ISSUE # 83: shANTy Town

"All 'public interest' legislation (and any distribution of money taken by force from some men for the unearned benefit of others) comes down ultimately to the grant of an undefined undefinable, non-objective, arbitrary power to some government officials. The worst aspect of it is not that such a power can be used dishonestly, but that it cannot be used honestly. The wisest man in the world, with the purest integrity, cannot find a criterion for the just, equitable, rational application of an unjust, inequitable, irrational principle."

               -- Ayn Rand

I've been promising (threatening?) to follow up on Issue #71's subsidized housing expose for ages, and with the first "Housing Summit" in 5 years upon us (beginning this Thursday, September 27, and concluding on October 11), it's high time to let 'er rip.

It's such a HUGE mess, there will be two issues of The Red Ant devoted to Aspen's beleaguered subsidized housing program, so look for "ShANTy Town, Part II" later this week!

"COMMUNITY WORKFORCE HOUSING"

Originally deemed "employee housing" and later "affordable housing," our community's deed-restricted housing program turns out to be neither. Far from housing just employees (who are required to work a minimum of 1,500 hours/year in Pitkin County) and even farther from being "affordable," our local bureaucrats introduced the new nomenclature ("community workforce housing") in the latest rendition of the Aspen Area Community Plan (AACP). Ostensibly to infer that the subsidized housing units are intended for the working people of Pitkin County as opposed to just anyone in the valley, the term "community workforce housing" is as misrepresentative as its predecessors. Simply put, the community's "housing" units are riddled with scofflaws, felons, the unemployed, the homeless and an increasing number of retirees. In short, we should start (and finish) the discussion by calling our politically christened "employee-affordable-community-workforce housing" exactly what it is: simply "subsidized housing."

It's not the people. It is the system. No one should question that Aspen needs a source of safe, affordable, quality housing for its workforce. Everyone should question whether the city and county governments are best suited to provide it. Over the past generation, gradually, a well-intended idea has become a nightmare, and the unintended consequences of those good intentions (the "golden handcuffs" of deed-restricted ownership, the impact on the cost of free market housing, the class-based divide between workers and free market property owners whose properties are often more than five times the value) are exploited for political gain, and threaten the very fabric of Aspen's fragile mountain town tapestry.

What is needed is a an intervention of sorts by of those who make the program possible, the private property owners who finance this ridiculous extravaganza with their RETT payments to the City and their impact fee payments to Pitkin County, but who have no actual power because they do not represent a voting majority. Will the private property owners have a seat at the table at the upcoming housing summit? No. It would just make too much rational sense.

To understand why this issue is so important and why some type of rational intervention is needed, let's start with the basic economic tenets of Aspen's subsidized housing program:

Funded by 2/3 of the City of Aspen's 1.5% Real Estate Transfer Tax (RETT) on Pitkin County property sales of $100,000 and above, the housing authority, formed in 1974 and coined APCHA in 1988, has about 2800 units in its portfolio, roughly half owned (on a deed-restricted basis) and half rented. According to its website, APCHA was formed to "foster public and private development of affordable housing for resident workers by making housing available to full-time employees who could not otherwise afford to own a home and build a life as part of the community they support." The intention of the program was to provide a step up to the free market. So much for that goal. With the aspiration of free market ownership no longer part of the equation, should the other elements of the original concept be revisted? Must employees "own a home??" Do the employees support the community or does the community support them?? In its 38 years of existence has the program effectively lost its way?

APCHA lists four primary qualifications for its ownership units:

Prospective owners must:

• work 1500 hours per year in Pitkin County            
• not own other property in the Roaring Fork Valley
• maintain the unit as one's sole residence
• have lived and worked in Pitkin County for a minimum of four years in order to automatically quality for the opportunity to participate in unit selection lotteries

Deed restricted rental units carry these first three requirements but not the fourth.

