HomeMy WebLinkAbout07-17-17 Public Comment - T. Cunningham - Affordable HousingFrom:Terry Cunningham
To:Agenda
Subject:Workforce Housing and Affordable Housing Fund
Date:Monday, July 17, 2017 12:56:35 PM
Attachments:Bozeman Affordable Housing Fund Development Proposal 7-17-17.pdf
Bozeman Workforce Housing Discussion Document 7-17-17.pdf
Dear Mayor Taylor and Bozeman City Commissioners:
During tonight’s Commission Meeting’s public comment period, I will be asking the Commission to
consider the two attached proposals:
1. A coordinated effort to engage Bozeman’s top employers in developing workforce housing
solutions. I believe great potential exists for collaborative efforts between, for instance,
Bozeman Health and MSU to develop a workforce housing program that aids in their
recruitment and retention efforts while addressing issues of traffic congestion, unproductive
commuting time and pollution.
2. As a complement to inclusionary zoning proposals being discussed, providing an option that
allows for the creation of a fee-based pool of affordable housing funds that can be directed
by the city to address future needs for low-income housing and for construction of true
“starter homes” for young families and single-wage-earning households. I believe this
represents the most transparent way of collecting and spending such funds.
Thank you!
Terry Cunningham
3224 Hidden Springs Ln.Bozeman, MT 59715(406) 587-9180 (PH)(406) 587-1153 (FX)tcunningham@mcn.net
Affordable Housing Fund Development
A Fee-Based Alternative to Inclusionary Zoning
Purpose:
To provide an alternative program to inclusionary zoning that builders / developers can elect to
participate in. Note that this is meant to be a complementary program to inclusionary zoning as
opposed to a replacement; one that provides flexibility to the development community in how
affordable housing is created / funded in the Bozeman market. The program is designed to:
• Create better cost / funding transparency for the creation of affordable housing.
• Develop a city-directed affordable housing fund that provides much more flexibility in terms of
how/where/when affordable housing resources are deployed.
• Shift the mandate for the actual construction of affordable housing to those organizations /
builders / developers who specialize in the market niche.
• Allow for the subsidization of true “starter homes” for young families and single-wage-earning
households.
Background:
Inclusionary zoning may not be the complete solution to the affordable housing problem in Bozeman.
The development community reports that:
• A mandate to construct homes of markedly different size, materials and amenities in a
development is like putting a square peg in a round hole.
• Constructing such housing is likely a money-losing venture which must be subsidized by raising
the cost of the other homes in the development, thus creating a financial “shell game” in the
funding of affordable housing.
• In order to track the inclusionary zoning results, the city would need to create a mechanism to
monitor and approve affordable housing units to ensure compliance, then create a means of
ensuring that the units aren’t immediately “flipped” by buyers.
This proposal addresses each of those issues by providing an opt-in alternative to inclusionary zoning at
the discretion of the builder / developer.
The Proposal:
Starting January 1, 2018, the builder / developer of a project involving the new construction of 10 or
more dwelling units in Bozeman city limits would be provided the option – in lieu of participating in the
inclusionary zoning program – of participating in a fee-based affordable housing funding program.
• The actual fee (e.g. $2,500, $5,000, $7,500 per lot) would be assessed on a sliding scale based on
the lot size or dwelling unit size (TBD) of the new construction.
• The fee would be disclosed in a transparent manner on the sales documents as part of the
overall price of the home or condo so the buyer is aware that they are paying this fee (as
opposed to being absorbed by the developer / builder).
• The fee is collected at closing by the title company and deposited into a fund managed by the
city (or a third party, if deemed necessary) for the creation of affordable housing.
The affordable housing fund is used only for the construction of affordable housing and is disbursed on a
competitive basis – in a manner similar to the Trails, Open Spaces and Parks funds. It is anticipated that
petitions would be received that include:
• Requests from HRDC and other organizations that can leverage the affordable housing funds
with other funding sources for creation of low-income housing.
• Requests from local developers who want to create starter-homes that young families and
single-wage-earners can afford, but who need fund assistance to make the projects pencil out.
The developer would have to commit to a certain maximum per-square foot sales price based
on %AMI in order to qualify.
