Regional Government Affairs Update :: September 2014

LOCAL

Boulder County

Boulder
City Struggles with Affordable Housing
Council Approves Housing Partners Strategic Plan

Longmont
City Appeals Fracking Ban
REALTORS Support Luallin

Larimer County
REALTORS Endorse Gaiter

Weld County
Young and Cooke Endorsed by REALTORS

REGION

Denver
Impact of Revised Affordable Housing Ordinance Unclear
CDOT Has Funding Model for I-70 East but not I-25
I-25 Update

STATE

Public Trust Doctrine Advocates Try Again

NATION

FHA Short Sale Update
FHFA’s GSE Plan
FHA to Eliminate Post-Payment Interest Changes


LOCAL

Boulder County
Boulder
City Struggles with Affordable Housing:  The Boulder City Council was poised to adopt some general goals related to the City’s Comprehensive Housing Strategy (CHS) but even abstract concepts proved controversial in a classic NIMBY (not in my backyard) backlash from citizens. Short-term actions that had been identified as early wins proved more difficult than had been anticipated.

In particular, a goal to “age in place” became a sticking point when an ordinance was introduced that would permit six to ten citizens over 62 to share a home, depending on the zoning of the home. Although staff didn’t predict shared housing would be wildly popular, there was enough outcry from citizens to table the ordinance. One speaker said the concept would “alter the fabric of the neighborhood” and asked “why seniors should receive special treatment.” This was balanced by many who spoke in support of the concept but that wasn’t enough to get the ordinance on to 2nd reading in the near future.

One aspect of the hearing of particular interest to REALTORS relates to the goal of “maintaining the middle (class).” The Council evidently wants to focus on single-family homes as well as multi-family units. One strategy that was mentioned was “protecting the purchase of single-family homes from investors.” Observers say this may be as simple as working with Boulder Housing Partners (BHP) to buy housing stock and out-compete others in the free market.

In the end, after a long discussion the Council approved the goals, allowing the staff to move forward with the public engagement phase of the CHS. Note: Affordable housing is a goal that everyone supports – in theory. The devil, as always, is in the details. Citizens will always oppose efforts that they think will impact their quality of life or their home values.

Affordability is an issue in any town with high demand and low availability. The elected officials of Boulder have implemented a variety of regulations over the years that have restricted growth and increased the cost of construction. The question is, can the City really make an significant impact on affordability in a city that was recently ranked as the most expensive place to live (for a town of its size) in the country? If denser multi-family development isn’t the best approach, than what is?

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Council Approves Housing Partners Strategic Plan:  At the same meeting the City Council also approved Boulder Housing Partners’ draft Strategy Plan. BHP is the City’s housing authority. BHP asserts the City has “an acute and chronic housing affordability problem.” The Executive Director cited a number of statistics to support that assertion: In the last 12 years, Boulder has lost 5,650 affordable rental units to market inflation; Through its affordable housing programming, Boulder creates only 81 units each year between for sale and for rent. This is a net loss of 400 rental units each year; Today, the market offers 7,700 units and the City’s affordable program has just less than 2100.

Given the situation BHP anticipates “that there’s a window of time in which to preserve affordability,” and therefore proposes to “implement eight strategic initiatives to help Boulder respond to the affordable housing needs in the community…” Perhaps it goes without saying but BHP believes “there is a disconnect between the stated vision for Boulder in the BVCP (Boulder Valley Comprehensive Plan) and the direction the market is taking this community.”

BHP’s initiatives include increasing its inventory of housing by 2,000 units over 10 years to help the broader goals of 10 percent affordability and a diverse community. BHP currently produces an average of 50 rental units/year; expanding efforts to include workforce housing opportunities; its geographic focus in two ways, partnering on affordable housing projects that have regional significance and considering income producing assets anywhere in Boulder County.

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Longmont
City Appeals Fracking Ban:  On August 26 the Longmont City Council voted unanimously to appeal the ruling of the Boulder District Court Judge D.D. Mallard overturning the fracking ban in Longmont. The decision was made in executive session with little discussion afterwards during the public meeting. The decision surprised observers, who had thought the City would accept the judge’s ruling.

The City Attorney Eugene Mei didn’t provide a long list of reasons to appeal. He listed the possibility that an appeal would extend the ban between two to five years, defending the citizen-approved charter provision and a chance to increase local control as positives. On the other hand, the downsides of appealing the ruling were more convincing. Mei and the legal team hired to defend the City admitted it was an uphill battle to prevail on the merits of the case, saying it could be a “chance to create bad law.” The appeal could involve years of litigation and between $75,000 to $350,000 in legal fees depending on whether the case goes all the way to the Colorado Supreme Court.

