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HomeMy WebLinkAboutEPS Proposal REV_Bozeman Affordable Housing, revised  Proposal Affordable Housing Regulations & Policies Evaluation Prepared for: City of Bozeman, MT Prepared by: Economic & Planning Systems, Inc. October 10, 2014 EPS #143075 October 10, 2014 Ms. Stacy Ulmen City Clerk 121 North Rouse Ave Suite 202 Bozeman, MT 59771 Subject: Affordable Housing Regulations & Policies Evaluation; EPS #143075 Dear Ms. Ulmen: Economic & Planning Systems (EPS) is pleased to submit this proposal to provide an evaluation of the City of Bozeman’s Affordable Housing Regulations and Policies. As a full-service urban economics firm, our broad practice in real estate economics, market analysis, housing and public policy can provide the City with assurances that issues identified in the RFP will be assessed and viewed from critical perspectives. Our recommendations will be grounded in national best practice with an understanding of the local and regional markets and regulatory framework. Please accept this proposal as a first draft; we look forward to crafting a final work plan and schedule that addresses your input and refinements. If we can provide additional information, please feel free to contact me. We look forward to discussing our approach and methodology with you in person. Sincerely, ECONOMIC & PLANNING SYSTEMS, INC. Daniel R. Guimond Principal Table of Contents 1. PROJECT SUMMARY ............................................................................................... 1  2. COMPANY DESCRIPTION/CAPABILITY ........................................................................... 2  3. INFORMATIONAL CONTENT ....................................................................................... 5  4. REFERENCES ....................................................................................................... 9  5. COST ............................................................................................................. 11  6. OUTLINE OF SERVICES ......................................................................................... 12    Economic & Planning Systems, Inc. 1 Project Summary 1. PROJECT SUMMARY Project Understanding The housing market crash, a financial crisis, and two recessions have not only made policy formation at the local, regional, and national levels difficult, but had an enormous effect on the housing market itself. While markets like Bozeman and surrounding mountain resort communities seem to be recovering from the Great Recession, the recovery has not translated to increased wages (when adjusted for inflation) or increased purchasing power (the ability to buy the “same” amount of house today as a decade ago), but costs of construction (materials and labor), however, have continued to escalate. At the least, this raises several questions as the City continues to see an increase in housing sales prices and housing development activity while trying to achieve a fiscally-prudent budget with regard to the provision of public services and utilities. Project Approach EPS brings a multi-faceted set of perspectives and experience to this project. Our technical approach will be to provide the City with a rigorous and thorough evaluation of the relevant trends and conditions, which, along with our professional perspectives on best practices throughout the larger Rocky Mountain West, will inform a reasonable assessment of future housing needs and recommendations crafting the most effective housing policy. Proposed Scope of Work The proposed scope of services is tailored to comprehensively document the economic and demographic conditions that are critical to understanding and identifying the presence and extent of housing affordability challenges and issues. A review of land use regulation and policy in addition to review of best practices and case studies from around the region and nation will provide context for discussions with stakeholders and staff. Focus groups with stakeholders will assist the process by incorporating a community and stakeholder buy-in process, vetting ideas through those most closely involved in the industry. Goals Based on the desired outcomes of the City as articulated in the RFP, the proposed scope of services, and EPS’ experience in projects dealing with these issues, the goals for this project are:  Comprehensively identify the relevant conditions  Build consensus and agreement around what the problems are  Incorporate feedback from industry professionals  Structure a regulatory and/or non-regulatory set of housing policies that address the problems, but do not overreach  Identify a strategy for implementation and items for future consideration Economic & Planning Systems, Inc. 2 Company Description/Capability 2. COMPANY DESCRIPTION/CAPABILITY Economic & Planning Systems, Inc. (EPS) is a land economics consulting firm experienced in the full spectrum of services related to real estate development, the financing of public infrastructure and government services, land use and conservation planning, and government organization. EPS was founded on the principle that real estate development and land use-related public policy should be built on realistic assessment of market forces and economic trends, feasible implementation measures, and recognition of public policy objectives, including provisions for required public facilities and services. The firms’ areas of expertise