Vacancy Tax Proposal Debate Coming to the Legislature in 2025

A consortium of mountain towns will push Colorado lawmakers this year to pass legislation that would enable local governments to ask voters to tax homes that sit empty for most of the year.

There are no communities in Colorado that tax empty homes, but the growing challenge of building affordable housing for workers in mountain communities where real estate prices are soaring and as many as 40% of homes are unoccupied by full-time residents is fueling creative thinking around new revenue sources.

“We are not asking the legislature to make it so. This just clears some potential land mines for communities who might want to do this,” said Jonathan Godes, a councilman in Glenwood Springs and president of the Colorado Association of Ski Towns, or CAST, which is promoting the legislation for the coming session.

CAST is asking its 28 resort town members to support a bold legislative agenda this year. The group also is hoping for lawmakers to approve legislation that will enable local governments to approve fees on every real estate transaction.

(There are 12 Western Slopes communities that have real estate transfer taxes — from 1% to 3% on all property transactions — that were established before passage of the 1992 Taxpayer’s Bill of Rights, or TABOR, which prevents new taxes without voters’ approval. Those communities — Aspen, Avon, Breckenridge, Crested Butte, Frisco, Gypsum, Snowmass Village, Telluride, Vail and Winter Park — are collecting record revenues in recent years.

Obviously, this proposal raises serious concerns for the real estate industry. ABOR and the Colorado Association of REALTORS will be closely monitoring these developments.

HUD Ends Investigation of the Appraisal Foundation with Agreement

The Department of Housing and Urban Development (HUD) announced a Conciliation Agreement with The Appraisal Foundation (TAF). TAF is a private organization that sets qualifications and standards for the appraisal profession. HUD’s former Secretary Marcia Fudge filed a complaint against TAF alleging that its standards for training and qualification to enter the profession precluded access to communities of color. In turn, the resultant low share of Black and Latino appraisers was allegedly linked to higher rates of low appraisals in communities of color.

HUD did not issue findings against TAF or evidence of violations of the law or the Fair Housing Act. However, under the agreement, TAF will establish a $1.22 million scholarship fund to cover the costs of aspiring appraisers to utilize the Practical Applications of Real Estate Appraisal (PAREA) program. PAREA is a virtual program that enables candidates to obtain on-the-job experience required by TAF that can be hard to come by without industry connections. In addition, TAF agreed to market the PAREA program to communities of color and to collaborate with state licensing organizations to facilitate adoption of the program and its PAREA credit towards experience requirements.

NAR was one of the original organizations to sponsor TAF’s licensing and standards setting function for the industry in the early 1990s. That sponsorship entailed annual financial support for TAF in exchange for appointments on TAF’s Board of Trustees and Advisory Committee. Some fair housing and consumer groups questioned that relationship as potential “pay-for-play”, and, in the spring of 2024, NAR’s Executive Committee approved a motion of more general support for TAF’s licensing and standards setting function.

NAR Opposes Rent Cap Proposal

In late July, NAR and a coalition of housing provider industry partners (including the National Multifamily Housing Council, the National Apartment Association, IREM, the National Association of Home Builders, and the Mortgage Bankers Association) sent a letter (link is external) to the White House and Congress expressing strong opposition to the President’s announced rent cap proposal. The proposal—which requires Congressional action—would take away the accelerated depreciation tax provision from housing providers with 50 or more units who raise rents by more than 5% per year. It would be in place for two years and only apply to existing properties, not new builds.

NAR and its coalition partners stress that rent caps will absolutely not solve the issue of the shortage of affordable housing. They jeopardize the financial solvency of rental communities, lower the quality of housing stock, limit housing choices, and disincentivize new development. Economists from across the political spectrum agree—rent control ultimately worsens challenges to affordable housing in communities and ignores the real reasons those challenges exist. Instead of focusing on this failed policy solution, the administration should support federal programs that encourage new investment into our nation’s rental housing stock and push for states and localities to remove barriers to new development.

While the proposed policy is not expected to get any traction in the 118th Congress, NAR will continue to monitor this issue closely and keep our voice heard by the administration and policymakers. Additionally, NAR has resources for state and local associations facing rent control proposals in their communities to help them push against these damaging policies and for real solutions to the nation’s housing supply and affordability crisis. Additionally, NAR is a founding member of the Housing Solutions Coalition, which is dedicated to finding real solutions to housing affordability challenges and providing information and resources to oppose misguided rent control campaigns.

