Housing Restrictive Covenant/Deed Restrictions Discussion

The December 10, 2024 Town Council work session is the third work session with Council regarding housing restrictive covenants. The first work session was held on August 27, 2024, and the second work session on September 16, 2024. One to two additional work sessions will be scheduled with Council in early 2025. These work sessions will result in a new covenant, which will be presented to Town Council for review and approval after the additional work sessions on this topic and likely in the first quarter of 2025.

The purpose of the December 10, 2024 work session was for staff to provide information regarding buyer selections, initial purchase price, and priority period for employment location. Town Council was also able to discuss resale calculations and what the new covenant opt in period should be.

What is a Restrictive Covenant/Deed Restriction?

A restrictive covenant/deed restriction is a common tool used for placing limitations on the uses of a housing unit and are frequently utilized when a housing unit has been partially (or fully) funded by taxpayer money, and subsequently, deed restrictions are recorded on applicable properties. The covenant is a written agreement that restricts or limits the activities that may take place on a property or development. When purchasing a property that has a covenant recorded on it, new property owners acknowledge a written statement affirming that they understand the restriction recorded on the property and that they will abide by it.

There are approximately 155 properties within the Town that have restrictive covenants/deed restrictions on them through various development measures primarily stemming from development agreements or bonus density commitments. Approximately 40 of these units are employee units with no resale price cap (often referred to as “light” or “live/work” restrictions). The remaining have some type of limitation on household income and/or resale calculation, typically tied to an area median income (AMI) between 80-120% area median income; some units have a higher AMI, up to 160% AMI.

In 2019, Town Council adopted a new residential housing restrictive covenant/deed restriction, which provided a resale calculation that allows owners to potentially sell their property for an increased value over the previous method and which for the first month of the listing provided a priority to buyers who work in Frisco. The purpose of the modifications was to allow an alternative method for calculating the allowable maximum resale price, and alternative methodology was established to create a new deed restriction option for affordable workforce housing developments moving forward. Additionally, any property owner has the option to terminate their existing covenant and opt-into the 2019 covenant/deed restriction. This has primarily been utilized when property owners sell or refinance their property, as the 2019 covenant typically allows a higher resale price than many of the older covenants recorded on properties.

Since 2020, 24 deed restricted properties within the Town of Frisco have sold, 14 of these properties were sold under the 2019 covenant, and 10 remained under the existing covenant recorded on the property. No matter which covenant/deed restriction is applied, there is a clause that protects against a property being priced at less than it was purchased due to pricing calculations; pricing could still be less but only if market conditions cannot support prices.

Buyer Selection

Buyer Selection: The standard covenant currently allows a seller to pick a qualified buyer of their choice. This part of the discussion asked Council to consider whether they would like to require the sale of a property with a covenant on it to include a lottery process or a waitlist for buyer selection.

Current Buyer Selection Process

The majority of Frisco’s original covenants state that if an owner wants to transfer their property or if an owner is required to transfer their property, they shall notify the Summit Combined Housing Authority (SCHA) or such other person or entity designated by the Town, in writing of their intention to transfer their property. The property may be offered, advertised, or listed for sale by the owner at the owner’ s sole cost and expense, in any manner which they choose. An owner may list the property for sale through SCHA for a commission equal to 2.0% of the sale price. The property may not, however, be sold, transferred and /or conveyed to any person, entity, or entities who are ineligible based on the restrictive covenant/deed restriction on the unit being sold.

Due to continuous concerns raised by the public that there were property sales that included “behind the scenes deals” such as furniture transfers, cash given not included in sale price, etc., there have been requests that the Town consider a lottery or waitlist system for sales.

This current language in the 2019 covenant requires a seller to list the property publicly, allowing anyone interested in submitting an application to the SCHA to be qualified to purchase. The SCHA then qualifies applicants based on the covenant requirements (income limit and employment location). The seller is given the list of qualified applicants who meet the priority period, the seller can then choose which of those applicants they would like to sell to, and work through realtors to move forward with the sale.

Whereas the current process outlined in 2019 makes the sale of a property more public, the Town is still receiving public input that a lottery or a waitlist should be considered.

