Aspen Suspends New Home Construction Permits as it Drops the Hammer in the Name of Affordability

Aspen’s city council this week stopped issuing not just short-term rental permits, but permits for all home construction as the city struggles with a critical lack of affordable housing and the increasing use of homes by vacationers.  

A moratorium, passed unanimously by emergency ordinance Wednesday night after two meetings in two days, goes beyond suspending new short-term rentals with an unprecedented pause in all residential construction or renovation that expands the size of a home.

“It’s not outlandish to say all our mountain communities are experiencing an existential crisis on this nexus of housing, overtourism, community identity and protecting our environment,” said Phillip Supino, Aspen’s director of community development. 

City workers on Wednesday were processing 182 new applications for short-term rental licenses filed by owners hoping to get into the vacation rental market before the council’s unanimous vote during a contentious emergency meeting Wednesday night.  

Emergency Ordinance 27 includes a first-ever ban on new construction permits that expands living area, square footage or building heights. The ordinance steps beyond the sweeping crackdown on short-term rentals underway across Colorado’s mountain towns, targeting home building and renovations, which is close to a billion-dollar annual industry in Aspen. The ordinance cites recent land use applications that were not consistent with the community’s goals and vision. 

“We must pursue aggressive measures to make sure the needs of the community are met and to preserve our unique community character,” the 3,500-word, 8-page ordinance reads.

Tracy Sutton owns Aspen Signature Rentals and has been renting homes to vacationers in and around Aspen since 1986. Today she manages about 104 homes. She organized about 30 homeowners and property managers to speak at Tuesday’s meeting. 

“This is such a knee-jerk reaction,” said Sutton, who is working to form the Aspen Rental Alliance, not unlike the Summit Alliance of Vacation Rental Managers that organized recently to represent the interests of owners of short-term rental properties in Summit County.

Sutton said she is working with new buyers who were planning to rent to visitors and counted on that revenue to pay the bills in one of the priciest areas in the country. 

“But the council gave us less than 24 hours’ notice … and they have not reached out to anyone in the rental community. I don’t think they have accurate data,” she said. “This is obviously not well thought out. No one seems to be able to answer why this is an emergency and why it had to happen in one day.”

Vrbo and Airbnb have been active in organizing property owners and managers to speak up in support of the short-term rental industry. That’s led to speakers showing up at council meetings urging town leaders to weigh the benefits of vacation rentals when considering bans, caps and suspensions of permits. 

“We support fair and effective regulations across Colorado, but the process here is concerning,” said Phillip Minardi, the head of public affairs for Expedia Group, which owns Vrbo. 

A long line of fiery residents blasted the five-member council’s plan Wednesday night. One resident said he had gathered 600 signatures from Aspen residents hoping to stop the moratorium. One man asked if the council was considering how energy efficient new homes replacing older construction might help the community reach its environmental goals.

Kim Raymond, an Aspen architect, said “many people will be devastated by this.” 

“What is the emergency?” she asked, citing the ordinance’s goal to “restore public confidence in the development process” “Doing something this quickly does not do that.”

Bill Stirling, a longtime Aspen real estate broker who served as mayor of Aspen in the 1980s, remembers using an emergency ordinance to stop issuing permits for the demolition of historic Victorian homes in the city. 

“We were losing two a month in the late 1980s. That to me was an emergency. We would have lost the whole historic character and history of the town,” Stirling said. “I feel it’s an abuse of the process to use an emergency ordinance to do a thing that is worthy of discussion and attention. It locks the public out.”

Short-term rental permits issued in Aspen this year will be continued through next September and new permits for 2022 will not be issued under the moratorium. (Holders of 2021 permits will be able to renew next year and home construction applications already in the Aspen system are exempt from the moratorium.)

The ban on short-term rental permits and home construction through next summer was the “culmination of years of discussion” between community planners and the town council, Supino said.

That discussion involved affordable housing, short-term rentals, the city’s off-the-charts real estate market, Aspen’s ambitious climate plan and environmental goals, as well as a decades-long battle to protect the community’s character, Supino said.

The Aspen City Council has embraced goals to address the city’s interconnected web of challenges as it follows the long-term vision outlined in the 2012 Aspen Area Community Plan. City leaders are years into environmental stewardship missions to reduce Aspen’s waste and emissions. Recently, the council has noted that the industry surrounding residential home development “poses significant obstacles in making progress on many of these important issues,” Supino said.

For example, Supino said, more than 75% of the local landfill is waste from construction. (That compares to the national average of about 20%.) Half of the vehicles clogging downtown Aspen are trucks like those used by contractors and builders. And more than 68% of the town’s single-family units are vacant, according to the 2020 census, Supino said. 

“The impact of the residential sector and development are fighting our community and our needs,” said Councilman Skippy Mesirow on Wednesday before approving the emergency ordinance. 

