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HomeMy WebLinkAbout01-14-19 City Commission Packet Materials - CII1. Ord 2012 Final, Amending Division 38.380 Affordable Housing of BMC1 REPORT TO: Mayor and City Commission FROM: Chris Saunders, Community Development Manager Martin Matsen, Director of Community Development SUBJECT: Final Adoption of Ordinance 2012, amending Division 38.380 affordable housing, of the Bozeman Municipal code, to revise definitions, pricing requirements, eligibility for subsidies, alternate means of compliance, and non-cash subsidy recapture provisions, Application 18424. MEETING DATE: January 14, 2019 AGENDA ITEM TYPE: Consent RECOMMENDATION: Final Adoption of Ordinance 2012, amending Division 38.380 affordable housing, Application 18424. BACKGROUND: The City of Bozeman adopted Ordinance 1922, known as the Affordable Housing Ordinance (“AHO”) on December 7, 2015; which became effective on February 5, 2016. Provision of affordable housing in new subdivisions became mandatory on July 12, 2017. Since that time city staff has been identifying and working with challenges in implementation of the ordinance. Based on experience working with the AHO, zone text amendments were proposed. A public hearing on the amendments was held on November 19, 2018. After consideration of all materials, public comments, and evaluation of the text amendment criteria, the City Commission provisionally adopted Ordinance 2012 with two amendments. The minutes and video of the City Commission meeting are available at https://media.avcaptureall.com/session.html?sessionid=930b4ebb-5725-462d-949e- f3844e95b70d&prefilter=654,3835. The two amendments were to consistently reference “buyer-household” throughout the ordinance and to accept the suggestions from the Community Affordable Housing Advisory Board regarding eligibility for procedural adjustments and subsidies. The memo from CAHAB was on page 309 of the Commission packet. Staff has revised the ordinance in accordance with the two amendments and final reviews for consistency with earlier edits in the provisional draft. The following describes the location of changes in the ordinance between provisional and final adoption. All section references are to the version of the ordinance for final adoption which is included with this memo. Commission Memorandum 62 2 Section 1: two edits were made to refer to procedural adjustments and subsidies rather than incentives. This is consistent with the retitling of 38.380.130 in Section 7 of the ordinance. Section 2: four edits were made to refer to procedural adjustments and subsidies rather than incentives. This is consistent with the retitling of 38.380.130 in Section 7 of the ordinance. Section 3: the definitions for lower-priced home and moderate-priced home were modified to remove redundant language and place a cross reference to 38.380.070. Section 4: revise the number of homes required to reference the applicable definition of each type of home and remove language redundant to the definition. Section 5: no changes. Section 6: added the CAHAB recommendation for inclusion of information on procedural adjustments and subsidies to be included with an affordable housing plan. Section 7: added footnote 1 to include the CAHAB recommendation for additional latitude in what homes may qualify for which procedural adjustments and subsidies. Section 8: no changes. Section 9: no changes. Section 10: removed language originally included as an provisional draft amendment in paragraph B which was determined to be redundant to the newly created paragraph C included with the provisional draft of the ordinance. To address the additional options for procedural adjustment and subsidies included by Commission amendment changed wording from referencing only lower-priced homes to affordable homes. A copy of both the provisional (marked draft) and final adoption versions of Ordinance 2012 are provided with this memo to enable comparison. A mark up of all of Division 38.380 showing where the amendments fit into the municipal code is also provided. UNRESOLVED ISSUES: None determined at this time. ALTERNATIVES: 1) Adoption of Ordinance 2012 as presented. 2) Direct additional revisions to the ordinance. 3) Continue the ordinance for further discussion. FISCAL EFFECTS: None Attachments: Ordinance 2012 final text Division 38.380 markup Ordinance 2012 provisional draft – marked as draft Report compiled on December 13, 2018 63 Page 1 of 14 ORDINANCE NO. 2012 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA AMENDING CERTAIN AFFORDABLE HOUSING PROVISIONS OF CHAPTER 38, ARTICLE 380 OF THE BOZEMAN MUNICIPAL CODE WHEREAS, the City adopted Ordinance 1922 adding a new article to Chapter 38, Unified Development Code (“UDC”), regarding affordable housing (“Affordable Housing Ordinance” or “AHO”) on December 7, 2015; and WHEREAS, since the adoption of Ordinance 1922 homes have been built and sold pursuant to the AHO, and the builder has suggested amendments to the AHO to improve its workability; and WHEREAS, since the adoption of Ordinance 1922 the Community Affordable Housing Advisory Board (“CAHAB”) has suggested amendments to the AHO; and WHEREAS, in 2018 the City hired an Affordable Housing Program Manager who has suggested amendments to the AHO; and WHEREAS, the Commission’s legislative findings in Ordinance 1922 still apply in the City and adjustments to the AHO are necessary to ensure that article 38.380 of the UDC fulfills its purposes as stated in section 38.380.020; and WHEREAS, the amendments to the AHO were reviewed by CAHAB on July 11, 2018 and August 8, 2018, and CAHAB recommended adoption of the amendments on August 8, 2018; and WHEREAS, the amendments to the AHO were reviewed by the Zoning Commission and Planning Board at a joint meeting on October 16, 2018. The Zoning Commission voted 2:1 to 64 Ordinance 2012, Amending Affordable Housing Provisions Page 2 of 14 recommend approval of the proposed amendments and the Planning Board voted 6:0 to recommend approval of the proposed amendments: and WHEREAS, a public hearing on the amendments to the AHO was held by the City Commission on November 19, 2018 and after receiving public comments and deliberating on the proposal, the City Commission directed two amendments to the provisional text draft. NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA: Section 1 That Section 38.380.020 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.020. - Purpose. The purpose of this article is to promote the public health, safety, and welfare by ensuring that the affordable housing needs of the residents of Bozeman are addressed. In addition, the purpose of this article is to ensure that quality housing is dispersed throughout Bozeman's neighborhoods for households of a variety of income levels including low- and moderate-income residents to meet the goals of the community plan and the action plan by encouraging a mix of housing types throughout the city and integrating affordable housing so as to not concentrate affordable housing in a particular area. In addition, the ordinance is intended to alleviate the impacts that would result from the use of available residential land solely for the benefit of households that are able to afford market- rate housing and to mitigate the service burden imposed by households in new market-rate residential developments by making additional affordable housing available for service employees. The ordinance is also intended to mitigate environmental and other impacts that accompany new residential development by reducing traffic, transit and related air quality impacts, promoting jobs/housing balance and reducing the demands placed on transportation infrastructure. The ordinance provides residential developers with a menu of options from which to select alternatives to the construction of inclusionary units on the same site as market-rate residential developments, and provides incentives procedural adjustments and subsidies for housing 65 Ordinance 2012, Amending Affordable Housing Provisions Page 3 of 14 developers to ensure houses are constructed and sold in a manner that furthers the city's affordable housing goals. Finally, the ordinance provides incentives procedural adjustments and subsidies for housing developers who are not legally required to comply with the requirements for construction of inclusionary housing, but nevertheless choose to construct affordable housing. Section 2 That Section 38.380.030 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.030. - Applicability. A. This article applies to: 1. Subdivisions and site plans which propose ten or more market-rate homes, to be created through development, new construction, substantial improvement or reuse. 2. Annexations where the net developable area of the annexing parcel when considering the applicable zoning could result in ten or more dwellings. In such a case, the annexation agreement shall require the provision of affordable housing pursuant to this article. 3. Developments seeking to use incentives procedural adjustments and subsidies to develop affordable housing. B. Contiguous tracts under common ownership and control. A developer may not avoid the requirements for construction of affordable homes by submitting piecemeal applications for development. At the time of the initial application for approval of a subdivision or site plan, the developer shall identify all contiguous property under common ownership and control in the affordable housing plan required by section 38.380.100. C. Development applications approved prior to the effective date of this article. A site plan or subdivision having received sufficiency approval as of the effective date of this article or a preliminary site plan or preliminary plat granted approval prior to the effective date of this article may apply for one or more of the incentives procedural adjustments and subsidies described herein. Only that portion of the amended preliminary plat or site plan pertaining to the request for approval of one or more incentives procedural adjustments and subsidies will 66 Ordinance 2012, Amending Affordable Housing Provisions Page 4 of 14 be subject to review. The requirements of section 38.19.130 for the amendment of plans will not apply. D. Newly proposed residential developments which include affordable housing in excess of this article's requirements for building affordable homes are eligible for incentives procedural adjustments and subsidies as provided in section 38.380.130. Such request shall require the preliminary plat or site plan to evidence compliance with all other requirements of this article. E. Exemptions. Developments comprised exclusively of rental housing units are exempt from this article. Section 3 That Section 38.380.040 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.040. – Definitions. . . . F. Lower-priced