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HomeMy WebLinkAboutA5. Affordable Housing Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Wendy Thomas, Director of Community Development SUBJECT: Recommended Incentives to Create Affordable Housing MEETING DATE: June 15, 2015 AGENDA ITEM TYPE: Action RECOMMENDATION: Upon reviewing the material and considering public comment, consider the recommendations for incentives as part of an Affordable Housing Creation Program. EXECUTIVE SUMMARY: This report contains information as a follow up to the City Commission request in February 2015 that Staff return to the Commission with incentives that the Commission could consider for inclusion in an Affordable Housing program. The recommendations are based on meetings with not-for-profit and for profit developers and builders. The recommendations largely mirror those included in the Workforce Housing program in Chapter 10 of the Bozeman Municipal Code (BMC). The incentives are based on three primary areas: expedited timing, financial support and flexibly to standards within the Unified Development Code (UDC). Based on prior public comment from the Southwest Montana Building Industry Association (SWMBIA), another recommended incentive to the creation of affordable housing would be the update and modification of the UDC with the objective of creating a more user friendly set of development regulations thereby improving comprehensibility, creating clarity and possibly decreasing project review time. Incentives proposed by Werwath, SWMBIA and staff align with the only difference being the income level for which incentives should be available. SWMBIA proposes that incentives are available to development(s) serving households earning 100% or less of Area Median Income (AMI). The incentives proposed by Werwath are generally focused on development(s) serving households earning 80% or less of AMI. In addition, Werwath’s incentives are categorized to address two general income levels, 60-80% AMI and 80-100% AMI. SWMBIA, consistent with direction from the City Commission has addressed incentives on three income levels: 65-75%, 76-90% and 91-100% AMI. BACKGROUND: 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. 466 • 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. o At the May 18, 2015 meeting, the City Commission directed staff to:  Create a program that was based on phased-in targets.  Units will be single household detached units as well as townhouse units.  Units shall serve three income levels based on area median income (AMI): • 60-70 AMI • 71-85 AMI • 86-100 AMI o The Commission generally supported the recommendation that 3 Mils be set aside to support affordable housing for the next three years. • 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. AFFORDABLE HOUSING INCENTIVES: The primary focus of this memo will be to address the changes in processing that could facilitate the creation of affordable housing units. Many of the incentives that are being proposed by Werwath and SWMBIA are included in the suspended workforce housing provisions within the BMC, please see Attachment A. The incentive chart created by Werwath and Associates, please see Attachment B, was developed after meeting with local developers and builders. The incentives proposed by SWMBIA are included as Attachment C. The following is a summary chart that provides an “at a glance” summary of the proposed incentives. 467 In addition to these incentives, I would recommend the following incentives also be considered by the City Commission. • Remove subdivision pre-application step for sub-divisions incorporating 10% of units as affordable units. Estimated saving of 30-45 days of review time. • Provide 1 + 1 expedited building permit review. Affordable single family units will be reviewed within 3 business days of being submitted. In addition, a market rate single family unit being built by the same builder will be given the same review time. Estimated saving of 2-4 weeks for each permit. • Create Innovative Housing development code to allow “Cottage Housing Developments.” • Allow subdivision exemption for townhouses or cottage housing developments where units and land under units is held in ownership separate from the common area surrounding the housing unit (MCA 76-3-203). The incentives bulleted above will require the creation of new processes, changes to the UDC, and/or resources that will be required for monitoring. It is worth noting that the City of Bozeman will be supporting the affordable housing creation efforts through the investment of staff time. ALTERNATIVES: As directed by the Commission. FISCAL EFFECTS: Incentives that include monetary subsidy will have an impact on the affordable housing fund. However, the policy direction being sought at this time will not have a direct and immediate fiscal impact. Report compiled on: May 31, 2015 Attachments: Codified Incentives, Summary of Chapter 10 Bozeman Municipal Code Werwath Associates Incentives Chart SWMBIA Incentives Chart 468 Affordable Housing Existing Regulations in Bozeman Municipal Code Chapter 10 Cost Offsets * Reduction of Parkland 1 square foot for each square foot of land used to develop affordable housing * Sliding Scale of Impact Fees (deferred /waived) * Reduction or Waiver of other fees for projects with 100% affordable units *Fast Track Plan Review * Simultaneous infrastructure and housing construction * Zero lot line for 2 attached units * Smaller lots: 2500 – 2700 sq .ft. lots * Density bonus Identified Issues Definition of lot: * Lot frontage on a street – excludes fee simple ownership of cottage type development 469 Discussion Draft of New City of Bozeman Ordinances for Affordable Housing Incentives May 7, 2015 by Werwath Associates 1 10.08.060. – Incentives Available for Affordable Housing A. The following incentives are available to Developers of affordable housing units, as applicable to the type of development proposed. Incentives Description Very Low- Cost Rentals Lower- Priced Homes 65-80 AMI Moderate- Priced Homes 80-100 AMI Impact Fee Subsidy Homes benefiting households with incomes at or below 80% of the Area Median Income, as defined in this section, shall be eligible for a full subsidization of impact fees, paid from municipal funds and secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the home. X X Financing of Infrastructure for Affordable Homes The city will provide on a first-come first-served basis, infrastructure development assistance funded from municipal sources not to exceed $10,000 per home benefiting households with incomes at or below 80% of Area Median Income, as defined in this section. This assistance shall be passed on to the buyer as a discount and be secured with a lien instrument due upon sale, transfer or non- rate/term refinance of the home. X X Waiver of