• Purchase of land by the city that will be used solely for the construction of affordable housing.
Once the city takes title to the land, they would solicit bids on affordable housing construction
on the site, possibly transferring title upon project completion.
Why Developers Might Opt-In to the Program:
• It would relieve builders /developers of having to build housing that is markedly different – in
terms of size, materials, etc. - than other the rest of the units in a development.
• It allows affordable housing to be built by those who specialize in that market segment (HRDC,
Summit Home Group, local builder, etc.) and takes that burden away from builders / developers
who don’t necessarily have that specialty.
• It would not require a potentially money-losing dwelling to be shown to financiers / investors /
bankers on a development pro-forma and would not require any “loss” on the affordable homes
to be passed along to the remaining homes in the development.
• Having the affordable housing fee identified as a line item in the dwelling unit cost – collected at
closing - makes it a more transparent cost for the buyer; they know it’s a true cost component of
the housing price.
• It transfers the funding of affordable housing from the developer to new home buyers, creating
a situation where “growth” helps fund Bozeman’s future affordable housing.
Why This Makes Sense for City of Bozeman:
• It does not require as extensive monitoring of inclusionary-zoning mandated dwelling units by
city staff. It also eliminates any ambiguity as to whether affordable housing unit targets ae being
met by the developer / builder.
• City can have control or influence over a pool of funds specifically designated to affordable
housing so they can decide how best to allocate the funds.
• Allows the city to direct where they’d like affordable housing units to be built according to a city
growth plan. Could locate it with Streamline access in mind.
• City doesn’t have to develop a mechanism for ensuring that affordable housing units in
subdivisions aren’t immediately “flipped” by buyers, this defeating the purpose of the program.
Employer-Assisted Workforce Housing:
A Real Opportunity for Bozeman
A Discussion Document
By Terry Cunningham
What is Employer-Assisted
Workforce Housing?
•“Workforce housing” is a general term in the affordable housing continuum, but for purposes of this discussion, we are referring to employer-assisted workforce housing, where:•The employer builds housing rental units on property they own -primarily for the benefit of their employees. •There is a sliding scale of rent charges based on either:
•A given % of household income –i.e. 30%.•A % of the area median index (AMI).•The objective of the employer is to recruit and retain employees who might not otherwise be able to find affordable housing within a reasonable distance of the place of employment based on the employee’s income level.•The employee is often encouraged –or assisted –in saving for a down-payment on a more permanent housing option.
What convergence of marketplace
realities would result in Bozeman
employers considering providing
convenient and affordable housing
options for their employees?
Bozeman Housing Market Snapshot
•Bozeman’s housing prices are among the most
expensive in Montana with demand outstripping
supply.
•Rental vacancy rates are near zero and rental prices reflect high demand.
•MSU student population continues to increase, creating greater pressure on the rental market.
•Bozeman renters spend over 50% of HHI on
housing costs –far exceeding the national average.
How Does This Impact the
Bozeman Workforce?
•Housing prices make it more difficult for essential workers –teachers, nurses, police, etc. -to live in the community that they serve.
•Housing costs are a factor when companies are deciding whether to relocate to Bozeman from another market.
•Wage earners who can’t afford a home or a high-cost apartment have to decide between:
•Living in a surrounding market and commuting to Bozeman.
•Finding a Bozeman rental unit they can share with multiple roommates.
•Leaving the Bozeman market to pursue a career in a city where housing prices are less than 30% of household income (HHI).
•This issue particularly impacts young families –in lower-earning years –and single wager-earner households.
•Money spent on housing or rent over the 30% HHI threshold means less money is available for child care and other workforce necessities.
How Does This Impact the City of
Bozeman?
•61% of the Bozeman workforce lives outside the city limits and commutes to work (2014 census).
•This results in increased traffic and congestion.
•Impacts our air quality and Bozeman’s ability to achieve the environmental goals we set for ourselves.
•Lost tax revenue as wage earners seek housing options in surrounding towns.
How Does This Impact Major
Bozeman Employers?
•Companies report that recruitment of executives and highly-skilled employees from outside the market is negatively impacted by the high cost of Bozeman housing as a % of wage.
