HomeMy WebLinkAboutA4. Affordable Housing
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Community Affordable Housing Advisory Board
Wendy Thomas, Director of Community Development
SUBJECT: Affordable Housing Report and Recommended Budget for FY 2016
MEETING DATE: May 11, 2015
AGENDA ITEM TYPE: Action
RECOMMENDATION: Upon reviewing the material and considering public comment, consider the
recommendations of the Community Affordable Housing Advisory Board (CAHAB) in preparing the FY 2016
City of Bozeman budget with regarding funding and expenditures from the Affordable Housing Fund.
EXECUTIVE SUMMARY:
In 2011, the City Commission allocated funds for an Affordable Housing Needs Assessment and Affordable
Housing Plan for 2012-2016. The Affordable Housing Plan was adopted May 14, 2012, and serves as policy
guidance for City staff and partners.
For the upcoming FY16 Budget, CAHAB and Staff recommend the continued funding of the Road to Home
program at +40,000 dollars. In addition, both recommend the Commission support the development of affordable
housing by setting aside three mils to be place in the Affordable Housing Fund. Staff recommends that the
Commission direct staff to work with CAHAB to develop a three year budget for the Affordable Housing Fund.
A multi-year budget will provide staff, non-profits, and private sector developers/builders with the assurance of
knowing funds will continue to be allocated to affordable housing on regular and predictable basis.
This report contains information as a follow up to the City Commission request in February 2015 that Staff return
to the Commission with goals for the creation of housing and recommended funding levels. Staff recommends
using 10% of a five year rolling average of the number of permits pulled each year for “single family” residential
construction. For 2015 the goal would be the creation of 22 homes. Staff recommends that these units be
constructed for those in the 60-100% Area Median Income range as described in the attached Werwath
Recommendation. Finally staff recommends that the goals be phased in during a two year time period.
AFFORDABLE HOUSING REPORT:
Affordable Housing Action Plan Status update:
In reviewing the housing plan production in relation to the approved goals, there are a number of areas where the
City and housing partners are performing quite well and are on target to meet and/or exceed the targets set.
Goals and outcomes:
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Increase and preserve the supply of affordable housing: 1. Build 240 affordable rental units. Outcome: 48 multi-family unit affordable housing units funded via the Montana Board of Housing Low Income Housing Tax Credits (Stoneridge Apartments) as a result of a partnership between the City of
Bozeman, HRDC, and Summit Housing Group. Construction to begin in Summer 2015.
2. Construction of subsidized homes for sale – only 28 homes—and that number to be built only if the market strengthens.
Outcome: 24 condominium units constructed and sold with subsidy, completion date October 2014 (West Edge Condominiums, Phase III). 3. To help strengthen the for-sale home market, the plan calls for providing down payment assistance to 100
low- and moderate-income buyers of modestly priced existing and new homes. Outcome: Through December 2014, 65 low and moderate-income buyers have been provided with down payment assistance through HRDC’s Homeownership Center.
4. The plan also calls for helping 125 low-income Bozeman homeowners repair their homes. Outcome: Since April 2012, 36 homes have received safety improvements to their homes through the Fix Up Festival operated by the Bozeman Sunrise Rotary (in partnership with HRDC and many other
community partners) and 17 homes have received safety improvement repairs to their homes through Habitat for Humanity.
5. Weatherize 350 homes and rental units in the tri-county area. Outcome: Since April 2012, 317 homes have been weatherized in the tri-county area (HRDC Energy Programs).
6. Bozeman’s first-ever green building guidelines for affordable housing are included in this plan. Outcome: Green building guidelines for affordable housing have been accepted and adopted. Further, anyone requesting city support to meet affordable housing needs is required to meet the guidelines.
Consider amendments to City regulations
The City contracted with Werwath and Associates to evaluate the suspended ordinance and make
recommendations regarding changes to the ordinance. The recommendations were presented to the City
Commission on February 9, 2015. At the February 9, 2015 meeting, the City Commission heard a presentation
from Werwath Associates on recommendations for regulatory changes to support affordable housing development
in Bozeman. Following public comment and discussion, the Commission provided direction to staff on how to
proceed.
