HomeMy WebLinkAboutBozeman Fee-Based Affordable Housing Concept 8-9-17Fee-Based Affordable Housing Program
Discussion Document
Presented By Terry Cunningham
To CAHAB
August 9, 2017
Fee-Based Program
Advantages
•Makes the cost of developing affordable housing a more transparent process –everyone knows what the cost is.
•Can be passed along to home buyers in a transparent manner.
•Is a straight-forward method of creating and growing a pool of funds specifically for affordable housing.
•Allows funds to be used and leveraged in new ways:
•Low interest and no-interest loans for qualifying projects.•Crates a base for leveraging federal funds and other private funding.
•Shifts the construction of affordable and workforce housing to who specialize in this market.
•Provides much more flexibility to city staff to direct the funds –and to determine where such projects should be constructed.
•BUT: are there models of effective fee-based programs to fund affordable housing in a market similar to Bozeman?
Bend, Oregon & Bozeman, Montana
Category Bend, OR Bozeman, MT
Population (2014)84,080 41,660
Pop Growth Since 2000 + 61.6%+51.4%
Median Age (2015)37.3 years 27.9 years
Median HHI (2015)$52,905 $47, 361
Detached Home Cost (2015)$355,499 $341,489
Median Gross Rent (2015)$986 $963
Both communities face an acute affordable housing problem.
Bend’s Fee-Based Program
•Enacted in 2006 by City Council to address Bend’s affordable housing issues.
•The stated purpose of the fee was to: “Address the lack of workforce housing, low vacancy rates and increase in home prices.”
•It requires all builders of residential and commercial properties to pay a fee equal to 1/3rd of 1% of the total valuation on all building permits submitted.
•The fee was determined by a collaborative process with representation from:
•Building industry.•Chamber of Commerce.
•Local realtors.
•Affordable housing providers.•City staff.
•It is estimated that the fund raises $2.5 million annually.
•The typical single-family home results in a $500-$800 contribution to the program (depending on the % of the fee.)
How The Fund Works
•Priorities for the fund are based on goals identified in Bend’s 5-year Community Development Consolidated Program.
•Used for affordable housing targeting families at or below 80% of the median household income.
•Typical fund uses:
•Low-interest or no-interest loans for land acquisition.•Low-interest or no-interest loans for construction financing.•Rental housing for working families.•Housing for homeless veterans.•Loans to builders of rent-controlled units and low-cost homes for purchase.
•In a typical year, Bend lends out $1.0 million in loans for affordable housing projects –and receives requests for between $1.5-$2.0 million in loan funding.
•Since a high % of the fund is used for loans, the money circulates back into the fund as loans are paid off.
History of Bend’s Fee %
•From 2006 –2011, the fee was 1/3rd of 1%. (0.0033)
•In reaction to the great recession, the fee was reduced in 2011 to 1/5th of 1% (0.002) to reduce the cost of all construction projects in Bend.
•In 2015, the fee was raised back to 1/3rd of 1%. (0.0033)
2006
2011 2015
2017
0.0033%
0.002%
0.0033%
Some of Bend’s Affordable Housing Projects
Discovery Park Lodge –53 senior housing units at 60% AMIThe Parks at East Lake –40 units at 60% AMI
Putnam Pointe
44 units at or below 60% AMI
Southern Pines
10 homeowner units at 100% AMI
Bend’s Program Administrators
Take Great Pride in Saying That
Their Affordable Housing
Projects
Are Indistinguishable From
Other Housing Projects in Town.
Bend’s Fee Program Results
To Date
•Bend’s fund is utilized by both non-profit and for-profit developers.
•Since 2006, 770 affordable housing units have been funded:
•631 multi-family units.
•139 single family homes.
•The fund has loaned out over $13.5 million to date.
•The fund has leveraged over $77.5 million in federal and state funds and nearly $28.5 million in private equity.
•Every $1 in fund loans has resulted in $7.85 in leveraged funds.
•Bend fund administrators point out that most federal and private housing financing programs require –or give priority to -a local fund match.
•As a result, fund requests initiating from Bend have a much higher funding success rate.
Program Director’s Perspective
•Some select quotes from Jim Long –Bend’s Affordable Housing Director:•“The fee program is by far the biggest Band-Aid in our first aid kit for the affordable situation in Bend.”•“This program allows us to punch way above our weight. We’re the second biggest generator of affordable housing in the state; second only to Portland. We produce far more than all other cities in Oregon.”•“In 2016, I gave a tour of the program’s results to a group of Oregon Mayors and now many other cities are enacting a similar program.”•“Our program can fund short-term construction money. Banks charge 12%-14% -and we loan out at zero %. That can take $20,000 out of the cost of a home.”•“The 9% tax credits are where the big money is –and our partners’ applications go to the top of the stack due to the local match.”•“I can’t think of a program pitfall. We’ve had zero defaults.”
Companion Incentive Program
Bend also provides an Affordable Housing Developer Incentive Plan:
•Expedited review and permitting–2 weeks maximum.
•Low income rental property tax exemption.
•Exempt for between 2 years and 20 years, depending on project.
•An exemption from System Development Charges –their version of impact fees.
Central Oregon Builder’s
Association (COBA)
•Initially, there was general opposition to the imposition of the fee-based program from COBA.
•I am told that COBA’s opinion about the fund changed during the recession since it kept the hammers swinging.
•“Since the recession began and the real estate market caved, the fee has funded a high proportion of the projects that have employed builders in the Bend area.”
•When the fee % was increased in 2015, COBA took a neutral position.
•COBA has a non-profit arm for affordable housing and they have taken advantage of the program to receive millions of dollars of loans or financing.
Select Other Cities With a Fee-Based
System to Fund Affordable Housing:
•Napa, CA: Converted to an Affordable Housing Impact fee in 2012.
•Denver, CO: Initiated in January, 2017, the fee is based on square foot. Goal is to create or preserve 6,000 affordable homes.
•San Francisco, CA: offers developers the option inclusionary zoning or the affordable housing fee.
•Arlington, VA: The refer to their fee as a “linkage fee” and it’s $1.77 per sf –and is estimated to generate $14 million in revenue inn 3 years.
•Boston, MA: Charges a linkage fee of $8 per sf for new commercial development.
Is a Similar Fee-Based Model
Appropriate for Bozeman?
•The folks in Bend, Oregon would like to provide consultation, site visits, etc.
•Contact Information:
•Jim Long –Economic Development Department
•(541) 312-4915
•jlong@ci.bend.or.us
•Nathan Boddie –City Councilor (was once a Big Sky EMT and Ski Patroller)
•City Hall #: (541) 388-5505
•nboddie@bendoregon.gov
•Andy High–COBA –VP Government Affairs.
•(541) 389-1058.
•andyh@coba.org