Beyond these, there exists a complicated matrix of one-time qualification requirements and associated "categories," as well as priority levels for both rental and ownership units. The eight tiered categories, for example, are established according to income and asset levels (at time of application only) as well as the number of household members. The rule of thumb, loosely applied, however, is that there must be as many workers in a unit as there are bedrooms. For example, for a couple or 2-person household to qualify for a two-bedroom housing unit, both must be qualified employees. Children of course affect the equation as well, but it is such a convoluted assimilation of mind-numbing and overlapping regulatory requirements that stories of conflicting "interpretations" are numerous and most people are unwilling to challenge administrative rulings out of fear that such engagement may prejudice their future opportunities. (I leave it to your discretion to dig further at aspenpitkin.com.) The byzantine regulations are merely symptomatic contrivances of the overarching problem. The contrivances continue with the manner in which unit the value of unit ownership is calculated, or should I say fabricated. There is no comprehensive database of deed restriction provisions, and standard deed restrictions have changed over time. But with the "owned" units, the deed restrictions typically include a built-in opportunity for appreciation. So, units that are subsidized by the government and that also provide for an interest deduction against a mortgage also provide an opportunity for capital gain appreciation to the individual owners, even though the units were heavily subsidized in the first place!

Here's how, in general terms, the maximum sales price of a unit is calculated:

• Purchase price
• PLUS 3% simple appreciation for each year owned, or a multiple of the CPI between the date of purchase and the date of sale, whichever is LESS
• PLUS the cost of APPROVED capital improvements, not to exceed 10% of the purchase price, less depreciation
• PLUS the cost of EXEMPT capital improvements (health, safety, energy efficiency, water conservation, "green" building materials, etc.)
• MINUS discounts for the condition of the home, determined through inspection

When demand is high and many qualified applicants enter the lottery for a specific unit, that maximum price is most often assured. But, because "ownership units" are just deed-restricted publicly-subsidized homes that are owned by private citizens, these can be subject to the same potential market outcomes as free market units if the owner cannot sell the unit for what he or she owes on the mortgage. In good times, there is very little risk in this kind of home ownership and consequently very little incentive to maintain the properties. However, the opposite holds equally true; when the market is saturated with units available for sale, only the nicer ones will sell at the asking price.

FORECLOSURES: CAN THE BANK GET THE UNIT? THEN WHAT?

You knew it was inevitable, but surprisingly, it's not been as bad as I'd anticipated. Just 5 APCHA units have gone into foreclosure so far this year. When this happens, at the foreclosure sale APCHA will bid $50 above the minimum price for a unit in order to retain it in inventory. This is done with $500,000 APCHA has in its 2012 budget for exactly this purpose. But, if the bank keeps possession, in many cases depending on the language of the deed restriction, the unit could legally be sold as a free market residence, minus the deed restriction that keeps the units affordable to the workforce. APCHA staff seems to think that the banks would never do this, but hello, in this day and age, the banks want to make money too!! So that raises the bigger question: What happens when $500,000 isn't enough and APCHA can't save them all?

THE RETIREE ISSUE

What happens when the resident workforce, housed in our subsidized housing inventory, is no longer working? (Now nobody wants to boot our subsidized housing retirees out of their units, but we do have a problem, and the tidal wave is coming.) Our pal, lazy and incompetent city manager Steve Barwick, notably says about the coming onslaught, "We'll just have to build more units." Really? Ought the community be thinking bigger? Is doubling down on the unfunded liability of publicly-subsidized housing by continuing to grow the inventory really the right approach? Might there be other alternatives that meet everyone's needs?

For example: Are some of our retirees living in units larger than they qualify for, now that the kids are long gone? Are others wishing they could move to warmer climes like their snowbird brethren? Are they "stuck" in Aspen, with all of their assets tied up in a deed-restricted unit in need of repair that has minimally appreciated over all these years? These questions, and others like it, are what we should be looking at. The fact is, by definition, a retiree is no longer a worker. Yes, retirees bring great diversity and contributions to our community, but the key question in the matter of housing is whether they should continue to be able to live in subsidized housing built specifically to meet the housing needs of our local workforce. And if not, then what?