• Step 1: Staff is to come back to the Commission with recommendations for incentives and capacity
(available financial resources), but not inclusionary zoning to support affordable housing development
contained in the January 30, 2015 report prepared by Werwath Associates.
• Step 2: Staff is to sit down with the various members of the community (developers, builders, non-profit
organizations, etc.) to determine whether measurable targets for lower priced and moderate priced
housing can be achieved without inclusionary zoning requirements. A facilitated workshop or charrette
using a site to test alternatives is proposed by staff as an efficient way to accomplish Step 2.
• Step 3: Staff is to prepare an inclusionary zoning ordinance incorporating recommendations from the
Werwath report to be ready for vote within 180 days (first part of August 2015).
The overall direction is to further explore whether measurable affordable housing production targets can be met
using incentives, relaxations of certain code standards, offsets and/or financial resources without needing to
reinstate mandatory zoning requirements.
The Commission expressed a strong desire for the community to collaborate in this effort and for staff to report to
them on the viability of an approach that will achieve the desired results in the absence of stronger regulatory
tools.
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Assure financial and organizational capacity.
To carry out the goals of this plan, local nonprofit housing organizations will need to access a substantial amount
of currently-available federal funds managed by the State of Montana. The federal Low-Income Housing Tax Credits are a major resource for building affordable rental housing but have not been used in Bozeman for seven
years; a goal was set to encourage the development of 200 rental units using this program, as well as funding from
other sources to build 40 affordable apartments for seniors.
Outcomes: 1. Low Income Housing Tax Credit funds have been awarded to the City of Bozeman for construction of 48 rental units (Stoneridge Apartments) with construction to begin in Summer 2015.
Opportunities, ongoing tasks, and things left to do:
Maintaining and expanding programs and housing stock remain a priority for the City and our partners in the
nonprofit and private sectors. The City and partners will continue to leverage funds with outside sources when
possible. It is expected that production in all areas will be maintained/expanded subject to funding availability.
Opportunities:
The City has a pending application requesting funding support for the development of between 110 and 136 units
of affordable rental units through the Montana Board of Housing 4% Low Income Housing Tax Credit Program.
This project in conjunction with the Summit Housing development will be a significant step in meeting the goal
outlined in the Plan.
Ongoing Tasks:
The partnership between the City, housing advocates, builders and housing policy experts (Werwath Associates)
continues to work toward fulfilling the Commission directives outlined above. A summary report from Werwath
Association with a recommendation for an alternative to Inclusionary Zoning, housing production goals and
housing prices is found as an attachment to this report. For setting the goal of creation of detached affordable
housing, Staff recommends a five year rolling average. A rolling average would take into account the cyclic
nature of housing construction in Bozeman. Werwath suggested 10% of the residential units. Given that we are
currently focusing on detached housing, I would base the goal on creating units tied to “single family” starts.
Over the time period from 2010-2014, the average number of permits pulled for “single family” units was 219.
The high year was 2013 with 401 and the low was 2010 at 144. Therefore the goal for creation of housing for the
first year of implementation of a voluntary or required affordable housing program would be 22 units. Should the
Commission wish to consider the inclusion of attached residential units, now or in the future, an adjustment to the
goal would be appropriate. Staff also recommends that such a program be phased in over the course of 24 months
to ensure that the appropriate programs and policies are in place for the program to succeed. A successful
affordable housing program is a partnership between the local government, housing creators (both for profit and
not-for-profit), homebuyers, bankers/lenders, and housing program providers. If there is any disconnect between
the parties the program will struggle with being successful. Phasing in a program will ensure maximum
coordination and capacity for each of the critical parties.
The following phasing may be considered:
Phase In Proposal:
0-9 months: ¼ of target goal
335
10-18 months: ¾ of target goal
18-24 months: meet goal each year. Production of half of goal units within each six month period with a
30 day flexibility window for weather variations.
If a successful program is to be created, the community must be committed. A financial commitment is critical.
