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15358, Staff Report for the Rescission of the Existing Workforce Housing
provisions in Chapter 10, Section 8 and Creating Article 43 in Chapter 38,
Unified Development Code, for an Inclusionary Housing Program including
definitions, incentives and requirements for the provision of affordable
housing for public hearing September 8, 2015
Project Description: A text amendment to the Unified Development Code to create an
Affordable Housing Program including definitions, incentives and requirements.
Further amending the Unified Development Code to change existing references
within the Bozeman Municipal Code from Chapter 10 Section 8 to Chapter 38,
Section 43.
Recommended Motion: Having reviewed the staff report, considered public comment, and
considered all of the information presented, I hereby adopt the findings presented in
the staff report for application Z-15358 and move to recommend approval of
Ordinance 1922, creating an Inclusionary Housing Program.
Report Date: Wednesday, September 02, 2015
Staff Contact: Wendy Thomas
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...................................................................................................... 2
BACKGROUND ...................................................................................................................... 3
PROGRAM COMPONENTS ................................................................................................... 3
SECTION 1 – RECOMMENDATION AND FUTURE ACTIONS ........................................ 6
SECTION 2 - STAFF ANALYSIS........................................................................................... 6
Section 76-2-304, MCA (Zoning) Criteria ......................................................................... 6
APPENDIX A –AFFECTED ZONING AND GROWTH POLICY PROVISIONS ............. 11
APPENDIX B – ADVISORY BOARD REVIEW ................................................................. 12
APPENDIX C – NOTICING AND PUBLIC COMMENT ................................................... 12
APPENDIX D - OWNER INFORMATION AND REVIEWING STAFF............................ 12
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EXECUTIVE SUMMARY
A successful inclusionary housing program is understandable, implementable and built on a
foundation of cooperation between all parties involved in the creation of housing. The
program being proposed is iterative, balanced and focused on addressing housing needs
within Bozeman. Successful housing policies and programs are community specific. The
program being proposed has been developed based on best practice research that has been
modified after obtaining input from our community.
The City Commission directed staff to engage the services of an affordable housing
consultant to revise the City’s affordable housing ordinance. After conducting public
meetings to seek the input of the community, interviewing developers and housing producers,
and seeking the input of bankers and realtors, Werwath and Associates proposed a program
that required the creation of affordable housing units and introduced significant incentives to
facilitate the creation of units.
Werwath recommends the inclusionary housing program focus on creation of detached units
because his research shows this segment of housing has the highest demand and the lowest
inventory in the city. The City Commission challenged staff, builders, and developers to
work with Werwath’s recommendations, but alter the program to move away from a
mandatory requirement to an incentive based program.
The inclusionary housing program being proposed, please see Attachment A, is a full
program that has a requirement for the provision of affordable units; however, based on City
Commission direction, staff is recommending a phase in period, for up to two years, to gauge
the effectiveness of the incentives to facilitate the creation of affordable units without a
mandatory requirement. A summary of the goals, incentives and price points is available in
Attachment B. As proposed, Ordinance 1922 will be a temporary ordinance to be replaced
by a full ordinance when contingencies have been met. The contingencies are based on the
phased goals for housing creation.
If approved by the City Commission, the ordinance will be the first step in the re-creation of
the City’s affordable housing program. Additional steps are needed to fully activate the
program which would include: contracting with an agency or organization to assist in income
verification and monitoring of the program, creation of an innovative housing ordinance,
creation of an administrative manual, adoption of a program to support the creation of
affordable rentals, and the allocation of affordable housing funds for affordable rentals.
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BACKGROUND
In 2007 the City Commission adopted ordinance 1710 creating an affordable housing
program that allowed code relaxations and incentives in exchange for the creation of
affordable housing units. In 2008-2009 the housing market in Bozeman, and across the
United States, experienced a sharp decline in both demand and pricing. The City
Commission took action to suspend the affordable housing program for a period of two
years. Since 2013, staff has been providing the Commission with quarterly updates on the
status of housing pricing in the City. In September 2014, the City Commission directed staff
to move forward with a study and recommendation on development of a new affordable
housing program.