Waitlist

A waitlist system could be used for the resale of units. Through this method a seller of a restricted unit would advertise it for sale through the SCHA, similar to a unit for sale through a lottery system. No units within Summit County currently use a waitlist option, so this would also be a new system for the SCHA to administer and adapt their computer software to.

• Interested buyers for the unit would submit an application to SCHA.
• SCHA would go through each application to ensure compliance with income, employment location, etc.
• Qualified applicants would then be reviewed to determine how long they have lived in Summit County or possibly some other defined location.
• The qualified applicant who has lived within the defined area for the longest period of time would then be chosen for the unit.

The waitlist option is a method that would benefit a potential buyer who has lived in the defined location for the longest period of time. The waitlist option would also benefit a buyer who went through a change of life situation, such as a divorce, and needs housing to remain established in the community.

The waitlist option would not benefit local businesses trying to recruit new employees from out of the area who have specialized skills that they cannot find in the local workforce. If an employer found a job candidate and required them to move to Summit County, that employee would be placed on the bottom of the waitlist, and therefore, might not have an opportunity to purchase a restricted unit for many years. The waitlist option would eliminate the possibility of buyers being selected based primarily on who they know.

Lottery Process

Local jurisdictions are commonly switching to a lottery system requirement for sale of restricted units. The Town of Frisco is currently utilizing a lottery system for Housing Helps units that are purchased by Town, have a covenant recorded on them, and are resold to a qualified buyer selected by lottery, if a qualified resident is not already living in the unit. The lottery system process is:

• A seller of a restricted unit advertises the unit for sale through the SCHA.
• Interested buyers submit a lottery pre-screening form to SCHA.
• Interested buyers have five (5) days to apply for the unit through the SCHA.
• A lottery is then usually completed within three (3) days of the close of the application process.
• The first four drawn numbers go through a complete qualifying process to ensure they meet all income, employment location, and other applicable requirements.

Priority in the lottery process: If the Town utilizes the lottery process for unit resales, they can determine if they want to allow extra tickets for certain factors to benefit buyers. This could include, but not be limited to, an extra ticket for:

• Employment location with optional minimum length of time required (example: 5 years working year-round within Town of Frisco boundary)
• Current residence location with optional required minimum length of time (example: 5 years residing year-round within Town of Frisco boundary)
• Income priority requirement

The lottery option is a method that would benefit a potential buyer who thinks it is unfair that a seller can pick their buyer, as a housing lottery would eliminate the possibility of buyers being selected based primarily on who they know. It would also give the chance for newer residents to have the opportunity to purchase a workforce unit, while providing a needed job skill to the community.

Council Direction on Buyer Selection

Town Council gave staff direction to include a lottery requirement in any new covenant brought for future consideration. Council would also like to see a provision for extra lottery entries based on residency or employment longevity in Frisco and possibly other factors after consulting with the Summit Combined Housing Authority.

Initial Purchase Price

Initial Purchase Price: During this part of the discussion, staff asked Council to consider whether they would want for all initial purchase prices to follow the Summit County Area Median Income (AMI) table.

Original Frisco covenants and the 2019 covenant typically state that the initial purchase price is a formula based on the number of bedrooms, AMI, a deduction of $350 for interest on a mortgage loan, and an interest rate. The current way to calculate the initial purchase price is a complex method that is confusing and variable.

Staff requested that Council provide direction regarding whether they would like a change to be made to the initial purchase price calculation in the 2019 covenant. Staff suggests that the initial purchase price formula be removed in its entirety and replaced to state that the initial purchase price will be set based on the number of bedrooms and AMI, as stated in the 2024 Summit County area median income spreadsheet, effective at the time of listing the property. This is more closely aligned with how other jurisdictions are identifying initial purchase price as illustrated in Table 1 of the staff report.

Council Direction on Initial Purchase Price

Town Council gave staff direction to remove the initial purchase price formula and replace it with an initial purchase price that will be set based on the number of bedrooms and AMI, as stated in the 2024 Summit County area median income spreadsheet, effective at the time of listing the property. Town Council would like also like staff to consider any HOA monthly fees.

