development or nearing completion (Wellington Lincoln Park and Pinewood Village 2) but not approved projects that will provide additional units starting in 2017 (Huron Landing, Denison Placer 1 and 2, and Stan Miller.) The complete inventory of unit is listed in the appendix to this study. Rees Consulting, Inc. 7

11 Location within the Upper Blue Basin Of workforce housing within the Upper Blue Basin, 88% or 746 units are within the town of Breckenridge. Workforce Housing in the Upper Blue Basin by Own/Rent and Location Owner Renter Total Percent of Total Breckenridge % Unincorporated County % Total % Percent of Total 53% 47% 100% Just over 100 units are in the unincorporated area within the Upper Blue Basin. Just over half of these units are accessory apartments, however, that may or may not be used to house members of the workforce. Without clear covenants and routine verification/enforcement, accessory dwellings are often used as guest accommodations or short-term rentals, remain vacant or are used as offices, studios or other non-residential purpose. Owner/Renter Mix Of the workforce housing units in the Upper Blue Basin, about 53% are owner occupied. This compares with a mix in the household population of 62% owners and 38% renters. This indicates that workforce housing serves proportionately more renters than owners and that, over time, the community s character could be impacted by a decrease in the homeownership rate. Households and Workforce Housing Units Compared, Upper Blue Basin # Households % Households # Workforce Housing Units % Workforce Housing Units Owners 2, % % Renters 1, % % Total 4, % % Source: Ribbon Demographics The mix of owner and renter occupancy can vary slightly over time. Homes that were developed for ownership can be temporary rented with permission while owners take extended leaves. Dispersed condominiums that are now used as long term rentals could be sold to members of the workforce in the future. Rees Consulting, Inc. 8

12 Bedroom Mix While the workforce housing inventory in the Upper Blue Basin is diverse, it has a higher percentage of large homes (41% have three or more bedrooms) relative to large households (32% have three or more members). This is primarily the result of the three phases of the Wellington Neighborhood and the three-bedroom apartments at Breckenridge Terrace that house Vail Resort employees. Household Size and Number of Bedrooms Compared Household Size Workforce Housing Units* 1-Person 1, % studio % 2-Person 1, % 1 BR % 3-Person % 2 BR % 4+-Person % 3+ BR % Total 4, % % *Based on the 92% of units for which the number of bedrooms is known. Capture Rates Capture rates are used to express the percentage total resident households that reside in workforce housing. A lower capture rate indicates a higher level of need for the unit type. Approximately 19% of the Upper Blue Basin s resident households reside in workforce housing. The capture rate is higher for renters than owners. With the completion of four planned and approved workforce housing projects that will add a 227 units combined, the capture rate will increase to 24%. These rates are higher than in many mountain communities but lower than last counted in at least two very high cost areas Pitkin County and the Telluride Region. Percentage of Households Living in Workforce Housing Ownership Rental Total Estimated Households ,814 1,688 4,502 Existing Workforce Units Existing Capture Rates 16% 24% 19% Planned Workforce Units Denison Placer 1 & Huron Landing Stan Miller Total Built/Planned Workforce Units ,076 Planned Capture Rates 18% 33% 24% Rees Consulting, Inc. 9

13 Workforce Projects in the Pipeline In addition to the development potential that Block 11 provides for up to 350 units, several moderate to large-scale workforce housing projects are planned for development in Summit County. Availability of housing will not improve in the immediate future, however, since construction will start on a total of only 71 units this year. Huron Landing This 26-unit apartment project is a joint development of the Town of Breckenridge and Summit County on land that was previously the site for a recycling facility. Construction will start this summer on the two-bedroom apartments and be completed by summer The rents will be affordable to households at 80% AMI. Stan Miller Through an annexation agreement with the Town of Breckenridge 105 deed restricted units will be developed on the Stan Miller tract. As planned, 40 of these units will be rentals. The AMI restrictions will be as follows: 54 units under 100% AMI (includes the 40 apartments) 38 units under 125% 11 units under 150% 2 units under 180% The bedroom mix was not specified in the agreement, and timing of development is unknown. Copper Mountain Construction on 15 two-bedroom for-sale townhomes at Copper Mountain is taking place this summer. The first five units are anticipated to be completed by the end of The developer is Powdr Copper Participation LLC. Units will be deed restricted for the workforce at 100% and 110% AMI with prices as follows: 100% AMI units at $281, % AMI units at $315,543 Lake Hill The nearly 45-acre parcel near Frisco between I-70 and the Dam Road was purchased from the US Forest Service by Summit County for $1.75 million. The development, which may have as many as 400 residential units, is now in the conceptual plan stage. Summit County has selected a Corum Real Estate to lead the master planning process. Upon completion of the concept plan Rees Consulting, Inc. 10