On February 2, 2015, Werwath and Associates presented the results of their affordable
housing study. Please see Attachment C. The study recommended a program that focused
on the creation of detached single-family dwellings. Detached units that meet the price point
affordable to households earning 70% of Area Median Income (AMI) are not currently being
created within Bozeman. The lower the sale price of a unit, the more subsidy is needed in
order to have the home sold at a target price.
PROGRAM COMPONENTS
At this time, there are several not for profit organizations that continually work to provide
housing opportunities to meet the spectrum of housing need in this community. These
housing providers layer subsides to make housing opportunities available to households,
including down payment assistance, private contributions, sweat equity, land donations and
public funding for affordable housing. As the real estate market has improved in Bozeman,
the price of every aspect of the home building industry has escalated. A perfect storm of
increasing land costs, increasing material costs and shortage of labor has resulted in a market
where housing costs are rapidly increasing. The incentives that are being proposed in
conjunction with the affordable housing program are focused in three areas: financial,
regulatory offsets, and timing.
Incentives: The incentives are proposed so they facilitate the creation of affordable housing
throughout the development process.
Developer Incentives: Incentives to create lots for the placement of affordable housing
include waiver of sub-division pre-application, concurrent construction of infrastructure,
reduced lot sizes, and reduction of parkland dedication for qualifying units.
Builder Incentives: Incentives to facilitate construction of affordable homes includes
expedited permitting, development and implementation of an innovative housing ordinance,
reduced parking requirements and payment of impact fees for qualifying units.
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Buyer Incentives: Creation of units that are close to employment, transportation, and
services, payment of impact fees and down payment assistance.
At this time, there are existing provisions for the creation of homes on smaller lots in the
Unified Development Code (UDC). Staff is recommending that these provisions again
become effective. Staff also recommends the creation of an Innovative Housing Ordinance
that will allow smaller lots, cottage developments and create opportunities for the creation of
affordable housing based on the flexibility of trade-offs provided in the existing Planned Unit
Development (PUD) without having to dedicate the time and resources needed to create and
entitle a PUD. The ordinance is being drafted as part of the first phase of the update to the
UDC. Finally, staff is also recommending as part of the UDC update that the definition of lot
be amended in order to facilitate the creation of cottage developments. An example of a
cottage development can be found in Attachment D. The contract for the update of the UDC
was approved by the City Commission on August 24, 2015.
The Southwest Montana Building Industry Association (SWMBIA) worked with city staff
with regard to the proposed incentives. Though the ordinance development process,
SWMBIA has worked constructively with interested parties, however, they are proposing a
series of incentives that are different from those incorporated into the ordinance. The
SWMBIA incentives are included in this report as Attachment E.
Administration: Utilization of incentives will require the developer or builder create and
submit an Affordable Housing Plan. The affordable housing plan will outline the type of
homes (lots) to be created, timing of delivery, price point of home, size of home, and
applicant information. Review and approval of the plan will be concurrent with the review of
development applications. The agreement will be legally binding and will be recorded with
the Gallatin County Clerk and Recorder.
Incentives that are created at the platting stage will require a note on the plat designating
which lots are designated for the creation of affordable homes and the AMI to be served. By
noting the restriction on the face of the plat, the restriction on the lot will be known to future
purchasers. Unlike the Restricted Size Lot (RSL) program that the City used in the past to
create affordable housing opportunities, this restriction would not limited the square footage
of the home. This small change will capitalize on the City’s experience with RSLs and
eliminate the unintended consequence that resulted from placing a square footage limitation
on the home.
The price point for homes will be set annually based on Area Median Income (AMI) data
provided by the Department of Housing and Urban Development (HUD). HUD updates the
numbers each year, generally in December. The price point calculation will also include
down payment, mortgage rates, and household size.