home. Newly created dwelling for purchase, priced at a price affordable to a buyer-household with an income at 70 percent of Area Median Income (AMI) as determined by the city in accordance with section 38.380.070 of this article to be affordable to a household with an income between 65 percent and 80 percent of AMI. . . . FH. Moderate-priced home. Newly created dwelling for purchase, priced at a price affordable to a buyer-household with an income from 70.1 percent to a maximum of 90 percent of AMI as determined by the city in accordance with section 38.380.070 of this article affordable to a household with an income between 81 percent and 100 percent of AMI. Section 4 That Section 38.380.060.A of the Bozeman Municipal Code be amended as follows: The number of affordable homes a developer is required to build is a percentage of the total market- rate homes proposed in the development plan. A. The developer may: 67 Ordinance 2012, Amending Affordable Housing Provisions Page 5 of 14 1. Build and sell lower-priced homes. Ten percent of the total dwellings constructed within the subdivision or site plan must be lower-priced homes, as defined in 38.380.040.F; built and sold at price targets as established by the city pursuant to section 38.380.070 to households with incomes at or below 80 percent of AMI; or 2. Build and sell moderate-priced homes. Thirty percent of the total dwellings proposed must be moderate-priced homes as defined in 38.380.040.H; sold at price targets as established by the city pursuant to section 38.380.070 to households with incomes from 81 percent to 100 percent of AMI; or 3. Build and sell a mix of both types of affordable homes. If a developer proposes a mix of both lower-priced and moderate-priced homes, the developer starts with the ten percent calculation for lower-priced homes. For each lower-priced home eliminated from the resulting number, the developer may substitute three moderate-priced homes. . . . Section 5 That Section 38.380.070 of the Bozeman Municipal Code be amended as follows: 38.380.070. – Pricing of affordable homes. A. The city will calculate on an annual basis the maximum sales price a developer may charge for each category of affordable home required by this article as follows: 1. Lower-priced homes. The sales price for lower-priced homes affordable to buyer- households with incomes from 65 percent to at or below 80 percent of AMI will be calculated based on a household income of 70 percent of AMI. . . . C. Household occupancy assumptions. To determine the maximum sales price of affordable homes with different numbers of bedrooms, the city will base its calculation on the AMIs for households of different sizes, as follows: 1. Zero bedroom or studio unit – AMI for a one person household; 2. One bedroom unit – AMI for a two-person household; 3. Two bedroom unit – AMI for a two three-person household; and 4. Three bedroom unit or larger – AMI for a four-person household. 68 Ordinance 2012, Amending Affordable Housing Provisions Page 6 of 14 Section 6 That Section 38.380.100.C of the Bozeman Municipal Code be amended as follows: Sec. 38.380.100. - Submission of affordable housing plan; approval. C. Contents of affordable housing plan. The affordable housing plan submitted by the developer must include, at a minimum: 1. Number of affordable homes proposed in each affordable home category; 2. The number of bedrooms in each affordable home; 3. Number of market-rate homes in the development; 4. The number of bedrooms in each market-rate home; 5. Location of affordable homes in the development (lots in the plat or units within a site plan); 6. Timing of delivery of the affordable homes in relation to the market-rate homes in the development; 7. Marketing plan describing how affordable homes will be offered to the public; 8. Plan for construction of affordable homes in phased developments. It is anticipated that in developments being built in phases, the number of market-rate homes may not be certain at the time the developer submits the affordable housing plan. In such cases, the developer must estimate the number of market-rate homes and number of affordable homes for each phase. If the number of homes in the first phase of such development is certain at the time of the city's approval of the affordable housing plan, a separate affordable homes pricing and delivery schedule for that phase shall be incorporated in the affordable housing plan at the time of development or construction of each subsequent phase. As the number of homes in future phases becomes certain, the affordable housing plan shall provide for subsequent affordable homes pricing and delivery schedules for future phases of the development, consistent with the affordable housing plan; and 9. A description of the procedural adjustments and subsidies requested in the affordable housing plan. 10. Any other information that is reasonably necessary to evaluate the compliance of the affordable housing plan with the requirements of this article. 69 Ordinance 2012, Amending Affordable Housing Provisions Page 7 of 14 Section 7 That Section 38.380.130 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.130. – Incentives Procedural adjustments and subsidies available for affordable housing. Developers may apply for incentives procedural adjustments and subsidies in conjunction with a development application by submitting an affordable housing plan pursuant to section 38.380.100. Incentives Proce dural adjustments and subsidies Description Lower-priced Homes 1 Moderate- priced homes 70% AMI 80% AMI 90% AMI Impact fee subsidy Full or partial subsidization of impact fees, paid from municipal funds if such funds are available; such subsidization must be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. X X Down payment assistance Subject to the availability of funds, the city will provide on a first-come first-served basis, down payment assistance not to exceed $10,000.00 per home benefiting households. Down-payment assistance will only be provided directly to the qualifying homebuyer. This assistance shall be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. X X Waiver of subdivision pre- application Waive pre-application for subdivision when 10% of units are designated for lower price homes. X X Reduction of parkland 1 Allow a 1:1 square foot reduction in the amount of parkland dedication required per square foot of lot size for lower homes. If a developer provides more X 70 Ordinance 2012, Amending Affordable Housing Provisions Page 8 of 14 Incentives Proce dural adjustments and subsidies Description Lower-priced Homes 1 Moderate- priced homes 70% AMI 80% AMI 90% AMI than the required number of lower priced homes, the lot area square footage of the additional lower priced homes shall not further reduce the required parkland dedication. Reduced minimum lot sizes Per the provisions in this chapter, affordable homes may utilize reduced setback requirements and reduced sized lots. The reduction in lot size shall be allowed to create an increase in maximum unit density beyond the maximum currently allowed in a given zoning district. A subdivision satisfying the requirements of this article 38.380 through the construction of affordable homes (not by cash in lieu or land donation) may use any of the minimum lot area, lot width, and floor area reductions as described in article 38.320 Form and Intensity Standards for lots for qualifying homes. X X X Concurrent infrastructure housing construction Concurrent construction of infrastructure and housing development at the installation of gravel- base roads, provided the developer has provided assurance through a performance bond, letter of credit or other financial security acceptable to the City Attorney ensuring the completion of infrastructure and meets all applicable criteria in 38.270.030.D. X X Expedited review for affordable housing 1+1 Detached homes and attached homes in groups of less than 6 units will receive expedited (3 business day) building permit review for affordable housing. For each building permit for an affordable home, a market rate unit will receive the same expedited review. X X X 71 Ordinance 2012, Amending Affordable Housing Provisions Page 9 of 14 Incentives Proce dural adjustments and subsidies Description Lower-priced Homes 1 Moderate- priced homes 70% AMI 80% AMI 90% AMI Reduced parking requirements Reduced parking requirement of two spaces per three-bedroom dwelling. X X 1 This incentive is available only until the city has approved affordable housing plan(s) that include the number of lower-priced homes at 70 percent AMI as established by commission resolution. In addition, a developer seeking to use this incentive may only do so if the affordable homes at 70 percent AMI constitute no more than ten percent of the total units in a development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not previously been provided. 1 The procedural adjustments and subsidies in this column may also be requested for moderate- priced homes with a sales price affordable to a buyer-household with an income from 70.1 percent to a maximum of 80 percent of AMI as determined by the city in accordance with section 38.380.070 of this article. Section 8 That Section 38.380.140 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.140. – Alternative means of compliance; payments of fees-in-lieu. . . . B. Allowable alternative means of compliance. If approved by the city, a developer may satisfy the affordable housing requirements of this article by providing (i) a cash or in-kind payment in lieu or (ii) a donation of land. 1. Payment of cash in lieu. Payment shall be made to the city of a payment of cash-in-lieu per a fee schedule adopted annually by the city commission. For each required affordable home not built, the cash-in-lieu amount will be the difference between the 72 Ordinance 2012, Amending Affordable Housing Provisions Page 10 of 14 sales price of a lower-priced home according to the then-current schedule of affordable home prices and the sales price of a market-rate home average of the median sales price of homes within the city with the same number of bedrooms over the two years prior to the adoption of the schedule. The sale price for the market-rate home will be based on a median sale price of dwellings of a similar type, location and square footage for the prior two years. Cash-in-lieu payments shall be paid prior to issuance of a certificate of occupancy for any dwelling or building in the development subject to this article. . . . Section 9 That Section 38.380.150 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.150. – Qualification of buyers of affordable homes. A. Lower-priced homes. To qualify for purchase of a lower-priced home, a buyer must meet all the following criteria: 1. A household income in the 65 percent to at or below 80 percent AMI range, as verified and certified by the city; such certification must have been provided n more than one year prior to the closing date of the purchase. Income verification will be performed using HUD’s online income certification tool or a similar method that meets Code of Federal Regulations (CFR) 24 part 5, as amended, which adjusts gross incomes based on extraordinary expenses and imputation of assets to income. . . . 