Sept. 04--new map temp_july 15Santa Fe is renowned for a lot of things: its richness in arts and culture, history, food, museums, galleries, and much more.
But it's also inflating its reputation for being an expensive place to live. The market for housing, particularly rental housing, is as tight as it's ever been, which has driven up costs. And there are no signs that it will get any better in the foreseeable future.
"Rising rents, lack of rental options for very low-income renters and low vacancy rates are likely to worsen the cost burden situation over the next several years," states the city of Santa Fe's housing action plan for the current fiscal year.
The city's Housing Needs Assessment for 2013 notes that, while consumer incomes remain flat, rents have increased 25 percent since 2000. A recent report by CBRE, a national real estate company with an office in Albuquerque, indicates that since then the average cost to rent a unit has increased by another 4 percent.
CBRE releases a report three times a year, the last one in May, which surveys most apartment complexes of more than 80 units and some smaller complexes, encompassing 23 properties totaling 3,627 units. It doesn't take into account single-family home rentals, which generally cost even more to rent.
new map temp_july 15 Nonetheless, the report shows that the average monthly rent for a one-bedroom, one-bathroom unit is $772. It's $826 for a two-bedroom, one-bathroom unit, and $987 for a three-bedroom, two-bathroom place.
In comparison, the average rent for a one-bedroom, one-bathroom apartment in Albuquerque is nearly $90 less ($685). A two-bedroom, one-bathroom unit is over $100 less ($720). Rents for a three-bedroom, two-bathroom apartment are almost exactly the same ($987 in Santa Fe and $986 in Albuquerque).
The rates for Santa Fe are the highest since CBRE began analyzing the market in 2008. The occupancy rate of 97.22 percent is also the highest it's been since records have been kept.
"Anything above 95 percent represents what I would call full occupancy," said David Eagle, senior vice president for CBRE in Albuquerque. "When a market has reached that kind of saturation, rents go up."
That causes people to look elsewhere for housing. A Department of Workforce Solutions report from a year ago indicates that more than half of Santa Fe's total workforce live outside the city limits.
That's a problem, says Chamber of Commerce President and CEO Simon Brackley.
"When a Santa Fe worker can't find a place to live, they end up commuting and we lose the economic benefit and talent," he said.
Those commuters tend not to buy groceries, shop at retail stores or spend money on services from local businesses. With nearly 30,000 people commuting into Santa Fe to work from elsewhere, that has a huge impact on the city's economy.
"A Homewise study shows we are losing $300 million a year because of commuting," Brackley said, adding that city residents could benefit from more civic amenities if those commuters lived in town.
Santa Fe has a lot to offer, and that may be part of the problem, according to Eagle. The City Different's appeal attracts lots of tourists, increasing the demand for rental housing for those in service industries.
"Santa Fe is unusual because it's not industrial, there's no Air Force base, but it's a national treasure that attracts visitors, so you have workers in the tourism and service industries who tend to be more transient, and that's an important factor. When you're coming and going, you don't buy a house, you rent."
In all, about 40 percent of people in Santa Fe rent their homes.
Mayor Javier Gonzales said the city recognizes the problem and the impact it has on the local economy.
"We're focused on economic development, and to get where we want to be we have to pair that with a plan that delivers accessible housing at every level of the workforce, top to bottom," he said.
The long and short of it
Another way the city's appeal affects the rental housing market, and the city's economy, is the saturation of short-term vacation rentals.
While the city ordinance allows for only 350 permitted short-term rentals, the reality is there are many more. Websites such as Airbnb, FlipKey, VRBO and Craigslist list vacation rentals, many of which don't have permits from the city.
A survey conducted this summer by Tourism Santa Fe suggests there are at least 576 short-term rental properties operating in Santa Fe without a license.
Tourism Santa Fe Executive Director Randy Randall said that number may be much higher because it is difficult to quantify many properties due to a lack of owner information provided on websites.
Still, the large number of short-term rentals affects the market for long-term rentals.
"All it does is reduce the inventory," he said.
And that increases demand -- and reduces city revenues.
"This demand for housing means that many unlicensed Airbnb units exist, which often do not pay gross receipt tax or lodger's tax and therefore do not contribute to improving community services or tourism marketing," Brackley said.