Definition of a Resident and Priority Period for Defined Employment Location

Priority Period for Defined Employment Location: The 2019 covenant has a 30-day priority period for a purchaser who works within the Town of Frisco boundaries. Any restricted property sold under the 2019 covenant has always gone under contract within the first thirty (30) days, as there has always been a qualified buyer who works within the Town boundaries. Council was asked to give direction on whether the priority period for employees within the boundaries of the Town of Frisco be removed completely as a requirement or be modified to include a larger area, such as the Ten Mile Basin.

Some community feedback has indicated opposition to this priority period, as it limits qualifying buyers and does not recognize employment locations that are near the Town boundaries and provide important services. Examples of employment locations that are not included in the 30-day priority period include:

• Copper Mountain
• Summit Middle School
• Summit High School
• Summit County Sheriff’s Office
• Summit County Government
• CommonSpirit Hospital
• Medical Office Building on Peak One Blvd

Staff requested feedback from Council regarding maintaining the same priority employment location, Frisco, or have priority period for:

• One mile buffer around the Ten Mile Basin (this is the current boundary used for the Frisco Housing Helps program) or;
• Remove any priority period for employment location and allow any purchaser who earns his or her living from a business operating in Summit County, by working at such business an average of at least 30 hours per week on an annual basis

Council Direction on Residency/Work Requirements

Council gave staff direction that they should return with a covenant that redefines the work requirements to not require people to work in Summit County after they have initially qualified to buy a workforce unit by having employment in Summit County for 30+ hours and now live in those units. This would open the possibility for residents already having qualified for and now living in workforce units to switch jobs to include remote work outside of Summit County without having to give up their workforce housing units. Council would also like staff to return with a covenant that prioritizes those who work within the Ten Mile Basin for the first 30 days that a unit is made available.

Duration of Time to Opt-In to a New Covenant

Currently, staff recommends that no one enter into a new covenant until they are selling to ensure that they are selling under the covenant that is most beneficial to them. In the case of a new covenant, Council would like any new covenant to replace the 2019 covenant, and therefore, the 2019 covenant would no longer be an option. Council gave staff direction to make any new covenant opt in available indefinitely.

Resale Calculation

Most surrounding communities have covenants that only allow a 2% appreciation cap, and Frisco’s standard covenant allows for a 3% appreciation cap. Town Council would like to keep the 3% appreciation cap but to remove the possibility that the Summit County Area Median Income (AMI) table could be used instead and reduce the possible resale price, as it does in the 2019 covenant. Council gave staff direction to move forward with incorporating the 2019 covenant’s parameters around qualifying capital improvements with some changes around depreciation schedules. Council would like to return with a more in-depth conversation around whether or not to cap total qualifying capital improvements.

Workforce Housing Financing for 602 Galena Street

In August 2022, the Town of Frisco and Summit County Government entered into an intergovernmental agreement to purchase the property known as the Colorado Workforce Center, located at 602 Galena Street, to be developed into 50+ affordable workforce rental housing units. The Town then approved a long-term ground lease in May 2023, with the NHP Foundation, a not-for-profit real estate organization with experience preserving and creating multifamily housing affordable for low- and moderate-income families.

In April 2024, The Town of Frisco was awarded a Strong Communities grant for $4,000,000 by Colorado Department of Housing (DOH) for the construction of project infrastructure related to affordable housing projects located at 101 West Main Street and 602 Galena Street. Additionally, in July 2024 the Town of Frisco was awarded a More Housing Now grant for $375,898 by Colorado Department of Local Affairs (DOLA) for the construction of Town owned infrastructure related to the affordable housing project located at 602 Galena.

There is still a need for additional funds for this project, and therefore, staff are recommending an Essential Function Bond (EFB), as the proposed financing mechanism for the 602 Galena Street project. An EFB is a tax-exempt bond issued by a housing authority or other authorized issuer to fund the construction and rehabilitation of affordable housing and other community facilities. EFBs are also known as governmental purpose tax-exempt bonds. EFBs are typically long-term bonds with maturities ranging from 20 to over 40 years. They can be used for a variety of purposes, including financing affordable housing, developing community and social service centers, upgrading energy systems, and constructing office space. If the Town pursues this, then the Town/Frisco Community Housing Development Authority would own this development, which is a departure from the previous plan to have NHP own the project.