4. The buyer must meet one of the following definitions of “first-time homebuyer”: . . . c. An affected individual who is, defined by HUD as a displaced homemaker, who and has only owned with a spouse; or . . . 73 Ordinance 2012, Amending Affordable Housing Provisions Page 11 of 14 Section 10 That Section 38.380.160 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.160. – Subsidy recapture for lower-priced homes. . . . B. Requirement for repayment of non-cash subsidy. Because most or all lower-priced homes affordable homes which received procedural adjustments or subsidies will be sold at a discount from market value, defined as the difference between the appraised value and the maximum allowed price of a lower-priced at the time of the initial sale to a qualified buyer, the city commission finds that it gives a subsidy with cash value to the initial buyer which may be recaptured under certain circumstances. Therefore, upon resale or transfer of a lower- priced home the affordable home, the city aims to further its housing affordability goals by recapturing the principal amount of the subsidy by use of a lien in favor of the city in that amount, which will be due and payable to the city, at zero percent interest, when the home is sold or transferred or when the initial buyer who qualified for the affordable home has failed to abide by the terms of this article. C. Determination of non-cash subsidy amount. The community development director determines the amount of non-cash subsidy based on the difference between 98% of the fair market value of the affordable home and the sales price of the home. To determine the fair market value the director may rely on market data or analysis or one or more professional appraisals provided The appraisal used to calculate the amount of subsidy may be the appraisal obtained by the buyer's mortgage lender or, if that is not available, a professional appraisal provided by the purchaser, or such other professional appraisal as may be obtained by the director for this purpose. An appraisal report used for purposes of this section must provide the fair market value of the affordable home. The commitment letter instructions provided to the appraiser must include a requirement that the appraiser not use as comparables other homes that have received subsid(ies) pursuant to this article 380, or through any affordable housing assistance from the city, State of Montana or federal program. If such property 74 Ordinance 2012, Amending Affordable Housing Provisions Page 12 of 14 must be used as a comparable in the appraisal report, the appraiser must clearly indicate and adjust for the value of such subsidy in determining the fair market value of such property. D. Reconsideration of director’s determination of fair market value. Any party involved in the affordable home sale transaction, including buyer, seller, or the city’s agent may request reconsideration of the director’s determination of fair market value of an affordable home. In the event of such a request, the requesting party may provide the city with an appraisal that meets the requirements of subsection C of this section and/or any other written evidence the requesting party believes the director should consider in his determination. Section 11 Repealer. All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this ordinance are, and the same are hereby, repealed and all other provisions of the ordinances of the City of Bozeman not in conflict with the provisions of this ordinance shall remain in full force and effect. Section 12 Savings Provision. This ordinance does not affect the rights and duties that matured, penalties that were incurred or proceedings that were begun before the effective date of this ordinance. All other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force and effect. Section 13 Severability. That should any sentence, paragraph, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole. 75 Ordinance 2012, Amending Affordable Housing Provisions Page 13 of 14 Section 14 Codification. This Ordinance shall be codified as indicated in Sections 1-10. Section 15 Effective Date. This ordinance shall be in full force and effect thirty (30) days after final adoption. 76 Ordinance 2012, Amending Affordable Housing Provisions Page 14 of 14 PROVISIONALLY ADOPTED by the City Commission of the City of Bozeman, Montana, on first reading at a regular session held on the 19th day of November, 2018. ____________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: ____________________________________ ROBIN CROUGH City Clerk FINALLY PASSED, ADOPTED AND APPROVED by the City Commission of the City of Bozeman, Montana on second reading at a regular session thereof held on the 14th day of January, 2019. The effective date of this ordinance is February 13, 2019. _________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: _______________________________ ROBIN CROUGH City Clerk APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 77 Page 1 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 DIVISION 38.380. - AFFORDABLE HOUSING (For illustrative purposes only) Part 1. - Findings and Purpose Sec. 38.380.010. - Legislative findings. The city commission hereby finds: A. The Bozeman Community Plan establishes a goal to encourage an adequate supply of affordable housing and land for affordable housing in Bozeman. A lack of affordable housing affects the ability of many residents to find housing which is adequate for their basic housing needs. A lack of adequate housing affects health, social stability, and other issues which can have negative and intergenerational effects. To fulfill this goal, the community plan establishes an objective to promote the development of a variety of housing types, designs, and costs to meet the wide range of needs of Bozeman residents. B. The Affordable Housing Action Plan: 2012—2016 (Action Plan) analyzed housing needs and existing market conditions and determined housing affordability has become an acute problem as demonstrated by the number of households paying over 30 percent of their incomes for housing. A 2015 update to the city's housing needs analysis (Action Plan Update) concluded that the group of homebuyers with significant affordability gaps have incomes at or below 80 percent of the area medium income and are in need of subsidies and/or below- market home prices. The Action Plan Update also determined that buying opportunities are increasingly scarce for homebuyers with incomes between 60 percent and 100 percent of AMI, and that housing and land prices have increased faster than incomes for many of Bozeman's residents. C. Since the adoption of the Bozeman Community Plan and the Action Plan, the median sales price of housing has continued to climb. According to the Action Plan Update, as of the end of November 2014, the median home price was $287,000.00. D. The Action Plan Update states that the number of detached homes priced below $250,000.00, a rough indicator of housing affordability for a family of three at 100 percent of AMI, has fallen from 48.4 percent of the market in 2012 to just 18.6 percent in 2014. E. There is a critical shortage of for-sale housing affordable to Bozeman households with incomes at and below the area median income, as currently calculated by the U.S. Department of Housing and Urban Development. As a result, some residents pay excessive amounts of income for housing, reducing the amounts available for other necessities and a decent and adequate standard of living. F. Limited housing opportunities within the city requires households to seek housing outside of the city limits which has a negative impact on transportation infrastructure by adding unnecessary trips to the network. Increased driving distance to affordable housing also negatively impacts air and water quality. To maintain a sufficient resident workforce in all fields of employment, and to ensure the public safety and general welfare of the residents of the city of Bozeman, affordable housing needs must be addressed.. G. The city can achieve its goals of providing more affordable housing and its goal of achieving an economically balanced community only if part of the new housing built is affordable to households with low and moderate incomes. H. The inclusionary housing regulations codified in this ordinance will substantially advance the city's legitimate interest in assuring that additional housing is built in the city that is 78 Page 2 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 affordable to residents, including low- and moderate-income households and dispersed throughout the city in order to encourage economic integration of the city's residents. I. This ordinance is adopted pursuant to the city's self-governing powers and the city's independent general police power to protect public health, safety, and welfare. Requiring affordable housing within certain developments is consistent with the community's housing goals of protecting the public welfare by fostering an adequate supply of housing for persons at all economic levels and maintaining both economic diversity and geographically dispersed affordable housing. J. Requiring developers of newly created market-rate housing to provide some housing affordable to low and moderate-income households is reasonably related to the impacts of their projects because: 1. Rising land prices are a key factor in preventing development of new affordable housing. New market-rate housing construction in Bozeman has generally created strong and increasing demand for a finite stock of unbuilt land within the city, and thus continues to drive up the price of remaining land. New development without affordable units reduces the amount of land development opportunities available for the construction of affordable housing. 