are as follows:  Real Estate Market and Feasibility Analysis  Public Finance  Fiscal and Economic Impact Analysis  Reuse, Revitalization, and Redevelopment  Housing Development Feasibility and Policy  Regional Economics and Industry Analysis  Land Use Planning and Growth Management  Transportation Planning and Analysis Since 1983 EPS has provided consulting services to hundreds of public- and private-sector clients in Colorado and throughout the United States. EPS is located in Denver, Colorado, and Los Angeles, Oakland, and Sacramento, California. EPS clients include cities, counties, special districts, education and other non-profit institutions, multi-jurisdictional authorities, property owners, developers, financial institutions, and land use attorneys. Inclusionary Housing Ordinance Study Denver, Colorado The City and County of Denver’s Inclusionary Housing Ordinance (IHO) was passed in 2002 and was a major achievement for affordable housing policy. Since that time, however, economic and policy changes occurred, all of which have affected the IHO’s performance. To evaluate its options for making the program more productive and effective, the City contracted with Economic & Planning Systems to improve the IHO with a focus on: 1) geographic distribution of units; 2) an improved set of incentives that would motivate developers to construct units; and 3) a recalibration of the IHO’s parameters, such as cash-in-lieu payments, cash subsidy amounts, and income levels. EPS assessed affordability trends, conditions, and gaps at the neighborhood level, as well as evaluated overlays of proximity to employment, transit, and locally-calibrated H+T costs by neighborhood. The study included a pro forma model to test the development and city impacts (i.e. feasibility) of modified and enhanced IHO requirements and incentives to maximize the incentive to developers to build units. The pro forma was built with a variety of prototypical developments throughout the City and accounted for the full range of market and program parameter assumptions, which were vetted through developer interviews. The recommendations, which included adopting a tiered structure of cash incentives and CIL amounts by neighborhood in low/medium/high zones was adopted by the City Council on August 25, 2014. Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 3 Company Description/Capability Housing Affordability Policy Study Fort Collins, Colorado The City engaged EPS to complete a comprehensive housing affordability policy study with a public process component of three public stakeholder workshops and Council work sessions. EPS identified demographic, economic, and housing market trends to characterize housing affordability issues and challenges, as well as existing regulatory (land use incentives, building codes) and non-regulatory (fee waiver policies, etc.) structures. The analysis delved further into core housing cost issues, such as documenting the extent that land, hard and soft costs, and taxes/fees had contributed to exacerbating housing affordability issues. The analysis then quantified the housing issues and need, such as trends in commuting and ownership housing costs, changes in affordability gaps, gaps in rental and ownership inventory, legislative barriers (i.e. threat of construction defects claims) to construction of multi-family ownership housing, among others. EPS structured recommendations by short, mid, and long-term strategies and solutions to address each of the identified challenges and conditions. These recommendations included quasi-regulatory and non-regulatory solutions, such as the establishment of a public- finance based incentives policy, a reduction in the minimum house size in the building code, granting of development review fee waivers for affordable housing projects, reevaluation of marginal capital expansion and development review fee structure, and disposition of land bank properties, among others. Sonoran Institute Smart Growth in Northern Rockies Colorado, Montana, Idaho The Sonoran Institute contracted with EPS to understand the degree of potential demand for smart growth housing in rural western regions. Smart growth concepts have had good market traction in many progressive communities located throughout the west. However, the recession from 2007 through 2009 and protracted recovery changed the economic and market landscape. The primary objective of this study was to document the economic and demographic drivers of selected representative communities, link these drivers to housing supply and demand and recent market performance, and provide direction about future needs and trends based on economic forecasting for the representative communities. Some of the key questions addressed include: identifying what segments of the market gravitate to smart growth products; what degree these segments will grow or contract in the future; and what might cities or towns do, related to policy, planning, and visioning to better position a community to increase the amount of smart growth in the future. EPS’s analysis expanded on the body of knowledge regarding smart growth in the western U.S., using national level understanding as a platform for departure. The study integrated primary and secondary data, including a household survey in six communities to formulate a planning and policy document that provides guidance to the Sonoran Institute as it partners with private sector (developers, lenders, brokers, or designers) and public sector (cities or towns, city councils, BoCC members, and appointed officials). Residential Linkage Program Nexus Study Douglas County, Colorado Douglas County offers its residents an attractive blend of quality of life with an abundance of natural beauty and outdoor recreation opportunities. From 2000 to 2010, the County’s population more than doubled from 120,000 to 270,000. As a result of strong demand, housing costs were too high and workers in the County’s largest industries—service, education, and construction, were forced to commute. The Board of County Commissioners, the County Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 4 Company Description/Capability Manager’s Office, and the Housing Partnership retained EPS to conduct a housing nexus study to determine the linkage between new housing and demand for service sector jobs and affordable housing, and establish a legally defensible fee in-lieu to mitigate that demand. EPS assessed the dynamics of employment by industry, commuting patterns, and expenditure patterns by income level. Our effort also included conducting focus groups with representatives from each of the affected industries to document employment recruitment and retention problems. One on one interviews were also completed with representatives from the development, housing, insurance, and legal community to understand the impact that recent legislation concerning construction defects (HB 10-1394) would have on the future of affordable housing. With this analysis and outreach, EPS established the linkage between new households and demand for jobs and affordable housing. This established the legal basis for adopting a housing fee in-lieu for financing the affordable housing need. To motivate the County’s decision- makers, EPS also documented the beneficial and detrimental impacts that a continuation or mitigation of the current heavy in- and out-commuting patterns would have on household cost- burden and the County’s fiscal revenues and expenditures. Housing Policy Strategy Big Sky, Montana The Big Sky Chamber of Commerce (BSCC) contracted with EPS to address some important underlying questions regarding the issues. To identify what policies and programs had been successful in similar communities and to address the needs of an increasingly year-round and permanent resident population, EPS assessed economic, demographic, income and wage, housing, and affordability conditions, as well as best practices of regulatory and non-regulatory policy solutions to address the identified challenges. In this context, EPS also met with a wide range of stakeholders and community groups with an interest in affordable housing in one-on- one interviews, group meetings, and focus groups. EPS also conducted a survey to collect and identify information regarding in-commuting patterns among the community’s largest employers. EPS’ strategy and action plan recommendations were organized into short and long-term strategies, including the participation of the Chamber in a affordable housing demonstration project, an evaluation of the use of Montana’s TEDD structure for offsetting public infrastructure costs associated with affordable housing, an exploration of a modified Resort Tax District taxing authority, the establishment of a non-profit housing organization (such as would take advantage of the newly established Trust Montana). Long term recommendations included evaluating the actual costs and benefits of incorporation. Valley West Market Study Bozeman, Montana The purposes of this study were to document residential market conditions in Bozeman, Montana, to estimate market potentials for the Valley West development. The Aspen Group, LLC was actively developing a 310-acre site and had sold lots for 452 units. Since the first lot sales in 2003, the development was highly successful. Over the following five years, however, a substantial number of other projects in the Bozeman market were platted, diluting Valley West’s market share. The Aspen Group retained EPS to evaluate the local market and address the need to reposition its development and increase capture rates. EPS estimated how many years of supply were represented by the current inventory of vacant platted lots and when equilibrium could be expected, a capture rate, and estimated optimal price points. Economic & Planning Systems, Inc. 5 Informational Content 3. INFORMATIONAL CONTENT Adequate and affordable housing is critical to the sustained vitality of any regional economy. In resort economies, the high cost of housing has caused the dislocation of many individuals integral to the functions of the economy and community. In such places, the provision of fees to mitigate these economic forces is integral to the strength and diversity of the economic base, the optimal use of land and transportation resources, and the environmental and social health of the community and the region. EPS has a depth of affordable housing related experience. In addition to conducting evaluations to support municipal fee programs, EPS has completed numerous affordable housing market and feasibility studies; evaluations related to the physical and economic linkage between jobs and housing; and analysis of the impacts that employment growth has on housing needs. We have also analyzed the impacts of land use and growth control measures on the ability of the private sector to meet the demand for housing.  