By Deborah Goonan, Independent American Communities
Aspen, Colorado is one of the most expensive real estate markets in the country, a world-class resort town known for skiing, winter sports, and year-round outdoor recreation.
Tourism is big business in Aspen, and that requires thousands of workers for hotels, bed and breakfast inns, restaurants, city and recreational facility maintenance workers, as well as teachers, health care workers, and law enforcement officers to serve full time residents of Pitkin County.
But, like most resort areas, real estate development has a tendency to cater to wealthy patrons, creating a shortage of affordable housing for workers earning low to modest wages.
Aspen-Pitkin County Housing Authority (APCHA) was established in the 1970s, with a mission of providing affordable workforce housing through creation of deed restricted communities with price-controlled residential property.
The price controls impose caps on rent for apartments as well as resale prices for condominium and townhouse properties.
But while price controls may keep Aspen homes affordable to purchase, they don’t necessarily keep the homes affordable to own. Like most condominium and homeowners’ associations in the U.S., APCHA’s inventory of deed restricted communities have under-funded capital reserve funds.
According to a recent report from APCHA (see below), a limited survey of 20 condo associations estimates that each unit owner would need to contribute an additional $9,000, on average, to adequately fund reserves. The shortfall in reserves has made it difficult or impossible for homeowners to repair and replace critical infrastructure such as roofs, siding, and heating boilers.
For more than a year, city of Aspen officials have considered giving each homeowner a $10,000 boost, either as a grant or loan, or some combination.
But some city leaders and APCHA board members are reluctant to bail out condominium HOAs. APCHA has decided to take an inventory of all of their HOAs, and take a hard look at how much — or how little — each association has set aside for capital reserves. The board suspects that the majority of HOAs aren’t following Colorado state law requirements.
Of course, some Trustees of APCHA say the price controls contribute the problem. After all, what homeowner is motivated to spend $10,000 or more on major renovations and improvements to preserve their condominium or townhouse, especially if the cost to take care of deferred maintenance eats up all of their limited equity?
And that’s a valid concern. But it’s not isolated to expensive cities like Aspen.
For more than a decade, the HOA industry, local, and state governments have generally failed to acknowledge the fact that the majority of condominium HOAs are underfunded, even though most of them are not subject to price controls or deed restrictions that impose limited equity upon homeowners’ investments.
Historically in the U.S., local and state governments have offered virtually no administrative guidance or fiscal oversight of HOAs.
Developer-controlled boards regularly get away with making minimal contributions to reserves. And owner-controlled boards are usually more interested in keep assessments low than collecting additional funds to set aside for the future. Most volunteer board members don’t know how to maintain infrastructure and common elements, and often have unrealistic expectations about what it should cost to maintain common property well into the future.
Now, after decades of expecting thousands of association-governed communities to figure out what needs to be done, and to have the fiscal discipline to save what’s necessary for the future, some of Aspen’s government officials propose “educating” HOA and condo boards.
But it could be too little, too late. And, if Aspen decides to bail out up to 1,600 owners of APCHA homes, will there be any guarantee that another bailout won’t be needed in another decade?
Looking beyond Aspen, what will become of hundreds of thousands of other aging, underfunded condominium, cooperative, and homeowners’ associations across the U.S., most of which are not supported by a public housing authority?
Aspen’s housing authority taking stock of homeowner association bank accounts
March 8, 2018
The local housing authority plans to take a roll call of homeowners associations within the system to see if they comply with state laws and whether they are deficient in funding their capital reserve accounts before the government potentially bails them out.
That is the direction the Aspen-Pitkin County Housing Authority board gave to staff last month. It’s a policy that is meant to help resolve HOA deferred maintenance and capital reserve funding problems among the 1,600 deed-restricted units that are individually owned. A 2012 assessment estimated a $15 million shortfall of capital reserves across the inventory, or roughly $9,000 a unit.
Last year, city of Aspen officials proposed giving each unit $10,000, either through loans or grants. The funds would go in the escrow accounts of homeowners associations and pay for capital improvements to common areas such as work on roofs, sidings and boilers, among others.
But before that happens, APCHA wants a better idea of how many HOAs are out there, and then assess their capital reserve funding levels so the agency can educate them about legal fiduciary responsibilities under state and local laws.
“Before we start throwing money at this, let’s assess and reach out to every HOA in the system,” APCHA Executive Director Mike Kosdrosky said.
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