14 in September 2016, more information should be available on the number of units that will be developed for ownership and rental housing. Smith Ranch This large parcel owned by the Town of Silverthorne is zoned for up to 309 residential units. The Town has solicited and considered proposals from developers interested in designing and developing the site. High infrastructure costs and funding uncertainties stalled the development, but with reauthorization of 5A and heightened concerns about workforce housing, the Town is reconsidering Smith Ranch. Rees Consulting, Inc. 11

15 Rental Housing Rees Consulting, Inc. 12

16 Rental Market Analysis Number of Renter Households Approximately 1,700 renter households now reside in the Upper Blue Basin, which equates to 37% of Summit County s total. Most are small households. Of the total, two-thirds or 1,130 households have one or two members. Upper Blue Renter Households by Size 16% 11% 6% 32% 35% 1-Person 2-Person 3-Person 4-Person 5+-Person Source: Ribbon Demographics There are slight differences in the size of 4,530 renter households county-wide compared to renters in the Upper Blue Basin. Based on 2015 Ribbon Demographics data, the county has proportionately more large households but fewer two-person households. The extent of these differences was greater according to the 2013 Housing Needs Assessment survey. According to both sources, one- and two-person households comprise the majority. Renter Household Size - Upper Blue Basin and Summit County Compared 1-Person 2-Person 3-Person 4-Person 5+- Total Person Upper Blue Basin ,688 32% 35% 16% 11% 6% 100% Summit County 1,451 1, ,526 32% 33% 16% 11% 8% 100% Source: Ribbon Demographics Rees Consulting, Inc. 13

17 Projected Growth in Renters The Colorado State Demographer estimates that Summit County s households will increase by over 14% between 2015 and 2020, which would mean a gain of 635 households. Ribbon Demographics estimates that the renter household population will grow to 4,813 households by 2021, an increase of 6.5%. The State Demographers estimate seems the more likely scenario given recent levels of job growth and current low unemployment rates (an average of 2.5% in 2015 and 1.5% in January 2016, well below the state average for unemployment). Renter Household Incomes The incomes of renter households largely fall in the range of $20,000 to $100,000 per year. Very few (about 11%) have incomes over $100,000, an indication that opportunities to develop free market apartments with amenities often found in urban areas is limited. Renter Household Income Distribution Summit Co. Total Upper Blue Total $0-10, % % $10,000-20, % % $20,000-30, % % $30,000-40, % % $40,000-50, % % $50,000-60, % % $60,000-75, % % $75, , % % $100, , % % $125, , % % $150, , % % $200, % % Total 4, % 1, % Source: Ribbon Demographics In Summit County as a whole, there are relatively fewer renters in the upper income categories and more with annual incomes below $10,000 than in the Upper Blue Basin. Renter Households by AMI About half of the renter households in the Upper Blue have incomes at or below 80% AMI and are therefore defined as low income (HUD defintion). About one-fourth fall in the 30% to 60% AMI range, which is the population that can be served through Low Income Housing Tax Credits. Rees Consulting, Inc. 14

