Land sales, new development remain sluggish in Grand County
August 20, 2017
"Buy land," Mark Twain once said. "They're not making it anymore."
But it appears Grand County has yet to get the memo.
The housing market in Grand County has been tightening for several years with rising rents, rebounding home prices and shortages in many areas, but as local residents continue to wrestle with these systemic forces, new housing developments on open land are few and far between and new affordable housing even more scarce.
Out of all the market segments related to local housing, from rentals to condos to stick-built homes, land sales are among the most sluggish, rivaled only by commercial property sales. The dynamic is created by many elements from a glut of properties on the market to high permitting and construction costs, to general consumer interest in existing homes.
“The infrastructure fees make it virtually impossible for anybody to take that risk. It’s the permitting fees, water taps, sewer taps, gas taps, electric taps, and then there are the land costs and construction costs on top of that. Until we see a compelling reason, from a bottom-line perspective, we are not going to see people take those risks and provide us with what we need.”Lance GutersohnBroker and owner of RE/MAX Peak to Peak in Winter Park
Whatever the causes, the already tight housing market in Grand County is likely to only get tighter unless new units are built.
"My belief is the current home inventory has been sufficient enough that buyers have chosen to buy resale versus build their own (homes)," said Lance Gutersohn, broker and owner of RE/MAX Peak to Peak in Winter Park. "But we are at a tipping point. There is not enough inventory to meet demand."
Gutersohn said the lack of housing inventory is starting to push some people towards open land and construction, but he added that the cost of construction could be prohibitive to many people, including developers.
"We are not seeing any development pressure yet," Gutersohn said.
He acknowledged that there are some developers currently working on projects in the county, but there has been effectively no sales pressure from the vast majority of prospective developers or those looking to build affordable housing.
"The infrastructure fees make it virtually impossible for anybody to take that risk," Gutersohn said. "It's the permitting fees, water taps, sewer taps, gas taps, electric taps, and then there are the land costs and construction costs on top of that. Until we see a compelling reason, from a bottom-line perspective, we are not going to see people take those risks and provide us with what we need."
Still, Gutersohn said he believes the market for affordable housing in Grand County will improve in the future, along with the entire housing market.
Clark Lipscomb, developer of the Grand Park housing development in the Fraser Valley, is one of the few in Grand County conducting larger-scale housing construction and echoed many of Gutersohn's sentiments.
Lipscomb highlighted market conditions as the primary factor behind his, or any other developer's, decision to build but segued quickly to blame costs and the labor pool.
"Material costs are going up dramatically," Lipscomb said. "We also have a labor shortage. Those are two key factors. The workforce issue is more of a housing-related issue."
Lipscomb said he is currently working on several development projects of varying sizes, but highlighted uncertainty about size of demand, coupled with scalable construction costs, as an obstacle to new rental housing developments. He was quite clear that he sees both a need and demand for new housing, but when asked if affordable housing developments were a good financial investment in Grand County, Lipscomb paused briefly.
"Yes, to an extent," he continued. "They are absolutely viable, but the question is at what scale? Fraser and Winter Park have worked hard on what demand might be, but we can't be sure. Do we need 20 units or 200 units? I don't think most people really know how deep the market is for affordable housing."
Lipscomb explained his belief that labor force issues in Grand County will continue to be a "bigger and bigger problem" until more workforce housing is created.
"What the solution is? I don't know," he stated.
He highlighted several potential measures including employer provided housing, which Lipscomb says he provides for some of his employees, including subsidies — either employer or government, fee waivers or reductions or simply paying employees higher wages.
"The bottom-line is we need investors in the marketplace," Lipscomb said. "To have them, we need to have market support for these projects. We need people to be encouraged to buy or build more."