Proposed Timeline

Staff proposed a timeline, which can be found in the staff report, for the 602 Galena Street workforce housing project, which estimates that demolition of the existing building and construction begin in the summer of 2025.

Time Constraints

• The More Housing Now grant requires the Town owned infrastructure project to be put out to bid within 120 days after the effective date of the grant agreement. This deadline is January 29, 2025, and therefore, the project will need to be put out to bid by the Town’s Public Works Department by that date.
• Project financing can take up to 90 days to close. Interest rates are predicted to be most favorable in the first or second quarter of 2025. Additionally, funds will be required for construction estimated to begin in spring 2025. However, the reimbursement resolution allows reimbursement of construction costs that may occur prior to the closing of financing funding.
• The Strong Communities grant requires proof of substantial completion and final financial statement due to Department of Housing by August 31, 2026.
• More Housing Now project final report is due to DOLA by January 29, 2027.

Council Direction on 602 Galena Financing

 Council indicated that they were looking forward to moving forward with this project and pursuing this financing option to that end.

Automated Vehicle Identification on Highway 9

Automated vehicle detections systems (AVIS) are used to detect speeding or traffic light violations to potentially send automatic notices of traffic infractions to violators. Colorado Senate Bill 24-195 gives the Colorado Department of Transportation (CDOT) the authority to adopt rules concerning the use of AVIS on state highways when more than one governmental entity desires to use the system on a single portion of state highway. The bill also provides that CDOT’s rules will not apply where a municipality has designated, before January 1, 2025, a portion of state highway within its boundaries for the use of AVIS.  

In response to Colorado Senate Bill 24-195, concerning the use of AVIS to enforce traffic laws, Frisco’s Town Attorney proposed Resolution 24-36, which would preserve the Town’s ability to use AVIS on Highway 9 in the future, without the need to comply with CDOT’s rules concerning the use of AVIS on a state highway by more than one government entity. 

Council approved Resolution 23-46; to be noted- the Town of Frisco has no plans to install a system of this type, and this was passed by Council so that the Town would have the ability and authority to make local decisions about implementing an AVIS system on this state highway corridor.

Frisco Municipal Election Code Amendments

During the April 2024 Town Council elections, ballots were mailed and received by voters, even though the election was canceled, due to the race being uncontested. The ballots still had to be printed and mailed due to the timing requirements in Frisco’s code surrounding write in candidates.

Staff subsequently recommended to Town Council that the code be amended to be consistent with State statute by moving the write-in candidate affidavit deadline. This change would have saved over $6,500 in unnecessary printing and postage costs in 2024, and similar savings are expected in the future if an election is canceled.

Council approved Ordinance 24-11 on the first reading

Water Timing Code Correction

This water conservation program was developed to match surrounding communities and align with their irrigation schedules. This program was initiated to streamline public messaging and expand awareness of water use and conservation. Council approved Ordinance 24-07 in March of 2024 to adopt the new irrigation schedule. Unfortunately, an error occurred when translating code sections from the staff report into new code language, and the odd/even days were reversed. Ordinance 24-19 simply makes this correction. All of the information communicated with the public and posted on the Town of Frisco website on updated watering days was correct; only Frisco’s code language was adopted incorrectly.

Council approved Ordinance 24-19 on second reading.

Frisco Town Council Meetings: Ways to Participate

Frisco Town Council meetings are available to view via Zoom and YouTube, and are also held in person to make Town Council meetings easier to access for everyone.

The public can provide comment during meetings via Zoom or in person (not YouTube), and a public comment period will be available at 7:00pm; during the consideration of ordinances; and at the discretion of Town Council during work session items, which are discussions that don’t require a formal vote by Town Council and do not require public comment. Again, this hybrid approach is intended to make Town Council meetings more accessible, and meeting recordings will typically also be made available the day after a meeting in the meeting archive with agenda topics bookmarked to the discussions in the video.