18 Renter Households in the Upper Blue Basin by AMI AMI Range # Households % Households <30% % % % % % % % % % % % 150% % TOTAL 1, % Source: Ribbon Demographics data; WSW Consulting conversion Rental Availability and Market Rents The rental market rebounded strongly after the Recession, much faster than the ownership market, due to a combination of factors including job growth, economic uncertainty and loss of units through sale or conversion into short-term vacation rentals. Vacancies dropped sharply and rents began to rise in Currently, conditions are extremely tight and rents are continuing to increase. The Summit Combined Housing Authority maintains a rental database covering approximately 900 rental units. The database is updated twice yearly to track rents and availability. No vacancies were reported in either of the 2015 surveys. In the 7-month period between April and November 2015, market apartments increased 6.2% and condo/duplex/sf homes rentals increased 7.4%. This indicates rents are increasing at annual rates exceeding 10%. Market rents have continued to escalate in Market rents averaged about 80% AMI in According to 101 long-term rentals listed for rent in Summit County in March and the first half of April 2016, the median county-wide rent had grown to $1,898 per month, or about 115% AMI. The county median rent was $1,475 for studios and one-bedroom units and $1,895 for two-bedroom rentals. Market Rents by Area, Mar/Apr 2016 Breckenridge Dillon Frisco Silverthorne Keystone & Copper Countywide Studio/1 BR BR BR Total Listings Median Rent $1,925 $1,650 $1,823 $2,200 $1,623 $1,898 Sources: Summit Daily News, Zillow and Craigslist Rees Consulting, Inc. 15

19 Of the for-rent listings in March/April, 40 units were in or near Breckenridge. Rents in Breckenridge were higher than in the rest of Summit County, with an overall median monthly rent of $1,925, or about 117% AMI (or 104% if based on CHFA s rates which assume 40% of income goes toward rent including utilities). While the rents that new tenants will pay for these 40 listings are likely higher that the rates paid by renters who have leased the same units for many years, it is clear that the market no longer serves households with incomes at or below 80%. The majority (over 70%) of available listings were priced at 100% AMI and above. Market Rents in the Upper Blue Basin by AMI, Apr/Mar % % % >120% Total Studio/1 BR BR BR Total Listings % 15.0% 40.0% 32.5% 100.0% Sources: Summit Daily News, Zillow and Craigslist Apartment Inventory in Summit County Summit County has only eight apartment projects including Pinewood Village 2 in Breckenridge, which was just completed, plus employee housing at Copper Mountain and Keystone. Combined, these projects have a total of 611 existing units that house less than 14% of the renter households in Summit County. The Dillon/Silverthorne area has the largest apartment inventory in Summit County with 312 out of 611 units. Breckenridge now has almost as many with 299 units in three apartment properties. There are no major apartment properties in the Frisco area. Public subsidies and/or financing were used to develop all of Summit County s apartment properties except Straight Creek in Dillon Valley, a complex of several buildings that are over 30 years old with no income or employment restrictions. This is significant. Other than the 79 Straight Creek units, which appear to be in need of renovation or replacement, the free market has not been able to profitably develop apartment properties in Summit County. Rees Consulting, Inc. 16

20 Summit County Apartment Complex Inventory Property Name Location Yr. Built # of Units LIHTC Units Restriction Blue River Silverthorne LIHTC Breckenridge Terrace Breckenridge * Town Mountain Creek Dillon USDA RD Pinewood Village 1 Breckenridge LIHTC/Town Pinewood Village 2 Breckenridge LIHTC Straight Creek Dillon Market Villa Sierra Madre Silverthorne LIHTC Villa Sierra Madre 2 Silverthorne LIHTC *Only 101 units are currently restricted for the workforce though all function as workforce housing. Workforce Rentals Upper Blue Basin Approximately 400 workforce rental units are located in the Upper Blue Basin, most of which (322 units or 80% of the total) are in Breckenridge. In addition to the units in three complexes, the Upper Blue has 167 units that are dispersed in town and rural areas. Some may not be renter occupied, particularly the 67 accessary and caretaker units in unincorporated areas. Existing Inventory of Workforce Rentals # of Units Breckenridge Terrace Breckenridge 101* Pinewood Village Breckenridge 74 Pinewood Village 2 Breckenridge 45 Units Dispersed in Town Breckenridge 102 Buy Down Units Breckenridge 3 Entrada at Breckenridge PUD County 1 Continental PUD County 2 Quandary at Breckenridge County 2 Tiger Run Rv Park, Tract B County 1 Tyrollean Terrace County 2 Accessory Apartments County 54 Caretaker Units 13 Total Existing Units 400 *101 out of 180 units are currently restricted for the workforce though all function as workforce housing. Rees Consulting, Inc. 17