2. New residents of market-rate housing place demands on services provided by both public and private sectors, creating a demand for new employees. Some of these public and private sector employees needed to meet the needs of the new residents earn incomes only adequate to pay for affordable housing. Because affordable housing is in short supply in the city, such employees may be forced to live in less than adequate housing within the city, pay a disproportionate share of their incomes to live in adequate housing in the city, or commute ever increasing distances to their jobs from housing located outside the city. These circumstances harm the city's ability to attain employment and housing goals articulated in the community plan and place strains on the city's ability to accept and service new market-rate housing development. Sec. 38.380.020. - Purpose. The purpose of this article is to promote the public health, safety, and welfare by ensuring that the affordable housing needs of the residents of Bozeman are addressed. In addition, the purpose of this article is to ensure that quality housing is dispersed throughout Bozeman's neighborhoods for households of a variety of income levels including low- and moderate-income residents to meet the goals of the community plan and the action plan by encouraging a mix of housing types throughout the city and integrating affordable housing so as to not concentrate affordable housing in a particular area. In addition, the ordinance is intended to alleviate the impacts that would result from the use of available residential land solely for the benefit of households that are able to afford market-rate housing and to mitigate the service burden imposed by households in new market-rate residential developments by making additional affordable housing available for service employees. The ordinance is also intended to mitigate environmental and other impacts that accompany new residential development by reducing traffic, transit and related air quality impacts, promoting jobs/housing balance and reducing the demands placed on transportation infrastructure. 79 Page 3 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 The ordinance provides residential developers with a menu of options from which to select alternatives to the construction of inclusionary units on the same site as market-rate residential developments, and provides incentives procedural adjustments and subsidies for housing developers to ensure houses are constructed and sold in a manner that furthers the city's affordable housing goals. Finally, the ordinance provides incentives procedural adjustments and subsidies for housing developers who are not legally required to comply with the requirements for construction of inclusionary housing, but nevertheless choose to construct affordable housing. Part 2. - Applicability and Definitions Sec. 38.380.030. - Applicability. A. This article applies to: 1. Subdivisions and site plans which propose ten or more market-rate homes, to be created through development, new construction, substantial improvement or reuse. 2. Annexations where the net developable area of the annexing parcel when considering the applicable zoning could result in ten or more dwellings. In such a case, the annexation agreement shall require the provision of affordable housing pursuant to this article. 3. Developments seeking to use incentives procedural adjustments and subsidies to develop affordable housing. B. Contiguous tracts under common ownership and control. A developer may not avoid the requirements for construction of affordable homes by submitting piecemeal applications for development. At the time of the initial application for approval of a subdivision or site plan, the developer shall identify all contiguous property under common ownership and control in the affordable housing plan required by section 38.380.100. C. Development applications approved prior to the effective date of this article. A site plan or subdivision having received sufficiency approval as of the effective date of this article or a preliminary site plan or preliminary plat granted approval prior to the effective date of this article may apply for one or more of the incentives procedural adjustments and subsidies described herein. Only that portion of the amended preliminary plat or site plan pertaining to the request for approval of one or more incentives procedural adjustments and subsidies will be subject to review. The requirements of section 38.19.130 for the amendment of plans will not apply. D. Newly proposed residential developments which include affordable housing in excess of this article's requirements for building affordable homes are eligible for incentives procedural adjustments and subsidies as provided in section 38.380.130. Such request shall require the preliminary plat or site plan to evidence compliance with all other requirements of this article. E. Exemptions. Developments comprised exclusively of rental housing units are exempt from this article. Sec. 38.380.040. - Definitions. A. Affordable housing or affordable home. A dwelling for purchase by an owner-occupant that requires no more than 33 percent of a household's income for housing payments and meets 80 Page 4 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 the definition of a lower-priced home or moderate-priced home. For purposes of 38.380, "affordable housing" or "affordable home" does not include condominium units. B. Area median income or AMI. As calculated by the U.S. Department of Housing and Urban Development (HUD), AMI is the median income for a family of four within a specific geographical area, such as Gallatin County. For each such region, HUD adjusts this AMI calculation for households of different sizes and updates the calculations annually based on estimated changes in area incomes. For purposes of this article, the city hereby adopts HUD's AMI calculations as an equitable and reasonable method to determine affordability, based on percentages of AMI specified in this article. C. Common ownership or control. "Common ownership or control" refers to property owned or controlled by the same person, persons, or entity, or by separate entities in which any shareholder, partner, member, or family member of an investor of the entity owns ten percent (10%) or more of the interest in the property. D. Developer. For purposes of this article, a developer is the person or legal entity, or their successor(s) in interest who: (a) submits an affordable housing plan for a subject property along with other submissions required for land use approvals, zoning, or permit reviews by the city, and/or (b) is the owner of property subject to this article during the development phase or a successor in title, such as a builder, obligated to implement the affordable housing plan required by this article with respect to one or more lots or parcels of land and/or (c) receives incentives for the production of affordable housing. E. Liquid Assets. Assets such as cash, stocks, bonds or similar that can readily be converted to cash with no significant loss in value, but excluding long retirement assets such as IRA accounts, 401K accounts, pension funds, etc. Explicitly excluding retirement F. Lower-priced home. Newly created dwelling for purchase, priced at a price affordable to a buyer-household with an income at or below 70 percent of Area Median Income (AMI) as determined by the city in accordance with section 38.380.070 of this article to be affordable to a household with an income between 65 percent and 80 percent of AMI. G. Market-rate home. Any dwelling for purchase subject to this article which is not an affordable home. The number of market-rate homes in a development is used to determine the required number of affordable homes, as described in this article. For the purposes of 38.380, "market rate home" does not include condominium units. H. Moderate-priced home. Newly created dwelling for purchase, priced at a price affordable to a buyer-household with an income from 70.1 percent to a maximum of 90 percent of AMI as determined by the city in accordance with section 38.380.070 of this article affordable to a household with an income between 81 percent and 100 percent of AMI. Part 3. - Requirements Sec. 38.380.050. - Requirement to build and sell affordable homes. All development subject to this article must include affordable homes. Sec. 38.380.060. - Number of affordable homes required. The number of affordable homes a developer is required to build is a percentage of the total market-rate homes proposed in the development plan. A. The developer may: 81 Page 5 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 1. Build and sell lower-priced homes. Ten percent of the total dwellings constructed within the subdivision or site plan must be lower-priced homes, as defined in 38.380.040.F; built and sold at price targets as established by the city pursuant to section 38.380.070 to households with incomes at or below 80 percent of AMI; or 2. Build and sell moderate-priced homes. Thirty percent of the total dwellings proposed must be moderate-priced homes as defined in 38.380.040.H; sold at price targets as established by the city pursuant to section 38.380.070 to households with incomes from 81 percent to 100 percent of AMI; or 3. Build and sell a mix of both types of affordable homes. If a developer proposes a mix of both lower-priced and moderate-priced homes, the developer starts with the ten percent calculation for lower-priced homes. For each lower-priced home eliminated from the resulting number, the developer may substitute three moderate- priced homes. The distribution of homes between the two categories of affordable homes will be identified in the affordable housing plan required by section 38.380.100. B. Fractions. If the calculation of the required number of affordable homes results in a fraction of a home, this obligation will be satisfied by payment of a fee-in-lieu pursuant to section 38.380.140 or by providing an additional moderate-priced home. C. Calculating number of affordable homes in phased developments. It is anticipated that in developments being built in phases, the number of market-rate homes may not be certain at the time the developer submits the affordable housing plan pursuant to section 38.380.100. In such cases, the developer must estimate the number of market-rate homes and number of affordable homes required for all phases. If the number of homes in the first phase of such development is certain at the time of the city's approval of the affordable housing plan, a separate affordable homes pricing and delivery schedule for that phase shall be incorporated in the affordable housing plan at the time of development or construction of each subsequent phase. As the number of homes in future phases becomes certain, the affordable housing plan shall provide for subsequent affordable homes pricing and delivery schedules for future phases of the development, consistent with the affordable housing plan and section 38.380.070.B. Sec. 38.380.070. - Pricing of affordable homes. A. The city will calculate on an annual basis the maximum sales price a developer may charge for each category of affordable home required by this article as follows: 1. Lower-priced homes. The sales price for lower-priced homes affordable to buyer- households with incomes from 65 percent to at or below 80 percent of AMI will be calculated based on a household income of 70 percent of AMI. 2. Moderate-priced homes. The sales price for moderate-priced homes affordable to buyer- households with incomes from 81 percent to 100 percent of AMI will be calculated based on a household income of 90 percent of AMI. B. Affordable home sales price schedule. 