Telluride Takes Unconventional Approach to Affordable Housing as Resort Towns Grapple with Soaring Real Estate Prices

In a groundbreaking move, the renowned Colorado ski resort town, Telluride takes unconventional approach to affordable housing by turning to municipal bonds. setting a precedent for other vacation destinations facing similar challenges.

The decision to sell municipal bonds for affordable housing comes as prospective homebuyers searching for properties in Telluride are confronted with exorbitant price tags, often reaching millions or even tens of millions of dollars. Recognizing the pressing need to make housing more accessible, Telluride is now prioritizing the acquisition and construction of affordable rental units.

Last week, Telluride School District R-1 secured $31.8 million through a bond sale, with half of the funds earmarked for the development of 25 units of “workforce housing.” This marks a continuation of the town’s strategy, as it has tapped into the bond market multiple times in recent years to address the housing shortage. Just last month, Telluride borrowed $9 million, part of which is allocated for refurbishing existing affordable housing.

Christine Reich, director of finance and nutrition for the school district, emphasized the critical link between housing availability and job recruitment, stating, “If there are no homes, I can’t fill positions.” This sentiment resonates with officials in vacation areas across the nation, where the scarcity of housing has resulted in the displacement of locals, including essential workers such as police, firefighters, and teachers.

Similar initiatives have been undertaken in other vacation destinations, including Nantucket and Wellfleet on Cape Cod, as well as Vail, another Colorado ski town. Notably, some colleges and universities, such as the University of Vermont and Middlebury College, have also turned to bond sales to finance faculty housing.

Telluride’s housing market poses unique challenges due to its remote location, making commuting from distant areas impractical. With only 55% of housing occupied by full-time residents, the remaining properties are often used as short-term rentals or vacation homes in a town with a population of 2,620.

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Bill Fandel, the founding broker of Compass real estate in Telluride, highlighted the constraint on housing supply in small towns, stating that “the cost of the dirt becomes prohibitive,” referring to the limited space available for housing construction.

Telluride School District encompasses several towns and parts of unincorporated San Miguel County, covering 326 square miles with a population of 6,515. The district faces the challenge of being a second-home destination for the wealthy, contributing to a high cost of living that hinders the recruitment and retention of teachers.

Moody’s Investors Service, which rates the bonds Aa2, noted that the district’s “exceptionally high” full value per capita exacerbates the housing affordability issue. The district currently provides housing to approximately 10% of its personnel and aims to increase this to one-third, with base rents set at 25% of salary. The proposed affordable housing already has a waiting list, highlighting the urgency of addressing the housing crisis in Telluride.