21 Four additional apartment properties with a combined total of 162 units are planned for construction within the town of Breckenridge. This will bring the total workforce rental inventory to 562, an increase of 40%. Construction will commence on two of the projects this summer (Denison Placer 2 and Huron Landing), and units will be ready for occupancy by summer Construction on the largest of the projects, Denison Placer 1, is schedule for 2017/18. The target date for the 40 Stan Miller rentals is unknown. Planned Workforce Rentals Project # Units Denison Placer 1 66 Denison Placer 2 30 Huron Landing 26 Stan Miller 40 Total 162 Rental Capture Rates by AMI When capture rates are calculated by income category, they show the relative extent to which various income levels are over or under served by existing and planned units. Rental capture rates vary from a low of 1.4% in the 30% AMI category to 42% in the 81% to 100% AMI range. The capture rate is also relatively high (32%) in the 31% to 60% category. This pattern is due to several factors: The 81% to 100% category is typically targeted by private developers who have an affordable housing obligation due from annexation, linkage or subdivision agreements since it requires smaller subsidies than lower income groups. Low Income Housing Tax Credit is available for rental housing for the 31% to 60% AMI range therefor this income group is often over served relative to other income groups. Rees Consulting, Inc. 18

22 Rental Demand and Capture Rate Calculations, Upper Blue Basin All Renter Households <30% 31-60% 61-80% >120% 100% 120% Existing Rentals Pinewood Village Pinewood Village 2 45 Sub-total Proposed Rentals Denison Placer Denison Placer 2 30 Huron Landing 26 Stan Miller 40 Sub-total Total Units Mkt Mkt Net Demand N/A N/A Existing Capture N/A N/A 1.4% 31.8% 11.9% 42% Rates Note: Units without income/rent restrictions are excluded. The 30% AMI and below category is an uncertainty. While data sources suggest there are over 150 renter households in this extremely low income category, income verifications often show that applicants who apply for income restricted housing have higher incomes than reported. Qualifying applicants for 40% AMI LIHTC units in Silverthorne has been challenging. The proposed Denison Placer LIHTC project will have three two-bedroom units serving households with incomes no greater than 30% AMI. These units will provide valuable experience for determining if additional rental housing should be income restricted for this group in the future. None of the existing or planned workforce rental units target households with incomes above 100% AMI. These households must find rental housing provided by the free market household population estimates suggest that about 590 households rent market housing in the Upper Blue Basin. Rees Consulting, Inc. 19

23 Need Compared to Units Developed The 2013 Summit County Housing Needs Assessment projected that 200 to 370 additional rental units would be needed in the Upper Blue Basin in five years. Low- and high-end estimates were provided based on assumptions about the rate of growth in jobs. The high-end estimates are likely more accurate for two reasons: strong job growth and conversion of long-term rental units into short-term vacation rentals, a factor not fully considered in the 2013 calculations. An upcoming update to the demand projections will verify if this assumption is accurate. 5-Year Projections for Rental Units Needed, 2013 Upper Blue Summit County Low High Low High <=30% % % TOTAL Gap Since these projections were developed, no apartments have been built in the Upper Blue Basin. Four projects under construction or in the planning pipeline will produce 167 units by 2018: 45 apartments at Pinewood Village 2, restricted at 60% AMI 66 two-and three-bedroom units at Denison Placer 1, restricted at 30% through 60% AMI 30 studio and one-bedroom apartments at Denison Placer 2, the restrictions for which have not been determined; 26 two-bedroom apartments at Huron Landing, with rents at 80% AMI. Combined the 167 units will address 45% of the high-end need projected by 2018 and nearly 84% of the low-end estimate. The needs assessment assumed that the free market would provide rental opportunities for households with incomes at or above 80% AMI. This has not been the case, however. The gap now extends at least as high as 100% AMI. Addressing Projected Rental Needs in the Upper Blue Basin Rental Units Needed - High Rental Units Built/Planned Percent of Need Addressed <=30% % % % % % TOTAL Gap % The rental gap in the rest of Summit County is much larger with no apartment projects under construction or planned for completion by In 2013, the countywide five-year rental gap Rees Consulting, Inc. 20

24 was projected to range from 515 to 960 units. The development of Villa Sierra Madre in Silverthorne addressed a small portion of this gap with 64 units. The 167 additional units in Breckenridge will help. Only 24% to 45% of the gap, however, will be addressed. When demand projections are updated to 2020, the gap will be larger. Rees Consulting, Inc. 21