Charlie Goodman agrees. He's owner of Kokopelli Properties, which deals mostly with long-term home rentals but some short-term units as well.
Goodman said the city is looking at a more than $10 million deficit next year, but is missing out on untapped revenue from such unlicensed proprietors.
"Part of the issue is regulators can't get around what's going around on the Internet," he said. "They have to get their arms around it."
City Councilor Joseph Maestas plans to introduce a resolution at next week's Public Works Committee meeting that calls for staff to try to get a handle on how many short-term rentals there are in Santa Fe -- both permitted and un-permitted -- and try to determine how much the city is losing in uncollected gross receipt and lodger's taxes.
Barriers block supply of long-term rentals
One city official said there have not been any new apartment complexes built in Santa Fe in 10 years.
The city's housing action plan identifies some of the barriers to affordable housing as tax policies affecting land, growth limitations, zoning ordinances, and policies affecting the return on residential investment.
The report states that stakeholders expressed concerns about "inconsistent and unpredictable development approval decisions and 'NIMBYism' affecting approvals," NIMBYism being the "Not In My Backyard" mentality.
It goes on to say that "there is a stigma associated with affordable housing developments and neighborhood associations make strong efforts to impede affordable development."
Tell that to Eric Faust, a partner in Tierra Concepts, which proposed building a 399-unit apartment complex on Agua Fria Road. Faust said Tierra Concepts spent "a significant amount of money" drawing up plans and lining up connecting properties to accommodate the El Rio apartment complex, designed specifically to provide affordable housing for young professionals, only to have the City Council vote it down in June. Scores of neighbors and some 20 neighborhood associations opposed the plan.
"Statistics point to the fact that Santa Fe continues to get more and more expensive, so people have to find housing outside the city and outside the county," Faust said. "That means a higher carbon footprint and fewer dollars staying here locally. It also sort of pushes Santa Fe toward being a tourist/retirement community vs. a 'people who live and work here' community."
Before the council voted, Mayor Gonzales asked if Tierra Concepts could reduce the density of the complex, but the company declined.
"The reality is that with all the demands the city wants -- water requirements, affordable housing requirements, and impact fees -- you can't make the numbers work," Faust said.
The city requires that apartment complexes must make 15 percent of their units affordable housing for low-income families.
"That's a big barrier to the rental market," he said, adding that he's not against the 15 percent requirement but believes it needs to be massaged. "The city needs to look at that affordable housing rule and recognize that small apartments are a component of affordable housing and add to affordability in Santa Fe."
Alexandra Ladd, special projects manager for the city's affordable housing division, says subsidized affordable housing is a necessity.
Her department and groups such as Habitat for Humanity, The Housing Trust and Homewise work to provide housing for people who otherwise might be living on the streets, many of whom may be recovering alcoholics or drug abusers.
"If you don't have affordable rental opportunities for someone coming out of a situation, they'll fall out and end up back on the street," she said, adding that services must also be made available to them. "When you have people with incomes at poverty levels, the lack of affordable housing is not their only problem."
Ladd defends the city's rules that require a segment of the market be set aside as affordable housing.
"How much worse would it be if the city hadn't done what it's done?" she asks.
Changes sought from the top
So what can be done to make long-term housing in Santa Fe more affordable?
Brackley, who spoke in support of the El Rio project, said the city's leadership has to look at changing rules.
"The solution is to have the political courage to fast-track permit approval for high-density housing using existing infrastructure -- roads, trails, water, etc. -- and work for the benefit of the whole community," he said.
Kokopelli Properties' Goodman also said city leaders need to act.
"In my opinion, it has everything to do with this city not being willing to approve any new housing," he said. "That requires a City Council that is willing to change density. We can't just keep building single-family homes."
But Goodman is optimistic changes may be forthcoming.
"We've got some fresh blood on the Planning Commission, so there's a possibility we could see some changes," he said. "But you've got to have changes coming from the council."
Mayor Gonzales said there are opportunities for the city to fill the void in affordable rental housing with "responsible infill" in areas that can accommodate new development.
"We are intensively studying this problem," he said. "It's something that cities all over the world are wrestling with, and by this fall we'll be proposing reform to the affordable housing code that we hope will eliminate barriers and give private industry the incentives and the freedom to start proposing more innovative solutions."
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