There are alternatives, many recommended by the City's Citizen Budget Task Force (CBTF) -- formed back in 2008 in the wake of the Burlingame fiasco -- but never implemented, including the development of potential optional financial incentive programs to enable existing residents to downsize, sell, or bridge to the free market. (Incidentally, 23 local citizens served on the CBTF, and it is notable how many are now on the mayor's/city's "public enemy #1" list today. Coincidence? Or did their professional backgrounds and rational assessments of the critical issues threaten the city to such a degree that to demagogue them was the only answer?) In the end, most all of the CBTF recommendations were ignored by council.

THE R.O. GLUT

And then there are the middle-class millionaires. The "Resident Occupied" category of housing, relatively new to the housing program, is specifically for working professionals who could not previously qualify with APCHA yet could not afford free market housing, specifically in the real estate boom years. Residents of R.O. housing have no income limits, but cannot have net assets above $900K. There are certainly some fabulous R.O. places out there that have sold for $1M+. And this category offering has definitely kept many working professionals in our community. But with the recent market downturn, the resale market for R.O. has all but dried up. Many of these places cannot be sold because savvy buyers with a budget of $1M+ would rather spend their money in the free market vs on a deed-restricted place with limited economic upside. Remember, the deed restriction stipulates a maximum sales price but doesn't guarantee it! I foresee R.O. unit prices continuing to fall as supply increases. (There will always be people who want to and have to move away. And pity those who'd like to get "out" of R.O. now so as to be able to wisely invest in the free market!) I see inevitable short sales in this category; I believe it has been over-built with the belief that the good times would never end.

And at press time, recent events are proving me right. Subsidized housing owners at the W/J Ranch are hoping that APCHA will remove the $900,000 asset cap from their R.O. deed restriction. They believe that this asset cap is preventing them from being able to sell their units. Well, well, well. Who'd have guessed? As you recall, the qualification for R.O. housing stipulates no income limits but caps assets at $900K. I hate to tell the W/J folks, but it's not the asset cap that's the problem. It's that they bought the most expensive deed restricted housing in the first place. Nobody on earth who can afford the $1.2M unit on the market at W/J today would be foolish enough to buy a deed restricted place in this economy! It's just a bad investment. Unfortunately for the owner who is trying to sell, the risk taken in his subsidized investment is not paying the huge upside he had naively counted on in better times, and for now he's stuck. But that's a risk that everyone takes in all investments. Hopefully APCHA won't be so near-sighted as to remove the cap. It's a bad precedent for the days when the economy and housing market bounces back. But should they be so stupid, my bet is that the seller will have to take a HUGE hit in order to move that unit, perhaps even a loss depending on what he owes. Simply put: there are no guaranteed outcomes in investing. Nor should there be in the sale of subsidized housing!

THE SCOFFLAWS: EVICTIONS & CALLS FOR COMPASSION

Swell. This winter, security cameras were installed at the City-owned Marolt Ranch rental property. Fights, loud behavior, vandalism and violence seem to have escalated at the subsidized housing project, home to seasonal workers and homeless locals. Imagine that. (And riddle me this... Just how does one define a "homeless local"???)

Next, meet Terry Decker. She lives in APCHA rental housing at Truscott. Most of us know her from the string of malfeasances reported in the weekly police blotter. It seems she and her ex, Marc Altman, characterized as "homeless" and "a transient," have quite the ongoing feud. In April, she whacked him in the head with a hammer and was charged with domestic violence and second-degree assault, a felony. She will be arraigned soon, but lives at Truscott awaiting trial. Not to be outdone, Altman returned in early August and stabbed Decker. He was charged with a number of felony offenses, including second degree attempted murder. The latter incident also threatens Decker with a bond violation charge; she was prohibited from contact with Altman and from consuming alcohol, but cops at the August incident say she smelled of alcohol. These two are known in law enforcement circles for, among other things, trashing a free market rental unit they shared on Bonita Avenue several years ago and then neglecting the court-ordered restitution to the owner required by the judge (see Issue #71), claiming that they are unemployed. That she was allowed to rent an APCHA unit in the first place illustrates just how far the program has fallen.