The motion to appeal the ruling was made by Bonnie Finley, who said there is “a need for clarity” and urged other municipal governments to join the appeal. (The courts have also overturned Bans in Fort Collins and Lafayette.) Polly Christensen said she agreed with the motion, adding, “Every area of Longmont will be fracked if we don’t do something.” Council member Jeff Moore may have hinted at the Council’s strategy. He said, “This is the first shot in the war. Longmont needs to make a statement and let the (Colorado) legislature do something.” Gabe Santos did not speak during the public hearing but later said the public would have to trust the Council regarding its decision to appeal the ruling.

REALTORS Support Luallin:  The Board of Directors of the Longmont Association of REALTORS approved a recommendation from the Government Affairs Committee to support Randy Luallin for Boulder County Commissioner, District 3. Mr. Luallin, a Libertarian, is an advocate for property rights. He believes Boulder County land use regulations are too restrictive, making development expensive. His view that Boulder County has spent too much money on open space and should reallocate some of that money to road and bridge maintenance resonated with the interviewing committee. He may be an extreme long shot for this office but LAR wants to make a statement to the current Board of Commissioners; the association feels the BOCC does not listen to the real estate community. Other candidates for the seat include incumbent Cindy Domenico and Kai Abelkis.

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Larimer County

Ft. Collins
REALTORS Endorse Gaiter:  The Fort Collins Board of REALTORS and the Loveland-Berthoud Association of REALTORS are supporting Lew Gaiter for Larimer County Commissioner, District 1. A committee comprised of members from both associations interviewed the three candidates and recommended Gaiter to the boards of both associations.

Although the committee felt CDOT Commissioner and former Loveland Mayor Kathy Gilliland was also a strong candidate, in the end Gaiter’s experience as an incumbent persuaded the committee to recommend him.  Gaiter supports REALTOR issues including economic development, private property rights and the need to expand I-25. He believes the county and its municipalities should work together for the benefit of the citizens. (Eric Sutherland is also petitioned his way on the ballot as a write-in candidate.)

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Weld County
Young and Cooke Endorsed by REALTORS: The Colorado Association of REALTORS Political Action Committee has endorsed incumbent Democrat Dave Young for House District 50 and Republican John Cooke for Senate District 13. Both candidates and their opponents were interviewed by a team of REALTORS that made recommendations to CARPAC.

Young is an incumbent with a less than spectacular voting record on REALTOR issues, however he has shown himself to be accessible and willing to discuss our issues. His Republican opponent Isaia Aricayos has not been nearly as active or visible in the community. Cooke is currently serving as Weld County Sheriff and if elected will assume the seat vacated by term-limited Scott Renfroe. He demonstrated his alignment with REALTOR positions during his interview. Other endorsements by CARPAC will be announced soon.

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REGION
Denver
Impact of Revised Affordable Housing Ordinance Unclear:  Changes to Denver’s Inclusionary Zoning Ordinance were approved by the City Council by a 7-6 vote. The law, which was originally passed in 2002, requires that for apartment complexes over 30 units, 10 percent of units must be affordable for those who make 80 percent of area median income, which is about $42,000 annually for an individual.  The revisions will not change that percentage however, the cash-in-lieu amount will change and will be tiered depending on the area in which the complex will be built.

The ordinance splits the city up into three types of zones based on the cost and need in the area. For “high” zones, where median for-sale home prices are highest, the cash-in-lieu payment is 70 percent of the sales price. In “medium” areas, the payment will be 50 percent of the sales price; in “low” areas, the payment will be 25 percent of the sales price. But if developers do build affordable units, in return they are given a cash incentive, which also varies under the new law depending the cost in the area surrounding a development.

Under the 2002 ordinance, the incentive was $5,500 per unit. For the “high” zones, this incentive now will be $25,000 per unit, for “medium” zones, $6,500 per unit and for “low” zones, $2,500 per unit — unless the development is located within half a mile of public transit, in which case the incentive is bumped up to $6,500.

However, the new ordinance ignores a key issue — developers are not building large condo projects. CAR was part of a coalition that lobbied to persuade the legislature to pass a bill intended to reduce the risk of construction defect lawsuits, but the leadership ensured that the bill stalled during the waning days of the session. Because of the problems related to possible construction defect lawsuits, developers have opted to build apartment projects and state law prohibits rent control.
Denver faces a shortage of more than 30,000 affordable homes, according to a market analysis performed for the city. In metro Denver, condos make up 2 percent of new residential developments, according to industry estimates. In other cities nationally, it’s closer to 20 percent.

CDOT Has Funding Model for I-70 East but not I-25:  The Colorado Department of Transportation has a $1.8 billion plan to lower a few miles of Interstate 70 and add toll lanes to the stretch of highway east of Interstate 25, including the viaduct area around the Denver Stock Show. This is good news for Denver but proponents of expanding I-25 north of Highway 66 were perplexed at the announcement because the final Environmental Impact Statement (EIS) and Record of Decision (ROD) for the project have not even been released yet.

