HomeMy WebLinkAbout07-08-24 Public Comment - S. & F. Boyd - Brief statistical review of the Bozeman multifamily market and The GuthrieFrom:Scott and Frances Boyd
To:Terry Cunningham; Joey Morrison; Jennifer Madgic; Douglas Fischer; Emma Bode; Bozeman Public Comment
Subject:[EXTERNAL][WARNING: ATTACHMENT UNSCANNED]Brief statistical review of the Bozeman multifamily market and The Guthrie
Date:Sunday, July 7, 2024 4:45:30 PM
Attachments:202407 TTM Bozeman Studio 1BR 2BR rentals.xlsx
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Dear Bozeman Commissioners, It is imperative that the city commissioners familiarize themselves with the state of Bozeman’s current
multifamily rental market before voting on the Guthrie, a project that will set an unwanted precedent in our city.
For purposes of gauging the effectiveness and potential impact of the deep incentives of the Affordable HousingOrdinance (AHO), we should first quantify the state of the current multifamily market as is, without anyincentives influencing activity. In the previous twelve months from June of 2023 through June of 2024, there
were 2,245 apartments that were either leased or are currently offered for lease.1 The data is organized by unitsize and covers the number of listings, days on market, square footage, initial asking rent, and effective leasedrate (i.e., actual rent, accounting for discounts and incentives offered by the landlord). A summary is presentedbelow along with an outline of The Guthrie’s proposal for comparison.
Less for more. When comparing the average square footage of the studio units we see that only 6 of the 203leased and available units in the market are smaller than the Guthrie’s average of 405 square feet. Only 45 ofthe 953 one-bedroom market units are smaller than the Guthrie’s average of 588 square feet. For the two-bedroom units, the Guthrie’s 595 square feet will be the smallest of the over 1,000 units in the entire market. When accounting for rents by including the square footage, the Guthrie’s forty-five studio units offered at$1,526.25 are essentially at the same rate as the average effective rate for all leased and currently availableunits at $1,527.25 but again, offering only 405 square feet versus the market’s average of 555 square feet. Thefive one-bedroom units from the Guthrie will be at a lower rent of $1,745 versus the $1,830 effective rate for allunits, though offering only 588 square feet versus the 742 square feet average in the market. The Guthrie’s sixtwo-bedroom units will be offered at $1,962.50 versus the $1,873 for the market and, as with the other units,
offering a smaller footprint with only 595 square feet versus the market’s average of 886 square feet. Though the AHO makes no effort to measure affordability by the square foot and instead uses only gross rent, itis nevertheless representative of how people make their financial decisions. Given two properties with thesame rent and amenities, a reasonable person will choose the larger unit with a lower effective rent per squarefoot. Put differently, if the Guthrie’s units were accurately classified as studios and one-bedrooms, and offeredat the market’s average rate for each unit size, tenants would see the below rents:
Maximum rents. Representatives of HomeBase have said both at public meetings as well as in the BozemanDaily Chronicle that the proposed rents are simply the maximum rents that will be offered and that they mayoffer them at lower prices. If HomeBase can offer units at lower prices than what the AHO requires then whydoes the city need to offer them any incentives at all? Shouldn’t the AHO call for a rent that, but for theincentives, would not otherwise be possible? Isn’t that the purpose of the incentives? Numerous otherproperties within the city are currently providing units at 80% of AMI called for by the deep incentives of theAHO, without making use of any incentives. Gaps in the application of the AHO. Further examination of the data highlights another deficiency within theAHO since it only uses bedroom counts as a means of determining and measuring affordability. Referring tothe earlier table we see that there are nearly 1,000 2Br/2Ba units leased or offered for lease while there are only134 2Br/1Ba units in the previous year’s data. This data makes perfect sense because 2Br/2Ba units would bevastly preferable to unrelated roommates who desire their own bathroom for privacy and are considerablycheaper per person to rent than a 1Br/1Ba. The 2Br/1Ba units would be less objectionable to a singlehousehold where parents aren’t opposed to sharing a bathroom with a child, while unrelated people sharing anapartment have distinctly different requirements and preferences. Naively using the same rental rate for bothtypes of units offers less rent relief to unrelated persons who prefer a 2Br/2Ba unit. Yet the AHO makes nodistinction between the two types of units and will not incentivize the construction of apartments that folks needand clearly prefer. Distribution of Rents. A review of the distribution of rents by unit size illustrates that the deep incentives willnot offer rates that are significantly better than the existing market rates:
A summary of the market rate units compared to those offered at 80% of 2024 AMI is presented below. 2BR/2BA units are not included in this table in order to provide an apples-to-apples comparison.
If the market is currently providing sufficient units at the rent level mandated by the deep incentives of the AHO,
what purpose do the deep incentives serve?
