Yesterday, the Frisco Town Council held a discussion on potential workforce housing solutions, which included ideas that would affect STRs. No decisions were made at this meeting.
Read the staff memo and workforce housing report starting on page 18 in the agenda packet here >>
Highlights from Council Discussion:
Workforce Housing Discussion - Detailed Meeting Notes
Mayor Mortensen introduced Eva Henson, Housing Coordinator for the Town of Frisco, to present on the workforce housing plan presented to Town Council. We have taken a lot of effort to put together a comprehensive packet together on how to move forward with housing and look forward to getting guidance on building our Frisco strategic plan. The focus will be on affordable housing strategies, regulatory changes, and funding opportunities.
Ms. Henson reviews the current project, 619 Granite Street (CDOT partnership) and 602 Galena Street (very early stages) and Lake Hill for affordable workforce housing. Other opportunities include 257 Granite street, First and Main building, 113 Granite Street and Peak One School. The council discusses next steps and strategy with these properties and parcels. In conversation on capacity she notes that the STR specialist has started this week. She gives an overview of her opinions on each specific proposal/project.
Ms. Henson introduces the policy and regulatory measures conversation and Bill Gibson, Asst. Community Development Director chimes in for zoning expertise. We do have a number of regulatory options we’re doing. First option is density bonus, this is a lever for increasing workforce housing. We can expand that to other areas of town. He notes that our regulations are already fairly liberal, there is currently push back on density expansions. There are no caps or limits on density right now. ADUs have been allowed for a number of years, there are only 2-3 that are deed restricted. The incentive to create a deed restricted is where properties exceed their occupancy rules. Many folks just do a lock off without a kitchen. ADUs in its current form isn’t increasing workforce housing. Land banking has inherent challenges. We’ve talked about housing helps 2.0 and there are always opportunities to expand these programs. Short Term Rentals are being talked about across the county, there are specific opportunities to change our regulations there, capping a number or percentage for example. We also do small lot development; we may already be de facto doing that with town home development.
There are other things other communities are doing for example incentive programs for STR to convert to LTR. He notes that inclusionary zoning has also been added to the report, Denver uses this model. There are some ski towns that are looking into this as well. He notes that some communities are looking at tiny home codes and we aren’t looking into that yet, we don’t allow permanent campers right now. Commercial linkage is similar to inclusionary zoning but with the commercial real estate. We’d need legal consultants if we take on this project. We haven’t been seeing a lot of commercial development respectively.
Another strategy would be a workforce housing overlay zone, similar to our historic overlay, this could be the same for affordable workforce housing. Another item on the list is adaptive reuse of hotel space, some owners could be open to some sort of arrangement. It reduces lodging and lodging taxes but increases workforce housing. Parking is also a concern as people are moving around and coming from other areas.
Councilor Fallon asks if you left development transferability off the list intentionally. Mr. Gibson notes that they haven’t engaged in this historically, they are typically used for environmental projects. Don comes up and notes that TDRs exempt workforce housing except in the upper blue basin. Frisco is liberal in its density allowance anyway so there isn’t a market for it. We also don’t have TDRs available in the 10 mile basin. This isn’t a great tool as it pertains to housing.
Fallon continues that inclusionary zoning is a place I’d really like to see us look into. Crested Butte and Ouray allowed RVs on properties that would allow it and only 1 person used it. ADUs are a good idea, and I think we need to update its intent. The most beneficial will be parking requirements, inclusionary zoning, and continued conversation around STRs eventually.
Councilor Melissa Sherburne highlights conversations of taking a traditionally middle income home to build several multi-million dollar vacation homes. It happens on every single lot that is developed right now. You talk about an overlay zone and I think our whole town is an overlay zone. We need to disincentivize the $2-5M townhomes. They are hollowing out our town. On STRs, I just met someone from Salida, they have a cap, per block cap, and this is maybe something we should look into. Peak 1 neighborhood we can’t have STRs in the neighborhood or need some limit. There were some ideas out of Grand County that was monetizing the STR to LTR. Start paying development fees for affordable housing builds, we don’t need to spend money to encourage visitation via advertising we need to funnel that money into housing. Lowly’s idea which I think is brilliant – we could pay transfer fees if you sell to a local vs an out-of-town cash offer. In concept I think the RVs is smart but overall, I think that could backfire where we create another camp ground for visitors.
Mayor Mortensen asks a question about inclusionary zoning, once you exceed a certain number of units, can you move to deed restricted units? That is a big policy question. Mr. Gibson notes that if you change the code to say if you build 4 units, you’d need to build one deed restricted. Right now, we are 5 / 1 for the cabins. Because of the density limits have been on the books for a long time we are seeing changes now instead of single-family homes. Mr. Sherburne chimes in that she isn’t sure if changing one townhome unit to workforce housing may not want to be desirable. I want more affordable housing; I think inclusionary zoning needs to be very thoughtful. Steamboat’s inclusionary zoning was a total failure. There are some loopholes that aren’t the intended goals.