On the other hand, the final EIS and ROD for I-25 have been in place since 2011 but CDOT says it will take until 2075 to get the funding to do the work. CDOT Executive Director Don Hunt says I-70 is different because of the viaduct. CDOT expects to raise about $1.2 billion to help pay for the project by borrowing from the federal government and repaying the loans using fee money from the Colorado Bridge Enterprise fund. I-25 on the other hand, has multiple bridges and only one that is in the same state of disrepair (the Poudre River bridge).

I-25 Update:  At its 2015 Board Retreat the Northern Colorado Legislative Alliance focused much of its agenda on transportation. Both Gov. Hickenlooper and CDOT Director Don Hunt attended a portion of the meeting. Gov. Hickenlooper argued it’s time for a new approach about how CDOT thinks about I-25 north of Denver. He said instead of thinking Denver to the north, it’s time to look from Highway 14 (Fort Collins) to the south. (And this is what NCLA advocates through its Fix North I-25 Business Alliance.).He said the focus should be on the most congested areas. (Note: The section of I-25 between Highway14 and US 34 has the highest traffic counts along the stretch of highway that has not been expanded to three lanes.)

Mr. Hunt said Northern Colorado is a concern because no funding plan has come forward regarding use of the $35 million RAMP grant allocated to north I-25. If a plan is not in place by the end of the year NoCo could very well lose this money. In spite of his sense of urgency, no formal plan has been unveiled yet and the I-25 Elected Officials Coalition just cancelled its third monthly meeting in a row.

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STATE

Public Trust Doctrine Advocates Try Again:  Phillip Doe and Barbara Mills-Bria have refilled a proposal that they describe as “basically like Polis’s, except that it has teeth in it” according to the Denver Business Journal. Congressman Polis pulled his proposal as part of an agreement brokered by Gov. Hickenlooper. It was intended to create a constitutional right for Coloradans to clean air, water and scenic vistas.

If Doe and Mills-Bria are successful, the proposal will be on the 2016 ballot. It would amend the state’s constitution to give Coloradans an “inalienable right to clean air, clean water, including ground and surface water, and the preservation of the environment, and natural resources.”

The proposal says the resources are the “common property of all the people,” including future generations, and requires the state, or businesses, to prove that an action or policy won’t harm the environment. The proposal also allows any citizen to sue the state if they believe the environment is being harmed or the state isn’t “prudently” managing Colorado’s resources.

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NATION
FHA Short Sale Update:  The US Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2014-15 allowing dual agency agreements in FHA short sales. Dual agency includes transactions in which two agents are working for the same broker and one agent represents the seller and the other agent represents the buyer. Dual agency also applies to a single agent who represents both the buyer and the seller in a short sale transaction.
Some agents have received information from loan servicers that HUD will only allow a 3 percent commission if there is a dual agency agreement on an FHA short sale. This is not true. HUD has clarified its guidance to servicers that FHA short sales with dual agency agreements are eligible for up to a 6 percent commission if the contract that is submitted meets all current pre-foreclosures sales guidelines, including the required marketing period, and yields the highest net return to HUD.

FHFA’s GSE Plan:  On August 15, 2014,The Federal Housing Finance Agency (FHFA) released a Request for Input on its Strategic Plan for 2015-2019.  The plan outlines the direction that FHFA will guide the GSEs while in conservatorship.
Goal 1: Ensure Safe and Sound Regulated Entities. FHFA needs to ensure that it is identifying risks to the GSEs, improving risk management weakness and, most importantly ensuring GSEs are in sound financial condition.
Goal 2: Ensure Liquidity, Stability and Access in Housing Finance. FHFA will require the GSEs, where feasible, to take actions to improve liquidity in the present single-family housing finance market.
FHFA also wants to expand access to housing finance for qualified financial institutions of all sizes and in all geographic locations and for qualified borrowers.
FHFA proposes pushing the GSEs to meet Housing Goals and will follow up on a previously proposed rule on a duty to serve regulation.
Goal 3: Manage the Enterprises Ongoing Conservatorship. FHFA will continue to pilot programs that shift risk to private market participants and away from the GSEs.  FHFA will insist in a process that does not reduce liquidity or adversely impact the availability of mortgage credit.
 A new platform will bundle mortgages into securities structures and will process and track payments from borrowers through to investors.  It will only be GSEs at first then will be open to other MBS issuers.

FHA to Eliminate Post-Payment Interest Changes:  On August 26 the FHA issued its final rule to eliminate post-payment interest charges on FHA-insured single family mortgages.  NAR has urged FHA and Ginnie Mae to remove this prepayment penalty for years as the policy placed an unreasonable burden on consumers who already face high housing and closing costs.  Conventional loans, as well as loans from the Veterans Administration’s Loan Guaranty Program and the U.S. Department of Agriculture’s Rural Housing Service loan program, do not have post-payment interest charges.  The policy change will prohibit mortgagees from charging borrowers interest on their home mortgages after a principal balance pay-off.  The final rule will go into effect on January 21, 2015.

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