HomeMy WebLinkAboutRoot Policy Affordable Housing PresentationAFFORDABLE HOUSING ORDINANCE
City of Bozeman
PRESENTED BY
Mollie Fitzpatrick, Managing Director
Project
Background
Root Policy Research is currently working in partnership with Clarion Associates to help the City revise the AHO:
1.To reflect an incentive-based system(as opposed to a mandatory inclusionary system); and
2.Broaden the application of the AHO to rental developments in addition to for-sale (owner occupied) developments.
The City of Bozeman’s existing Affordable Housing Ordinance (AHO) reflects an inclusionary zoning system which is no longer permissible (due to recent state legislation) and only applied to owner occupied, single-family development.
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Modification of the AHO was recommended in the Bozeman Community Action Plan to broaden application of the AHO (to multifamily), calibrate income targets, and strengthen deed restrictions. State restrictions on inclusionary zoning now require a complete restructuring of the AHO.
AHO
Purpose
The AHO should facilitate the development of affordable (deed/income restricted) rental and ownership housing.
The Bozeman Action Plan suggest AHO income targets prioritize:
•<80% AMI for rental;
•<100% AMI for condos; and
•<120% AMI for single family.
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Affordable Production PoliciesThe key challenge of moving from an inclusionary system to an incentive system is that the provision of affordable units becomes “optional.” As such, there must be substantial market demand (and market reward) for the incentives offered in order to entice developers to participate.
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Approaches to Incentive Based Affordability Systems
Calibrated to maximize the potential of purely Affordable developments.
•Pros: Capitalizes on experts on the affordable housing field and maximizes impact of other housing investments/ subsidies.
•Cons: Reduces opportunity to spread affordable housing production across a broad spectrum of developments.
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Approach 2Approach 1
Calibrated to incent affordable units from market-rate development.
•Pros: leverages private sector and creates mixed-income developments.
•Cons: Relies on developers without expertise in building/managing affordable units and only works in markets where developers “need” something from the City (e.g., higher entitlement, parking reductions, etc.).
Generally provides greater incentives to fewer developments who provide a high proportion of affordable units.
Generally offers smaller incentives to more developments who provide a small proportion of affordable units.
Driven by barrier/opportunity research.Driven by feasibility analysis.
FEASIBILITY
ANALYSIS
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Feasibility Testing Process
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Prototype
Proformas Financial
Feasibility Changes in
Outcomes
Incentive &
Affordability
Pkg
•Based on Regional
Housing Study
prototypes and costs,
market data, and
interviews. •For-sale and rental
residential prototypes
(from single family to
12-story)
Proformas account for
variation in site and
prototype
characteristics,
development cost,
operating expenses,
and sale/rental
revenues to calculate
overall project returns.
Incentives and affordability
requirements are added to
base case proformas,
focusing on:•Height bonuses•Reduced parking
requirements•Reduced lot size
requirements
Measured actual
change in output
metrics; incentive/
affordability must
demonstrate higher
return on cost, net
cash flow, and/or
project margin to be
considered feasible
Feasibility Results
The feasibility analysis shows the incentives and affordability requirements (at right) improve developer returns (return on cost, annual net cash flow, and/or project margin). However, they require incentive options that may have limited market appeal (very small lot sizes and heights that require different construction types) for relatively low dedication of affordable units. As such, incentive adoption may be low among existing market-rate developers in Bozeman.
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at Target AMIs at Higher AMIs
3-Story Rental
Residential
1-3 Story height bonus
(4-6 story building) and
parking reduction to 1.0
spaces per unit
5% of units at
80% AMI
8% of units at
100% AMI
Lot size reduction to
2,200 SF lot
5% of units at
100% AMI
9% of units at
120% AMI
Lot size reduction to
1,800 SF lot
7% of units at
100% AMI
13% of units at
120% AMI
Single-Household
Unit on 4,000 SF lot
Lot size reduction to
3,000 SF lot
1.5% of units at
120% AMI
2% of units at
150% AMI
Townhome on
3,000 SF lot
Incentive PackageBaseline prototype Feasible Affordability Requirement
TIERED
PROGRAM
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Root Recommends a Tiered Incentive
Based on the findings Root recommends a tiered approach for the City’s AHO:
•Include incentives (based on the feasibility analysis) for market-rate developers to
include a small proportion of affordable units in their development. However, the City
should expect relatively low adoption of such incentives under current market
conditions. The City should also continue to evaluate and calibrate incentives, particularly
following code revisions that are currently in process. The incentive packages should
balance feasibility, housing needs, and policy goals.
•Develop additional incentives for affordable housing developers whose projects are 75%-
100% affordable (i.e., LIHTC developers, land trust products, HUD-funded housing,
Habitat for Humanity, etc.) in order to make the development of workforce housing
easier and faster for those who specialize in such housing. These incentives should be
based on interviews with affordable developers to understand the unique barriers their
projects face as opposed to a market-driven feasibility analysis.
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