Ask a Broker: What Does the Midterm Election Mean for the Local Real Estate Market? | Company
Affordable housing has always been a challenge in this region. But as we all wake up and deal with the aftermath of the pandemic – whether it’s pent-up demand, cheap money, low interest rates or a huge amount of money pumped into our economy through PPPs and other programs – we are now living with the results: high house prices, inflation and higher interest rates. All of these factors are barriers to an affordable housing market.
Due to high demand for services and a change in the housing market, we are facing a labor shortage which has put a strain on many local businesses.
What I took away from this midterm election was that we had clear direction from the electorate on some important issues surrounding our local real estate market. Voters chose to raise taxes to create more affordable housing solutions with ballot measures for every county in the Roaring Fork Valley and every city in the Vail Valley and Aspen in Glenwood Springs. It’s rare to see voters in favor of tax increases of any kind, so this is a direct reflection of the local real estate market.
What’s exciting is seeing how Pitkin, Eagle and Garfield counties come together – perhaps for the first time – to come up with creative solutions for today’s tougher market. Buyers and sellers are also working together to close the deal, and public entities are doing their part to ensure their communities continue to thrive.
Sometimes the need for affordable housing can scare off developers, but we are already seeing innovative solutions, such as public-private partnerships and buyout programs for open market sellers. In other communities, we have seen zoning changes to allow secondary suites above garages, where this has traditionally not been permitted, in the hope that this will help provide more affordable housing options. .
As the economy cools and interest rates rise, sellers must adapt. For example, buyers and sellers work together on interest rate buybacks. A buyout is when you pay extra money to the lender to buy out the interest rate. Buy-backs are nothing new, but traditionally the buyer would be responsible for the expenses – and now we’re seeing sellers and buyers working together to take care of closing the deal. On the business side, many Small Business Administration loans are assumable. If someone is going to buy a business or building and they have an SBA, instead of going out and getting a new loan, the buyer may be able to take on the old loan but make up the difference purchase price. It’s another way for investors and entrepreneurs to find new ways to pivot and adapt to today’s market.
Perhaps one of the hottest and most controversial issues in Colorado resorts involves short-term rentals. On the one hand, owners believe that they should be able to do whatever they want with their property; on the other hand, we have commercial and residential zoning for a reason.
Commercial zoning is where we as a city or community decided we wanted commerce, activity, and density. The bottom line is that STRs that renew frequently are a commercial undertaking and can be seen as going against residential zoning agreed to years ago. It should also be noted that there is a huge difference between residential and commercial property tax and generally the cost of commercial property taxes is ultimately passed on to the consumer transacting in the commercial area.
All three counties presented ballot initiatives related to raising taxes for STRs – and in all three counties, voters approved the increase by a substantial majority.
Finally, some of the greatest companies in history were created in difficult business climates. It is a time of creativity, ingenuity and collaboration. As a commercial broker, I’m used to seeing the big picture: we help clients find a property that can enable them to open a business which in turn creates jobs and ultimately of account, provides the necessary income for housing. We all sacrifice a lot to live here, but we always find a way to understand it. The people of the Roaring Fork Valley are resilient and resourceful – that’s one of the things I love most about this valley.
Mike Mercatoris has owned or consulted businesses in every town in our valley. He started the commercial and entrepreneurial real estate division at Slifer Smith & Frampton to help local entrepreneurs on their real estate journey. Email Mike at [email protected]