1. The city will annually publish a schedule of sales prices for low-priced homes and moderate-priced homes within 30 calendar days of the HUD's annual publication of 82 Page 6 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 updated AMI calculations. The sales price schedule will be effective on the date of publication by the city. The new sales price schedule will apply to applications for building permits received after the effective date of the new sales price schedule. A developer may request that a new sales price schedule apply to the sale of an affordable home approved under a previous sales price schedule. 2. The city, at the city's sole discretion, may recalculate the sales price schedule if prevailing mortgage interest rates have adjusted by 50 basis points or more over the assumption used for the previous schedule. 3. Considerations. The following factors will be considered by the city in calculating the sales price schedule. The Director of community development may make de minimis exceptions to application of these factors: a. AMI for the Bozeman area; b. Gross monthly income will be calculated as the appropriate HUD AMI calculations income divided by 12; c. The maximum monthly payment will be 33 percent of gross monthly income. The maximum monthly payment will include costs directly applicable to a mortgage such as payment of principal, interest, as well as assumptions for typical costs of taxes, public assessments, property insurance premiums, mortgage insurance premiums (assuming the higher of either government or private mortgage insurance), and homeowner association fees; d. The interest rate will be determined by the city by a survey of at least three local mortgage lenders, averaging their current rates for loans for homes with price ranges within the low-priced homes range and the moderate-priced homes range; e. The financing will be a conventional or government-insured fixed-rate loan with a term of 15 to 30 years; and f. A borrower will typically contribute $1,000.00 toward the purchase price. C. Household occupancy assumptions. To determine the maximum sales prices of affordable homes with different numbers of bedrooms, the city will base its calculation on the AMIs for households of different sizes, as follows: 1. Zero bedroom or studio unit - AMI for a one-person household; 2. One bedroom unit - AMI for a two-person household; 3. Two bedroom unit - AMI for a two three-person household; and 4. Three bedroom unit or larger - AMI for a four-person household. Sec. 38.380.080. - Timing of delivery of affordable homes. Required affordable homes must be provided in accordance with the following: A. In each development in which more than one affordable home is required to be sold, the affordable housing plan shall specify that affordable homes are to be sold concurrently and in proportion to the sale of unimproved lots or market-rate homes. Such timing of compliance will be represented in an affordable homes pricing and delivery schedule as described in section 38.380.100. 83 Page 7 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 B. A developer may build and sell affordable homes earlier than required in an affordable housing plan. Sec. 38.380.090. - Minimum design and construction standards for affordable homes. A. Required number of bedrooms in affordable homes. In each development subject to the requirements of this article, affordable homes shall represent a mix of bedrooms per unit as similar as possible (given rounding of numbers) to the mix of bedrooms per unit of the market- rate homes in the development. B. Standards for design and construction. The city shall define reasonable standards for the design and construction of affordable homes to ensure livability and compatibility with nearby market-rate homes in the development. Affordable homes may have different interior finishes and features than other dwellings within the development, as long as the finishes and features are functionally equivalent and of good quality. Finishes include, but are not limited to, design and materials, the provision of appliances, cabinets, and floor treatment. Features include, but are not limited to, the numbers of bathrooms, garages and parking areas, mechanical equipment and hookups, and green building features. C. Amenities. Affordable homes shall have the same amenities as the market-rate homes in the development, including the same access to and enjoyment of common open space and facilities in the development. Sec. 38.380.100. - Submission of affordable housing plan; approval. A. Affordable housing plan. The applicant for any development seeking to utilize the incentives to create affordable housing or subject to the requirements of this article must submit an affordable housing plan in a form provided by or approved by the city that describes how the requirements of this article will be satisfied. When approved by the city, the affordable housing plan must be incorporated by reference in the recorded subdivision plat, site plan or annexation agreement. The applicant will provide only one affordable housing plan to meet the requirements of this article. B. Affordable housing plan as binding agreement. An affordable housing plan approved by the city will be considered a binding contract between the developer and the developer's successors in interest to the lot or dwelling. Such plan will be included in a separate recorded written agreement between the developer and the city, or incorporated into another recorded document wherein the developer is required to implement the affordable housing plan. C. Contents of affordable housing plan. The affordable housing plan submitted by the developer must include, at a minimum: 1. Number of affordable homes proposed in each affordable home category; 2. The number of bedrooms in each affordable home; 3. Number of market-rate homes in the development; 4. The number of bedrooms in each market-rate home; 5. Location of affordable homes in the development (lots in the plat or units within a site plan); 84 Page 8 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 6. Timing of delivery of the affordable homes in relation to the market-rate homes in the development; 7. Marketing plan describing how affordable homes will be offered to the public; 8. Plan for construction of affordable homes in phased developments. It is anticipated that in developments being built in phases, the number of market-rate homes may not be certain at the time the developer submits the affordable housing plan. In such cases, the developer must estimate the number of market-rate homes and number of affordable homes for each phase. If the number of homes in the first phase of such development is certain at the time of the city's approval of the affordable housing plan, a separate affordable homes pricing and delivery schedule for that phase shall be incorporated in the affordable housing plan at the time of development or construction of each subsequent phase. As the number of homes in future phases becomes certain, the affordable housing plan shall provide for subsequent affordable homes pricing and delivery schedules for future phases of the development, consistent with the affordable housing plan; and 9. A description of the procedural adjustments and subsidies requested in the affordable housing plan. 10. Any other information that is reasonably necessary to evaluate the compliance of the affordable housing plan with the requirements of this article. D. Pricing and delivery schedules in affordable housing plans. The affordable homes pricing and delivery schedule shall be in the form of a chart that contains the numbers of required affordable homes by bedroom count and affordable home category, and shall indicate the current affordable home prices as calculated by the city. E. Approval of affordable housing plan. The affordable housing plan will be reviewed as part of the initial application approval process for the type of development proposed. A condition shall be attached to the approval of any subdivision plat or site plan to require recordation of the affordable housing plan or other separate agreement obligating the developer to meet the requirements of this article. Sec. 38.380.110. - Marketing, sales and occupancy of affordable homes. Developers subject to this article shall market and sell affordable homes in accordance with provisions described in the city's published instructions for preparing affordable housing plans. These provisions will address factors such as waiting list management, marketing materials, responsibilities for marketing affordable homes, actions to be taken in the event of inability to identify qualified buyers, procedures for certification of buyer eligibility, purchase contracts, and full disclosures to buyers of their obligations and rights under this article. If after 120 calendar days of marketing efforts on the part of the developer of an affordable home in compliance with the city's published instructions the developer has not executed a purchase contract with a qualified buyer, the developer may enter into a purchase contract with a buyer at a sales price that shall not be subject to the maximum sales prices established pursuant to section 38.380.070. In such a case, upon closing of the sale the developer must pay the city the difference between the sales price and the price of the affordable home as set out in the approved affordable housing plan in accordance with section 38.380.180.B. Sec. 38.380.120. - Recording requirements upon sale of affordable home. 85 Page 9 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 The developer, or the city or its agent if the city is involved in the sale of an affordable home shall cause to be recorded in the offices of the Gallatin County Clerk and Recorder, simultaneously with the recording of the deed of conveyance, a restrictive covenant, deed of trust or other legal instrument, approved as to form by the Bozeman City Attorney that fulfills the resale and recapture requirements described in section 38.380.160. Part 4. - Incentives Sec. 38.380.130. - Incentives available for affordable housing. Developers may apply for incentives in conjunction with a development application by submitting an affordable housing plan pursuant to section 38.380.100. Incentives Procedur al adjustments and subsidies Description Lower- priced Homes 1 Moderate- priced homes 70% AMI 80% AMI 90% AMI Impact fee subsidy Full or partial subsidization of impact