State bill would be damaging to efforts

Plan may end deed restrictions on affordable housing

— City Council members are worriedly charting the progress of a state Senate bill that could wipe out deed restrictions on affordable housing.

City Manager Paul Hughes called the proposed law disastrous to the city's affordable housing initiatives, which have deed-restrictive components.

At a City Council "brown bag lunch" Thursday, Hughes said the bill would prohibit deed restrictions on affordable housing in the city's first owner-affordable housing project, West End Village; the component in the West of Steamboat Springs Area plan that requires one-third of all housing be affordable; and the only existing affordable housing unit in the city, the Habitat for Humanity house. In all of those cases, Hughes said, the new bill would require houses to sell for full value and without restrictions.

"This would cut the legs out from underneath (affordable housing)," City Councilman Steve Ivancie said.

When the Regional Affordable Living Foundation created the West End Village project, it put deed restrictions in place. Those restrictions were designed to make sure the 44 affordable homes would remain in the affordable housing pool even once the original owners sell them.

Under the deed restrictions, the West End Village units can only be purchased by those who make 120 percent or less of the area's median income, live and work in Routt County and have assets of $200,000 or less.

Sen. Mark Hill, R-Burlington, introduced the bill Tuesday. Senate Bill 154 would prohibit a county or municipality from creating a law that would require a private residential property owner to sell the property below its fair market value. Essentially, the bill takes away municipalities' abilities to set aside affordable housing.

Hughes said the city will draft a letter opposing the bill and send it to Sen. Jack Taylor, R-Steamboat Springs. County commissioners and RALF board members would be asked to sign the letter.

If they cannot establish deed restrictions, council members worry the city could create affordable housing, sell it at a subsidized price -- and then have the owner immediately sell the unit at market value and turn a profit. Not only would that render the council's affordable housing efforts useless, it would deplete the area's stock of affordable housing.

Even without deed restrictions, Councilman Paul Strong said affordable housing assistance could still be put in place through use of silent second mortgages. Strong agreed the bill is horrible but noted a floating pot of money coming from the repayment of silent second mortgages would still exist.

In October, the council made a commitment to keep deed restrictions in place for the West End Village project.

It decided that if a foreclosure occurs on a house designated as affordable, the council wants a chance to step in and purchase the home to keep the deed restrictions in place. The council agreed that the city and RALF's names would be listed on the loan so that when homeowners stopped making payments, they could be notified.

When homeowners are in default of loan payments, 45 days to six months go by before the home is sold. During that time, the city or RALF could step in and buy the property at the mortgage rate and keep the deed restrictions in place. If they decided not to buy the property, the lender could sell it and lift the deed restrictions.

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