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HomeMy WebLinkAboutBozeman City Comm 3-3-26 AHO CIL PPT_Bz formatMarch 3rd 2026 AHO Cash in Lieu (CIL) Calculation and Fee Adoption PRESENTED BY Mollie Fitzpatrick, Managing Director AFFORDABLE HOUSING ORDINANCE - BACKGROUND •Community Development Board – August 12, 2024 •Economic Vitality Board – December 4, 2024 •Community Development Board – January 13, 2025 •City Commission – Adoption of AHO – February 11, 2025 o Adopted a Cash-in -Lieu of Housing provision Setting the Cash-in -Lie u Ra te AFFORDABLE HOUSING ORDINANCE - BACKGROUND 38.340.060 – Alternatives for land donation and cash-in -lieu As an alternative to constructing the affordable dwellings required by 38.340.020, the applicant may qualify for the incentives listed in 38.340.040 by: B. •An applicant may provide a cash-in -lieu payment to the city’s community housing fund. •The review authority may establish administrative rules and procedures for the calculation and implementation of a cash-in -lieu program. •The city must use all cash -in -lieu funds to support the creation or preservation of affordable dwellings. AHO ALTERNATIVE COMPLIANCE THROUGH CIL 1.For each affordable dwelling required by 38.380.020, but not provided, the cash-in -lieu amount will be established based on a per dwelling price adopted by resolution of the commission. 2.The per dwelling amount must be based on the difference between the average new construction rental rate for apartments in the city and the established affordable rental rate calculated over the course of 20 years. 3.The cash -in -lieu amount must be determined on the number, type of dwellings, and mix of bedrooms identified as affordable in the affordable housing plan and proposed to be constructed. 4.Cash -in -lieu payments must be paid prior to issuance of a building permit for any dwelling in the development. AFFORDABILITY GAP METHODOLOGY This methodology is common in both incentive and inclusionary programs nationwide and is based on the theory that the City should be able to use the fee revenue to “subsidize” units— effectively “buying down” the cost of market-rate units to affordable prices/rents. MONTHLY RENTS BY BEDROOM, BOZEMAN, 2025 Data sources: Costar rental data, HUD AMI for Gallatin County. AFFORDABILITY GAP CALCULATION AND RESULTING CIL PER UNIT REQUIRED Bedrooms 60% AMI 80% AMI 60% AMI 80% AMI Monthly Rent 1 Bedroom $2,161 $1,338 $1,785 $823 $376 2 Bedrooms $2,616 $1,606 $2,142 $1,010 $474 3 Bedrooms $3,136 $1,857 $2,476 $1,279 $660 Annual Rent x 20 years 1 Bedroom $518,640 $321,120 $428,400 $197,520 $90,240 2 Bedrooms $627,840 $385,440 $514,080 $242,400 $113,760 3 Bedrooms $752,640 $445,680 $594,240 $306,960 $158,400 Affordable Rent Affordability Gap Market Rent Units Built 2023+ EXAMPLE APPLICATION A rental development of 100 2-bedroom units that accepts incentives would “owe” the City 5 units priced at 60% AMI or a Cash in Lieu payment of $1.2 million. 2-Bedroom Affordability Gap at 60% AMI: $242,000 Affordable units required: x 5 Cash in Lieu Payment: = $1,212,000 PROPOSED CIL RATE Proposed rate based on 60% AMI affordability gap (difference in average new construction rental rate and affordable rental rate) calculated over the course of 20 years. Dwelling Size 1 Bedroom $197,520 2 Bedrooms $242,400 3+ Bedrooms $306,960 Proposed CIL per Affordable Unit QUESTIONS?