•With the current 2% unemployment rate, competition for talented in-market employees is on the rise:
•Employees have more options and more leverage.
•Job shifting for higher wages becomes common.
•Those who have chosen to live outside Bozeman city limits become more likely to consider working for employers in Belgrade, Livingston, Manhattan, etc. as those towns grow and offer local employment options.
The Issue: Employers Need to Find Creative Ways
to Recruit, Retain and Motivate Qualified
Employees.
A Possible Solution: Employer-Assisted Workforce Housing
Should be Carefully Evaluated as an Important Tool in
Achieving Such Objectives.
From the National Real Estate Investor –
“Why Every City Needs Workforce
Housing” (April 2016)
•“Workforce housing is a topic that is receiving much greater attention today among officials at all levels of government and the real estate community, as well as those concerned with housing policy and affordability.”
•“Workforce housing generally serves families and households making greater than 60 percent of area median income (AMI) and up to 120-150 percent of AMI in the country’s highest cost metropolitan areas..”
•“According to a recent report by Harvard’s Joint Center for Housing Studies, more than 25 percent of renter households spent more than half their income on rent in 2013. That percentage could well increase as the number of renter households is at an all-time high and projected to increase faster than the new households purchasing homes.“
•“When people can afford to live closer to their jobs, entire communities reap the benefits. Commute times and traffic congestion ease, neighborhoods are more diverse and provide the opportunity for families to live and grow in one place over time, and economies strengthen by helping employers attract and retain essential workers.”
Which Bozeman Employers Are Good
Candidates for Employer-Assisted
Workforce Housing?
•An organization that employs over 300 full and part-time employees.
•Those that have a diverse employee mix in terms of income levels.
•Those that have access to land on which to build a workforce housing project.
•Organizations facing ongoing challenges in recruiting and retaining top-notch employees.
•Please note that there are solid opportunities for multiple employers to collaborate on such a project.
Bozeman Employers Who Might
Meet the Criteria Include:
What Recruiting & Retention Challenges do
These Employers Face in Addition to Employee
Housing Costs?
•Bozeman Health: 2,200 employees.
•Located on the far east side of Bozeman while most new housing development is on Bozeman’s west side.
•Possible new competitor entering the marketplace.
•City of Bozeman: 360+ employees.
•Community would benefit by having employees –especially emergency personnel –live close to their workplace.
•City has committed to specific air quality goals that are impacted by traffic and commuting time.
•Wal-Mart: 300+ employees.
•Competition for manager-level employees increases with each new business that enters the market.
•Hourly wage earners are more likely to switch jobs for increase of $2-$4 per hour.
What Challenges do These Employers Face
in Addition to Employee Housing Costs?
•Montana State University –4,000+ employees including graduate assistants.
•Increasing student enrollment at Bozeman campus requires additions to staff.
•Montana legislature funding is a consistent challenge.
•Bozeman School District –500+ employees.
•With enrollment growing, the need for additional high-quality teachers and administration staff increases.
•Nationwide, salaries for teachers –particularly starting salaries –are on low end of wage spectrum.
•Gallatin County –350+ employees.
•One of the fastest-growing counties in the country. Pace of growth dictates a need for qualified employees.
With a Total Employee Base of over 7,700, Bozeman’s Top 6
Employers Could Make a Huge Impact if They Offered a
Workforce Housing Option, Particularly if They Were to
Collaborate.
4,000+
2,200
500+
360+350 300+
A Case Study: How Two Major Employers
Combined For a Game-Changing Workforce
Housing Project:
•University of Washington and Seattle Children’s Hospital collaborated to build 184 housing units for the benefit of their employees.
•U of Washington contributed 40,000+ square foot parcel of land.
•Seattle Children’s contributed low-interest loans.
•Developer (Security Properties) was identified via public bid process and was awarded a 30-year lease.
•Rental / managing agent was selected via bid as well.
•30% of the units are set aside for families earning no more than 75% of the Area Median Income (AMI) for the next twenty years.
•Employees from both institutions will receive priority for apartment rentals.
•Employees who are benefits-eligible faculty or staff with active 9-month or longer appointments are eligible to apply for the priority list.
•The project is called “Bridges @ 11th”.
