Regardless of all the talk of a recession, soft landing, or something in between. Many…
In an emergency ordinance, Aspen city council unanimously implemented radical changes to any new construction, remodeling, and expansion of a property. Furthermore, the ordinance halted all new nightly rental permits. Why did the city implement this emergency ordinance? What was actually in the ordinance? How will this impact real estate going forward?
Why did Aspen implement an emergency moratorium on new construction and nightly rentals?
Aspen, like every Colorado mountain town, has seen a huge influx of new visitors and residents because of Covid. The enormous increase of people in town has caused huge strains in mountain towns with affordable rental housing nonexistent, nightly rentals proliferating, and building off the charts.
City officials argued that the impacts of speculative real estate activity is putting negative pressures on the local workforce, available housing, traffic, the environment and the quality of life that is emulated in the Aspen Area Community Plan, which is a guiding document that is used to make policy decisions.
“The fabric of my community is not for sale,” said Councilman Ward Hauenstein. (Aspen Times)
What was in Aspen’s emergency ordinance regarding new construction and nightly rentals:
- Nightly rental permits: No new nightly rental permits will be issued for 9 months, existing permits are still valid
- Ban on construction: For six months there is a ban on any new permits for new construction, demolition, or anything that increases the height, square footage, or net livable area of any building. Permits that were submitted prior to 12/8 are not subject to the moratorium.
What impact will this have on real estate?
- Values: It is ironic that the premise of this ordinance was as a result of skyrocketing prices and changes to community character. Unfortunately a moratorium will likely only increase prices further due to less supply.
- New Construction: There is still probably several years of work already permitted and in the pipeline in Aspen, so I don’t see huge impacts on the moratorium in the short term. If it continues look for more development to move down valley to Carbondale, Basalt, etc… Also there could be unintended consequences where builders pull out of the Aspen market due to the uncertainty and focus on other markets (Vail, Steamboat, Jackson Hole, etc…)
What about the future of new construction and nightly rentals in Aspen?
Even though the moratoriums are limited in duration (6 months construction and 9 months nightly rentals) there likely will be some big changes when the moratoriums are lifted.
- New Construction:
- Much higher costs in the form of impact fees for affordable housing. The council has already alluded to this in their issuance of the moratorium
- Change in building requirements: For example, making an ordinance so that you can only expand a house 10% or something to that nature.
- Some sort of a cap on permits issued: I wouldn’t put a cap on permits off the table. The city council will look to balance the volume of construction somehow.
- Nightly rentals: I could see Aspen emulating Breckenridge with three major changes to nightly rentals.
- Substantially higher impact fees
- Cap on number of nightly rentals
- Cap/ban on nightly rentals in certain locations
I would be extremely surprised if all three of the above were not implemented. There could be some new twists as well. For example council might limit the existing permits as well; they could specify that they want the number of nightly rentals reduced by some number (for example 20%) and do some sort of a lottery to allocate the licenses. With the sudden moratoriums I wouldn’t take anything off the table.
Remembe,r only full-time residents get to vote. I have been saying for years that full time residents in many mountain towns feel like they are getting the short end of the stick with tourism radically altering the character of the “small town” feel. Voters are installing council leaders with similar values which is leading to the ordinances above.
This is not unique to Aspen as every Colorado mountain town is working to address the balance of tourism/growth with resident’s needs. This trend is just in its infancy and look for even more changes coming in the next several years that could radically alter what is allowed to be built and/or rented.
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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