! Policy Study Aspen/Pitkin County Housing Authority Affordable Housing Guidelines ! February 8, 2016 Prepared by: Navigate, LLC Jackson Hole, WY Rees Consulting, Inc. Crested Butte, CO WSW Consulting San Anselmo, CA Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 Contents LIST OF TABLES ................................................................................................................. 5 LIST OF FIGURES ............................................................................................................... 7 EXECUTIVE SUMMARY - KEY ISSUES AND RECOMMENDATIONS ................................. 8 APCHA’S AFFORDABLE HOUSING PROGRAM ..................................................................... 9 Inequities Serving Workforce Households .............................................................. 9 INCOMES AND ASSETS ...................................................................................................... 10 Number of Income Categories ............................................................................. 10 Income Category Methodology .......................................................................... 11 Recommended AMI Conversion .......................................................................... 11 Calculating Income ............................................................................................... 12 Asset Caps ............................................................................................................... 13 Negative Perceptions related to Income Qualifications ................................... 15 AFFORDABILITY ................................................................................................................ 15 Affordability Standard ............................................................................................ 15 Affordability over Time ........................................................................................... 16 AFFORDABILITY OF CURRENT RENTS AND OWNERSHIP PRICES ............................................... 16 QUALIFICATIONS FOR APCHA OWNERSHIP AND RENTAL HOUSING ..................................... 17 Income Qualification - Distinctions between Owners and Renters .................. 17 Bedroom Qualification ........................................................................................... 18 ADMINISTRATIVE COMPLEXITY ........................................................................................... 18 INTRODUCTION ............................................................................................................. 20 METHODOLOGY .............................................................................................................. 21 Pitkin County Employee Survey ............................................................................. 21 Community Interviews ............................................................................................ 23 Review of Peer Housing Programs ........................................................................ 24 Secondary Data ..................................................................................................... 24 ORGANIZATION OF THIS REPORT ....................................................................................... 24 DEFINITIONS .................................................................................................................... 25 CONSULTANT TEAM ......................................................................................................... 28 ACKNOWLEDGEMENTS ..................................................................................................... 28 ELECTED AND APPOINTED OFFICIALS ....................................................................... 29 Aspen/Pitkin County Housing Authority (APCHA) ............................................... 29 City of Aspen Council ............................................................................................ 29 Pitkin County Board of County Commissioners ................................................... 29 Administration ......................................................................................................... 29 SECTION I – EXAMINATION OF APCHA’S AFFORDABLE HOUSING PROGRAM ......... 30 PURPOSE ........................................................................................................................ 30 HOUSING PROGRAM ....................................................................................................... 30 EMPLOYEE HOUSING GUIDELINES 2015 ............................................................................. 31 HOUSING PROGRAM GOAL ............................................................................................. 31 EVOLUTION OF THE ASPEN COMMUNITY AND RESULTING HOUSING CHALLENGES .................. 32 Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 1 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 INVENTORY OF UNITS ........................................................................................................ 33 Ownership Units ....................................................................................................... 35 Rental Units .............................................................................................................. 35 COMPARISON OF APCHA RESIDENTS AND PITKIN COUNTY WORKING HOUSEHOLDS ............ 36 Household Demographics ..................................................................................... 37 Housing Costs .......................................................................................................... 38 Cost Burdened ........................................................................................................ 39 Work Location ......................................................................................................... 39 Type of Industry ....................................................................................................... 40 LOCAL LENDING ENVIRONMENT ........................................................................................ 41 SECTION 2 – INCOME, ASSETS AND CATEGORIES ...................................................... 43 PURPOSE ........................................................................................................................ 43 APCHA INCOME LIMITS BY CATEGORY ............................................................................. 43 Maximum Renter Incomes ..................................................................................... 44 Maximum Owner Incomes .................................................................................... 44 APCHA INCOME MAXIMUMS TRANSLATED TO AREA MEDIAN INCOME (AMI) ..................... 45 Area Median Income (AMI) Defined ................................................................... 45 APCHA Categories Expressed as AMI .................................................................. 48 Considerations for Transitioning to an AMI-Based Program ............................... 49 MEASURING INCOME ....................................................................................................... 