Staff recommends that as the Commission considers the coming budget year, a commitment is made to provide
the CAHAB recommended three mils for each year for the next three years. Without financial support the goals
of the community as stated in the Affordable Housing Action Plan will go unrealized. This community is
fortunate to have HRDC continually advocate for housing and housing service providers. The community
expectation to meet a broad spectrum of housing goals will never be met, or even significant strides made, if there
is no commitment to grow the capacity of these organizations. Now is the time for the City in partnership with
for profit and not-for-profits to move collectively in a direction that creates, implements and achieves our shared
goal to provide housing opportunities for those working in this community.
ALTERNATIVES: As directed by the Commission.
FISCAL EFFECTS: CAHAB and Staff recommend allocating $40,000 for support of the road to home program
and allocating three mils (approximately $240,000) to the Affordable Housing Fund. Staff recommends
allocating three mils for three years. The fiscal effects of funding increased capacity and/or affordable housing
incentives will result in the creation of affordable housing opportunities within Bozeman. Broader financial
impacts to the City are undetermined at this time.
Report compiled on: May 3, 2015
Attachments:
Affordable Housing Action Plan 2012-2016
Werwath Associates Report Follow Up Recommendation
336
actual projected BALANCE
04/07/2015 change 06/30/2015
** BALANCE - BEGINNING 347,769$ beginning balance:347,769$
PLUS: REVENUES
property taxes 49,201$ 39,861$ 89,062$
interest income 1,967$ 1,967$
loan repayments P&I 7,306$ 7,306$
one-time from Big Box 56,248$ 56,248$
** TOTAL REVENUES 114,723$ 39,861$ 154,583$
LESS: EXPENDITURES
West Edge (110,000)$ (50,000)$ (160,000)$
Road To Home (40,000)$ (40,000)$
Rental Housing Survey (5,671)$ (5,671)$
Misc Supplies & Advertising (252)$ (252)$
Werwath Affordable Housing Study (18,000)$ (26,329)$ (44,329)$
Impact Fee Payment for Summit Housing (24,269)$ (24,269)$
** TOTAL EXPENDITURES (173,923)$ (100,598)$ (274,521)$
** BALANCE - CURRENT 288,568$ (60,737)$ 227,831$
-
227,831$
ADD BACK Werwath Affordable Housing Study 26,329$
254,160$
337
1
Suggested
Evaluation
Criteria
for
Alternatives
to
Inclusionary
Zoning
Discussion
Draft
by
Werwath
Associates
4/30/2015
Background
On
November
10th,
2014
the
City
of
Bozeman
commissioned
an
assessment
of
its
suspended
Workforce
Housing
Ordinance,
which
was
completed
by
Werwath
Associates
on
January
30,
2015.
The
study
concluded
that
housing
market
had
recovered
from
the
recent
recession
and
that
the
supply
of
affordable
homes
for
purchase
was
shrinking
for
buyers
with
household
incomes
below
the
area
median
income.
Opportunities
for
buyers
with
incomes
under
80%
of
area
median
income
have
become
incredibly
scarce.
The
report
recommended
two
remedies:
1.
Adoption
of
a
new
inclusionary
zoning
(IZ)
ordinance,
in
a
form
simpler
and
more
effective
than
the
previous
Workforce
Housing
Ordinance.
2.
Adoption
of
a
set
of
financial
and
regulatory
incentives
that
the
City
should
make
available
to
builders
of
for-‐sale
and
rental
housing
at
specific,
lower
price
points.
The
incentives
should
be
provided
whether
or
not
new,
lower-‐price
homes
are
required
by
the
IZ
ordinance.
After
the
City
Commission
received
the
report,
a
group
of
local
homebuilders
asked
the
City
Commission
if
they
could
propose
an
alternative
approach
to
providing
low-‐cost
homes.
The
Commission
agreed,
and
asked
the
Department
of
Community
Development
to
provide
the
builders
with
production
and
pricing
targets
that
would
be
roughly
equivalent
to
the
estimated
output
of
an
IZ
ordinance.
Werwath
Associates
was
engaged
by
the
City
to
provide
this
and
related
guidance
to
the
builders,
while
its
consultant
team
was
drafting
the
language
for
a
new
IZ
ordinance.