A Case Study: More on the Bridges
@ 11th Project:
•Opened in 2015, Bridges @ 11th has three buildings: eight, seven and five stories -connected by passageways and sky-bridges.
•There are 82 studios and open one bedroom units; 24 one bedrooms; 12 loft one bedrooms; 58 two bedrooms; and 8 three bedrooms.
•U of W and Seattle Children’s employees now have a convenient affordable housing option that reduces commuting time and is likely to produce more long-term loyalty to the organizations.
Additional Examples of Employer-
Assisted Workforce Housing:
•School Districts:
•Carbondale, CO: Roaring Fork School District is building a 20-unit employee housing project.•Menlo Park, CA: Ravenswood School District has a pilot program to build 22 workforce housing units for teachers.
•Lee County, FL: School District developing program to target 765 single teachers earning the $40,000 entry level salary.
•Health Systems:
•Santa Barbara, CA: Cottage Health System builds 115 to attract out of town medical professionals who may have been deterred by Santa Barbara’s high cost of living.
•Orlando, FL: Florida Hospital opens 230-unit apartment complex 2 blocks from their hospital. A survey found employees were three times more attracted to the on-campus apartments.
•Universities:
•Cal-Poly: In planning process: This project would include up to 420 market-value units and would be targeted toward Cal Poly faculty and staff, along with qualified members of the San Luis Obispo community.•San Mateo: College of San Mateo and Canada College: Faculty and staff at the college pay very reasonable rents for units in the two medium density complexes, allowing them to save money for a down payment on a home when they move out.
Can It Work in Bozeman?
How Workforce Housing Might
Work for Bozeman Employers:
•Starting The Process:
•Identify organization-owned land parcels that appear to be well-suited for multi-family dwelling units.
•Contact the City of Bozeman to identify possible development challenges and opportunities.•Conduct an assessment of the current workforce to determine the level of interest in rental units that would be affordably priced and conveniently located.•Contact similar organizations in other markets that provide employer-generated workforce housing and present those case studies to the organization.•Meet with the City of Bozeman, HRDC, etc. to determine the level of support and resources available to help plan and budget such a project:
•Explore incentives, impact fee or property tax reductions, etc.•Develop a preliminary budget estimate for the project.•Arrange meetings with other Bozeman employers to discuss possible project collaboration parameters.
How Workforce Housing Might
Work for Bozeman Employers:
•Project Feasibility Study:
•Working with workforce housing experts, develop a pro-forma based on assumptions such as % of employees likely to apply, need-based rental rates, # units suitable for site, etc.
•Determine the level of the housing subsidy to be offered to need-based employees:
•Based on 30% of HHI or a % of AMI.
•Develop projected tiers for application process:
•Employees receive first opportunity to apply.
•Second tier can be employees of a partner organization.
•Tier 3 can be essential employees such as police, fire, teachers, nurses, etc.
•Determine if the surplus rental units will be market-priced to help offset discounted units.
•Bid out development/building costs and property management costs.
•Evaluate financing options such as bonds, etc.
•Make a go-no-go decision.
How Can the City of Bozeman
Help? We Can Provide Leadership
•Meet with major area employers and describe the
benefits of employer-assisted workforce housing.
•Offer to coordinate meetings with other employers about possible joint projects and facilitate such meetings.
•Connect employers with recognized experts in the
field of workforce housing as a resource.
•Discuss any special incentives which might be available for workforce housing projects.
An Opportunity Awaits!
•The Bozeman School District has identified a 12.67 acre parcel near the bus barn as a possible site for a future workforce housing project.
•It is strongly recommended that the Bozeman City Commission take a leadership role in ensuring that the Bozeman School District:
•Is aware that workforce housing would be a beneficial outcome for the community.
•Is flooded with the tools, resources and encouragement necessary for them to give serious consideration to the possibility of workforce housing.
•Is offered a joint meeting with other area employers –facilitated by the City –to explore possible joint venture opportunities.
•Let’s not let this opportunity pass!
Contact Information:
Terry Cunningham
3224 Hidden Springs Lane
Bozeman, MT 59715
(406) 587-9180
tcunningham@mcn.net
www.terryforbozeman.com