It was an exciting winter with two high profile APCHA eviction actions. One woman was evicted from Truscott because she had been unemployed for 22 months. Laid off in April 2010, Susan Johnson was drawing unemployment and paying $756/month for her Truscott studio. Should anyone who is collecting unemployment be living in subsidized housing for workers??? Should anyone who is collecting unemployment be paying $756/month in rent in ASPEN??? Times have certainly been tougher than they've been in years, but Johnson's primary rationale that she's lived in the Roaring Fork Valley for about 30 years and raised her children here just doesn't cut the mustard as far as "deserving" subsidized housing in my book. Although it shouldn't be, enforcing the rules is a difficult thing to do. APCHA, you did the right thing. Now another qualified worker can live at Truscott.

Then there's Heidi Mines. Unemployed for the past 4 years, she owns her deed-restricted home. Diagnosed with breast cancer in 2007, she was in treatment for two years, but once healthy enough to work, could not find a job. Outed via an anonymous tip, APCHA gave her a short reprieve. A sympathetic figure, Mines had until July 31 to find a job, otherwise she'd have to sell. Expressing a seeming indifference to the APCHA rules as they applied to her, Mines admitted, "I do realize I dropped the ball." At press time, APCHA director Tom McCabe assures The Red Ant that she has found local employment. Congratulations, Heidi.

Cries for compassion abound! The Aspen Times, while on one hand noting that "if not for certain guidelines, affordable housing units might be filled with retirees and people of independent means," begs for more compassion on the other. After all, they say, both women were making their payments on time, as if that alone should supercede any rules. The Times also played the "this is selective enforcement of the rules" card. They wrote, "If the housing authority wants to start investigating under every rock, there's plenty to turn up." Exactly. Let's start investigating. Even one of Mines' advocates cried out, "Why those two when we know there are other people with violations that are much worse, where they may own two or three other houses and are using public housing for a vacation home?" It's widely acknowledged that the abuses are widespread. I'm sure we'd never have to build another unit if we had proper enforcement. And while my points may seem terribly harsh to some, we cannot break rules just because we like people, or because they strike a sympathetic chord. The more rules we actually enforce, the more fair the program will be for everyone. Especially those of us who pay for it.

My recent favorite? It seems that a certain Anita Boda somehow entered a subsidized housing lottery despite owning private property in Basalt (an APCHA no-no). Who is in charge if this can happen?? Besides, why are people going the wrong way on what should be a one way street?? (Remember the old "step up" to the free market intent of the program?) When she won the lottery and acquired a subsidized housing unit in Aspen, good old APCHA gave her 180 days to sell her Basalt unit. When her Basalt residence didn't sell (imagine that in this economy), she rented it out to "employees," figuring that APCHA would break their own rules and let it go. Thankfully, they've finally had it with her pleas for more and more time; she may just have to sell Basalt now at a loss in order to comply with the APCHA rules. Too bad, so sad - but she shouldn't have been sold an APCHA unit in the first place! Call me crazy but isn't the EASY and OBVIOUS answer right before APCHA's eyes? Make her sell the APCHA unit today! Ya think!? She shouldn't be in it to begin with, and by being there, she is keeping a qualified applicant out. Her tearful retort? She is a mom with a kid and simply can't commute from Basalt to her job in Aspen. Really?! Can you believe this nonsense? Cry me a river.

Again, subsidized housing not a right, but a privilege. Why would we ever build more housing until we know EXACTLY who is in each of our units and whether or not they qualify. And if they don't qualify, it's simple. Get them out so someone qualified can get in.