Real estate buyers spent $3.44 billion in Pitkin County through October, up 13% from the previous year, according to data collected by Land Title Guarantee Co. The bulk of that spending is in Aspen, where buyers of homes and condos have spent $2.34 billion in 397 deals through October. The average price of a single family home in Aspen so far this year is $12 million, up from $10.5 million this time last year.

Of the 742 real estate transactions recorded in Pitkin County through October, 66 involved deals worth more than $10 million and 26 were more than $18 million. 

Supino is not concerned that restricting the supply of new homes and residential construction in Aspen could send prices even higher. 

The supply and demand for Aspen homes have been decoupled from local economics in Aspen for decades. Working residents are not paying $12 million for their homes. The real estate market in Aspen “no longer delivers meaningful housing for local residents” and “the vast majority” of locals and workers in the city live in deed-restricted, subsidized housing, the ordinance says. 

“So council is justifiably concerned about community character, the environment, short-term rentals and affordable housing,” Supino said. “Whether or not there will be an impact on supply and demand affecting prices in the free-market residential sector does not change the fact that the real estate economy in Aspen does not provide … affordable housing or rentals.”

Aspen temporarily suspended commercial and lodge construction in 2016. That moratorium ended up lowering allowed building heights in the downtown core and increased affordable housing funding paid by commercial projects.

“And it significantly slowed the pace of commercial development in town,” Supino said. 

But even with the slowdown in downtown building, the community continued to experience “significant negative impacts” of traffic, parking problems and affordable housing fees paid by developers have not kept pace with demand for homes, Supino said.

Traditionally, it’s been the builders of commercial properties in mountain towns that carry the heaviest burden for providing affordable housing. In Aspen, for example, commercial developers need to provide housing for 65% of the employees their projects will need. But residential developers need to provide housing for only 30% of the employees they generate. 

That rule was created before short-term rentals changed how private homes were used. 

Aspen’s current regulations do not distinguish between how many workers are needed for a single-family home occupied year-round by residents versus a home occupied by visiting vacationers. 

“Is our mitigation adequate for the number of employees generated per square foot of residential? Is 30% of full-time employees still the right number relative to the changing uses of homes?” Supino said. “The council feels it’s necessary to look at how residential properties are being used relative to 10 years ago. I think that’s a big question that all mountain towns should be thinking about.”

Aspen Councilwoman Rachel Richards agreed that the city needs to look harder at how many employees are needed for the city’s trophy homes. 

“It is no longer that employee demand is being driven by commercial growth,” she said Wednesday night before approving the moratorium. “It is residential growth.”

Richards said the moratorium on short-term rentals will not create more affordable housing, but it gives the city a chance to better manage “something that is unmanageable, unmitigatable, unserviceable and is demanding more and more employees every week.”

From January through August, visitors staying in short-term rental homes in Aspen spent about $50.7 million. With the city’s 2% lodging tax, the roughly 1,200 permitted short-term rentals generated about $1 million for the city through August.

Aspen collected $5.8 million in fees for permits and planning applications paid by homeowners and builders in 2020. Through Dec. 8 this year, the city had collected $5.9 million in those development fees, which are not broken down based on construction type. 

Those construction fees do not include mitigation fees collected to help fund programs like affordable housing and energy efficiency in the city. The city surpassed 2020 development fee collections in August. And 2020 fees surpassed 2019 fees. It’s not because fees are increasing. There’s more projects under construction, city manager Sara Ott said. 

There is $750 million worth of residential construction occurring right now or in the planning and approval process in Aspen, Ott said. “That’s the real number that shows development pressure on the residential side,” she said. 

Bob Bowden, a 40-year Aspen resident and longtime home builder told the city council Wednesday night that the moratorium would “cost hundreds and hundreds of people their jobs in the construction industry.”

Ott heard from contractors worried about the permit suspension on Wednesday, but she said the council feels the amount of work underway and planned will keep the city’s robust construction industry working for many months to come. 

“We believe that taking a pause to address these code-related issues, while inconvenient, is not detrimental in the long run,” she said. “It is a big deal for city council to take this action. But they believe it is critical to make sure the community plan is being truly executed as intended by the community. They don’t see what’s coming through in these development applications as meeting that intent.”

Real estate buyers pay a 1% real estate transfer tax, which through October had generated $15.6 million for affordable housing. Last year the real estate transfer tax delivered $17.6 million for the city’s housing programs.

Aspen’s government collects a lot of money from home buyers, builders and vacationers who rent homes. That will be something the council will study as it examines how it pays for affordable housing and other measures to reduce environmental impacts and preserve the community’s character, Supino said. 

“It’s kind of a devil’s bargain, needing development to pay for affordable housing,” he said. “I think there’s a chance the council will look at alternatives to the current way. How can we not rely so much on development?”

By: Jason Blevins I The Colorado Sun I December 9, 2021