Dan Guimond, Principal and manager of the Denver office, will serve as senior project advisor. His time will be incorporated before and during critical project milestones, such as completion of the analysis, structuring of the recommendations, and final report.  David Schwartz, Vice President, will serve as the project manager. He will be the primary client contact, involved on a day-to-day basis, coordinating staff research efforts. He will ensure that the project remains on task and incorporates the best available research and information for the City.  Michelle Chung, Research Analyst, will serve as the primary project analyst and be responsible for collecting data, researching best practices, and compiling other information relevant to the housing policy study. Résumés of key personnel follow. Economic & Planning Systems, Inc. The Economics of Land Use 730 17th Street, Suite 630  Denver, CO 80202 303.623.3557  dguimond@epsdenver.com  www.epsys.com Daniel R. Guimond Principal ABOUT As a Principal at EPS Dan has worked at the firm for over 13 years. He is an economist and planner with 30 years of experience in market and financial analysis and development planning for the public and private sectors including market and financial analyses, economic development and impact analyses, and implementation programming. He has advised numerous cities and resort communities on affordable housing and growth management policy issues throughout the Rocky Mountain region. SELECTED PROJECT MANAGEMENT EXPERIENCE Inclusionary Housing Rental Program Update, Boulder, CO Financial model to test and evaluate charges to IH require-ments for rental housing including required AMI levels, cash-in-lieu amounts, and an offsite building option. Aspen Affordable Housing Strategic Plan, Aspen, CO Housing demand analysis, evaluation of alternative sites, and financial analysis of recommended 10-year housing development program. Housing Affordability Policy Study, Fort Collins, CO With stakeholder meetings and Council work sessions, EPS assessed conditions, existing regulatory and non-regulatory structures, core housing cost trends, and identified problems by category. Recommendations were structured to address public finance policy, building code modifications, development review policy, City fee structures, and disposition of land bank properties. Flagstaff Housing and Sustainability Study, Flagstaff, AZ Housing needs analysis, affordable housing strategies recommendations, and economic sustainability program. Housing Strategy Plan, Big Sky, MT Assessed conditions relevant to documenting housing challenges, best practices, engaged wide range of stakeholders, community groups, and conducted a survey. Recommended short and long-term strategies, including a development project, use of Montana’s TEDD structure for offsetting public infrastructure costs associated with affordable housing, and modified Resort Tax District taxing authority, the establishment of a non-profit housing organization. Buckley Annex Redevelopment Plan, Denver, CO Market analysis for forecast residential, retail, and office development potentials for a 72-acre redevelopment site at Lowry. Created a financial model to estimate a property sale value and to evaluate the Air Force’s independent appraisal for the site. Inclusionary Zoning Financial Analysis, Boulder, CO Developed financial model to evaluate options for increasing affordable housing onsite including density bonuses and alternative IH and cash-in-lieu options. A new cash-in-lieu payment schedule and premium for not building 50 percent of the requirement onsite were adopted. Education M.A., Urban Geography, University of Colorado, 1976 B.A., Political Science, University of Colorado, 1972 Previous Employment 1999-present Principal Economic & Planning Systems, Inc. 1997-1999 Principal, In Motion, Inc. 1993-1997 Vice President, BRW Inc. 1978-1992 Vice President, Hammer Siler, George Associates 1976-1978 Planner, Jefferson County Planning Department Affiliations American Institute of Certified Planners Urban Land Institute International Downtown Association Denver Planning Board, 1992 to 2005 ICSC Colorado Alliance Economic & Planning Systems, Inc. The Economics of Land Use 730 17th Street, Suite 630  Denver, CO 80202 303.623.3557  dschwartz@epsdenver.com  www.epsys.com David Schwartz Vice President ABOUT David has a diverse skill set for addressing urban economic and policy issues, such as analyzing industry composition, market supply and demand, economic and fiscal impacts, the creation and modification of land use and housing policy, feasibility related to development and policy, public infrastructure financing, and economic and demographic forecasting. His background in mathematics, statistics, urban economics, and a familiarity with the implications of land use controls complement and guide his work for clients. SELECTED PROJECT EXPERIENCE Inclusionary Housing Ordinance Study, Denver, CO EPS re-established the basis for the City’s IHO and recommended restructuring its requirements and incentives, e.g. in-lieu payments and subsidies; also assessed developer impacts of proposed changes; project was integrated into a larger stakeholder, policy-maker, and City Council process. Housing Demand Forecast, Oklahoma City, OK A comprehensive study to assess housing demand and preferences. Made policy and investment recommendations to capitalize on economic drivers, and identified