As
discussions
continued
between
builders,
the
Community
Development
Department
and
the
consultants,
it
became
apparent
that
further
clarification
was
needed
regarding
the
minimum
requirements
an
alternative
IZ
proposal
would
have
to
meet
to
be
equivalent
to
the
certainty,
durability
and
effectiveness
of
an
IZ
ordinance.
Summary
of
Evaluation
Criteria
Werwath
Associates
recommend
that
any
alternative
proposal
to
inclusionary
zoning
be
evaluated
in
terms
of
the
following
criteria:
1.
Responsible
Entity
-‐
The
proposal
should
identify
an
entity
or
entities
that
takes
primary
responsibility
for
the
production
of
units
in
the
form
of
a
written
agreement
with
the
City.
Whether
one
or
more
entities
take
full
responsibility
for
implementing
the
alternative
program
is
also
a
critical
factor
for
assessment.
2.
Written
partnership
agreement
-‐
Such
entity
or
entities
should
have
a
written
agreement
with
the
City
of
Bozeman
defining
respective
responsibilities,
the
pledged
outcomes
in
terms
of
affordable
homes
sold,
a
timetable
for
construction
and
sales
of
homes,
and
termination
clauses
in
the
event
that
production
falls
short
or
the
City’s
partners
do
not
want
to
continue
the
program.
The
City
and
Responsible
Entity
should
agree
to
a
realistic
production
schedule
that
scales
up
over
time
to
reach
a
sustainable
level
of
annual
production
that
meets
or
exceeds
the
stated
production
goals.
3.
Proposed
sales
targets,
target
incomes
and
home
pricing
-‐
The
written
agreement
should
include
a
detailed
description
of
pricing
levels
that
will
be
considered
satisfactory
to
the
City.
In
addition
the
agreement
should
include
descriptions
of
housing
types
that
include
the
minimum
size
based
on
the
number
of
bedrooms.
If
this
agreement
is
structured
as
a
multi-‐year
agreement
it
will
need
to
include
formulas
for
adjusting
pricing
over
time
as
Area
Median
Income
and
prevailing
interest
rates
change
over
time.
338
2
4.
Program
Sustainability
–
Inclusionary
Zoning
represents
a
long-‐term
and
stable
production
of
affordable
homes,
as
long
as
the
larger
for
sale
housing
market
remains
active.
The
alternative
proposal
should
include
components
that
describe
a
plan
for
long-‐term
sustainability
and
unit
production
over
time.
5.
Clear
incentives
structure
-‐
The
written
agreement
should
also
outline
the
structure
of
any
financial
assistance
and
other
incentives
being
provided
in
exchange
for
the
production
of
low
cost
homes
as
well
as
the
triggers
for
when
that
assistance
is
provided.
Necessary
Programmatic
Components
Absolutely
critical
to
the
success
of
any
affordable
housing
program
targeted
at
buyers
in
the
60%-‐100%
of
area
median
income
group
will
be
robust
programmatic
support
to
help
prepare
buyers
for
home
purchase.
This
is
true
for
both
Inclusionary
Zoning
and
any
alternative
proposal.
We
would
recommend
the
creation
of
a
business
plan
for
an
enhanced
homebuyer
assistance
program
that
will
aim
to
serve
20-‐
30
additional
homebuyers
a
year.
Enhance
current
programs
-‐
Work
with
HRDC
to
increase
the
depth
of
service
for
buyers
in
the
60-‐100%
AMI
income
range.
This
includes
increased
focus
on
one-‐on-‐one
counseling
for
credit
repair
and
budgeting,
as
well
as
increasing
HRDC’s
role
in
connecting
buyers
with
housing
options
and
tracking
their
outcomes.
Properly
Fund
Expansion
-‐
Most
failures
of
programs
of
this
kind
have
resulted
from
low-‐balling
the
overhead
expenses.
Normally
these
programs
do
intakes
and
counseling
with
8
low-‐income
buyers
to
end
up
with
one
successful
home
purchase.
