By Vince Phillips
For the foreseeable future, the First & D site in Salida is a parking lot.
On May 7, 2026, Artspace officially withdrew from the project to build 19 live/work rental units plus community space. The organization cited a funding gap exceeding $2.5 million, rising construction costs, difficult tax credit markets, and a decision to focus on stabilizing their existing national portfolio. After years of planning, eminent domain, pre-development grants, demolition, and legal expenses, zero affordable units have been built. The site, which opened as a temporary public parking lot on Memorial Day 2025 with roughly 40 spaces, will remain parking “until vertical construction on housing begins.” That could be years away.
The Deed Restriction Reality
Mayor Justin Critelli noted that because the property was acquired through eminent domain, any future development must honor a court-ordered deed restriction for affordable housing. These restrictions run with the land and typically lock in income-based rent limits (often 60-120% AMI) for decades.
While legally required, the economics remain challenging. The units were planned as rentals, not for-sale homes. Deed restrictions on rentals require ongoing rent caps and oversight, making it difficult in Salida’s high-cost market to generate enough revenue to cover debt, operations, and maintenance without substantial ongoing subsidies.
Headwinds That Killed Artspace – And Threaten South Ark
Even with experience, grants, tax credits, and local support, Artspace could not close the deal. Construction costs have risen to roughly $450,000–$500,000 per unit, even for apartments, in Colorado mountain communities. Interest rates, skittish tax credit investors, and softening rental demand have made projects like this much harder.
In today’s environment, it is fair to question whether either First & D or the much larger South Ark project is viable without enormous additional public subsidies. Yet the city is attempting to advance both simultaneously. South Ark is already consuming the majority of the city’s Housing Fund, roughly $9 million+ for Phase 1 infrastructure alone.
Local resources are limited. Splitting them between reviving First & D and pushing South Ark forward risks underfunding both efforts.
Builders thrive on stability and predictability. They are not getting it in Salida. According to builder feedback, the city’s shifting sands approach, agreeing to terms and then pushing for more concessions, higher affordability requirements, or added costs after the fact, creates significant uncertainty. Many report a relentless push for extra giveaways even after initial agreements.
As a result, a number of builders are choosing to build in other mountain communities where the process feels more predictable. When the city acts as both regulator and developer, it creates an inherent tension. Private builders need clear, stable rules applied evenly, not a system that appears to change requirements in ways that favor the city’s own projects.
The city recently had to relax South Ark requirements in April 2026 (dropping Phase 1 affordable units from 50% to 33% and reducing workforce set-asides) because the original terms made projects unfinanceable. The RFQ for Phase 1 partners is open, but early interest appears limited.Trying to finance two ambitious, subsidy-dependent projects at once in this environment carries real risk. Partial support for both increases the chance of delays, cost overruns, weak outcomes, or outright failure.
Realistic Paths Forward
The city should prioritize rather than stretch resources across both sites.For First & D, treat the parking lot as a useful interim resource. Any future revival will likely require a partner who can bring the vast majority of the capital.
Smaller scale, modular construction, or limited-equity ownership options (if allowed under the deed restriction) should be seriously considered.For South Ark, focus on completing what is already underway. Offer stable, clear terms to attract serious teams and be willing to make further adjustments if needed to make projects financially viable. One successful large project would be far better than two struggling ones.
Bottom Line
The Artspace collapse at First & D is a sobering reminder that good intentions, eminent domain, and heavy public subsidies do not guarantee results. As the city moves forward with South Ark, taxpayers deserve full transparency on Housing Fund commitments, realistic timelines, and contingency plans if developer response remains weak.
The parking lot at First & D now stands as a cautionary example. Learning from it before committing more resources to similar challenges would serve Salida well.
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