25 Ownership Housing Rees Consulting, Inc. 22

26 Ownership Market Analysis Affordability of Market Housing Prices Households in the Upper Blue Basin earning 100% AMI can afford homes priced at $244,300. This is based on multiple assumptions, including an interest rate of 5.5%, which is about one point higher than 30-year fixed mortgage interest rates have reached in recent months. Interest rates are projected to rise, which will impact affordability and could significantly lower the price that residents can afford. Affordable Purchase Prices by AMI Year % 80% 100% 120% 150% AMI figures for 2-person households $32,950 $52,600 $65,900 $79,080 $98,850 Affordable payment (30% of income) $824 $1,315 $1,648 $1,977 $2,471 Principal and interest $659 $1,052 $1,318 $1,582 $1,977 HOA, prop taxes, insurance $165 $263 $330 $395 $494 Mortgage Interest rate 5.50% 5.50% 5.50% 5.50% 5.50% Maximum mortgage $116,064 $185,280 $232,128 $278,554 $348,193 Max Affordable Price $122,200 $195,000 $244,300 $293,200 $366,500 *Assumes 5% down, a 30-year fixed-rate mortgage at 5.5% with 80% of the monthly payment covering principal and interest and 20% covering HOA dues, property taxes and insurance Home Prices In 2015, the average price of residential units sold in the Upper Blue Basin (excluding fractional ownership) was $706,000, or nearly three times what a household earning 100% AMI could afford. An income of approximately 290% of the area median is needed to afford the average 2015 home price. Condominiums were not affordable an income of 190% was needed to afford the average priced condominium. The average price on townhomes sold was equivalent to 260% AMI. Single family homes averaged over $1,083,000 in 2015, affordable for households with incomes of 440% AMI. Mobile homes were the only unit type priced under the 100% AMI amount. Rees Consulting, Inc. 23

27 2015 Homes Prices by Type Townhouses Single Family Condos Mobile Homes Median $615,000 $792,100 $376,500 $127,000 Average $637,977 $1,082,053 $464,669 $120,222 Source: County Assessor data 2015 Sales: Locals vs. Out-of-Area Buyers In 2015, 621 residential units sold in the Upper Blue Basin, excluding fractional ownership. Local buyers purchased 134 or 22% of the total. Out-of-area buyers dominated among all unit types sold, even purchasing 86% of the 21 mobile homes that sold Sales by Unit Type and Ownership Out of Area Local % Local Buyers Townhouse % SF % Condo % Mobile Home % Total % Source: County Assessor data Sales to local residents were most concentrated in the $150,000 to $350,000 price range. Despite the high prices and competition from second home/investment buyers, local residents purchased more single family homes than any other unit type, with 17 local buyers purchasing homes priced over $1 million. These buyers may not have been members of the workforce, however. Rees Consulting, Inc. 24

28 2015 Sales by Property Type - Local Purchases Townhouse SF Condo Mobile Home Source: County Assessor data Availability All residential for-sale listings in the Upper Blue Basin as of the end of March 2016 were analyzed to determine what type and at what price point the free market is providing homeownership opportunities. This examination revealed very limited availability of homes that would be affordable and appropriate for the workforce. Homes Listed for Sale by Unit Type and Price Single Family Condominiums Total Percent of Total <$250, % $250,000 - $499, % $500,000 - $749, % $750,000 - $999, % $1 million % % Source: MLS Condominiums 89 condos were listed for sale ranging in price from $212,000 to $2.5 million with a median price of nearly $650,000. Rees Consulting, Inc. 25

29 Many of these units are in lodging complexes with nightly rentals and other features that make them largely inappropriate for year-round living. For condos listed at prices under $500,000 the median size was 690 square feet and the median year built was Single Family Homes 100 single family homes were listed for sale at prices ranging from $415,000 to nearly $6.3 million. The median price was $1.8 million. Only three homes were listed for under $500,000. Of these, two were built in the mid 1960 s. The other, built in 1985, has only two bedrooms and one bathroom. Availability and choice improves as prices increase with 25 listings in the $500,000 to $1 million price range. These are mostly older homes the median year built was Their affordability is impacted by their age. Repairs, replacement of heating systems and appliances, and energy efficiency improvements to reduce heating costs could require a significant investment in addition to the purchase price. These units are generally large enough for families, however, with a median size of 2,445 square feet. Rees Consulting, Inc. 26