fees, paid from municipal funds if such funds are available; such subsidization must be secured with a lien instrument due upon sale, transfer or non- rate/term refinance of the home. X X Down payment assistance Subject to the availability of funds, the city will provide on a first-come first-served basis, down payment assistance not to exceed $10,000.00 per home benefiting households. Down-payment assistance will only be provided directly to the qualifying homebuyer. This assistance shall be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. X X Waiver of subdivision pre- application Waive pre-application for subdivision when 10% of units are designated for lower price homes. X X Reduction of parkland 1 Allow a 1:1 square foot reduction in the amount of parkland dedication required per square foot of lot size for lower homes. If a developer provides more than the required number of lower priced homes, the lot area square footage of the additional lower priced homes shall not further reduce the required parkland dedication. X X 86 Page 10 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 Reduced minimum lot sizes Per the provisions in this chapter, affordable homes may utilize reduced setback requirements and reduced sized lots. The reduction in lot size shall be allowed to create an increase in maximum unit density beyond the maximum currently allowed in a given zoning district. A subdivision satisfying the requirements of this article 38.380 through the construction of affordable homes (not by cash in lieu or land donation) may use any of the minimum lot area, lot width, and floor area reductions as described in article 38.320 Form and Intensity Standards for lots for qualifying homes. X X X Concurrent infrastructure housing construction Concurrent construction of infrastructure and housing development at the installation of gravel-base roads, provided the developer has provided assurance through a performance bond, letter of credit or other financial security acceptable to the City Attorney ensuring the completion of infrastructure. X X Expedited review for affordable housing 1+1 Detached homes and attached homes in groups of less than 6 units will receive expedited (3 business day) building permit review for affordable housing. For each building permit for an affordable home, a market rate unit will receive the same expedited review. X X X Reduced parking requirements Reduced parking requirement of two spaces per three-bedroom dwelling. X X 1 This incentive is available only until the city has approved affordable housing plan(s) that include the number of lower-priced homes at 70 percent AMI as established by commission resolution. In addition, a developer seeking to use this incentive may only do so if the affordable homes at 70 percent AMI constitute no more than ten percent of the total units in a development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not previously been provided. 1 The procedural adjustments and subsidies in this column may also be requested for moderate- priced homes with a sales price affordable to a buyer-household with an income from 70.1 percent to a maximum of 80 percent of AMI as determined by the city in accordance with section 38.380.070 of this article. Part 5. - Alternative Means of Compliance Sec. 38.380.140. - Alternative means of compliance; payments of fees-in-lieu. 87 Page 11 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 A. Alternatives to building lower-priced homes. The city may authorize a developer otherwise required to provide affordable homes within a development to provide an alternative means of compliance of equal value to the affordable homes otherwise required to be constructed pursuant to this article. B. Allowable alternative means of compliance. If approved by the city, a developer may satisfy the affordable housing requirements of this article by providing (i) a cash or in-kind payment in lieu or (ii) a donation of land. 1. Payment of cash in lieu. Payment shall be made to the city of a payment of cash-in-lieu per a fee schedule adopted annually by the city commission. For each required affordable home not built, the cash-in-lieu amount will be the difference between the sales price of a lower-priced home according to the then-current schedule of affordable home prices and the sales price of a market-rate home average of the median sales price of homes within the city with the same number of bedrooms over the two years prior to the adoption of the schedule. The sale price for the market-rate home will be based on a median sale price of dwellings of a similar type, location and square footage for the prior two years. Cash-in-lieu payments shall be paid prior to issuance of a certificate of occupancy for any dwelling or building in the development subject to this article. 2. Donation of land. Credits for donation of house lots or multi-family parcels. The city may accept donations to a city-designated community housing nonprofit entity of: (a) ready-to-build house lots; or (b) parcels of land suitable for construction of affordable multifamily housing. Restrictions on the donated lots or parcels will run with the land. Such donations, if approved, will provide credits against this article's requirements for building lower-priced homes. The credits will be determined as follows: a. House lots. The value of the lot or lots, as determined by a professional appraisal paid for by the developer, will be divided by the city's then-current average of cash- in-lieu payments for homes of different sizes. The product of that division to two decimal points will constitute the credit against the otherwise required number of lower-priced homes. b. Parcels of land. The city shall periodically adopt a valuation for donation of parcels of land intended for multifamily development, for purposes of determining credits against the number of affordable homes that would otherwise be required in a development subject to this article. The parcel of land must be zoned for the development of multi-family housing, such as R-3, R-4 and REMU. C. Timing of delivery of alternative means of compliance. 1. Timing of providing in-lieu contributions. In-lieu contributions when permitted shall be due and deliverable to the city before the recordation of the affordable housing plan. A developer may propose an alternative to this requirement in which staged contributions are made upon the predicted occurrence of certain events, such as the sale of lots, which alternative may be approved at the sole discretion of the city. 2. Staged delivery of in-lieu contributions. In the case of staged delivery of in-lieu contributions, when permitted, the city's determination of the value of each contribution shall take into account the differential financial value of payments that are made later 88 Page 12 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 than recordation of the affordable housing plan using conventional methods of discounting future cash flows to present value. Part 6. - Buyer Qualification and Subsidy Recapture Sec. 38.380.150. - Qualification of buyers of affordable homes. A. Lower-priced homes. To qualify for purchase of a lower-priced home, a buyer must meet the following criteria: 1. A household income in the 65 percent to at or below 80 percent AMI range, as verified and certified by the city; such certification must have been provided no more than one year prior to the closing date of the purchase. Income verification will be performed using HUD's online income certification tool or a similar method that meets Code of Federal Regulations (CFR) 24 part 5, as amended, which adjusts gross incomes based on extraordinary expenses and imputation of assets to income. 2. Maximum liquid assets of $25,000.00 at the time of income certification. Exceptions may be granted by the Director of community development based on extraordinary circumstances. 3. The household occupying the lower-priced home must meet the definition of "Household" in section 38.700.090. 4. The buyer must meet one of the following definitions of "first-time homebuyer": a. An individual who has had no ownership interest in a principal residence during the three-year period ending with the date of purchase; or b. A single parent whose only prior home was owned with a former spouse while married; or c. An affected individual who is, defined by HUD as a displaced homemaker, who and has only owned with a spouse; or d. An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations; or e. An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of construction a permanent structure. 5. The buyer must contribute at least $1,000.00 towards the purchase of the home unless waived in writing by the city because of extraordinary circumstances, such as death of primary or secondary income earner or qualification as displaced homemaker. 6. The buyer must utilize conventional or government-insured fixed-rate first-mortgage financing with a term of 15 to 30 years. 7. The household in a lower-priced home must occupy the home as its primary residence. Lower-priced homes may not be rented to another party, since the intent of the program is to provide these homes only for income-qualified owner occupants, with the exception of rentals for a limited period of time necessitated by a family hardship or a temporary move for one year or less, if approved in advance by the city. 89 Page 13 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 B. Moderate-priced homes. To purchase a moderate-priced home, a buyer must occupy the home as a primary residence. The developer must provide evidence satisfactory to the city verifying the initial owner will use the home as their primary residence at time of sale. Sec. 38.380.160. - Subsidy recapture for lower-priced homes. To ensure that the community investment in affordable housing is perpetuated and that beneficiaries of affordable housing programs do not receive a windfall financial benefit, the city requires repayment of subsidies as follows: A. Requirement for repayment of cash subsidy. The buyer of a lower-priced home that received cash support in the form of funds from the Affordable Housing Fund or other funding through the city, including but not limited to down payment assistance, impact fee payment, or other funding shall be required to repay the subsidy, at zero percent interest, when the dwelling or property is sold, transferred, refinanced with equity converted to cash out or when the initial buyer who qualified for the subsidy has failed to abide by the requirements of this article. The subsidy will be recorded as a lien against the property at the Gallatin County Clerk and Recorders office. B. Requirement for repayment of non-cash subsidy. Because most or all lower-priced homes affordable homes which received procedural adjustments or subsidies will be