Snowmass Considers New Accessory Employee Unit Requirements

The Snowmass Village Town Council has started the process of approving new accessory employee unit requirements despite the Snowmass Homeowners Association saying it would not apply to the nearly 900 homes in the association.

AEU requirements were first introduced June 3, and the regulations would crack down on noncompliance and introduce new incentives for homeowners who add units. Under the proposed new standards, homeowners could build up to 1,000 square feet of extra floor area beyond their property’s maximum floor area without applying a floor area excise tax (FAET).

But SHOA representatives said during the June 3 meeting that its covenants for the 874 homes it governs would not allow the construction of an AEU. The covenants require all single-family homes to have no more than one full kitchen.

Council members passed the ordinance on first reading in a 4-1 vote to allow homeowners not governed by SHOA who wish to build an AEU to do so.

In conversations with SHOA after the June 3 meeting, town staff asked if reducing the maximum size to 750 square feet would make the HOA board more willing to change its covenants, Community Development Director Dave Shinneman said. But allowing AEUs would require changing the SHOA covenants, which would require a supermajority vote from the HOA board.

About 87% of the homes in Snowmass are governed by SHOA covenants. There are 97 existing accessory employee or caretaker units in Snowmass.

The primary goal of updating the AEU requirements was to provide more accessible and affordable housing for employees and seniors. A new provision would subject new AEUs to a restricted housing agreement with the town that would be negotiated on a case-by-case basis, Housing Director Betsy Crum said.

There is no subsidy in AEU housing like there is in the town’s affordable housing stock, but the town would work with homeowners to determine maximum rents.

Homeowners could rent to businesses who could then lease those units to their employees. The rents would not be as low as town-owned affordable housing, but they would not reach free-market rates, Shinneman said. The town’s affordable rent rates vary by complex, but the lowest rent listed is $485 for a small studio at Brush Creek and the highest rent listed is $1,975 for a three-bedroom at Mountain View.

A second reading of the ordinance will take place in August.

State News: New law will make it tougher for Colorado HOAs to foreclose on homes

Colorado homeowners’ associations will have a tougher time foreclosing on their residents for unpaid debt starting in August.

House Bill 1337, signed by Gov. Jared Polis in early June, creates new hurdles for HOAs before they can file for foreclosure and limits how much associations can charge in attorney fees when they are trying to collect what they’re owed. It also gives homeowners and renters a second chance at keeping their properties in the event a house is foreclosed on by an HOA and sold at auction.

“(This bill) really gets at the pieces of this process and how it works that we were really seeing lead to the most devastating foreclosures,” said Melissa Mejia, director of state and local policy at the Community Economic Defense Project, which was one of the main groups behind the bill.

The measure, passed by the legislature in April, is aimed in part at making good on a promise from the governor and lawmakers to change the state’s HOA laws following a Colorado Sun investigation published last year. The investigation revealed Colorado HOAs had filed roughly 3,000 foreclosure cases between 2018 and June 2023, more than 250 of which — or roughly 8% — resulted in properties being auctioned off, most for well below market value.

National News: FHA Changes 203(k) Rehabilitation Mortgage Insurance Program

The Federal Housing Administration (FHA) recently announced changes to their 203(k) Rehabilitation Mortgage Insurance Program. NAR previously submitted comments to FHA, seeking updates to the program to ensure they remain consistent with market trends and are more accessible and streamlined for all home buyers. Specifically, FHA is updating the 203(k) loan program by:

• Increasing the maximum cost of the limited 203(k) program to $75,000 from $35,000. FHA also created an annual review process for updating the maximum allowable amount;
• Extending the rehabilitation period for the standard 203(k) to 12 months; and
• Increasing the number of months of financeable mortgage payment reserves.

The 203(k)-rehabilitation mortgage insurance loan program provides low to moderate income buyers with the opportunity to purchase homes in a broader range of the market while simultaneously revitalizing housing supply stock. NAR commends FHA for modernizing the 203(k) program as home buyers are struggling with the limited housing inventory, and we look forward to continuing our work with them.