51 APCHA Standards ................................................................................................... 51 Federal Standards ................................................................................................... 52 APCHA ASSET LIMITS BY CATEGORY ................................................................................ 54 APCHA Asset Maximums ........................................................................................ 54 The Effect of APCHA’s Asset Limits ........................................................................ 54 MEASURING ASSETS ......................................................................................................... 57 APCHA Standards ................................................................................................... 57 Federal Standards ................................................................................................... 59 NEGATIVE PERCEPTIONS OF INCOME/ASSET QUALIFICATION ............................................... 59 Unreported Income ................................................................................................ 60 Trust Funders ............................................................................................................ 60 Complexity and Transparency .............................................................................. 60 APCHA’S CATEGORIES ................................................................................................... 60 Inventory of APCHA Units by Category ................................................................ 60 Distribution of Units and Employed Households by Category ........................... 61 COMPARISON TO PEER COMMUNITIES (BRECKENRIDGE, JACKSON, TELLURIDE, VAIL) ............ 63 Income Categories and Limits .............................................................................. 63 Asset Limits ............................................................................................................... 64 SECTION 3 – AFFORDABILITY ANALYSIS ....................................................................... 65 PURPOSE ........................................................................................................................ 65 STANDARDS OF AFFORDABILITY ......................................................................................... 65 Government Agencies ........................................................................................... 66 Mortgage Lenders .................................................................................................. 67 Peer Resort Communities ....................................................................................... 68 Inputs for Housing Cost Calculation ..................................................................... 69 Weaknesses in the 30% Affordability Standard ................................................... 69 AFFORDABILITY OF APCHA HOUSING ............................................................................... 70 Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 2 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 Part 1 - Rental Affordability .................................................................................... 71 Part 2 - Ownership Affordability ............................................................................ 80 Affordability of New APCHA Units Over Time ...................................................... 91 OTHER IMPACTS TO THE AFFORDABILITY OF APCHA’S UNITS ............................................... 94 Deferred Maintenance .......................................................................................... 95 Capital Improvements ........................................................................................... 95 Interest Rates ........................................................................................................... 96 COMPARISON TO PEER COMMUNITIES – BRECKENRIDGE, JACKSON, TELLURIDE, VAIL ............ 96 Initial Prices/Rents ................................................................................................... 96 Price Appreciation Limits ....................................................................................... 96 Resale Price Guarantees ....................................................................................... 97 Evaluating Affordability over Time ........................................................................ 97 Capital Improvements ........................................................................................... 97 Special Assessments ............................................................................................... 97 Deferred Maintenance .......................................................................................... 98 SECTION 4 – HOUSEHOLD SIZE AND QUALIFICATIONS .............................................. 99 PURPOSE ........................................................................................................................ 99 DIFFERENT INCOME AND BEDROOM QUALIFICATIONS ......................................................... 99 INCOME QUALIFICATION - DISTINCTION BETWEEN OWNERS AND RENTERS ........................... 100 Equity in Housing the Workforce ......................................................................... 101 Affordability ........................................................................................................... 102 Compatibility with AMI ......................................................................................... 103 Impact on Income Categories ........................................................................... 103 Fair Housing Concerns ......................................................................................... 104 Administration ....................................................................................................... 105 BEDROOM QUALIFICATION ............................................................................................ 105 Federal Household Size Restrictions and Fair Housing ...................................... 105 CHFA Household Size Limits ................................................................................. 106 APCHA’s Qualifications ........................................................................................ 106 Ownership Units ..................................................................................................... 107 Rental Units ............................................................................................................ 107 PEER COMMUNITY COMPARISON (BRECKENRIDGE, JACKSON, TELLURIDE, VAIL) ................. 108 Household Size Calculations ............................................................................... 108 Bedroom Occupancy Standards ....................................................................... 108 APPENDIX A: SUPPORTING DATA FOR SECTION 1 – EXAMINATION OF APCHA’S AFFORDABLE HOUSING PROGRAM ........................................................................... A-1 HOUSEHOLD COMPOSITION AND SIZE ................................................................................. 