sold at a discount from market value, defined as the difference between the appraised value the maximum allowed price of a lower-priced home at the time of the initial sale to a qualified buyer, the city commission finds that it gives a subsidy with cash value to the initial buyer which may be recaptured under certain circumstances. Therefore, upon resale or transfer of a lower-priced home the affordable home, the city aims to further its housing affordability goals by recapturing the principal amount of the subsidy by use of a lien in favor of the city in that amount, which will be due and payable to the city, at zero percent interest, when the home is sold or transferred or when the initial buyer who qualified for the affordable home has failed to abide by the terms of this article. C. Determination of non-cash subsidy amount. The community development director determines the amount of non-cash subsidy based on the difference between 98% of the fair market value of the lower-priced home and the sales price of the home. To determine the fair market value the director may rely on market data or analysis or one or more professional appraisals provided The appraisal used to calculate the amount of subsidy may be the appraisal obtained by the buyer's mortgage lender or, if that is not available, a professional appraisal provided by the purchaser, or such other professional appraisal as may be obtained by the director for this purpose. An appraisal report used for purposes of this section must provide the fair market value of the lower-priced home. The commitment letter instructions provided to the appraiser must include a requirement that the appraiser not use as comparables other homes that have received subsid(ies) pursuant to this article 380, or through any affordable housing assistance from the city, State of Montana or federal program. If such property must be used as a comparable in the appraisal report, the appraiser must clearly indicate and adjust for the value of such subsidy in determining the fair market value of such property. D. Reconsideration of director’s determination of fair market value. Any party involved in the lower-priced home sale transaction, including buyer, seller, or the city’s agent may request reconsideration of the director’s determination of fair market value of a lower- 90 Page 14 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 priced home. In the event of such a request, the requesting party may provide the city with an appraisal that meets the requirements of subsection C of this section and/or any other written evidence the requesting party believes the director should consider in his determination. Part 7. - Administration and Enforcement Sec. 38.380.170. - Administration. A. Director of community development authority. The director of community development or an agent designated by the city commission shall have authority to promulgate and enforce all reasonable rules and regulations and take all actions necessary to the effective operation and enforcement of this article, unless such authority is expressly reserved to the city commission or another city official, including but not limited to: 1. Reviewing a developers' affordable housing plan for compliance with this article; 2. Adopting all forms and prescribing the information to be given therein; 3. Monitoring developers' compliance with this article, notifying the developer of noncompliance, and ordering compliance; 4. Imposing any and all sanctions permitted by this article; and 5. Calculating the annual pricing targets for affordable homes and causing a sales price schedule to be published. The director of community development may make de minimis exceptions to the factors considered in calculating the price targets. B. Administrative manual. The city will publish administrative rules and instructions approved by the city commission, including but not limited to instructions for completing the affordable housing plan, valuations required by this article, and the distribution of the required number of affordable homes between the two affordable home categories and required number of bedrooms. Such distribution by affordable home category shall be based primarily upon an assessment by the city of housing needs among the income groups corresponding to each affordable home category, but shall take into account the economic impact on developments subject to the requirements of this article. C. Verification of sales prices and income certification prior to closing. The city manager may create standards for documentation the city will use to verify the sale price of a home created pursuant to this article. For the initial sale of an affordable home, the seller must provide the city with a copy of the HUD-1 form prepared by an attorney or title company indicating the sales price. The final sales price on the HUD-1 form may not exceed the maximum price for a specific affordable home as described in the current price schedule pursuant to section 38.380.070 plus an allowed maximum of $3,000.00 in buyer selected upgrades, if allowed by the first mortgage lender underwriters. In addition, the city shall require certification satisfactory to the city of homebuyer income qualification. D. Monitoring completed sales. Upon receipt of a settlement statement for an affordable home, the city will determine if the completed affordable home sale complies with the approved affordable housing plan and the requirements of this article, and if not, respond to the noncompliance as provided in section 38.380.180. Sec. 38.380.180. - Noncompliance; sanctions. 91 Page 15 of 15 Illustration of Ordinance 2012 amendments within Division 38.380 A. Discovery of noncompliance. If the city determines a developer subject to an affordable housing plan has failed to comply with any terms or conditions of the affordable housing plan or this article, the Director of community development or authorized agent shall notify the developer of the noncompliance in writing and order compliance by the most reasonable and expeditious means as determined by the city. Notification shall describe a date certain by which the developer must be in full compliance (which may not be less than one week or more than one year from the date of the notice), and shall describe: (i) the exact nature of the noncompliance; and (ii) the possible sanctions for noncompliance with this notification. B. Cancellation of incentives provided. If a developer sells a home for a price not in compliance with the approved affordable housing plan or any other recorded documentation obligating developer to comply with this article, the developer must, prior to the release by the city of the dwelling from the affordable housing plan or binding agreement, pay the city the difference between the sale price and the price of the affordable home as set out in the approved affordable housing plan. C. Sanctions for noncompliance. In addition to other remedies available to the city pursuant to this article, if on a date certain by which compliance has been ordered by the director of community development or authorized agent, the developer remains in noncompliance, the director of community development or authorized agent shall notify the city attorney of the noncompliance and request that sanctions be imposed. The city shall have the authority to impose one or more sanctions including but not limited to the following which the city deems most effective and appropriate considering the nature of the noncompliance: 1. Withholding or revoking building permits, 2. Issuing stop-work orders, and/or 3. Withholding certificates of occupancy. 92 Ordinance 2012 Page 1 of 10 ORDINANCE NO. 2012 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA AMENDING CERTAIN AFFORDABLE HOUSING PROVISIONS OF CHAPTER 38, ARTICLE 380 OF THE BOZEMAN MUNICIPAL CODE WHEREAS, the City adopted Ordinance 1922 adding a new article to Chapter 38, Unified Development Code (“UDC”), regarding affordable housing (“Affordable Housing Ordinance” or “AHO”) on December 7, 2015; and WHEREAS, since the adoption of Ordinance 1922 homes have been built and sold pursuant to the AHO, and the builder has suggested amendments to the AHO to improve its workability; and WHEREAS, since the adoption of Ordinance 1922 the Community Affordable Housing Advisory Board (“CAHAB”) has suggested amendments to the AHO; and WHEREAS, in 2018 the City hired an Affordable Housing Program Manager who has suggested amendments to the AHO; and WHEREAS, the Commission’s legislative findings in Ordinance 1922 still apply in the City and adjustments to the AHO are necessary to ensure that article 38.380 of the UDC fulfills its purposes as stated in section 38.380.020; and WHEREAS, the amendments to the AHO were reviewed by CAHAB on July 11, 2018 and August 8, 2018, and CAHAB recommended adoption of the amendments on August 8, 2018; and WHEREAS, the amendments to the AHO were reviewed by the Zoning Commission and Planning Board at a joint meeting on October 16, 2018. The Zoning Commission voted 2:1 to 93 Ordinance 2012 Page 2 of 10 recommend approval of the proposed amendments and the Planning Board voted 6:0 to recommend approval of the proposed amendments. NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA: Section 1 That Section 38.380.040 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.040. – Definitions. . . . F. Lower-priced home. Newly created dwelling for purchase, priced at a price affordable to buyer with an income at 70 percent of Area Median Income (AMI) as determined by the city in accordance with section 38.380.070 of this article to be affordable to a household with an income between 65 percent and 80 percent of AMI. . . . FH. Moderate-priced home. Newly created dwelling for purchase, priced at price affordable to a buyer with an income from 70.1 percent to a maximum of 90 percent of AMI as determined by the city in accordance with section 38.380.070 of this article affordable to a household with an income between 81 percent and 100 percent of AMI. Section 2 That Section 38.380.070 of the Bozeman Municipal Code be amended as follows: 38.380.070. – Pricing of affordable homes. A. The city will calculate on an annual basis the maximum sales price a developer may charge for each category of affordable home required by this article as follows: 1. Lower-priced homes. The sales price for lower-priced homes affordable to buyer- households with incomes from 65 percent to at or below 80 percent of AMI will be calculated based on a household income of 70 percent of AMI. . . . 