30 Deed Restricted Ownership Housing Inventory The Upper Blue has a wide variety of dispersed workforce housing for homeowners. The largest concentration is in the Wellington neighborhood where 288 single family homes, duplexes and townhomes will be deed restricted for the workforce at full build out. Seven other projects provide 178 units, most of which are townhomes. All have long-term affordability restrictions with the exception of the 36 units at Kennington Place. Owner-Occupied Workforce Housing in the Upper Blue Project Name # of Units Gibson Heights Breckenridge 40 Kennington Place Breckenridge 36 Maggie Placer Breckenridge 9 Monarch Townhomes Breckenridge 13 Valley Brook Breckenridge 41 Vic's Landing Breckenridge 24 Vista Point Breckenridge 18 Wellington Neighborhood Breckenridge 98 Wellington Phase 2 Breckenridge 66 Wellington Lincoln Park Breckenridge 62 Units Dispersed in Town Breckenridge 14 Farmers Grove, Breckenridge County 15 Valdora Village, Lot 129, 130, 140 County 3 Vienna Townhouses - Units 2, 11, County 6 Villas at Swan's Nest, Breckenridge County 3 Woodmoor at Breckenridge County 1 Total Existing Units 449 Breckenridge has 116 dispersed units provided by developers to meet conditions of their development agreements with the town. Relatively few (14 at last count) are owner occupied; most are rented long term. This could fluctuate over time. The situation is similar for three buy down units that were acquired by the Town; all are now renter-occupied but could be sold to members of the workforce in the future. Rees Consulting, Inc. 27

31 Income Targeting Of the 449 deed restricted ownership units in the Upper Blue, 371 have income restrictions. These restrictions specify the maximum income that purchasers may earn, expressed as a percentage of the AMI. There are no minimum incomes associated with eligibility although mortgage underwriting criteria makes it difficult to purchase homes with incomes in lower categories. Most projects serve more than one income group. This means that identical homes sell for different prices depending upon the deed restriction placed on the unit. All phases at Wellington have restrictions targeting three or more income categories. Gibson Heights and Monarch Townhomes are the only ones that serve just one income category. The others such as Valley Brook have two income targets. Maximum Incomes by Project # Units 80% 100% 110% 120% 150% Gibson Heights Maggie Placer Monarch Townhomes Valley Brook Vic's Landing Vista Point Wellington Wellington Wellington Lincoln Park Total Income Restricted % 26% 33% 17% 22% 2% The incomes initially targeted are not always the income levels at which homes are now affordable. Prices have increased due to a combination of allowed appreciation, capital improvements and sales commissions. The increase has been particularly high among the units at Wellington, where most homes initially targeted higher AMI categories. Decisions on how price escalation or affordability creep will be addressed are likely to impact the maximum income targets presented in the above table. Capture Rates The percentage of owners that deed restricted homes with income restrictions house are low at all income levels. This provides flexibility in income targeting and unit pricing. Serving households with incomes no greater than 80% will become increasingly difficult as the cost gap widens. The 120% through 150% AMI category is relatively under-served by deed restricted Rees Consulting, Inc. 28

32 housing. The higher prices that this group could afford (around $370,000) could offset the subsidies needed for 80% AMI homebuyers. Some units could target up to 200% AMI with prices up to $500,000 because the free market is not providing homes for locals at this price. These conclusions and the following capture rates are based, however, on the initial income targets, not the AMI s at which current and maximum allowed prices are affordable. If the price escalation is allowed to continue, or if additional resources are devoted to reduce or buy down prices to the AMI s initially targeted, will influence the income levels that Block 11 ownership housing should serve. Capture Rates for Deed Restricted Homes by AMI 80% 120% 150% Owner Households # 590 1,154 1,070 % 21% 41% 38% Deed Restricted Units # % 26% 72% 2% Capture Rates 16.3% 23.1%.7% Availability of Deed Restricted Homes Availability of housing for members of the workforce to buy is now extremely limited even though the inventory of deed restricted housing in the Breckenridge area has grown over the years. As of March 30 th, only two townhomes were listed for sale through the MLS in the Upper Blue Basin: A three-bedroom townhome built in 1972 in the Woodmoor subdivision for $370,000 ($259/SF) A two-bedroom townhomes built in 1996 at Kennington Place for $405,000 ($342/SF), which had only been listed for one day. The Summit Combined Housing Authority also lists deed restricted homes for sale. As of the end of March, they had only two units listed for sale county wide, both of which were in Frisco (one at Ophir Mountain, Summit County s first deed restricted homeownership neighborhood, and the other at Watertower, a mixed-use development where commercial space in the third phase has limited mortgage availability). In the first three months of 2016, six deed restricted units were sold in the Upper Blue Basin. All of these were resales since no new ownership units have been built since Maggie Placer was completed in All but one unit were at Wellington. A trend has occurred at Wellington Rees Consulting, Inc. 29