Councilor Rick Ihnken chimes in that people don’t want to be living on top of each other, but developers are maximizing their dollar. I don’t know that that will ever fit in our view anymore, density is where it’s at. With every affordable set up and the rental fleet, we need to be looking at as much tiny home or micro unit options that are out there. Copper is a good example.
All of the other opportunities have cross over. We need to pursue them all, I don’t know what staff capacity is but we need to incentivize LTR by charging STR. The hotel adaptive reuse is brilliant. People are psyched to be renting at the Alpine Inn. Inclusionary zoning, commercial linkage, we need it all to work in conjunction. I don’t know that we need to be limiting STRs per block but STRs absolutely need to be looked at as a business proposition and they need to pay their business taxes or fees.
Councilor Fallon comments on the challenging political path forward of inclusionary zoning. I really want to get into workforce housing, changing the parking stuff, it’s underutilized. There is capacity about, we’ve talked about rights of ways outside of town. How do we codify that into a regular program? In terms of capacity, I like the adaptive hotel reuse this is a big opportunity. One of the things that come up with buy downs, housing helps 2.0 gives us an opportunity to increase capacity. As we start to see increasing home prices, we need to purchase them, deed restrict them and put them back into the market. I’d like you to speak to the ones you’ve referenced, and the housing helps dollars coming into play. If we see something and want to accrue workforce covenants and get them off the STR market. We need to buy these down, there are things in the market right now. It seems like we won’t be holding on to these for that long as the market has shown. We need a package to incentivize LTR for investors. We buy it, have brokers in the field for us, and inspect the homes, vet the tenant etc we need to build off of programs like that. Really want STR incentives to LTRs even if it’s for three months, six or nine. There is a lot of opportunity there, we just need to put cash on the table.
Fallon continues that in terms of STR caps, I think it is reasonable at some point. I think it is a mistake to limit transferability in a sale. This protects the value of the investment, and the Breckenridge decision is going to change the market. That is something that I think is really important if we do consider that.
Ms. Henson gives an overview of the current Housing Helps program transactions and down payment assistance.
Mayor comments that he doesn’t want to get rid of any rental that they have because that is the biggest need. He notes that if we do move forward with a cap, do we tie that to deed restriction populations? I don’t know how that will look but we don’t have workforce housing and we have a growing STR market, can we marry them together to be mutually beneficial. Fallon chimes in that what is too many, I don’t know that there are too many. They are generating revenue right now. I don’t know what that algorithm would be to find the balance. Reducing the number of STR units doesn’t ensure a larger capacity. I don’t want to do something that won’t actually bring more workforce capacity. Sherburne wonders if we can buy up leases as a master lease in larger complexes, we could be the middle man for employees and local main street businesses. Ms. Henson shares her support for that approach.
Councilor Aerenson wants all of the above, using our existing housing stock. This is where the focus should be and the dollars should go. Let’s not chase a major change in zoning with our staff time but focus on other things that bring forward more effective results.
Ms. Henson gives an overview of the projections for SCHA 5A Tax. The point of the slide is that the 5A tax doesn’t cover the goals of our housing approach. It grows the deficit into 2022 and through 2024. There is an opportunity to put an excise tax on the ballot that would increase opportunities. She shares a slide on other communities that have increased STR Tax Rates and the possible numbers given different levels with Frisco shown too (below). We are on the lower side of tax percentage. The tax is on nightly rate charged per night per STR unit. This would be for April 2022 if anything. Paul Myers notes that unless you are a large group, you don’t see any decision-making changes with increase in excise tax, it only would be looked at for large parties. This includes only STR licenses fees, not hotels. One councilor notes that this charges the STRs as more of a business and I agree with that. We would still be looking at a deficit in a few years with this proposed excise tax, staff notes that this is only one option proposed on increasing funding.
Someone says they are comfortable with pursuing the 7.5% STR excise tax. I don’t know that it will necessarily be a pass through right away, the market may take a while to incorporate into their fees which won’t put us out of market price. Most people in town, I think will resonate with this. Staff clarifies that the excise tax will ultimately be paid by the renter they want to make sure it’s clear that the owners know that it wouldn’t be on them, that they would be able to pass through.
Ms. Henson talks about the real estate investment fee, the code ordinance has never been used for affordable housing but we could talk about it. Housing impact fee, we spoke about this spring. STR or 2nd Homeowner tax could address occupancy issues, low-income housing credits could be an option but it would only work with building with over 25 units. She’s tracking 2021 affordable housing grants and the federal infrastructure bill.
One councilor suggests selling the two old mine claims for $300,000 to a conservancy that could move towards housing helps. The rest of the council hadn’t heard of it but would sell it back to the forest service or something to preserve it. Councilor Sherburne is supportive of doing a little more digging into the opportunities.
Ms. Henson comments that she did just complete the STR survey with interest in LTR. That is on the forefront of what I think is possible. We got a 72% response rate and could tie into the conversation of a rental program. Mayor Mortensen thanks staff and the discussion is concluded.