94 Ordinance 2012 Page 3 of 10 C. Household occupancy assumptions. To determine the maximum sales price of affordable homes with different numbers of bedrooms, the city will base its calculation on the AMIs for households of different sizes, as follows: 1. Zero bedroom or studio unit – AMI for a one person household; 2. One bedroom unit – AMI for a two-person household; 3. Two bedroom unit – AMI for a two three-person household; and 4. Three bedroom unit or larger – AMI for a four-person household. Section 3 That Section 38.380.130 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.130. – Incentives Procedural adjustments and subsidies available for affordable housing. Developers may apply for incentives procedural adjustments and subsidies in conjunction with a development application by submitting an affordable housing plan pursuant to section 38.380.100. Incentives Proce dural adjustments and subsidies Description Lower-priced Homes Moderate- priced homes 70% AMI 80% AMI 90% AMI Impact fee subsidy Full or partial subsidization of impact fees, paid from municipal funds if such funds are available; such subsidization must be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. X X Down payment assistance Subject to the availability of funds, the city will provide on a first-come first-served basis, down payment assistance not to exceed $10,000.00 per home benefiting households. Down-payment assistance will only be provided directly to the X X 95 Ordinance 2012 Page 4 of 10 Incentives Proce dural adjustments and subsidies Description Lower-priced Homes Moderate- priced homes 70% AMI 80% AMI 90% AMI qualifying homebuyer. This assistance shall be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. Waiver of subdivision pre- application Waive pre-application for subdivision when 10% of units are designated for lower price homes. X X Reduction of parkland 1 Allow a 1:1 square foot reduction in the amount of parkland dedication required per square foot of lot size for lower homes. If a developer provides more than the required number of lower priced homes, the lot area square footage of the additional lower priced homes shall not further reduce the required parkland dedication. X Reduced minimum lot sizes Per the provisions in this chapter, affordable homes may utilize reduced setback requirements and reduced sized lots. The reduction in lot size shall be allowed to create an increase in maximum unit density beyond the maximum currently allowed in a given zoning district. A subdivision satisfying the requirements of this article 38.380 through the construction of affordable homes (not by cash in lieu or land donation) may use any of the minimum lot area, lot width, and floor area reductions as described in article 38.320 Form and Intensity Standards for lots for qualifying homes. X X X Concurrent infrastructure housing construction Concurrent construction of infrastructure and housing development at the installation of gravel- base roads, provided the developer has provided assurance through a performance bond, letter of credit or other financial security acceptable to the Ordinance 2012 Page 5 of 10 Incentives Proce dural adjustments and subsidies Description Lower-priced Homes Moderate- priced homes 70% AMI 80% AMI 90% AMI infrastructure and meets all applicable criteria in 38.270.030.D. Expedited review for affordable housing 1+1 Detached homes and attached homes in groups of less than 6 units will receive expedited (3 business day) building permit review for affordable housing. For each building permit for an affordable home, a market rate unit will receive the same expedited review. X X X Reduced parking requirements Reduced parking requirement of two spaces per three-bedroom dwelling. X X 1 This incentive is available only until the city has approved affordable housing plan(s) that include the number of lower-priced homes at 70 percent AMI as established by commission resolution. In addition, a developer seeking to use this incentive may only do so if the affordable homes at 70 percent AMI constitute no more than ten percent of the total units in a development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not previously been provided. Section 4 That Section 38.380.140 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.140. – Alternative means of compliance; payments of fees-in-lieu. . . . B. Allowable alternative means of compliance. If approved by the city, a developer may satisfy the affordable housing requirements of this article by providing (i) a cash or in-kind payment in lieu or (ii) a donation of land. 97 Ordinance 2012 Page 6 of 10 1. Payment of cash in lieu. Payment shall be made to the city of a payment of cash-in-lieu per a fee schedule adopted annually by the city commission. For each required affordable home not built, the cash-in-lieu amount will be the difference between the sales price of a lower-priced home according to the then-current schedule of affordable home prices and the sales price of a market-rate home average of the median sales price of homes within the city with the same number of bedrooms over the two years prior to the adoption of the schedule. The sale price for the market-rate home will be based on a median sale price of dwellings of a similar type, location and square footage for the prior two years. Cash-in-lieu payments shall be paid prior to issuance of a certificate of occupancy for any dwelling or building in the development subject to this article. . . . Section 5 That Section 38.380.150 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.150. – Qualification of buyers of affordable homes. A. Lower-priced homes. To qualify for purchase of a lower-priced home, a buyer must meet all the following criteria: 1. A household income in the 65 percent to at or below 80 percent AMI range, as verified and certified by the city; such certification must have been provided n more than one year prior to the closing date of the purchase. Income verification will be performed using HUD’s online income certification tool or a similar method that meets Code of Federal Regulations (CFR) 24 part 5, as amended, which adjusts gross incomes based on extraordinary expenses and imputation of assets to income. . . . 4. The buyer must meet one of the following definitions of “first-time homebuyer”: . . . c. An affected individual who is, defined by HUD as a displaced homemaker, who and has only owned with a spouse; or . . . 98 Ordinance 2012 Page 7 of 10 Section 6 That Section 38.380.160 of the Bozeman Municipal Code be amended as follows: Sec. 38.380.160. – Subsidy recapture for lower-priced homes. . . . B. Requirement for repayment of non-cash subsidy. Because most or all lower-priced homes will be sold at a discount from market value, defined as the difference between 98% of the nonsubsidized fair market the appraised value of the lower-priced home and the maximum allowed price of a lower-priced home at the time of the initial sale to a qualified buyer, the city commission finds that it gives a subsidy with cash value to the initial buyer which may be recaptured under certain circumstances. Therefore, upon resale or transfer of a lower-priced home, the city aims to further its housing affordability goals by recapturing the principal amount of the subsidy by use of a lien in favor of the city in that amount, which will be due and payable to the city, at zero percent interest, when the home is sold or transferred or when the initial buyer who qualified for the affordable home has failed to abide by the terms of this article. C. Determination of non-cash subsidy amount. The community development director determines the amount of non-cash subsidy based on the difference between 98% of the fair market value of the lower-priced home and the sales price of the home. To determine the fair market value the director may rely on market data or analysis or one or more professional appraisals provided The appraisal used to calculate the amount of subsidy may be the appraisal obtained by the buyer's mortgage lender or, if that is not available, a professional appraisal provided by the purchaser, or such other professional appraisal as may be obtained by the director for this purpose. An appraisal report used for purposes of this section must provide the fair market value of the lower-priced home. The commitment letter instructions provided to the appraiser must include a requirement that the appraiser not use as comparables other homes that have received subsid(ies) pursuant to this article 380, or through any affordable housing assistance from the city, State of Montana or federal program. If such property must be used as a comparable in the appraisal report, the appraiser must clearly indicate and adjust for the value of such subsidy in determining the fair market value of such property. D. Reconsideration of director’s determination of fair market value. Any party involved in the lower- priced home sale transaction, including buyer, seller, or the city’s agent may request reconsideration of the director’s determination of fair market value of a lower-priced home. In the event of such a 99 Ordinance 2012 Page 8 of 10 request, the requesting party may provide the city with an appraisal that meets the requirements of subsection C of this section and/or any other written evidence the requesting party believes the director should consider in his determination. Section 7 Repealer. All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this ordinance are, and the same are hereby, repealed and all other provisions of the ordinances of the City of Bozeman not in conflict with the provisions of this ordinance shall remain in full force and effect. Section 8 Savings Provision. This ordinance does not affect the rights and duties that matured, penalties that were incurred or proceedings that were begun before the effective date of this ordinance. All other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force and effect. Section 9 Severability. That should any sentence, paragraph, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole. Section 10 Codification. This Ordinance shall be codified as indicated in Sections 1-6. 100 Ordinance 2012 Page 9 of 10 Section 11 Effective Date. This ordinance shall be in full force and effect thirty (30) days after final adoption. PROVISIONALLY ADOPTED by the City Commission of the City of Bozeman, Montana, on first reading at a regular session held on the _____ day of ________ ___, 2018. ____________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: ____________________________________ ROBIN CROUGH City Clerk 101 Ordinance 2012 Page 10 of 10 FINALLY PASSED, ADOPTED AND APPROVED by the City Commission of the City of Bozeman, Montana on second reading at a regular session thereof held on the ___ day of _________________, 2018. The effective date of this ordinance is __________ __, 2018. _________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: _______________________________ ROBIN CROUGH City Clerk APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 102 City Attorney ensuring the completion of X X 96