HomeMy WebLinkAbout08-20-24 Public Comment - B. Heller - Public Comment on AHOFrom:Benjamin HellerTo:Bozeman Public Comment
Subject:[EXTERNAL]Public Comment on AHO
Date:Sunday, August 18, 2024 7:11:47 AM
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Dear Commissioners,
I am writing to offer some observations on the Affordable Housing Ordinance that is up for reconsideration. I believe that promoting theproduction of affordable units is an important step in preventing displacement and gentrification. With that in mind, it is very important to get thedetails of the AHO right. I believe that closer attention to available data would help shape a better ordinance in two crucial respects: first, thedefinition of "affordable" units; second, the calibration of incentives to the economic benefits derivable by developers from those incentives. Thecurrent AHO suffers from serious problems on both dimensions.
First, the city needs to move away from what has become a very lazy standard for the definition of affordability, namely "housing costs at 30% ofhousehold income at [X]% of AMI." The calculation of AMI produces a highly artificial statistic that operates at too high a level of aggregation. First, you must note that HUD's AMI is calculated based only on family incomes; second, it lumps together both owner households and renterhouseholds, when each household type has very different financial characteristics; third, AMI will change rapidly in response tocompositional changes in the city's population, leading it to rise in line with gentrification.
AMI is a poor statistic.
HUD calculates the Bozeman area AMI as $109K. However, that disguises a massive gap between renter and owner households. According toACS data, the household income of renter households is just over half that of owner households. To the extent affordable housing is aimed atpersistent renters and renters who want to become homeowners, an AMI that includes both existing homeowners and renters will skewaffordability limits too high. In addition, non-family households in Bozeman earn quite a bit less than family households. The result is that an80% of AMI threshhold for a 4-person family reaches $87,000K, which would then lead the classifying an apartment with a gross rent of$2,175/mo for a 2-bedroom as "affordable." That is in excess of the average market rent in Bozeman today! Hardly affordable. Worse, yet, thisstatistic will go up even if locals do not see income gains. If gentrification proceeds apace, wealthier households replace less wealthy householdsand AMI increases even in the absence of existing-household income gains. For example, according to BLS statistics, the average weekly wagefor primary and secondary school teachers went up by 17% from 2019 to the latest data, whereas AMI rose by over 25%. A better solution wouldbe to peg initial affordability thresholds to renter household AMI. And on a going-forward basis, the thresholds should be adjusted by either CPIor by BLS wage statistics for a set of industry classifications that are not vulnerable to compositional change (for example, teachers, firstresponders, etc).
Benefits need to be better calibrated to cost of providing affordable units.
A consequence of the excessively high affordability thresholds produced by using AMI as a metric is that the economic concession the AHO asksof developers is in fact very small, and particularly small in relation to the benefits conferred by the ordinance. Shallow incentives, in particular,are given in exchange for truly nugatory concessions. Given the high levels of "affordable" rents relative to market rents, it is arguable that thedeveloper is not taking any economic hit in exchange for substantial benefits. The Guthrie illustrates this phenomenon. For for-sale product, a120% of AMI threshold means that housing costs of well over $3,000/month will be considered affordable. Even at today's high interest rates,that can carry a home price of in excess of $500K at standard terms and including taxes. The average condominium in Bozeman, according toZillow's ZHVI is... $501K. So how exactly is this a concession on the part of the developer? These are only concessions in the context of high-end luxury developments. Another wrinkle to consider is that the production of luxury units is not merely neutral for housing affordability. Luxury units make affordability worse by bringing in new residents at high income and wealth points, residents who consume a high volume oflow-wage services. Their demand in turn attracts lower-wage new residents who arrive instantly housing-stressed. An AHO needs to setaffordability percentages with this dynamic in mind. When San Francisco updated its Inclusionary Zoning rules, it commissioned a study fromKeyser Marston to analyze this dynamic(https://sfplanning.s3.amazonaws.com/commissions/cpcpackets/2016%20%20Residential%20Affordable%20Housing%20Nexus%20Analysis.pdf),which found that 100 units of new market-rate condominiums could generate as much as 40 units of new demand for affordable housing. Clearly,a 5% affordability requirement would be like running at 2 mph on a treadmill going 5mph. You won't move forward. Please consider scrapping"shallow incentives" entirely. With respect to deeper incentives, you should do a more careful calculation of the economic benefits of the bonusesgranted (how much, exactly, is an extra floor of height entitlement worth?) and make sure it aligns with the cost of providing affordable housingunder more sensible affordability thresholds. I would be happy to assist with more detailed numbers on this topic if the city does not have theinternal capability to collect and calculate them itself.
Thank you for your careful consideration of this important topic.
Regards,Ben HellerBridger Canyon