Those
8
require
about
$300-‐$400
in
services
each,
so
in
effect
it
costs
about
$2500-‐$3000
in
counseling
and
education
services
to
result
in
one
sale—not
to
mention
some
of
the
7
other
clients
being
headed
down
the
right
path
to
future
homeownership.
This
means
at
least
$70,000
in
additional
overhead
a
year.
Include
Downpayment
Assistance
-‐
Downpayment
assistance
will
be
critical
for
helping
homebuyers
in
this
income
range
cover
a
portion
of
their
downpayment
and
closing
costs.
Assistance
in
the
range
of
$5000
per
household
would
cover
half
the
required
downpayment
and
a
significant
portion
of
closing
costs
for
a
$150,000
home
with
FHA
financing.
This
additional
assistance
will
greatly
lower
the
bar
to
mortgage
qualification,
while
still
requiring
homebuyer
to
supply
a
portion
of
the
cash
needed
to
close
on
a
home.
.
Private
Sector
Buy-‐in
-‐
Program
success
will
also
be
contingent
on
participation
for
private
sector
lenders,
who
ultimately
will
underwrite
the
mortgages
for
clients.
At
least
two
lenders
familiar
with
first-‐time
homebuyer
lending
programs
should
be
engaged
early
in
this
effort.
Targets
for
Annual
Sales,
Pricing
Formulas,
and
Income
of
Buyers
The
following
proposed
targets
are
based
on
an
estimate
of
what
a
new
IZ
ordinance
could
produce.
That
ordinance
would
have
two
income/price
categories
for
owner-‐occupied
homes,
as
recommended
in
the
Jan.
30,
2015
report
to
the
City
of
Bozeman
titled,
“Recommendations
for
Regulatory
Changes
to
Support
Affordable
Housing
Development.
The
annual
goals
below
come
from
a
separate
working
paper
titled,
“Projected
Costs
of
Affordable
Housing
Incentives
in
Bozeman”.
The
total
number
of
Affordable
Lower-‐
Priced
homes
does
not
include
an
additional
10
units
presumed
to
be
produced
through
non-‐profit
driven
housing
development.
339
3
Category
Target
Income
Range
(Area
Median
Income)
Target
Income
to
Establish
Price
Point
Annual
Goal
Affordable,
Lower-‐Priced
65%-‐80%
of
AMI
70%
of
AMI
12
homes
Affordable,
Moderate-‐Priced
81%-‐100%
of
AMI
90%
of
AMI
37
homes
Home
Pricing
Pricing
is
based
on
the
2015
Area
Median
Income
assuming
a
family
of
three
for
2-‐bedroom,
a
family
of
four
for
3-‐bedroom
and
a
family
of
five
for
4-‐bedroom;
FHA
financing
assumptions
at
33%
debt
ratio
and
4.25%
interest
rate.
The
income
level
used
for
the
calculation
of
prices
for
the
Lower
Priced
units
is
70%
of
the
Area
Median
Income,
and
90%
AMI
for
the
Moderately
Priced
Units
Price
Targets
1-‐Bedroom
2-‐Bedroom
3-‐Bedroom
4-‐Bedroom
Lower
Priced
(65%-‐80
%
AMI)
$145,343
$167,120
$194,846
$204,640
Moderate
Priced
(81%-‐100%
AMI)
$216,436
$241,115
$279,080
$291,030
A
focus
on
below
market
rate
homes:
The
greatest
unmet
need,
and
challenge
for
developers
and
builders,
will
be
to
produce
detached
affordable
homes
in
the
lower-‐price
category
targeting
families
in
the
65-‐80%
AMI
category.
To
achieve
affordability
for
these
families,
home
prices
will
have
to
be
significantly
below
the
prevailing
prices
of
even
modest
detached
homes.
This
should
be
the
primary
focus
of
any
alternative
proposal
to
satisfy
the
production
that
would
otherwise
be
created
by
inclusionary
zoning.
Any
proposal
that
fails
to
address
the
production
of
homes
at
these
lower
income
ranges
should
not
be
considered
a
responsive
alternative
to
inclusionary
zoning.
340