community’s willingness to make tradeoffs and willingness to pay. Valley West Market Study, Bozeman, MT Conducted a residential market study to formulate a pricing and implementation strategy for mixed-use development. Identified absorption and optimal product pricing. Housing Affordability Policy Study, Fort Collins, CO With stakeholder meetings and Council work sessions, EPS assessed conditions, existing regulatory and non-regulatory structures, core housing cost trends, and identified problems by category. Recommendations were structured to address public finance policy, building code modifications, development review policy, City fee structures, and disposition of land bank properties. Smart Growth Demand in Northern Rockies, CO, MT, and ID Primary objective of this study for the Sonoran Institute was to document the successes and failures of smart growth development in the Northern Rockies. Survey data, interviews, and secondary data were used to document socio- economic drivers of demand and provide direction to Rocky Mountain communities. Kane-Elgin Consolidated Plan and Analysis of Impediments, Kane County, IL Documented economic, demographic, and housing conditions for Kane County, the City of Elgin, and the City of Aurora to complete a Five-Year Consolidated Plan and an Analysis of Impediments to Fair Housing Choice for the Consortium. Housing Strategy Plan, Big Sky, MT Assessed conditions relevant to documenting housing challenges, best practices, engaged wide range of stakeholders, community groups, and conducted a survey. Recommended short and long-term strategies, including a development project, use of Montana’s TEDD structure for offsetting public infrastructure costs associated with affordable housing, and modified Resort Tax District taxing authority, the establishment of a non-profit housing organization. Education Masters of City & Regional Planning, The Ohio State University, 2006 B.M., University of Cincinnati, 1999, magna cum laude Also attended: B.A., Miami University, 1994-1997 Previous Employment 2014-Present Vice President, Economic & Planning Systems, Inc. 2009-2014 Associate, Economic & Planning Systems, Inc. 2006-2009 Associate, Economic & Planning Systems, Inc. 2004-2006 Planner, Department of Land Use & Long Range Planning, City of Dublin, Ohio 2002-2004 Technical Assistant, Citizens for Civic Renewal, Cincinnati, Ohio Affiliations American Planning Association, 2004-present Member, 2013-present, Denver Association of Business Economists Board Member, 2007-2013, Denver Association of Business Economists ULI Housing Taskforce, 2008-present Colorado Symphony Sustainability Study Committee, 2011 el Sistema Budget Committee, 2011 2 HUD Consolidated Plan and Analysis of Impediments, Pueblo County, CO Provided direction to the City, County, and United Way regarding the allocation of community funds and how best to address community needs. Prioritized needs based on technical research, survey results, and community outreach efforts. Completed the City’s Five-Year Consolidated Plan. Douglas County Housing Nexus Study, Douglas County, CO Documented legal relationship between development and demand for housing, as well as addressed needs in business recruitment and retention for construction, education, and retail sectors. Housing Diversity Study, Denver Regional Council of Governments Documented demographic, economic, financial, insurance, and legal (such as the effects of changes to legislation concerning contractor general liability insurance) context to assess the degree to which each contributed to the absence of for-sale multi-family construction in the Denver Metro Area. HUD Consolidated Plan and Community Needs Assessment, Aurora, CO Five-Year Consolidated Plan and Neighborhood Revitalization Strategy. Community outreach included stakeholder interviews, focus groups, and community meetings. Evaluated workforce and economic development issues, special population needs, public, cultural and recreational facilities, infrastructure, public safety, code and law enforcement, and urban renewal. Inclusionary Housing Rental Policy Update, Boulder, CO Formulated new policies to meet the City’s overall affordable rental housing goals. This project explored the financial performance implications on developments of policy changes such as adjusting allowable AMI limits, recalibrating the cash in-lieu option, including a density bonus, and adjusting unit size proportionality. Inclusionary Housing Ordinance Incentives Study, Denver, CO Multi-disciplinary effort to amend Denver’s Zoning Code and Inclusionary Housing Ordinance. Provided financial modeling to evaluate developer returns in multiple geographies/districts of City. Established new incentive threshold needed to effectively encourage affordable housing construction. Senior Housing Needs Assessment, Gilpin County, CO Evaluated needs with focus on senior housing and demand from within and outside of the county using surveys and focus groups. Developed strategies to address this increasing need for senior housing facilities, programs, and resources. David Schwartz Economic & Planning Systems, Inc. 9 References 4. REFERENCES Summaries of the following project are provided in Section 2. Project: Inclusionary Housing Ordinance Study a. Agency: City of Denver, Colorado b. Contact: Robin Kniech, Councilwoman at-large, (303) 337-7712 robin.kniech@denvergov.org c. Jurisdiction Population: 650,000 d. # of Employees: 50 