Twin Buttes of Durango is the latest Durango development to prefer paying a fee instead of building designated affordable units.
But the city of Durango is starting to second-guess that approach.
Housing affordability has been one of Durango’s top issues for years, prompting the city to establish new affordable housing requirements for developments in 2009. Since then, developers often opt for the fee-in-lieu option. And with Twin Buttes, one of Durango’s largest developments since the 1990s, up to 105 affordable units are in play.
“Our workforce – parents, teachers, police, firefighters, city employees – is having trouble affording living units in our area,” said Mayor Pro Tem Kim Baxter during a City Council meeting March 2. “I’m really concerned about that. I’m wondering if, in these types of agreements, we shouldn’t take an approach where those units get built now.”
Twin Buttes of Durango, 3 miles west of downtown Durango on U.S. Highway 160, is a sprawling development split into 655 residential dwelling units, 135 accessory dwelling units and land used for commercial, community, agricultural, park and school purposes.
It was approved in 2008, a year before Durango adopted its Fair Share Ordinance. Under the Fair Share program, developers who build four or more units within city limits must make 16% of new units affordable to low-income residents, or they can pay a fee.
Twin Buttes agreed to meet the 16% commitment, originally through a combination of constructed residential units, land donation and fees in-lieu, according to a city staff presentation at the council meeting. (Twin Buttes contracted planner Dan Burkhart did not recall planning to construct units.)
Twin Buttes said its requirement could be fulfilled by its 1% transfer fee, which is collected in perpetuity and already generating revenue, as well as a voluntary 1.4-acre land donation. The transfer fee is estimated to generate $16.5 million to $26 million over the next 34 years.
“The city’s got a significant affordable housing problem at this time, as do most mountain communities,” said Burkhart, owner of Burkhart Planning and Permitting.
The transfer fee offers the city a flexible tool to address affordable housing for years to come, Burkhart said. Also, Twin Buttes is a developer – not a builder – and it would be “a significant expense” for Twin Buttes to get units built.
Twin Buttes isn’t the first development to find that paying fees is easier than maintaining affordable units.
The city of Durango agreed to let Three Springs, another development established before the Fair Share Ordinance, charge its own 0.5% transfer fee on the sale of homes and land in place of maintaining affordable units. The fee is expected to generate about $25 million over the next 40 years.
Under the Fair Share program, the city has collected about $997,500 from in-lieu fees from 10 development projects since 2015, when the program picked up after the 2008 recession.
In total, 10 deed-restricted units have either been built or planned since 2015.
“Since the adoption of the ordinance, it was always kind of a multiple-pronged approach to meeting your commitments,” said Kevin Hall, assistant city manager.
Building units priced appropriately for the low- or middle-income buyer is the preferred method, Hall said. In Durango, someone who makes less than $46,850 per year is considered low-income. Someone who makes about $73,200 is considered moderate-income.
But developers opt for the fee because it costs less than building units in Durango, Hall said.
“At this point, they’re finding it very difficult to build at a price and sell at a price that would meet the ordinance,” he said. “The city recognizes that that’s not working right. We are about to bring in some assistance to help us revise that ordinance.”
The Twin Buttes agreement is still in negotiation. City councilors spoke in support of the transfer fee and in favor of keeping land available for affordable units to be built soon. They opted to research options for Twin Buttes to meet its commitment.
One success of the Fair Share fee-in-lieu program: Of the $997,500 collected, about $666,000 has supplied assistance loans to 32 homebuyers, said Lisa Bloomquist Palmer, executive director of the HomesFund.
“It’s not all doom and gloom here. We have a success story through the mortgage assistance program,” Hall said. “It’s just this issue of getting new additional units on the ground that’s challenging.”