I confess to being slightly shocked, and pleasantly surprised, when the Town Council and Board of County Commissioners (BOCC) added “affordable housing” and “early childhood education” to their short list of immediate priorities at a recent joint meeting.
“Affordable housing” has not been on the government radar, here in Archuleta County, since about 2007. That’s nearly a decade. And I suppose we really can’t blame anyone for that. The community’s overall economy fell into disarray beginning right around that time, and hit bottom (it now appears) in about 2011. Public school enrollment fell by nearly 20 percent, and has, only in the past year or so, shown signs of flattening out. Property values dropped, unemployment increased, population growth stagnated.
We weren’t paying much attention to little problems like “affordable housing.”
In Part One, I provided a link to the 2008 Archuleta County Housing Needs Assessment, produced by Economic and Planning Systems (EPS) and funded jointly by the Town of Pagosa Springs and Archuleta County.
Another thoughtful study that has been gathering dust on a government shelf somewhere. Which is, in a sense, perfectly appropriate — considering that EPS used mainly data from 2005, and by the time the report was released in 2008, Archuleta County’s economic situation was headed off in a rather different direction. In other words, the report was outdated before it was released.
Between 2007 and 2011, Pagosa Springs saw a disturbing increase in vacant buildings — both residential and commercial — and some began to worry aloud that the town was likely to dry up and blow away unless our local governments got their act together and did something about the economy. “Affordable housing” didn’t seem like the same pressing problem it had seemed in 2005, for example — when we noticed that local housing prices had doubled in the past 10 years while average wages had increased maybe 10 percent.
But before we get too excited about the Town and County agreeing (in principle, at least) that affordable housing is still a key economic issue in Pagosa Springs, we ought to take a moment and ask the question honestly.
Can government solve the housing crisis? Can they help solve the housing crisis?
Back in November 2013, my girlfriend Cynda Green and I were living in Salida, Colorado — another smallish Colorado town with a similar tourism-based economy and a similar housing crisis. Between 1990 and 2000, most of the new housing built in Chaffee County had been purchased by permanent residents.
Between 2000 and 2005, most of the new construction was purchased by second home owners. During that same period, the cost of an average home skyrocketed, and the working class was essentially priced out of the housing market in downtown Salida.
That November, a group of government and non-profit leaders organized a “Housing Summit” to discuss the housing crisis in Chaffee County, which includes the towns of Salida, Buena Vista and Poncha Springs. (We could definitely use a “Housing Summit” here in Archuleta County, but I don’t see any signs of that happening, yet.)
The Chaffee County Housing Summit was a fascinating event, on various levels, and I’d like to share some of the more interesting commentary that came out of that event. Much of it applies directly to the situation we have here in Pagosa Springs; some of it does not.
We’ll begin with some comments by Chaffee County Development Director Don Reimer, who made a brief stab of the question: What role can government play in solving a housing crisis?
“Some of the speakers that you’ll hear today will be referring to housing programs where you need a certain percentage of the ‘AMI’ — that’s the Area Median Income — in order to qualify. So that’s a critical thing. In 2005, the AMI in Chaffee County was around $40,000. So that means, if you had two incomes, the median average was $40,000.”
Median average means: half the incomes are greater than that number, and half are less.
Mr. Reimer explained that Chaffee County and a number of other government boards had cooperated in 2006 on a ‘Housing Needs Assessment’, the main goal of which was to establish the AMI for the county — thus opening up opportunities for state and federal government grants and loans. Without such an assessment, government housing grants are simply not available, as I understand it.
As noted, our two local governments here in Archuleta County cooperated in funding just such a study in 2007. Both the Chaffee County study and the Archuleta County study are now outdated and invalid for supporting grant applications.
Like the Archuleta County study, the Chaffee County Housing Needs Assessment listed a number of ambitious tasks and opportunities. Then the economic crash of 2008 hit. Banks stopped making overly-generous loans, real estate values dropped in many communities — falling maybe 30-40 percent in Pagosa Springs, for example — and the construction industry, which had been happily investing in large speculative housing developments all over the country, suffered a major financial blow, down to its foundations.
So the final 2007 Chaffee County Housing Needs Assessment went, essentially, nowhere. As Mr. Reimer explained it, Chaffee County would need to fund a new Housing Needs Assessment in order to qualify for government grants and loans. (I understand housing needs assessments are valid for only two years? Don’t quote me on that.)
Don Reimer:
“In 2007, a group established a local land trust, that was known as the Chaffee Housing Trust. The goal there was to construct housing units that would remain affordable, because the Housing Trust would own the land, and only the actual house construction would be financed by the buyer. And there would be a price cap on any future sale of that house, so it would not escalate.”
Here we have an interesting solution that has been tried in various American communities: a government-enforced price cap.
Americans have, since the 1980s, become accustomed to the idea that a house was not simply a place to live, but was also a valuable investment that could be cashed in at some point.
As the director of the Chaffee Housing Trust, Read McCulloch, wrote in 2010:
In Chaffee County, pre-recession housing prices had been rising nearly 10% annually over the previous decade, while wages grew 3.6%. With the economic downturn starting in 2007, home prices in the County fell 10% – 20% (depends who you talk to), but are still out of reach for low-income families (family of four earning less than $45,600/year). In the last year the average home sales price in the County was $390,400, in Buena Vista it was $211,200, and for Salida $231,700.
To buy a $200,000 home, you would need to have a solid credit history (later topic), and come up with a 25% down payment ($50,000 cash) plus a few more thousand for closing costs. Few households have the financial resources to achieve this. Then, with a $150,000 conventional loan, at a 4.75% interest rate over 30 years, payments would be $782/month including taxes and insurance. Add to that utilities (gas, electric, water, sewer, trash) and you could easily be looking at $1,000/mo. for housing costs.
Conventional wisdom is that a household should not spend more than 30% of their gross monthly income (before taxes taken out) on housing payments alone — rent or mortgage — without becoming “cost burdened”. In Chaffee County, one-quarter of households fit this definition.
Please note that proportion: one-quarter of households fit that definition. Quite an assertion, I would say.
We thought our houses were bank accounts, generating 10 percent interest. Can we get used to a very different idea? That a house might keep the same flat value, and might be worth no more than what we paid for it, even 20 years later?