33 where neighbors have been moving up and down from one home to another that better meets their changing needs. This mobility is desirable yet limits the extent to which renters or new residents have the opportunities to buy deed restricted homes. Deed Restricted Sales per Year Over the past 15 years, an average of 36 deed restricted homes have sold each year among the workforce housing developments in Breckenridge. This figure includes initial sales and resales. It is an indicator of the size of the market for price limited ownership housing but is influenced by availability. Homes cannot be purchased unless they are for sale; home purchases are suppressed with listings are limited was a record-setting year with 63 deed restricted sales, most of which were the initial sales of new units at Gibson Heights, Vista Point and Wellington. Other peak years coincided with the construction of new homes, primarily at Vic s Landing and Wellington in 2008 and Valley Brook and Wellington in Note: Kennington Place and dispersed units not included. At the depths of the Recession in 2009 and 2010, just under 25 units were sold each year. Most of these were at Vic s Landing and Wellington. Resales of Deed Restricted Homes Deed Restricted Sales by Year, Among the 305 priced-capped, owner-occupied homes in major developments in Breckenridge, 257 resales have occurred. On average, 2.06 units have resold per month since The number has gradually increased as the number of homes has increased. Rees Consulting, Inc. 30

34 Resales are an indication of market activity but can also be a measurement of project performance and the extent to which homes meet the needs and desires of their owners. Monarch has the highest relative resale activity but it is one of the oldest projects. Wellington 1 has the second highest percentage of resales but it also dates from Based on the number of resales, no projects clearly outperform or underperform others. Furthermore, resales have shown that there is mobility within the deed restricted ownership market. Owners have been able to sell their homes when needed/desired, and the size of the inventory has created opportunities to move up or down. Initial Sale Year(s) Initial Sales Resales by Project Resales % Resales Months Resales Occurred Resales Per Month Gibson Heights % Maggie Placer N/A 0.00 N/A Monarch % Valley Brook % Vic's Landing % Vista Point % Wellington % Wellington % Total/Average Note: Kennington Place and dispersed units not included. Rate of Absorption On average 1.5 units were sold per month per project when new deed restricted homes were built. The newest project, Maggie Placer had the highest rate of absorption 4.1 units per month. Valley Brook, which was completed in 2012, has the second highest rate. While multiple variables could have contributed to the speed at which these homes were purchased, these recent projects provide evidence of the strength of the post-recession market for deed restricted ownership in the Upper Blue Basin. They suggest that the demand relative to supply has increased over time. Rees Consulting, Inc. 31

35 Number of Sales per Month by Project Project Units Months Units/Month Year of sales Maggie Placer Vista Point Wellington Gibson Heights Monarch Vic's Landing Valley Brook Wellington *First date of sale to last date of sale. Local Ownership of Market Housing Homes Owned by Local Residents Number of Units Summit County residents own 2,821 free-market homes in the Upper Blue basin, which equates to 28% of all unrestricted residential units, excluding apartments and fractional ownership. While ownership is not the same as occupancy, it is the best proxy for up-to-date information on the number and type of residential units that house the local population. Of the total homes, 503 (about 18%) were owned by corporations or individuals who owned multiple units. This suggests that roughly 2,300 units are owned and occupied by residents of Summit County. Of the total, 173 have a senior tax exemption and may not house members of the workforce. Type of Units Owned by Residents Locals own a higher percentage of single family homes (38%) and relatively fewer condominiums (18%) compared to those types of units with out-of-area owners. Of the 2,821 residential units owned by locals, 64% are single family homes. In contrast, only 49% of total units are single family homes. Rees Consulting, Inc. 32