Valley businesses address housing issues

Editor’s note: This is part two of a two-part series about affordable rental housing.

EAGLE COUNTY — Talk to an Eagle County employer about employee housing, and this is something you’ll hear: “It’s like the winter of 2007 all over again.”

Sweet Basil owner Matt Morgan remembers the hiring difficulties that came with the 2006-07 ski season. The economy was “on fire,” and the Vail Village restaurant was hiring — but the rolling economy also meant that local housing was in high demand, and real estate and rental prices were soaring.

“We couldn’t attract and hire the right people, mostly in the kitchen,” said Morgan. “We wound up shutting down for a few lunches (over the course of the season) to preserve our quality instead of muddle our way through all 14 of our shifts.”

Morgan and his business partner ended up purchasing a four-bedroom home for employee housing in 2007. The recession gave employers like Morgan a respite as far as housing goes. However, in the past few years, they’ve faced housing problems again, and in response they purchased another property and secured an additional rental unit for employees.

“The rental problem never really went away. Here we are again a few years later. The problem resurfaced this summer, so we closed for a few lunches with the same idea in mind as before. Fortunately the problem was short-lived and we were able to buy and rent the additional housing,” Morgan said.

Sweet Basil wasn’t the only business that faced housing-related hiring problems, and as the economy recovers and housing remains scarce in the Vail Valley, employers are taking note. Instead of looking to local governments and developers to solve the problem, many like Morgan and company are choosing to tackle the problem directly.

Housing: A cost of doing business?

There are a number of affordable rental or income-capped rental programs in Eagle County, ranging from Eagle County-managed complexes to Vail’s Timber Ridge and Middle Creek Village. A number of employers such as Vail Resorts master lease a large portion of these properties for their seasonal employees. However, almost every employer will tell you more housing is needed.

Johannes Faessler, owner of the Sonnenalp Hotel in Vail Village, owns about 100 employee beds in Vail. His program is among a handful that started decades ago.

“We first started here in 1979, and it was one of the first things we added onto our investment of what was then a small hotel. We’ve added on more over 30-some years, and I’d buy more if I could,” Faessler said, adding that he takes advantage of slumps in the real estate market to add more properties to his stock.

The employee rentals now house about one-third of Sonnenalp’s staff. Faessler said his early entry into the employee housing market was less foresight and more due to the fact that providing housing was simply part of doing business in the rural vacation area he came from in Germany.

“We never knew it wasn’t necessary. However, we got started and it quickly became apparent that it was necessary to attract a lot of the foreign visa employees that we have,” said Faessler. “It’s definitely paid off. It’s not an easy thing to operate employee housing, but for us it’s a very necessary thing to be in. It is absolutely essential to the business that we have it.”

The Eagle River Water & Sanitation District started its employee-housing program in the late 1990s and now has 50 discounted rental units for employees. With the current housing pinch, district administrative manager Leslie Isom said the rental program is in high demand.

“Even we got caught off guard at how the supply of rental units had dwindled and how demand surged after the recession. We were surprised how in demand those rental units were,” she said.

However, Isom said the program has been invaluable for recruiting and retaining employees.

“This is a safety net for the employees if something like the recession or a divorce happens, or something else unexpected happens,” she said. “It’s not just about right now when the market is tight — it’s about life, and all the things that can happen that might have otherwise meant an employee would have had to move elsewhere.”

Unaffordable and unavailable

When employers compare the current situation to 2007, they aren’t far off. According to data from the local governments and Vail Daily classifieds, rental prices have steadily increased over the last two years across the valley as the number of available rental properties has plummeted.

“We’re seeing levels that are worse than they were in 2007,” said Alan Nazzaro, town of Vail housing manager. “Now, employers are losing employees because they can’t find housing. We’re talking about everyone from small businesses to restaurants, all the way up to the hospital. It’s dire straights right now as far as housing.”

This fall, when many seasonal employees were seeking places to live and many leases ended, the average cost of a two-bedroom rental in the upper valley (Edwards to Avon), was $2,138 per month. That’s a 19 percent increase compared to the same time period in 2014, according to the Vail Daily classifieds. Rentals are still slightly more affordable downvalley (Eagle to Gypsum), with a 10 percent increase for two-bedroom rentals compared to the previous fall.

The lack of options has made the search even more difficult for potential renters. The newspaper’s data shows that there was a 57 percent drop in the number of rental ads for one-to-three-bedroom homes placed this fall compared to the fall of 2013. The decline in available rentals corresponded to rising prices, and on average rentals spent less time on the market.

While local governments don’t track the private market, municipal housing experts say the numbers aren’t surprising and correlate to what they’re hearing anecdotally.

“We haven’t tracked it, but we’ve talked to a lot of different people who said they were displaced by their landlord because the unit they were renting is now going to be a short-term rental or that the place is being sold,” said Nazzaro. “Towns and business are just trying to get their arms around what the need is and how to begin addressing it. People hesitated when it came to affordable housing (during the recession,) and now we’re playing catch up.”

Assistant Managing Editor Melanie Wong can be reached at 970-748-2927 and mwong@vaildaily.com. Follow her on Twitter @mwongvail.