1 AGE OF HOUSEHOLD MEMBERS .......................................................................................... 4 HOUSEHOLD INCOMES ....................................................................................................... 4 YEARS WORKED ................................................................................................................ 5 APPENDIX B: SUPPORTING DATA FOR SECTION 2 – INCOME, ASSET AND CATEGORIES ................................................................................................................ B-1 APCHA CATEGORIES EXPRESSED AS AMI .......................................................................... 1 Direct Translation Not Possible Discussion .............................................................. 1 Estimated Translation to AMI ................................................................................... 2 Measuring Assets – Federal Standards (HUD) ........................................................ 5 Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 3 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 APPENDIX C: SUPPORTING DATA FOR SECTION 3 – AFFORDABILITY ANALYSIS ..... C-1 PART 1 - RENTAL AFFORDABILITY ......................................................................................... 1 Affordability for Renters in Existing Units ................................................................. 1 PART 2 - OWNERSHIP AFFORDABILITY .................................................................................. 1 ESTIMATED AMI RENTS ....................................................................................................... 3 ESTIMATED AMI SALE PRICES .............................................................................................. 6 APPENDIX D: MATRIX OF PEER COMMUNITY HOUSING PROGRAMS ...................... D-1 APPENDIX E: MAP OF OWNERSHIP EXCLUSION ZONE .............................................. E-1 Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 4 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 List of Tables Table 1. Recommended AMI Categories with 2015 Income Maximums .............. 12! Table 2A,B. Survey Representation ............................................................................. 22! Table 3. 2015 HUD AMI - Pitkin County ........................................................................ 26! Table 4. Year APCHA Ownership Units Built ................................................................ 33! Table 5. APCHA Inventory of Deed Restricted Housing ............................................ 34! Table 6. APCHA Ownership Inventory ......................................................................... 35! Table 7. APCHA Rental Inventory ................................................................................ 36! Table 8. Representation in the APCHA Program ....................................................... 37! Table 9. Housing Costs ................................................................................................. 38! Table 10. Cost Burdened .............................................................................................. 39! Table 11. Where do you and others in your household work? ................................. 40! Table 12. Rentals: Maximum Income Limits, 2015 ..................................................... 44! Table 13. Ownership: Maximum Income Limits, 2015 ............................................... 45! Table 14. 2015 HUD AMI - Pitkin County ...................................................................... 46! Table 15. APCHA and HUD Defined Income Levels .................................................. 48! Table 16. Estimated Upper AMI Limit for Each Category: 2015 ............................... 49! Table 17. Estimated AMI Range by APCHA Category: 2015 ................................... 50! Table 18. Maximum Income Based on Size Category: Current Compared to Proposed AMI (2015) ..................................................................................................... 51! Table 19. HUD Income Compared to APCHA Income Inclusions ............................ 53! Table 20. Net Asset Cap: 2015 .................................................................................... 54! Table 21. Assets of Households Employed in Pitkin County by Income: 2015 ........ 55! Table 22. Affordable Purchase Price Given Income and Asset Caps: 2015 ......... 57! Table 23. Household Assets .......................................................................................... 58! Table 24. APCHA Redistributed Inventory: 2015 ........................................................ 61! Table 25. Permitted Increase in Rent for Existing Affordable Rentals ...................... 71! Table 26. 2015 APCHA Maximum Monthly Rental Rates .......................................... 72! Table 27. 2015 Category Incomes for APCHA Rentals .............................................. 72! Table 28. Households Paying Over 30% of Income for Rent: APCHA Renters 2015 ......................................................................................................................................... 73! Table 29. Average Affordability of APCHA’s Maximum Rents: 2015 ...................... 74! Table 30. Percent of Monthly Income Spent on Rent by Qualifying Households: New APCHA Rentals, 2015 ........................................................................................... 75! Table 31. 2015 APCHA Maximum Sales Prices ........................................................... 81! Table 32. 2015 Category Incomes for APCHA Ownership ........................................ 81! Table 33. Households Paying Over 30% of Income for Mortgage: APCHA Owners 2015 ................................................................................................................................. 82! Table 34. Average Affordability of APCHA’s Maximum Sale Prices: 2015 ............. 83! Table 35. Percent of Monthly Income Spent on Mortgage and HOA by APCHA Households: 2015 .......................................................................................................... 84! Table 36. Incomes Needed to Afford Current Sales Prices ....................................... 90! Table 37. Average Percent Change in APCHA Maximum Rents and Maximum Incomes by Category: 2000 to 2015 .......................................................................... 92! Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 5 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 Table 38. Dual and Single-System Comparison ....................................................... 101! Table 39. Household Makeup by Owners and Renters ........................................... 102! Table 40. Rental: Category 1 APCHA vs AMI ........................................................... 103! Table 41. Income Categories: Rental vs Ownership .............................................. 103! Table 42. Percentage Adjustments for Family Size: 2015 ........................................ 