to 200; worked directly with 5 to 10 staff e. Project Timeline: 11/2012 – 8/2014 Project: Sonoran Institute Smart Growth in Northern Rockies a. Agency: Sonoran Institute b. Contact: Clark Anderson, Western Colorado Legacy Program Director, (970) 384-4364 canderson@sonoraninstitute.org c. Jurisdiction Population: Colorado, Montana, Idaho  Bozeman, MT: 38,700  Boise, ID: 200,000  Carbondale, CO: 6,400  Buena Vista, CO: 2,600  Eagle, CO: 6,000  Teton Valley, ID: 10,000 d. # of Employees: Bozeman (6) Glenwood Springs (4) e. Project Timeline: 11/2011 – 1/2013 Project: Housing Affordability Policy Study a. Agency: City of Fort Collins, Colorado b. Contact: Sue Beck-Ferkiss, Social Sustainability Specialist, Office of Social Sustainability, (970) 221-6753 sbeckferkiss@fcgov.com c. Jurisdiction Population: 152,000 d. # of Employees: Approx. 10 Office of Social Sustainability employees, worked directly with 5 staff e. Project Timeline: 1/2014 – 11/2014 (completion) Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 10 References Project: Residential Linkage Program Nexus Study a. Agency: Douglas County, Colorado b. Contact: Maureen Waller, Commissioner’s Office, (303) 660-7401 mwaller@douglas.co.us c. Jurisdiction Population: 306,000 d. # of Employees: Approx. 10; worked directly with 3 staff e. Project Timeline: 9/2010 – 9/2011 Economic & Planning Systems, Inc. 11 Cost 5. COST EPS proposes to complete the proposed scope of services, including labor and direct costs such as travel, for a budget not to exceed $59,560, as shown below in Table 1. As for schedule, the City’s intent indicated in the RFP is to complete and finalize the report by January 23, 2015. While scheduling conflicts and holiday travel schedules create scheduling difficulties for a public input process such as envisioned by the City and proposed by EPS, it is anticipated that the study process may take longer than the 3 months allotted in the RFP. However, EPS is prepared and equipped to complete the project within this timeframe. In terms of invoicing for the project, it is EPS’ practice to submit monthly invoices based on the number of staff hours and/or direct expenses incurred. Table 1 Proposed Project Budget Principal Vice Production/ in Charge President Research Total Guimond Schwartz Chung Billing Rate $220 $175 $90 Labor Costs Task 1: Project Initiation Task 1.1: Initial Meeting 0 6 6 $1,590 Task 1.2: Scheduling of Stakeholder Process 0 2 0 $350 Task 2: Demographic and Economic Context Task 2.1: Demographics 2 6 12 $2,570 Task 2.2: Employment, Wages, Incomes, and Commuting 2 16 32 $6,120 Task 3: Housing Trends Task 3.1: Residential Construction 2 4 12 $2,220 Task 3.2: Housing Sales 2 8 20 $3,640 Task 3.3: Housing Inventory 0 4 12 $1,780 Task 4: Land Use Controls Task 4.1: Review of Existing Structures 2 10 16 $3,630 Task 4.2: Best Practices Review 6 16 30 $6,820 Task 5: Initial Focus Group 41624$5,840 Task 6: Recommendations and Focus Group 82436$9,200 Task 7: Report and Presentation 8 36 40 $11,660 Subtotal 36 148 240 $55,420 as % of Total Staff Hours 8% 35% 57% Total Staff Hours 424 Direct Costs Data Acquisition $0 Travel $4,140 Subtotal $4,140 Total Project Cost $59,560 Source: Economic & Planning Systems G:\143075-Bozeman Housing Policy Study\[143075-budget.xlsx]BUDGET EPS Staff Economic & Planning Systems, Inc. 12 Outline of Services 6. OUTLINE OF SERVICES Project Understanding The attractiveness of the City of Bozeman, its active outdoor lifestyle, a well-educated population, and average wages higher than the state are among the characteristics that have increasingly driven demand in Bozeman’s housing market. Annual residential permit activity had increased from an approximately 200 units per year on average during the mid-1990s to the 400 to 500-unit per year range in the mid-2000s and before 2007. Housing sales prices, an even stronger indicator of increasing demand among both permanent resident and second-homeowner markets, were also escalating at a rate of more than 11 percent per year between 2003 and 2007. It was at this point that the City adopted its Workforce Housing (WFH) Ordinance 1710, which established standards and procedures for the provision of workforce housing through its subdivision and zoning process. But over the course of the next year, residential building activity plummeted by more than 60 percent and average sales prices began a multi-year decline of more than 25 percent. As with many markets throughout the U.S. driven by investor and second-homeowner demand as Bozeman was, the overbuilt supply of housing and the financial crisis that resulted in tightened lending practices severely impacted homebuyers and the larger local and regional economies. Needless to say, the housing market crash, a financial crisis, and two recessions have not only made policy formation at the local, regional, and national levels difficult, but had an enormous effect on the housing market itself. While markets like Bozeman and surrounding mountain resort communities seem to be recovering from the Great Recession, the recovery has not translated to increased wages (when adjusted for inflation) or increased purchasing power (the ability to buy the “same” amount of house today as a decade ago), but costs of construction (materials and labor), however, have continued to escalate. At the least, this raises several questions as the City continues to see an increase in housing sales prices and housing development activity while trying to achieve a fiscally-prudent budget with regard to the provision of public services and utilities.  