Subdivision and Permit Fees Affordable Housing benefiting households with incomes at or below 80% of the Area Median Income shall be eligible for a waiver of applicable permit and development review fees on a pro-rata basis. X X Reduction of Parkland Requirements For development projects of ten or more units that include homes benefiting households with incomes at or below 80% of the Area Median Income, as defined in this section, shall be allowed a reduction in the size of parkland requirements equivalent to the actual lot area of lower-priced affordable units within the project. X X Reduced Minimum Lot Sizes Developments that include homes for purchase benefiting households with incomes at or below 80% of Area Median Income shall be allowed, by right, lot sizes as small as 2,500 square feet for the income-restricted units. Developments that include homes for purchase benefiting households with incomes between 81-100% of Area Median Income, as defined in this section, shall be allowed by right, a minimum lot size of 3,500 square feet for such homes. For both types of development, the X X 470 Discussion Draft of New City of Bozeman Ordinances for Affordable Housing Incentives May 7, 2015 by Werwath Associates 2 Incentives Description Very Low- Cost Rentals Lower- Priced Homes 65-80 AMI Moderate- Priced Homes 80-100 AMI reduction in lot size shall be allowed to create an increase in maximum unit density beyond the maximum currently allowed in a given zoning district. Simultaneous Infrastructure Housing Construction For development projects with homes benefiting households with incomes at or below 80% of the Area Median Income, as defined in this section, shall be allowed to simultaneous start of infrastructure and housing development at the installation of gravel base roads, provided the Developer has provided assurance through a performance bond ensuring the completion of infrastructure. X X Street Width Reduction For development projects that include homes benefiting households at or below 100% of Area Median Income, as defined in this section, shall be allowed a reduction of street widths to: need land use staff input X X X Expedited Review for Project(s) that Build Affordable Housing Expedited review by city departments of applications for developments in which at least 10% of the dwelling units will benefit households with incomes at or below 100% of area median income. NOTE: This encompasses both options, or even a development that chooses a mix of the 10% and 30% affordable options X X X Reduced Parking Requirements Projects that include homes for purchase benefiting households with incomes between 65-80% AMI units for sale shall be allowed a reduced parking requirement of two spaces per three-bedroom dwelling for income-certified homeowner-occupied units. Would the same apply to rental units or do they already have a lower requirement? X 471 Final Incentives Table Accurate as 6/2/15 Incentives Description 65-75% AMI Residence 76-90% AMI Residence 91-100% AMI Residence Impact Fee Subsidy Homes benefiting households with incomes at or below 100% of the Area Median Income, as defined in this section, shall be eligible for a graduated subsidization of impact fees, as provided in the original workforce housing ordinance. The subsidy will only be applied to the houses indicated as affordable housing through a plat note. The subsidy will be proportional to the Area Median Income level indicated. X X X Down-payment Assistance The city provide down-payment assistance funded from municipal sources not to exceed $10,000 per home benefiting households with incomes at or below 100% of Area Median Income, as defined in this section. This assistance shall be secured with a junior lien. X X X Reduction of Parkland Requirements Development projects of ten or more units that include homes benefiting households with incomes at or below 100% of the Area Median Income, as defined in this section, shall be allowed a reduction in the size of parkland requirements equivalent to the actual lot area of lower-priced affordable units within the project. The requirement shall be lowered to the original WFHO standard of the minimum lot size of the area’s zoning per affordable dwelling unit. Wetlands shall also count towards parkland dedication. X X X Reduced Minimum Lot Sizes All residences in R1-4 shall be allowed, by right, lot sizes as small as 2000 square feet. X X X Simultaneous Infrastructure Housing Development projects with homes benefiting households with incomes at or below 100% of the Area Median Income, as defined in this section, shall be allowed to simultaneous start of infrastructure and housing development at the installation of gravel base roads, and provided the developer has provided X X X 472 Final Incentives Table Accurate as 6/2/15 Incentives Description 65-75% AMI Residence 76-90% AMI Residence 91-100% AMI Residence Construction assurance through a performance bond ensuring the completion of infrastructure. Street Width Reduction Development projects that include homes benefiting households at or below 100% of Area Median Income, as defined in this section, shall be allowed a reduction of street widths when meeting all other safety regulations. Reductions of street width shall be handled on a case by case basis, upon the approval of the Public Works Department. X X X Expedited Review for Project that Build Affordable Housing Expedited review by city departments of applications for developments in which at least 10% of the dwelling units will benefit households with incomes at or below 100% of area median income. X X X Reduced Parking Requirements Projects that include homes benefiting households with incomes at 100% AMI and below shall be allowed the previous relaxations allowed under the original workforce housing ordinance. X X X Expedited Building Permits Building permits will be approved and returned to developers within one week (five business days) of submission for dwelling units benefiting households with incomes at or below 100% of area median income. X X X Open Market Sales After 30 days of good faith sales efforts following the completion of construction of a dwelling unit that has benefitted from the incentives, the unit will be allowed to market the unit to all customers for normal sales procedure. X X X 473 Final Incentives Table Accurate as 6/2/15 Incentives Description 65-75% AMI Residence 76-90% AMI Residence 91-100% AMI Residence Accessory Dwelling Units All residents in R-1 through R-4 shall be allowed to build accessory dwelling units, subject to parking and safety restrictions. Residents will be eligible to receive a low-interest loans to cover at least some of the cost of building the ADU, provided that they choose from an approved list of ADU designs and reserve the new ADU as an affordable rental unit (0-65% of AMI). X X X 474