Frisco, CO considers declaring state of “emergency”; it is not for what you would expect.

by | May 27, 2021 | Breckenridge, Breckenridge hard money, Breckenridge real estate, Colorado Hard Money, Colorado Living, Colorado Private Lending, Colorado Real Estate values, Colorado Ski real estate, Colorado Ski towns

City officials in mountain communities are worried rising home prices are pricing the workforce out of the market. “We’re really at risk of creating the modern era-ghost town in our mountain towns, where the lights are on and no one has a home to live in,” Hunter Mortensen, the mayor of Frisco.  Frisco is considering declaring a  “state of emergency”.  What is the real emergency?  What has caused the issues that all Colorado ski towns are facing?  How can the affordable housing issue be solved?


What is the “emergency” in Frisco and other Colorado mountain towns?

In Frisco, for any residential property, the median price is $1.1 million, according to Colorado Association of Realtors .  “We have some great, innovative programs in Frisco and throughout the mountain communities in Summit County that already fell behind because we can’t keep up with the buying power of who’s buying real estate,” Mortensen said. Mortensen is discussing declaring an emergency around housing in Frisco. “That will help us hopefully get a little more attention from the state and the federal government to say, ‘this is dire,'” he said. This problem is not unique to Frisco, every Colorado resort community is struggling with affordable housing.

A “State of emergency” in Frisco what does it mean/do?

Unfortunately, when I read that they were considering a state of emergency for the housing crisis, I was a bit surprised.  The state of emergency is no more than a publicity stunt as the town of Frisco has limited powers to solve the affordable housing crisis.

What is causing the affordable housing crisis/emergency in Colorado and the resort communities in particular?


Before discussing possible solutions, it is important to highlight the factors causing the current housing crisis.  There are five factors that are weighing on the ability of developers to meet the demands of the affordable housing market.  Individually, each factor is not a deal breaker, but combined these five factors will greatly reduce or eliminate affordable housing options both in the front range and throughout most ski towns.

  1. Land costs: This is the obvious factor driving up costs. As more people migrate to the front range and ski towns there is less available supply of buildable lots.  As basic economics tells us high demand and less supply increase prices substantially.  As lot prices increase developers are forced to builder more expensive houses since there is no other way to even break even. According to a Bloomberg report, this means” focusing on high-end apartments that offer better profit margins. The wealthiest residents are the only ones who can buy, and a vicious cycle is created.”
  2. Infrastructure costs: Assuming a developer could find land at a reasonable cost, there are huge infrastructure costs. One of the largest costs is water and sewer.  For example, if you were going to build a single family home in Louisville the water and sewer taps alone would be $35k.  Colorado has some of the highest infrastructure costs in the country
  3. Labor costs: With Colorado having one of the lowest unemployment rates in the nation, this means that skilled laborers can demand even higher wages. For example, I did a project in Steamboat Springs (a ski town), a plumber was charging 125/hour.  At rates like these building becomes quite expensive.  Along with labor rates the time to build has also lengthened due to the labor market tightness.  As the old saying goes, time is money.  The longer it takes to build the higher the capital costs are.
  4. Property Taxes: As property taxes rise, affordable housing becomes even less attainable.  For example in Steamboat property values went up 50% plus in many areas which means property taxes also went up. Those taxes are passed through to renters in once affordable neighborhoodsHigher taxes also make it harder to qualify for a mortgage since anyone who was close to be able to buy a house based on their income could easily be denied as taxes are factored into the total payment on the house.  Higher taxes result in less buying power for borrowers.
  5. Nightly Rentals: Regardless of your stance on nightly rentals, they are a contributing factor to the housing crisis throughout Colorado.  It is considerably more profitable to rent a property on a nightly basis than long term in every resort community.  The huge influx of nightly rentals has taken substantial long term rentals off the market.


How do you solve the affordable housing crisis?

Declaring a state of emergency is unlikely to solve anything other than garner a little bit of attention.  Hard choices must be made to create a viable strategy to address the affordable housing issue.

  1. Property taxes: Property taxes are a regressive tax meaning that the lower income are hurt harder by increased taxes. Values have almost doubled in the last 3 years in most mountain communities and so have taxes.  The increased taxes further propagate the cycle of unaffordable housing as more borrowers and renters are priced out as the taxes are “passed through”.  Along with rising values, many cities like Steamboat are proposing even more taxes which will further impact affordable housing.  The solution is easy, cap the amount of tax increases on primary residence properties and long term rentals.
  2. Change zoning laws: Higher density building is critical. This will allow developers to increase the supply therefore slowing down the rapid pace of appreciation.
  3. Building codes: I am all for green projects, high efficiency, an uniformity in buildings.  Unfortunately,  as a result of all these requirements, prices have increases substantially.  The rules need to be tailored to allow builders to profitably build lower priced housing. I am not saying life and safety items should be waived, but some of the more aesthetic items like min square footage or certain roof materials, or triple paned windows vs. double paned, or site built vs modular or panelized construction, needs to be waived to enable builders to offer products at lower price points.
  4. Nightly rentals: Nightly rentals need to pay their fair share of the affordable housing crisis. The easiest solution would be to assess an impact fee on every nightly rental license that must be renewed annually.  For example, they could charge each owner $1,000 for the annual license for each bedroom so larger properties would pay more.  For example a 4 bedroom property would pay an annual impact fee of $4,000 to go towards affordable housing initiatives.


None of the above changes will be easy but they must be implemented to at least give affordable housing a fighting chance.  This affordable housing ship is sinking; and yet instead of actually addressing the issues, cities are considering declaring “states of emergency” that will do nothing  to solve the problems at hand.  Unfortunately, the affordable housing ship is sinking; will the above policies be implemented in time to keep the boat afloat?

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Written by Glen Weinberg, COO/ VP 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 MagazineThe 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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