SANFORD & SON

In a robust housing market when the lotteries were huge and demand was at its peak, you would not believe your eyes at the condition(s) of what sold. Some of these places were on par with fraternity houses, replete with stained carpets, broken/missing cabinets, hideous murals. You see, with high demand, there was essentially guaranteed re-sale, and as such, little to no incentive to take care of a unit. The sellers were all but assured of getting their unit's maximum price because so many people wanted "in." It was actually really sad to see the condition of some of these places.

And then there are those do-it-yourself "improvements." And no, I'm not talking about Tibetan flags and sofas on the porch (although both are proliferate). My favorites are places like up in Williams Ranch where the owner simply paved his whole front yard. Yep, paved it. Now he can park 5-6 cars right in front! Don't the Williams Ranch houses have garages, you ask? Yes, they do. It was one of those fabulous amenities of that R.O. development at the base of Smuggler. But take a drive through. Every driveway has a car or two out front. The Red Ant did some very unscientific research and learned that many residents use their garages as additional living space and for storage, not to put their cars away. You can lead a horse to water, folks, but you can't make it drink!

Now that the housing supply seems to outpace demand (see weekly listings on Wednesdays in the Aspen Daily News), the crappy units languish. Now, some might rationally argue that in a bad economy when demand is low, unit owners might be more likely to make improvements to their units so that these will be more attractive to the few prospective buyers out there.   And the city could further encourage this behavior by not flooding the market with shiny new units to bid on. But the argument is flawed. Subsidized housing is not a pure market, and the working owners of these units are even less likely to make improvements during an economic downturn. The end result is a downward spiral of unit conditions throughout the subsidized housing portfolio, exacerbated by the tough economy.

The laws of supply and demand are tortured in their influence over such a heavily subsidized program. Unit owners are just as likely to try and find ways to game the system as they are to spend money they probably don't have fixing up a unit that stands to benefit them very little financially.

HOUSING THE HOMELESS: A SUBSIDIZED HOUSING QUANDRY... OR NOT

A terrible precedent set in early 2011 that enabled the use of city-owned seasonal housing to house the homeless, coupled with two spring 2012 APCHA evictions, has local homeless advocates crying that the housing authority "may be contributing to homelessness in the Aspen area." Puh-lease. Vince Savage, the director of the Aspen Homeless Shelter (you know, the guy who sent a homeless man with pending criminal charges against him to North Dakota on a bus in the middle of the winter) even went so far as to ask, "Is this a community for rich people and people willing to work 29 hours a week to serve them? Or is this a place that people can come to to live?" Well Vince, it's certainly not a sanctuary city offering free housing for all comers, that's for sure!!! According to the Aspen Daily News, Savage compared the housing system to a college campus, where one can't keep housing without staying in school, and characterized it as exploitative 20th century feudalism. "They're treated like chattel," he said of APCHA tenants. Good grief - when was the last time people lined up to be treated like chattel?? What Savage misses is that APCHA housing is EXACTLY like the housing on a college campus. You have to apply, be accepted and stay in school in order to live in the dorms. In Aspen, you have to qualify, apply, win the housing lottery and stay employed in order to keep your housing. Besides, the often-complicated deed restrictions on the units were put in place to ensure that the subsidies to build the projects in the first place were authorized for the express purpose of providing housing for workers. Housing the homeless in deed restricted units is emotionally-based mission creep for a program that already has enough of its own problems.

There are large legal barriers to change the deed restrictions in favor of housing the homeless and unemployed, so I think this well-intended but misguided proposal will probably fizzle. For now. But even former mayor Helen Klanderud weighed in, reminding APCHA and the homeless coalition that the housing program was originally formed to house young workers. "I don't think anyone at that time anticipated that people would spend their entire lives here," she said. The changing nature of our community and its needs has created the current problems with the housing program, such as what to do about retirees living in subsidized housing as well as compliance. And now the "homeless issue" is poised to take advantage of the program as well. That is, if our officials allow it to happen.

To be continued .... Look for The Red Ant, Issue #84 "ShANTy Town, Part 2" later this week!