179 ALI-ABA Course of Study Resort Real Estate and Clubs: Formation, Documentation, and Operation November 13-14, 2008 Savannah, Georgia Affordable Housing in Resort Areas By James L. Cunningham Sherman & Howard L.L.C. Denver, Colorado
180 2
181 AFFORDABLE HOUSING IN RESORT AREAS James L. Cunningham, Esq. February 2002 The resort and immediate surrounding business area quickly soak up all of the available low income housing stock and employees and service personnel (maids, gardeners, etc.) are left without housing reasonably convenient to the resort. 1. Employees Within or Near the Resort. The market cost of housing in a resort area is beyond the means of most resort employees. Where low income housing is available at or near the resort, there is typically not enough for all employees. The shortage of affordable housing in resort areas has resulted in: (a) (b) (e) (f) sleeping in cars overloading rental housing. In some areas employees reportedly sublease large closets for $200 per month tepees and other campsites living in summer cabins without utilities commutes of up to 70 miles the limited opening of campgrounds for winter use It is not unusual for a resort developer to purchase or build a project for some employee housing. Another developer bought and rehabilitated an old motel for employees and construction workers. A job at a resort area fast food chain may well include housing. These methods help to solve the particular employer's problem, but arguably have an adverse impact on the area employee housing stock. 2. Construction Workers. During construction periods the construction workers need and can afford housing. Because they can afford to pay more they have a significant impact on area housing. In successful resort areas there is usually a significant number of construction projects, each impacting local housing.
182 3. Supply. The problem is the reverse of the plight of most of the homeless in this nation. Resort employees and construction workers can afford housing. The supply just is not available during the resort season, and if the resort is a successful four season resort, the supply may never be conveniently available. The problems also may go beyond just the lack of housing. Other social problems may result from large numbers of employees living in cramped or makeshift housing. 4. Possible Solutions. (a) Busing In Hawaii many resorts provide transportation in buses from remote areas where housing is affordable, but it is a two hour drive each way. Busing is expensive and offers only a shortterm solution. (b) Mobile Homes A typical solution for low costs housing is the mobile home park. Most resort developers regard these developments as eye sores, and insist that the park be located reasonably remote and out of the main traffic patterns to and from the resort. Government Involvement Planners and developers should focus on the need for employee housing as projects are approved. Unfortunately, when new resorts are planned, governmental agencies are often blinded by significant new tax base and jobs which will be created by virtue of the new development. Legislation authorizing housing authorities should be passed, and sponsors recruited for the development of bond financed low income housing or local government can get directly involved as in the two examples listed below. The design of low income projects can be compatible with the resort, and maintenance standards can be controlled through covenants. A hundred units here and there help, but as the resorts mature, there never seems to be enough affordable housing. Some local governments have begun to be proactive in trying to address the lack of affordable housing. 2
183 Two Recent Examples of Government Involvement: i. Eagle, Colorado When the Town of Eagle, Colorado approved the annexation of a tract for development, it imposed a covenant to provide for affordable housing in the annexation agreement. Attached as Exhibit A and A-1 are a copy of a contract between the master developer and a merchant builder, and an excerpt from the annexation agreement, imposing the requirement for 12 out of 60 units to be offered first to a housing corporation controlled by the Town. If the unit is not purchased by the housing corporation within a specified period, the unit becomes a free market unit (free of the restriction). An amount per unit (in this case $40,000) is represented by a promissory note (in this case for $480,000) secured by a deed of trust on the units which is partially released and the note credited for $40,000 as each of the affordable units is sold. The names and dollar figures in the attached agreement have been changed. All free market and affordable units were sold. ii. Breckenridge, Colorado In the November/December 2001 issue of Urban Land page 30, there is an interesting article by William P. Macht entitled "Mountain Urbanism" regarding a development in Breckenridge, Colorado. The Town adopted an affordable housing strategy, a copy of which is attached hereto as Exhibit B-1. In the development discussed in the article, the Town imposed an affordable housing restriction in the Annexation Agreement. In this scenario only 24 of the 122 units may be sold at market rates. The remaining 98 units may be sold only to full time residents working in Summit County. Deed restrictions limit resale profit or appreciation to 3% per annum or the percentage increase in the area median income determined from time to time by HUD. Each buyer is required to sign a note and deed of trust to secure the excess sale price thereby assuring the Town of compliance with the covenants. As an incentive to the developer to build the affordable units, the Town agreed to forego certain inspection fees and a 2% transfer fee on the initial transfer of units, reported to be worth approximately One Million Dollars. Attached hereto as Exhibits B1-4 are: (a) (b) Affordable Housing Strategy - Breckenridge Employee Housing Restrictive Covenant and Agreement Affidavit (relative to employment) Appreciation Limiting Promissory Note 3