At a July 25 work session, the Pagosa Springs Town Council discussed the issue of workforce housing in the community, particularly a proposed project on town-owned property known as the Enclave at Aspen Village.
The town and Texas-based developer Servitas previously entered into a development agreement for Servitas to design and build workforce housing units on the 3.16 acre parcel located along the south side of Aspen Village Drive.
Servitas is proposing to build up to 70 units at the Enclave, with up to 12 of those being townhome ownership units and the remainder being multifamily rental units.
The town’s goal has been to make the cost of the units affordable for those in the community earning between the 60 percent to 140 percent range of the area median income (AMI).
However, the project has been on hold for more than a year after Servitas produced numbers revealing that in order to make the development “pencil” for the developer, the units would need to be more expensive than what the council desired.
This sent the town and its private sector partner to seek grant funding for the project to help keep the costs of rent and purchase prices down for the community’s workforce.
Community Development Director James Dickhoff suggested it was “very disappointing” that the town did not receive the Colorado Department of Local Affairs (DOLA) grant that it applied for, citing a certain level of “politicking” coming from other localities seeking the grant funding, adding that the town was not quite prepared for that.
Dickhoff explained that town staff had given Servitas clear direction on the town’s desired AMI levels for the price points of the units, but that this was “complicated by rising housing costs and building costs” to make such AMI levels “pencil.”
He said that the council would need to look at other ways to achieve the desired 60 percent to 140 percent AMI levels since the town did not receive the DOLA grant funding.
“One of the most valuable things we can contribute as a governmental entity towards promoting workforce housing is the land,” but sometimes this is still not enough to make workforce developments work out, he said.
He added that, initially, the town and Servitas were looking at three different town-owned sites for workforce housing developments, explaining that Servitas had “engaged a number of consultants to start working on these three sites.”
“Civil engineers, geotech and preliminary architecture work, doing a housing market study, general contractor pre-construction services, a phase 1 environmental assessment, water modeling, title work — so there’s a number of costs associated with those sites,” he said.
When council member Gary Williams asked how much the town has paid Servitas so far, Dickhoff replied that the town has paid about $480,000 to the developer and that it has incurred about $600,000 costs of its own.
Dickhoff added that when the town originally entered into a partnership with Servitas, the company had never built workforce housing in Colorado, but since the Enclave development has stalled, Servitas has more successful experience in Colorado under its belt, mentioning completed workforce housing projects in Summit County, Telluride, Gunnison and Denver.
He noted that the nature of a public-private partnership carries a certain level of risk.
“And where does that risk lay? Is it with the town? Is it with the developer?” he asked.
He stated that a 2022 housing assessment estimated that Archuleta County would need about 800 new workforce housing units in the next decade to fix the affordability problem in the community, which would amount to about 80 new units per year.
He said, “we’re not quite there,” but that the 70 units at the Enclave would go a long way toward helping the problem, mentioning other workforce housing projects in the works.
One distinguishing factor with the Enclave project compared to other workforce housing projects in the community is that, since it’s on town-owned property, it could be deed restricted as workforce housing in perpetuity, whereas other projects, such as Low Income Housing Tax Credit (LIHTC) projects, carry only a 30-year deed restriction, Dickhoff explained.
The town-ownership model would allow the town to always keep the units as workforce housing, or it could sell after its private partner is out of the picture, he added.
When opened to discussion among the council, a majority of council members and staff expressed that the Enclave project should move forward in some form or fashion, so the town has “something to show for” the time and money already invested in the project, as Town Manager David Harris stated.
“I’d like to find a way for the town to move forward without incurring more costs,” Harris said.
Harris suggested that perhaps Servitas could do a few market-rate units and perhaps sell a few of the townhomes at market rate to “make it pencil.”
He added, “How can you make this pencil so we are not breaking our bank?”
Council member Mat deGraaf noted that he favors the town supporting Servitas “to do the thing, rather than us doing the thing,” adding that it would be too expensive for the town to subsidize the project to make it pencil.
Mayor Shari Pierce thought that Harris, who is relatively new to the issue, starting with the town in November 2023, might be able to see the conundrum with “fresh eyes.”
She expressed that she’d like to see the original agreement with Servitas “salvaged” in some way, adding, “I’m not ready to scrap it,” and directing town staff to continue to look at the issue with fresh eyes.
Council member Matt DeGuise suggested the town has “a lot invested already and it would be nice to see something come out of it.”
Pierce asked Garrett Scharton, a representative from Servitas who attended the work session remotely via Zoom, if it was still feasible to move forward since the project has been on pause for so long.
Scharton replied, “Yes. It’s always feasible.”
He added it would take a lot of “trade-offs” and “pragmatism” on behalf of the council.
He continued that the hard part is that the town is “trying to make something happen that the market forces can’t make happen,” and there’s “so many variables in real estate development.”
He recommended to the council that it “zero in” on some concrete goals that it wants for the project, promising that Servitas would “stick around until it’s built.”
He added that Servitas was in it “for the long haul” as a partner with the town.
Pierce recommended that the town should keep the project on pause until spring of 2025, after a housing coordinator had settled into the new position.
The council then agreed upon some goals for the project, deciding that it wants to keep the costs of rents low, deed restrictions on both sale and rental units, and that time is of the essence and a factor as building costs continue to go up.
It was also suggested that the town would continue to look for other grant opportunities.
derek@pagosasun.com