104! Table 43. Peer Community Bedroom Occupancy Standards ............................... 109! Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 6 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 List of Figures Figure 1. The Type of Industry for Which You and Others in Your Household Work ......................................................................................................................................... 41! Figure 2. Households With a Pitkin County Employee by AMI: 2015 ...................... 47 ! Figure 3. Distribution of APCHA Rental Units Compared to Households Employed in Pitkin County by Category: 2015 ............................................................................. 62! Figure 4. Distribution of APCHA Ownership Units Compared to Households Employed in Pitkin County by Category: 2015 .......................................................... 63! Figure 5. Rent Affordable to Households Within the Permitted Income Range for Each Category Compared to APCHA Rents: One-Adult Household .................... 77! Figure 6. Rent Affordable to Households Within the Permitted Income Range for Each Category Compared to APCHA Rents: Two-Adult Household ..................... 78! Figure 7. Rent Affordable to Households Within the Permitted Income Range for Each Category Compared to APCHA Rents: Three-Adult Household .................. 78! Figure 8. Estimated AMI Rents Compared to Maximum APCHA Rents ................. 80! Figure 9. Sale Prices Affordable to Households Within the Permitted Income Range Compared to APCHA Rents: 0-Dependent Household ............................... 87! Figure 10. Estimated AMI Sale Prices Compared to Maximum APCHA Sale Prices ......................................................................................................................................... 89! Figure 11. 2015 Resale Value Compared to APCHA Sale Prices by Category: 2015 ................................................................................................................................. 90! Figure 12. AMI Affordability of APCHA Units Based on Income Category Designation and the Resale Price of Units: 2015 ....................................................... 91! Figure 13. Average Percent Change in APCHA Maximum Sales Prices and Maximum Incomes by Category : 2000 to 2015 ....................................................... 93! Figure 14. Change in Maximum AMI for Category 1: 2000* to 2015 ..................... 94! Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Table of Contents – 7 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 Executive Summary - Key Issues and Recommendations The Aspen/Pitkin County Housing Authority (APCHA) Program has been successful in achieving its primary goal of housing those that work or have worked in Aspen/Pitkin County. An impressive and diverse inventory of over 2,900 restricted units has been produced that is housing seasonal and long-term workers, as well as workers in a representative mix of industries in the County. APCHA housing is also affordable. Comparing incomes to home prices and rents shows that the vast majority of APCHA’s residents live in homes they can afford, most spending a far lower percentage of their income for housing than in peer communities. Employees express the benefit that this housing has had on the community and its workers: "[T]hanks for providing an opportunity for people to own/rent in Aspen. [W]ithout the housing authority Pitkin County would be a ghost town"! – Survey Comment "Keep up the good work. This is the most necessary program we operate in the city/county. It is vital for the long term health and existence of Aspen”. – Survey Comment Despite APCHA’s positive impact, there is room for improvement. As APCHA’s housing program has evolved over the last 40 years along with the communities it serves, some provisions in the Guidelines are no longer applicable. Other additions have been made over the years to address shifting needs. While all provisions at one time served important purposes, the patchwork of Guidelines created over the past 40 years has: • Contributed to the complexity of the program creating management challenges and large staffing requirements; • Reduced transparency, created misconceptions and made it difficult for residents to understand; • Made it difficult to evaluate the performance of APCHA’s programs as evidenced by the complexity of the analysis in this report; • Resulted in methods that are totally unique to Aspen, thereby limiting the ability to learn from lessons in peer communities and work with State and Federal programs when desired; and • Disproportionately served different types of employee households. Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Recommendations - 8 Policy Study: Aspen/Pitkin County Housing Authority Affordable Housing Guidelines. February 2016 The following key issues and recommendations address major elements of APCHA’s Guidelines – affordability, home prices and how households qualify to buy or rent APCHA housing. The overriding conclusion is that a major overhaul is warranted. Minor adjustments will not address the problems identified. Also, because the elements of the Guidelines are interdependent, changes cannot be made to one without also changing much of the system. For example, prices cannot be raised without establishing an affordability standard. The basis for the income categories cannot be changed as recommended without also changing the method for qualifying households. The following key issues and recommendations do not address several pressing aspects of the housing program that were beyond the scope of this study, such as how many or what type of units should be developed, the selection system, how to grapple with retirees remaining in their APCHA homes and how to address deferred maintenance. They do, however, highlight how the existing Guidelines relate to the program’s goal of serving the Pitkin County workforce, where the current system may be falling short of meeting that goal or not functioning well, and what changes can be considered to improve APCHA’s ability to meet the housing needs of the local workforce. APCHA’s Affordable Housing Program Inequities Serving Workforce Households Issues: Some segments of the workforce are presently under-served by APCHA housing, including: • Couples with and without children in both ownership and rental housing; • Persons that have been employed in the area for 4-years or less; • Very low income renter households earning under $25,000 per year; • Higher income owner households earning between $100,000 to $200,000 per year; and • Many APCHA renters, particularly those earning under $50,000 per year, are cost-burdened (paying over 30% of their income for rent). Recommendations: • Focus on serving lower income categories; higher income households have more options for housing. • Change the Guidelines as they pertain to income categories and the dual qualification system as recommended below so that all types of households are qualified for housing by the same method. Navigate, LLC; WSW Consulting; Rees Consulting, Inc. Recommendations - 9