Affordability is the central issue of our community. This valley is crazy expensive and Aspen is stratospheric. At the root of our affordability challenge is the scarcity of real estate. Demand for commercial and residential real estate is inexhaustible; local supply is highly constrained. With housing so expensive, everyone needs to earn higher incomes. With commercial space so scarce, leases are expensive. Development costs are very high, development processes are very slow. Together, these factors flow into the prices we pay for a meal, a drink, an hour at a pool table.
For now, let’s table the scarcity problem. Thinking about real estate supply means considering more construction, more residents. It could mean giving up a little open space on the edge of urban growth boundaries. It is painful to think about the supply side of this issue, so let’s consider creative solutions to this market-driven challenge.
In Aspen’s commercial sector, only a few types of businesses can operate: 1) longtime owners who bought their real estate early and have a low basis, 2) higher-end operators who can charge enough to bear market real estate costs, 3) global luxury brands who can make uneconomic decisions about locating in Aspen as a branding strategy, and 4) community-minded real estate players who take a little less to help local business thrive. It’s important to note that the second group includes exceptional local operators like Cache Cache and the CP Restaurant Group (Wild Fig, CP Burger, etc.) that have built local institutions. Not all higher-end operators are disconnected from our community. At the same time, we cannot have a vibrant community existing only at the higher-end.
Economics professors often say that there is no such thing as a free lunch, but I’m here to put one on the table. Call it a free lunch to lower the cost of real lunch. This idea came from a good friend who has lived here for the better part of 50 years and bridges capabilities across our community. Aspen needs a “low-profit/no-profit” land bank built to lower commercial real estate costs so more businesses can thrive while operating at reasonable prices.
This “land bank” — maybe call it Aspen Commercial Real Estate Sponsors (ACRES) — would bring together community-minded individuals in an investment fund to own Aspen commercial real estate for the extreme long-term, with no profit motive other than the eventual return of capital, plus an inflation-level rate of return. It would rent commercial real estate at below-market prices to local business operators who have an impressive business plan and capability to operate eating, entertainment, or vital goods/services businesses at affordable prices. The fund would only generate a return through profit sharing, perhaps with a cap on return and a commitment to redeploy surplus profit into regional affordable housing investments. By effectively foregoing meaningful profits on the real estate, the fund would keep profits in the hands of the operators, in good wages, and, most importantly, in lower prices. Think of this entity as organizing a deeply local, long-term entity to compete with external capital interests disconnected from the community.
To the wealthier members of our community, the basic ask would be: make a long-term investment in the Aspen community to keep it vibrant for everyone. Park some money you aren’t going to need; it’s probably very safe given the scarcity of Aspen real estate. Your investment helps everyone gets a $15 burger, a $6 beer, and places to hang out in town. You won’t get special treatment, but you can sidle up to the bar knowing that your investment is doing a small part to keep Aspen enjoyable and livable for everyone.
To longtime locals who own commercial real estate representing their family’s wealth, this fund would offer a known buyer to continue a legacy of preserving community. We don’t need more Guccification — we have enough luxury brands to amply serve our visitors. If local owners ever need to sell, maybe they would take a slight discount in order to see their legacy continue?
There are some good arguments against this idea. First, it would take serious, ongoing work to organize, structure, and manage this fund, likely requiring a full-time team of at least a couple people. Second, there is ambiguity in the meaning of “an affordable business that caters to local people.” There would be debates, disagreements, and maybe some hard feelings on what business might qualify. Third, not every operator will succeed, even with subsidized real estate. Would everyone be prepared for the hard situation of what to do when an operator is failing? Fourth, there is some degree of unfairness to local operators who are already scrapping to make it work. We want more Big Wraps, Bucks and Taco Pinas, established and new operators who deliver great food at reasonable prices today. Fifth, this idea addresses the real estate side of the problem, but people still need to live affordably or to commute with less pain.
These are all real challenges (and I’ve probably only listed a fraction), but they are not insurmountable with the right design, energy, and governance. We see this model working with individual landlords and operators today. But most of our wealthier community members do not have the time or expertise to dive into Aspen commercial real estate on their own. If there were a passive way to invest capital in this problem, many people would step up. Regardless of wallet size, nearly everyone remembers The Tippler, Johnny McGuire’s, and Little Annie’s fondly. These memorable locales closed long before the COVID bubble — this challenge has been growing for decades. While change will never stop in local retail, dining and entertainment, we can establish a counterweight to outside interests and we can support the next generation of affordable operators that add to our list of local institutions.
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The Supreme Court of Colorado on Tuesday ruled against an Aspen condominium association’s legal dispute over construction defects.
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