Deep incentives fall short. Not only do the deep incentives fall short of creating truly affordable units, but they
also do not align with the community’s preference for adequate on-site parking. The public comments provided
to the city for this project along with social media commentary on Nextdoor.com and Reddit.com show that the
community vastly desires parking at their residence. The use of a parking district to mitigate anticipated
congestion from the Guthrie as has been suggested by some city staff will not actually solve the parking issue
but instead will push the problem onto adjoining neighborhoods and areas. It is understandable for the city to
lessen outdated parking requirements for most types of buildings as required in previous generations, but the
simple fact of the matter is that most people in Montana own a car and it is not practical to eliminate residential
parking requirements altogether.
Ways to improve. There are a plethora of unintended consequences and shortcomings in the deep incentives
of the AHO that have been raised by the public that need correction before using these incentives. The
shortcomings impact not only the adjoining neighborhood but also the tenants of these affordable units. While
by no means an exhaustive list, to improve the AHO the city should: create a more dynamic method for defining
affordability than a static percentage of AMI; require lower rents for micro units; allow for distinguishable rent
relief for 2Br/2Ba units; reexamine vehicle parking requirements; reexamine bicycle parking requirements; if
eliminating parking requirements apply that relief only to the affordable units and not to the entire project;
require zone edge transitions in all cases; require permanent realization of affordable inventory (the
Commission should refamiliarize themselves with the 2020 staff report “Ensuring ongoing affordability in publicly
subsidized home”; eliminate the “by-right” nature of the ordinance to allow for input and oversight for such a
novel, untested ordinance; and consider a creating a per square foot metric to provide a minimum threshold for
dignified housing.
Take a deep breath. Because the previous AHO was eliminated by the legislature, the city hastily adopted a
well-intentioned but poorly considered ordinance as a result of the extraordinary, temporary shocks brought to
the housing market by Covid-19 and the federal government’s printing vast sums of money. Previous
Commissioners’ comments provided during the adoption of the current AHO reflect the desperate nature of the
effort stating, “It’s worth trying” and that “any benefit from the incentives will be ‘relatively modest’.” This current
ordinance is not robust and is clearly deficient in meeting community objectives in providing affordable housing. Undoubtedly there is an affordability issue and we as a community need to take diligent efforts to address it. However, the commission must recognize that the sense of urgency that existed during the extreme imbalancesof Covid-19 no longer exists and that we have time to pause and write a code that works under many differentassumptions and serves the community’s needs, ideally as part of the effort to rewrite the UDC. Indeed,according to Sterling Commercial Real Estate, a firm that specializes in the Bozeman multifamily market, 303units have been completed thus far in 2024, 1,716 are under construction, and an estimated 600 of those areexpected to be completed this year. None of those units will make use of the AHO. As of June 30, 2024, thevacancy rate is 5.17% which is considered stable and at equilibrium. Moreover, in March 2024, the City ofBozeman was designated as an “Entitlement Jurisdiction” by the U.S. Department of Housing and UrbanDevelopment (HUD), meaning the City is now eligible to receive direct federal funding from the CommunityDevelopment Block Grant (CDBG) program. CDBG provides eligible metropolitan cities and urban counties(called "entitlement communities") with annual direct grants that they can use to revitalize neighborhoods,expand affordable housing and economic opportunities, and/or improve community facilities and services,principally to benefit low- and moderate-income persons. Should we not focus our efforts there rather thanattempting to incentivize the development community to provide affordable housing, an endeavor that has aninherent conflict of interest between the public good and their private, for-profit nature? No harm, no foul. Any delay imposed by a moratorium on the deep incentives of the AHO will not causepermanent injury to developers or beneficiaries of any future constructed affordable housing. Understandably,limited input was provided when crafting the AHO during and immediately after Covid-19, but to date, nearly200 comments on the Guthrie have been provided to the Commission. There have been written countlessletters to the editor, guest columns, editorials, television news stories, social media postings, and newspaper
articles published about the Guthrie. The public is engaged. Now is the time to consider their input and reflecttheir will. It would however cause irreparable harm to the community to allow a single development constructedunder this flawed ordinance. Commission, please deny the Guthrie, impose a moratorium on the deep incentives, and engage with the publicto rewrite the AHO. Sincerely, Scott BoydBozeman 1 Attached is a spreadsheet analysis of the Bozeman multifamily rental market for the previous twelve months,with the summary tables and graphs included inline above. The source of this data is a subscription-basedmultifamily analytics and research platform that uses publicly available data and web crawlers to gather andanalyze data for use by real estate companies and investors to manage their properties and set their rentsusing this data and artificial intelligence. For the purposes of this analysis, the search is restricted to using onlystudios, one-bedroom, and two-bedroom units within Bozeman city limits, as those are currently underconsideration with The Guthrie development. It cannot be determined that this data set is exhaustive because itonly uses property-specific websites in addition to aggregators like Zillow.com, apartments.com, andRedfin.com as sources, so it potentially overlooks properties that are rented through word-of-mouth, on-propertysignage, and other means. With that said, this dataset represents 137 properties and nearly 5000 individualunits within Bozeman, and valid statistical inferences can be drawn from it.
