The Craig Housing Authority continues to move forward on a workforce housing development at the former hospital site on Russell Street, despite concerns from some council members about grant stipulations and potential long-term effects on the local housing market. 

The Craig Housing Authority held its first meeting on Tuesday, Jan. 24, to discuss the 8th Street Redevelopment project. Per the bylaws, Craig City Council members act as the housing authority board. 

As envisioned, the 8th Street Redevelopment would produce 20-townhomes at 785 Russell St., a vacant property that Memorial Regional Hospital recently deeded to the housing authority for developing housing geared toward local workers. The lot was appraised at $67,000 last year. 

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City officials will work with MRH and the Moffat County School District to try to identify employees who may be eligible for the units once they are ready to go on the market, and the city has agreed to reserve five of the units for hospital employees on a first-right-of-refusal basis. 

The city is in the process of applying for grant funding to cover the estimated $7.6 million project. City Manager Peter Brixius said $7.3 million in grant requests have been submitted or secured. 

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Craig City Council approved a $1.5 million Innovative Housing Strategies Funding grant application through the Colorado Department of Local Affairs on Tuesday. DOLA grant applications are by invitation only, so local officials feel there is a good chance it will be awarded. 

Council approved the grant application 6-1 with council member Paul James casting the only dissenting vote. 

In addition to DOLA funding, City Council also approved dedicating $833,743 from its $2.2 million American Rescue Act funding to the 8th Street project, an amount that had already been set aside from ARPA funding for affordable housing. 

Brixius said the city has applied for $5 million from the U.S. Department of Housing and Urban Development, or HUD. The city also has an additional $900,000 from 2022 congressionally directed spending that can be used for housing, but Brixius said he hopes that money can be applied to another project. 

Council member James adamantly opposed the DOLA grant stipulations, which require the sale of the units to be income-qualified to buyers at or below 140% of the area median income, a range that varies depending on the household size. Brixius estimated that 140% AMI for a three-person household would be about $90,000 and $100,000 for a four-person household. 

“When we talk about affordable housing, this isn’t low-income,” Craig Mayor Ryan Hess said. “These are people who are making good wages.” 

The project would produce four sets of five-plexes containing two-bedroom and three-bedroom units between 1,152 and 1,368 square feet. Overall, there will be 12 two-bedroom units and eight three-bedroom units. 

Another stipulation of the grant funding requires that the units be deed-restricted with annual appreciation capped around 2% each year in order to maintain affordability for 30 years. After 30 years, the Craig Housing Authority would have first right of refusal over management of the units and whether to maintain the affordable housing designation. 

“What we’re doing right now will help a few people immediately — this is a Band-Aid solution,” James said. “We’re essentially tampering with the market, so by the time we get to the end of this 30-year term, it’s going to cause problems, maybe not on the same scale as all of the other places that do this, the large cities at least.”

There have been similar housing projects in larger cities across the state and in Colorado resort towns, where the income caps have sometimes resulted in under-occupancy. Another concern is that residents who purchase units will not be able to resell because there is no incentive with the appreciation cap, which could be problematic for growing families looking to move into larger housing.

Hess argued that some of these issues are already happening in a community without a housing authority intervening with subsidized developments.

James also expressed concerns that a subsidized development could eliminate competition by removing incentives for other developers to build in Craig. 

Council member Derek Duran said that if there were a line of developers wanting to build in Craig or if there was more new construction, he might hesitate on the project, but he does not think that is the case. 

“I would much rather see a free-market solution to this,” Brixius said. “That to me is the perfect solution, but look how our free market has been turned upside down in the past three years. And that’s because it’s manipulated. Our free market is not free, and we’re responding to a need here.” 

Other questions were raised about the closure of the coal-related industries and what might happen once those workers leave and their existing homes start to go on the market.

Mayor Hess said that at one point, Craig lost more than 200 jobs and there was still a housing shortage. He added that future housing needs are hard to predict with the closures on the horizon. On the flip side, the other potential energy projects, like a small nuclear or a sodium reactor, could put a higher demand on the local housing market. 

“The fact is that no one is building houses in this town, and the other fact is 20 units is not going to bastardize the housing market in this community,” Brixius said. “When you infuse $7.6 million into a community and only get 20 units, you’re not going to screw up the market, but you are going to start to infiltrate and move some of the other properties up to scale.” 

Brixius said that the housing authority will do outreach work in February to address questions about the cost and eligibility of the units for local workers.