By Deborah Goonan, Independent American Communities
Mention the word condominium, and many people will imagine a posh apartment in an elegant building, perhaps with a view of the ocean or a bustling city skyline. But not all condos are luxurious havens for the rich and famous.
In fact, most condos are very modest apartment or townhouse style living quarters. Many were built as vacation resorts, retirement havens, workforce housing, or starter homes for younger buyers.
And some of those condominiums were built as affordable housing, a government initiative overseen by HUD (Housing and Urban Development). Many of these projects are built by private developers, and government funded with tax incentives to defray a portion of construction costs. By awarding tax credits to developers, the sale price of condo units can remain relatively lower than prevailing market value.
To further increase affordability in housing markets with very high sale prices, artificial price controls may also become a part of the affordable housing strategy. How does that work? Essentially, a buyer is able to purchase an affordable housing unit at a reduced price, but, return, that buyer agrees to cap their future sale price. That theoretically guarantees the home remains affordable for the next buyer.
Centennial HOA in Aspen, Colorado was constructed in 1984, and funded by the Aspen Pitkin County Housing Authority (APCHA). The project was designed to provide affordable housing for County workers at the popular and growing world-class resort city. Although the project developer received no government subsidies at the time, condo buyers – selected by lottery from a group of income qualified applicants – were required to agree to deed restrictions that would limit the future sale price of their units.
To some people, this may sound like a win-win situation. But, unfortunately, as with many affordable housing projects, in Centennial HOA, there are major glitches.
First of all, while it may be affordable to buy one of these condo homes, properly maintaining and repairing the condo unit and the common property of the Condo Association is often unaffordable for homeowners with relatively low or fixed incomes. Latest estimates to bring Centennial up to livable standards: $35,000 – $40,000 per unit!
Second, there is significant documentation – including engineer reports and reserve studies – showing evidence of shoddy construction and poor design of Centennial’s multifamily structures. That has resulted in early deterioration and a persistent mold problem due to water leaks. The HOA has attempted to repair these problems, and to involve APCHA and the original developer in covering some of the costs, but to no avail. Of course, this only further increases costs for condo owners in Centennial. In the meantime, condo values are decreasing.
Third, because condo owners are expected to sell their units at artificially low prices in the future, there is little incentive to make expensive repairs.
You would think APCHA planners would have had more common sense. Instead, they created a houisng project that was doomed to fail from the very start.
Centennial HOA has been unable to preserve property values. And APCHA now has deteriorating workforce housing that is unaffordable.
Two more HOA myths busted.
Read all about the legal and political conflict between Centennial HOA and APCHA below:
Aspen, Pitkin County, housing authority move to dismiss Centennial lawsuit
Definitions from the HUD Glossary
AFFORDABLE HOUSING: In general, housing for which the occupant(s) is/are paying no more than 30 percent of his or her income for gross housing costs, including utilities. Please note that some jurisdictions may define affordable housing based on other, locally determined criteria, and that this definition is intended solely as an approximate guideline or general rule of thumb.
AFFORDABLE HOUSING PROGRAM (AHP): A competitive program of the Federal Home Loan Bank (FHLBanks) system that provides grants twice a year through financial institutions for investment in low- or moderate-income housing initiatives. The program is flexible, so that AHP funds can be used in combination with other programs and funding sources, thus promoting a project’s feasibility.