No cheap fix for homeowners in Aspen affordable housing
ASPEN, Colorado ” Homeowners at Aspen’s Centennial Condominiums are facing an estimated $3 million in property repairs, which has forced monthly dues to be raised an average of $80 a month.
That’s a tough increase to swallow for many of the 92 condo owners, given tough economic times and already high assessments as homeowners.
The homeowners association at Centennial has about $100,000 in its capital reserve fund but that won’t even come close to covering all the repairs needed at the aging affordable housing complex.
“It does highlight the problem in affordable housing at this stage,” said Ed Cross, president of the Centennial Condominium Homeowners Association, adding his monthly dues are now $470 a month for a three-bedroom unit. “It shows how stressed people can get in affordable housing.”
In the future, it could be the same story at Burlingame Ranch, an affordable housing neighborhood located across from Buttermilk. Even though it’s a new development, the homeowners’ association there is not currently positioned to anticipate replacement and repairs.
Depending on the size of their unit, homeowners pay $5, $10 or $15 a month into a capital reserve fund. Even when the project is built out at a minimum of 236 units and homeowners pay an average of $10 a month, that only generates $28,320 a year, and $849,600 for the next 30 years. That might cover the cost of replacing the development’s 42 existing boilers, which have a life span of less than two decades. The current capital reserve program won’t leave much money for anything else, observers say.
There are dozens of other HOAs who are facing the same types of problems, according to the Housing Frontier Group, a six-member citizen task force charged with addressing issues within the Aspen/Pitkin County Housing Authority (APCHA) program.
And in the minds of task force members, the biggest issue facing the housing program is the lack of capital reserves accumulated in the 84 HOAs that are regulated by APCHA.
“I would characterize it as a ticking time bomb,” task force member Peter Louras told the APCHA board on Wednesday. He added that as aging buildings need repair, some of which will require big price tags, the burden will fall on homeowners.
“We are sending up the flare that it’s a potential problem for homeowners,” Louras said.
The group recently conducted an informal survey of local HOAs; 83 people responded, representing 36 out of 84 homeowner associations in the affordable housing program.
“They don’t have a lot of reserves in the bank,” Louras said of the survey’s results. “Many of them don’t have a capital reserve plan and it’s disappointing because most homeowners don’t have a clue about what a reserve is all about.”
Task force member Andrew Kole said there ought to be a capital reserve program established within APCHA so that future developments have a policy to follow. Currently, Kole characterized the capital reserve issue within APCHA a “mess.”
He points to Burlingame Ranch as an example. Even though it’s a new development, the homeowners already are set up for failure.
“Their capital reserve is garbage,” Kole told the APCHA board. “I don’t know where the money is going to come from; they’re broke already.”
The Frontier group plans to come up with recommendations on how to solve the problem and the legalities surrounding various options.
“We are going to stay on top of the capital reserve wagon until a policy is put into place and we are investigating what we can do retroactively,” Kole said.
One possibility is to assess homeowners who haven’t contributed to a capital reserve program and are selling their units without making necessary repairs. Or if a homeowner pays for a major improvement to the entire building, that contribution could be reflected in the sale price when they move.
“We are going to figure out how to make this work,” Kole said. “I think it’s solvable in a fair manner.”
Kole said since the local government administers and subsidizes the affordable housing program, it has a responsibility to make sure the assets remain in good condition, and unit owners are protected.
Some larger developments like Centennial and Hunter Creek may opt for creating special taxing districts to pay for their capital improvements.
APCHA board member Marcia Goshorn said Centennial and Hunter Creek representatives recently met with Wells Fargo bank officials to discuss the feasibility of setting up such a district.
Cross said having a taxing district bonded by the city and the bank granting a loan over 30 years would alleviate Centennial property owners of the increased assessments to pay for the repairs.
Instead of each owner having to pay around $30,000, it could be spread out over time through a bank loan.
“There is light at the end of the tunnel with a special taxing district,” Cross said. “Essentially, it would assist us in paying our own way.”
The APCHA board agreed that local HOAs need incentives to make improvements and build capital reserves.
Board member Ron Erickson said contributing to a capital reserve is much like a user fee.
“It pays for wear and tear,” he said. “It’s the cost of owning a house.”
Kole said once the task force has done more investigation, APCHA will host a seminar for current and future affordable housing owners to educate them on capital reserve options.
That seminar will likely involve experts like local contractors, lawyers and HOA consultants.
If the seminar has positive results, the task force will recommend that it be incorporated as an educational tool for owners of deed-restricted housing.