April 23, 2018 | Gary Feldman Group

An Insider’s Guide to Why Aspen Real Estate is So Expensive

An Insider’s Guide to Why Aspen Real Estate is So Expensive
First-time Aspen buyers invariably ask me why real estate is so expensive. Aside from my brief answer of desirability by the world’s wealthiest and the associated luxury services and amenities they expect, it really boils down to the anti-growth land-use codes implemented in the early 1970s.
When deplaning at Aspen/Pitkin County Airport, the first-time Aspen buyers are amazed at the large tracts of open spaces and shocked at how expensive homes and condos are. This is my cue to try to make sense of it all. My brief history lesson takes about 10 minutes, and after 33 years, I can do it in my sleep.
My explanation begins with most real estate above a certain elevation is owned by the federal government either through the U.S. Forest Service or the Bureau of Land Management (BLM). Owners of Aspen real estate will often say “we live adjacent to BLM land,” which translates to “we may only own two acres, but it abuts the million-acre national forest or BLM land.”
Next, comes Aspen’s version of the “supply and demand” factor. Aspen’s social climate in the early 1970s was fervently anti-growth. The rapid, unchecked transformation of Vail from a quiet sheep ranch along I-70 to a Disney-like resort had Aspen locals concerned and politically proactive.
Two attorneys, Dwight Shellman and Joe Edwards spearheaded a land-use code change that down-zoned property in Aspen and Pitkin County, and severely limited real estate growth to about 2% per year. A complicated formula for determining who received the annual development rights was created and is known as the Growth Management Quota System (GMQS). By limiting the amount of development, it turned Aspen real estate into a finite commodity chased by the world’s wealthiest people.
But the anti-growers didn’t stop there. Every few years since the 1970s, another layer of regulations was added to the land-use code, further restricting development. After Prince Bandar of Saudi Arabia built a 55,000-square-foot house in Starwood, home sizes that had never been limited were suddenly capped at 25,000 square feet. In four decades, the maximum home size has been systematically reduced and is currently 5,750 square feet, with many additional restrictions. If someone wants a larger home, they must purchase an older home that was built prior to the land-use restrictions.
Many successful developers new to Aspen will look at the cost of a building site and start calculating the number of homes that can be built. Generally, one home of 5,750 square feet can be built on 35 acres unless a Transferable Development Right (TDR) is purchased, but that is a whole separate can of worms worthy of another ‘Insider’s Guide’ to be written in the future.
The only break that buyers — especially those from New York, Florida, and Illinois — receive relates to Colorado’s favorable real estate taxes. At approximately $3,000 per $1 million of assessed value, buyers who start with a budget of $5 million quickly move to $7–$8 million when they find out how much debt service can be offset by Aspen/Pitkin County’s low real estate taxes.
Bottom line, Aspen and Pitkin County's restrictions on development and building have created a finite supply of real estate for the world’s wealthiest to pursue. Economics 101 dictates that when demand exceeds supply, prices rise as they have done since the 1970s.

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