But ‘Affordability Isn’t Just the Price’

TELLURIDE – The Gold Run affordable housing development being constructed at the east end of town has come under a spate of criticism recently for being at once too expensive, unnecessary, wasteful and generally ill-conceived, but perhaps the most pervasive is the idea that the project will be exactly the opposite of what it says it is.

The fear is that it will be unaffordable.

But with the earliest price estimates on the 12 single-family homes and three duplex buildings that will be targeted for those who earn between 80 and 120 percent of the average median income for San Miguel County coming in at approximately $191,000 for a one-bedroom unit and up to $357,000 for a three-bedroom unit, those familiar with the local affordable housing market believe they will deliver what they promise – the opportunity for Telluride’s workers to own homes where they work.

“That’s the most affordable thing around for a house,” said Ginger Perkins, who has handled a number of loans on other price-capped, deed restricted affordable housing units built by the Town of Telluride as underwriting administrator for The Mortgage Store.

A recent check of free market real estate listings confirmed Perkins’s conclusion. The least expensive three-bedroom single-family home within town boundaries asked $900,000, while $360,000 was akin to a one-bedroom condominium unit.

Admittedly, the town could have shaved a small percentage off Gold Run’s $194 per square foot hard construction costs had it opted away from environmentally friendlier building techniques.

“There’s things we could do if we want to ignore regulations that everybody else can’t ignore when they build in Telluride,” said Telluride Mayor Stu Fraser referring to the town’s mandatory Green Building Code.

“The minute you go to green building standards you’re not going to be cheaper.”

Still, the extra costs at the outset for the high-efficiency boiler systems and heavily insulated roofs being incorporated into Gold Run will pay for themselves in the form of energy savings for the purchasers, according to Town Program Manager Lance McDonald.

“You could make it cheaper to lower the [construction] price, but then their energy bills go up,” he explained.

And when it comes to true affordability, energy bills matter – a lot.

“Affordability isn’t just the price,” said Shirley Greve, executive director of the San Miguel Regional Housing Authority.

Greve said that while banks traditionally calculate affordability based upon a loan applicant’s gross earnings, she recommends a more conservative approach to more accurately ascertain what homeowners can comfortably pay.

“That number that they’ll let you borrow is very different than what I’m going to calculate; I have expenses that come out of my net that I’m going to take into consideration,” she said – like utility bills, car payments, property tax and insurance.

Yet even by figuring affordability using the most cautious hand, potential buyers also face the hurdle of obtaining a loan – a near Herculean task in today’s tough credit market.

“What I see is that the lending market has tightened up to the point where someone who would have had no problem qualifying a few years ago…now [qualification] is marginal,” said Greve.

“Two years ago they would have had no problem.”

In addition to higher credit scores (think 780 with little debt), banks want to see more evidence of stability like longer residence in a given location and have added new documentation requirements.

“They’re verifying every step of the way, there’s no trust,” said Perkins.

Still, obtaining a loan is not impossible.

“We are able to get them done, it just takes a really, really long time,” said Tom Byrne of Telluride Mortgage Co.

Despite these factors interest in Gold Run remains high.

“The calls haven’t stopped,” said Greve, recommending that those who are interested attend a homebuyers education class if it’s their first purchase and start seeking financing now.

“It used to be that you didn’t have to talk to a lender until you were ready to buy,” she said. “Now lenders are saying, ‘Send them to us now and let us find out what they need to do to close a loan.’”