July 2000

Planning

Copyright by American Planning Association

Court Kills Telluride Plan for Affordable Rental Housing

Officials of Telluride, Colorado, are looking at their options in the wake of last month's Colorado Supreme Court decision invalidating the rental policies in the town's affordable housing ordinance. The measure is rent control, the court said, and as such, prohibited by state law.

The decision reduces the options for developers in the mountain town, a skiing and tourist community of 2,000 people that swells to 10,000 at peak season, says planning director Steven Ferris, AICP. The basic mandate of the Telluride ordinance remains in effect: A developer must provide 350 square feet of housing for 40 percent of the number of employees generated by the proposed development. The requirement applies to most new developments-hotels, commercial property, and multifamily housing. It does not cover single-family houses or duplexes.

The court's ruling on rental property also limits what local governments can do to encourage moderately priced housing in a state where home prices have soared in recent years. Aspen has an ordinance similar to Telluride's, Ferris says. Aspen, the Aspen-Pitkin County Housing Authority, Pitkin County, and the Colorado Municipal League were among friends of the court in the suit brought by a developer, Lot Thirty-Four Venture, challenging the Telluride ordinance.

Ferris explains the town's position: Telluride's main businesses are tourism, construction, and real estate. The area has about 1,200 jobs, all of them centered in the town. "The town is trying to get workers to live here, to participate in the community," Ferris says.

Sixty percent of the population does live and work in the region now, and there are "still a lot of owner-occupied dwellings" in town, Ferris says, but affordable housing is "getting tighter and tighter." The average single-family house in Telluride costs $550,000, Ferris says, the average condo around $300,000.

"A big facet of retaining employees is providing housing because it's in such short supply," but the nearest communities with affordable housing are 45 minutes away via narrow canyon and mountain roads, Ferris says. Some employers are busing people from 90 minutes away. "Our geography says it's crazy for people to commute 45 or 90 minutes from rural communities over two-lane mountain passes."

The Telluride ordinance, adopted almost six years ago, gave a developer four ways to meet the affordable housing quota: build new housing units and deed-restrict them as of fordable housing with fixed rental rates, impose deed restrictions on free market units in order to fix rental rates, pay fees in lieu of deed-restricted housing, or convey land to the town for affordable housing.

The trial court dismissed the developer's complaint, saying the ordinance did not constitute rent control because the developer had "significant discretion" in satisfying the of fordable housing requirement. But the appeals court said that the ordinance was rent control, and the supreme court agreed. Two dissenting supreme court justices said the ordinance is an appropriate exercise of local authority over land use. The court's ruling affects about 46 units created under the 1994 regulations.

The main impact of the decision is that it reduces flexibility in the ordinance, Ferris says. Without rent control, a developer must sell units or deed them to the local housing authority. Sale units must be occupied by owners who meet asset and income limitations. The housing authority now administers occupancy of around 200 units and controls about 120 of these, Ferris says.

Affordable housing is "a constant battle," Ferris adds. Seven years ago the town imposed a half cent sales tax for affordable housing, with most of the money going to a capital fund.