Vail, Colorado: The Vail InDEED Program Provides Deed-Restricted Workforce Housing in a Resort Market

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Vail, Colorado: The Vail InDEED Program Provides Deed-Restricted Workforce Housing in a Resort Market

The resort town of Vail, Colorado, is an international destination for vacationers attracted to the area’s renowned ski slopes, expansive natural beauty, and annual events. With a total area of less than 5 square miles and hemmed in by rugged, mountainous terrain, Vail has limited housing capacity within its boundaries and has long struggled to maintain a supply of affordable housing for its year-round residents and seasonal workforce. As is common in many popular resort destinations, the town’s permanent resident and workforce population is often forced to compete with wealthy tourists in the housing market. In 2017, the town launched an innovative program to ensure housing affordability for residents and workers in Vail and the surrounding Eagle County: the Vail InDEED program. Managed by the Vail Local Housing Authority (VLHA) and funded through the town’s general fund, Vail InDEED allows the town to purchase deed restrictions from homeowners and developers to permanently limit the occupancy of a given unit to individuals employed in Eagle County. At considerably less than full development cost, the program has obtained deed restrictions on dozens of residences — including all 65 units in the Solar Vail apartment building. Vail InDEED, a cornerstone of the Vail Housing 2027 plan, won the Urban Land Institute’s Robert C. Larson Housing Policy Leadership Award in 2020.

Deed Restrictions

A deed restriction, also called a restrictive covenant, is a condition attached to the deed of a property. As a major tourist destination with limited developable land and a vested interest in controlling the image it presents to its many annual visitors, Vail has used deed restrictions extensively. George Ruther, director of the Vail Department of Housing, explains that Vail has used several different types of deed restriction to pursue housing and community stability goals since the 1990s. The Vail InDEED program is a new push to buy deed restrictions on both rental and ownership units that regulate who may occupy the units.

Under the agreement between the property owner and the town, the deed-restricted housing must be occupied by a household that contains at least one “qualified resident,” a person who works at least 30 hours per week in an Eagle County business. The property’s owner may be the qualified resident or rent to the resident. The agreement is in force in perpetuity and follows the property even if it is sold to a new owner, inherited, or given away. In the case of foreclosure on a restricted property — which could result in the restriction being removed — the agreement allows VLHA to make payments directly to the property’s mortgagee and impose a lien against the property equal to the payments. Although the agreement does not limit the resale price or rent that the owner may seek, the occupancy requirement effectively shrinks the market of buyers by tying the asking price to local wages — in other words, the deed restrictions separate the local housing market and the out-of-town market, insulating locals from competition with wealthier buyers and renters. “This is the root of Vail InDEED,” explains Ruther. His research into 2016 tax records revealed that about 90 percent of sales by local homeowners in 2016 were to nonresidents, and those properties rarely, if ever, revert to local ownership. Thus, the deed restrictions permit Vail to keep housing units in the market for use as local workforce housing.

The Vail InDEED program has several benefits. Ruther reports that the program purchases deed restrictions at between 15 and 20 percent of a given property’s fair market value, and as a result the town gains a unit of workforce housing that it need not develop, manage, or maintain. Because Vail merely changes the covenants of a deed, the city does not need to adopt an ordinance to increase zoning density or wrestle with “not-in-my-back-yard” sentiments, and town housing policy can be implemented outside of municipal boundaries. In most cases, the unit can be occupied by workers immediately. Property owners like the program because it provides them with a substantial payout without having to actually sell their property; 40 percent of properties in the program are owner occupied and 60 percent are renter occupied. The program is vital to Vail’s health and ability to function as a community, providing housing that is affordable to essential workers in the local government, healthcare, hospitality, and other sectors.

Workforce Apartments at Solar Vail

The Vail InDEED program has purchased deed restrictions in two multifamily developments. The larger of these is Solar Vail, a 65-unit apartment building primarily for hotel employees that opened in November 2019. Sonnenalp Properties, the development arm of the luxury Sonnenalp Hotel in Vail, began planning Solar Vail in 2007 but had to put those plans on hold when the financial crisis struck the following year. The developer was able to resume development in 2018, when it called Ruther to discuss how it might use the town’s new program. “The Vail InDEED program was built in from the ground up,” says Oliver Nunnenmacher, general manager of Sonnenalp Property Management. Vail offered the developer $4.2 million, the assessed value of the land, in exchange for deed restrictions on all 65 apartments. Sonnenalp Properties accepted, and combined that money with a $12.6 million mortgage from Alpine Bank to finance Solar Vail’s $16.8 million development cost.

A four-story building resembling a lodge, Solar Vail is tucked against a backdrop of majestic mountains north of the I-70 Frontage Road. The development has 39 studios along with 22 one-bedroom and 4 two-bedroom units. Each unit has ENERGY STAR^® appliances. The building features passive solar design and hydronic heating. Amenities include a common room with a television and foosball table, bicycle storage, and laundry facilities on each floor. The building offers a 16-space underground parking garage as well as 12 covered and 3 uncovered surface spaces. The building is adjacent to a bus stop. “Hardly anyone has to drive to work,” says Nunnenmacher.

Although most of the apartments are reserved for Sonnenalp Vail employees during the ski season, 16 units are available to any qualified resident year-round; after the ski season, when fewer workers are needed at the Sonnenalp Hotel, more of the reserved units are opened up for rent by any qualified worker. Nunnenmacher reports that, although Sonnenalp Properties has no additional workforce housing projects active in Vail at this time, the developer would be willing to participate in the InDEED program again. Ruther remarks that the Solar Vail deed restriction purchase was an especially good deal for the public: Vail stipulated that the town would not pay until construction was complete. “If we can get [workforce housing] built with no development risk to the public sector — no construction delays, no unexpected costs — people will vote for it all day long.”

Looking Toward 2027

Also in 2018, the Vail InDEED program purchased 23 deed restrictions at $21,000 each at the 6 West Apartments in the nearby unincorporated town of Edwards. Eagle County joined Vail in this endeavor and bought 13 restrictions of its own at the building. In its first 4 years, the Vail InDEED program has purchased deed restrictions on 165 units, rendering it an indispensable component of what Ruther calls an “all-of-the-above” strategy for pursuing the 1,000-unit goal of the Vail Housing 2027 plan. “We don’t spend our money on deed restrictions,” Ruther emphasizes. “We invest our money in deed restrictions.” In fact, Ruther reports that Vail is so dedicated to the InDEED program that it was the sole municipal program to be completely spared budget cuts when the COVID-19 pandemic first struck, indicating the town’s deep commitment to securing housing for its local workforce.