What are the housing affordability conditions and needs in the City?  Are the City’s land use regulations and policies regarding affordable housing appropriate?  Is the City’s affordable housing points-based PUD Ordinance structured effectively?  If enacted, would the WFH ordinance be an appropriate and effective tool for addressing the City’s needs?  Are there other tools or policy solutions that would be better suited to addressing the City’s needs?  And, how effective might these alternative policy solutions be? EPS has addressed these and many other housing policy questions for a diversity of communities throughout the Rocky Mountain West and beyond. EPS brings expertise and experience in:  Evaluating general land use regulations  Evaluating subdivision policies and building codes Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 13 Outline of Services  Assessing the feasibility and appropriateness of inclusionary housing ordinances  Evaluating impacts of housing policies  Reviewing and refining/modifying IHO incentive and requirement structures In addition to structuring and assessing the appropriateness of land use controls to address housing policy needs, EPS has also:  Structured tailored housing policy that addresses workforce housing fundamentals  Identified mechanisms and policy to respond to housing construction cost trends  Evaluated non-land use based incentive policies  Evaluated permanent funding sources to address persistent housing affordability issues EPS has also worked on broader housing demand and forecasting studies, as well as the evaluation of housing markets, including:  Studies of smart growth throughout the Northern Rockies (a study which included Bozeman)  Market and feasibility analyses of projects (e.g. Valley West)  Forecasting market demand based on changing local and regional demographic housing and community attribute characteristics Overall, EPS brings a depth of experience and perspective on the questions that the City would like answered. Approach As each community’s circumstances are unique, our approach is to assess the underlying conditions (i.e. the economic, demographic, and political forces), identify the challenges and opportunities, review the possible solutions with the client, and make recommendations tailored to the community’s needs. EPS brings a multi-faceted set of perspectives and experience to this project. Our work is not simply informed by our experience in our understanding and experience in crafting housing policy and programs tailored to local and regional markets, but also by evaluating the dynamics between residential and non-residential markets, differentiating between the needs of the community and service workforce, and by being able to quantify the impacts of policy on the development community and public sector. Our technical approach will be to provide the City with a rigorous and thorough evaluation of the relevant trends and conditions, which, along with our professional perspectives on best practices throughout the larger Rocky Mountain West, will inform a reasonable assessment of future housing needs and recommendations crafting the most effective housing policy. Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 14 Outline of Services Scope of Work The following scope of work is designed to address the purposes and deliverables identified by the City in its RFP. Task 1: Project Initiation Task 1.1 – Initial Meeting EPS will kick off the project with a meeting with City staff to review the scope of work and identify the project’s highest priorities and desired outcomes. The goal will be to establish a mutual understanding of the project expectations. Task 1.2 – Scheduling of Stakeholder Process While the RFP does not identify it, questions such as those posed in the RFP are often best addressed and solved through some level of meaningful and orchestrated involvement of industry professionals and stakeholders, including City staff. In today’s environment, when scrutiny of land use controls such as inclusionary housing ordinances is becoming more commonplace, and particularly in an area that has faced any resistance from the development community regarding such policies, stakeholder involvement will be necessary for the success of this project and for collective public buy-in. As such, EPS proposes to work with City staff to strategize on the most appropriate timing and number of meetings that will be most effective in facilitating a successful outcome to this project. Task 2: Demographic and Economic Context Task 2.1 – Demographics The objective of this task will be to identify general demographic trends with information from the U.S. Census, American Community Survey (ACS), and state demographer sources to frame the context of demographic pressure behind housing market demand and need, detailed by research in following tasks. Task 2.2 – Employment, Wages, Incomes, and Commuting The second component to characterizing the economic framework is to identify more fundamental trends and conditions in the market, such as the general strength of the employment market and its wages, as well as commuting patterns to understand the extent to which in-commuting has increased from surrounding areas. The analysis of commuting patterns will also be critical to the overall study because it identifies the commute shed, which is generally consistent with a market within which new workers seek housing. Most importantly, however, is to document the trends and conditions related to household incomes, which are critical to framing the discussion of housing affordability issues and challenges. In general, this analysis will form the basis of the housing affordability gaps analysis, the findings of which are crucial to establishing the basis of need for any broad-scale housing affordability policy. Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 15 Outline of Services Task 3: Housing Trends Task 3.1 – Residential Construction This task will document and update relevant housing market trends, such as residential construction activity by housing type and housing costs by type. As EPS has used information from the City’s Building Department for several projects in the past, we will work with staff to update our information on the geographic dispersion of construction activity. Task 3.2 – Housing Sales As with housing construction information, EPS will work with local real estate brokers to acquire an appropriate level of detail of sales data for the City and its surroundings (relevant to the trade area defined by the commute shed in the framework task described previously). This will provide necessary information to document the trends in average and median sales prices for new and older product available throughout the City. This analysis will inform the policy discussions that follow regarding the appropriateness and viability of housing policy tools such as the IHO or WFH ordinance. Task 3.3 – Housing Inventory The final aspect of the housing market assessment is to document the inventory of ownership and rental housing throughout the City. Using U.S. Census and ACS data, EPS will document the conditions of the housing inventory and to provide a quantification of the City’s housing inventory by tenure, by value, and by other relevant metrics of quality. Task 4: Land Use Controls Task 4.1 – Review of Existing Structures EPS will review the City’s land use regulations and subdivision structures, such as existing WFH ordinance structure and other existing zoning and/or building codes that potentially affect housing affordability issues. Task 4.2 – Best Practices Review EPS will provide the City with a review of various housing policies and structures that exist in similar communities. This overview will be intended for use in discussions with staff to identify the pros and cons of various incentive and regulatory zoning structures in practice today. The goal of this effort is to inform the process and incorporate successful elements where applicable and relevant to the City’s circumstances. As such, EPS will prepare research and summarize best practices from regional and national examples to address the following:  What programs and ordinances are in place?  When and why they were adopted?  What are the goals?  What flexibility is written into the program?  How they are administered?  How successful or effective have they been? Affordable Housing Regulations and Policies Evaluation October 10, 2014 Economic & Planning Systems, Inc. 16 Outline of Services Task 5: Initial Focus Group As mentioned previously, EPS will work with City staff to identify the most strategic timing and pacing of a stakeholder process component. It would be EPS’ intent to conduct 2 focus groups with stakeholders, and with the assistance of City staff in identifying the appropriate representatives for their attendance and coordinating the meeting space and times. The objective would be to ensure that the course of this study is guided appropriately by the industry’s representative and its recommendations guided by their input and buy-in. EPS also proposes that the spacing of these meetings be designed at points in the completion of various components of the study, such as one following the completion of the general data collection and review of the land use regulations, and another at the completion of the draft recommendations, as described below. Task 6: Recommendations and Focus Groups Based on the qualitative and quantitative research conducted to date, as well as feedback from stakeholders, EPS will identify the appropriate affordable housing mitigation tools to structure and present for consideration. Following initial review, EPS would plan to meet with the City for another stakeholder workshop to collect feedback and input regarding the recommended solutions. Depending on the outcomes of the previous research and focus group, EPS’ recommendations will identify any necessary analytical structures that need to be considered before adoption in a land use regulatory structure:  Outline and verify all inputs and assumptions used in the estimation process  Identify possible developer and/or City feasibility and impacts  Test a range of implementation options, such as set-asides or fees in-lieu  Test a range of incentives, such as cash subsidies, unit equivalencies, on- or off-site options  Identifies exemptions to the program Task 7: Report and Presentation EPS will provide the City with a comprehensive written document that outlines the study process, research and analysis, and recommendations. A draft will be submitted to the City staff for initial review and comment. Following review, EPS will revise the report and make a presentation to the City staff and City Commission on the final product.