5/3/2017 8:33:00 AM Experts say tribe's Shelter Bay lease proposal unsustainable
Shelter Bay Community leaders gathered a panel of experts to give residents the lowdown on the “best and final” lease proposal from the Swinomish Indian Tribal Community. In short, the tribe’s proposal which would include substantial rent increases, could make homeownership in Shelter Bay unaffordable, the experts indicated. Shelter Bay consists of 870 residential lots developed on land that is held in trust by the United States for the Swinomish Indian Tribal Community and some individual tribal members. Back in 1968, the developer signed a 75-year lease with the tribe based on “raw land” value. That lease expires in 2044, and for several years Shelter Bay has been asking for an extension to the Master Lease. Instead, two years ago, Swinomish proposed scrapping the existing lease and entering into a new 75-year lease to run through 2089 – this time with payments based on the “finished subdivision” value as opposed to “raw land” value. Under that assumption, rents would climb dramatically and by 2033, the experts said, there would no longer be an economic advantage to owning a home on leased land. Presently, people can have nice homes in Shelter Bay for less cost than equivalent houses owned by people who also own the land under their structures. The tradeoff is having equity in the structure only, but not in the land it sits on, which keeps the purchase price lower. The appraisal expert at Saturday’s presentation, Peter Shorett, figures the yearly rent per Shelter Bay lot averages $2,345 per year. A chart he showed in the presentation indicates that under the proposed lease terms, by 2023 average lot rents would be in the $5,000 range and by the end of the new 75-year lease, rents could be well over $70,000 per year. Economist Bill Reid of PNW Economics in his presentation noted that home ownership already poses risks based on uncertainty of future land values, household incomes, mortgage rates and other factors. But with Shelter Bay, there is another layer of risk. “At its current housing costs, Shelter Bay is experiencing foreclosure rates higher than the national average. Under the Tribe’s proposal, by 2025, as housing costs increase further beyond the affordability threshold, Shelter Bay will likely experience significantly higher foreclosure rates,” Reid’s presentation stated. The homeowners in Shelter Bay have individual subleases under the community’s Master Lease. Should there be more defaults, Shelter Bay might not be able to collect enough from the residents’ subleases to make the master lease payment, and the shortfall could be passed on to the remaining homeowners through assessments. A default in the master lease would cause ownership of Shelter Bay to pass to the tribe if it is not cured within 90 days and people with subleases would then negotiate directly with the tribe. Also participating in Saturday’s presentation were utilities expert Clair Oliver and attorney Mike Brandeberry. Shelter Bay Community Board President Anne Hays told attendees that over the last 18 months, the terms of the tribe’s lease proposal have not changed. She said the community has asked the tribe to consider a way to keep present Shelter Bay homeowners, many of whom are retirees, spared from being forced out by rent they can’t afford. Shelter Bay has proposed that should the lease be approved, the rent for the lots of present homeowners be “grandfathered” in under the terms of the original lease until the property changes hands, Hays said. That way, when the home is sold or inherited, the new owner must pay the new higher rent. So far, Hays said, Shelter Bay hasn’t heard back from the tribe on the “grandfathering” proposal. Cancelling the existing lease and enacting a new one would take a vote of the Shelter Bay property owners. Hays said there is no election scheduled so far.