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Grand County opens review of High Density Housing Overlay after lenders and developers say deed restrictions hinder financing and sales
Summary
Developers and mortgage lenders told the commission deed-restriction enforcement language in the High Density Housing Overlay has made units ineligible for FHA and other agency financing, leaving at least 14 units unsold at Murphy Flats and slowing additional construction; commissioners directed the housing subcommittee to redline changes and bring revisions to planning commission for expedited review.
Developers, lenders and community housing advocates asked the Grand County Commission to expedite changes to the High Density Housing Overlay (HDHO), saying enforcement language and deed‑restriction mechanics have made several HDHO units ineligible for agency-backed mortgages and have left units unsold or vacant.
Loan originators and representatives for the Murphy Flats project explained that an FHA determination in January 2025 found an "impermissible restriction on conveyance" in that condominium project, which rendered units ineligible for FHA mortgage insurance. Lender testimony underscored that deed restrictions and post‑occupancy enforcement language create a risk that can trigger loan 'suspense' conditions or buybacks during servicing audits, making FHA, Fannie Mae or Freddie Mac sales less likely and driving originators toward in‑house or seller-financed loans.
Murphy Flats developers and a local lender said about 14 units remain unsold/available and that the developer has used some seller financing and portfolio loans to fill gaps. Speakers urged the county to limit enforcement language to the construction and initial occupancy period (to hold developers accountable during build-out) and to allow greater flexibility for occupancy rules — for example, shifting focus from restricting ownership to restricting occupancy, or allowing limited nonlocal ownership when the unit remains occupied by qualifying local households.
Commissioners and staff agreed on the need for urgency and directed that the housing subcommittee redline proposed edits incorporating lender and developer concerns, then transmit a draft to the Planning and Zoning Commission and back to the county commission for a public hearing. Several commissioners stressed the HDHO was always intended as a pilot to be monitored and modified if it failed to produce qualifying homeownership at scale.
Next steps: staff to poll housing subcommittee members and stakeholders for a workshop; redlined draft to be reviewed by planning commission and returned to the commission for a public hearing and ordinance amendment as appropriate.