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At the direction of the City Commission, staff will create an administrative manual for the
affordable housing program. The manual will be brought to the City Commission for review
and approval through a resolution.
Goals: Annually, while a voluntary affordable housing program is in effect, the City
Commission will set a goal of housing creation in tandem with the update of the price point
data. Staff recommends that the goal be 10% of a five year rolling average of the number of
building permits issued for the housing type. At this time, the City Commission has
indicated they are interested in setting a goal for detached and duplex, triplex and townhouse
units. For the purpose of simplicity, the attached units are combined in Attachment B.
Based on this calculations, the goal of 54 housing units over the next two years is shown on
the attachment.
The Commission has provided feedback that the purpose of setting a goal is to provide clarity
on how to gauge success of the program. Recognizing that the program is new and untested
in Bozeman, the Staff is recommending the goal have interim targets to encourage the
ongoing creation of affordable units while recognizing that each of the participants in the
housing creation process will need time to understand and implement the new program. 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 created by
affordable homes. The City Commission indicated in policy feedback sessions the goal
should include attached residential units. 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.
Phase In Proposal:
0-9 months: ¼ of target goal
10-18 months: ½ of target goal
18-24 months: meet goal.
Thereafter: Production of half of goal units within each six month period with a 45 day
flexibility window for weather variations.
Code Consistency: The program, as proposed would require modification to the UDC to
incorporate definitions and also to create consistency within the document. References within
the UDC would need to be amended to reflect the change from having the affordable housing
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program in Chapter 10 of the Bozeman Municipal Code (BMC) to incorporation into the
UDC. Staff is proposing that the program be incorporated into the UDC because it is tied so
closely to development. In addition, based on feedback from affordable housing developers,
for ease of access in locating the inclusionary housing program, the UDC is where they are
looking for the provisions, not in the general code sections of the BMC. As such, staff is
proposing the recession of Chapter 10, Article 8 and changing all references in the UDC from
Chapter 10 to Chapter 38.43.
SECTION 1 – RECOMMENDATION AND FUTURE ACTIONS
Project Name: Affordable Housing Program
File: 15358
Having considered the criteria established for a municipal code amendment, the Staff
recommends the approval of the text as submitted, with the implementation of a phased
ordinance with an effective date of December 1, 2015 for the incentives, affordable housing
plan requirements, and subsidy recapture provisions. The remainder of the ordinance shall
have an effective date based on the contingencies.
The Zoning Commission will conduct a public hearing on the proposed text amendment on
September 8, 2015.
The City Commission will hold a public hearing on the text of the amendment on September
21, 2015.
SECTION 2 - STAFF ANALYSIS
In considering applications for approval under this title, the advisory boards and City
Commission shall consider the following:
Section 76-2-304, MCA (Zoning) Criteria
A. Be in accordance with a growth policy.
Yes. Chapter six of the Bozeman Community Plan describes the need for a diverse housing
stock within the City of Bozeman. If the community is to prosper, it is essential to address
residential issues. Housing is critical for the vitality of the City and is a critical component of
the economic landscape. Business and industry that consider locating in Bozeman evaluate
the availability of housing for their employees of all salary levels. In addition, it is of primary
importance is to ensure that current and future residents of the community, who come from a
diversity of socioeconomic backgrounds, have adequate and quality housing available to
them. The quality and availability of housing for all socioeconomic groups furthers
community goals regarding housing, economic development, transportation and provision of
infrastructure.
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There are several goals and objectives which interact with the amendments and these
principles.
As described in Appendix B, the review and update for the regulations regarding
manufacturing are appropriate to match regulations to the physical impacts of development
and to provide opportunities for additional economic activity.
Goal H-1: Promote an adequate supply of safe, quality housing that is diverse in
type, density, cost, and location with an emphasis on maintaining neighborhood
character and stability.
Rationale: A community needs a variety of housing stock to accommodate the diversity
in personal circumstances and preferences of its population. The type of housing required
may be different throughout a person’s life. A healthy community has a wide range of
citizens with differing age, education, economic condition, and other factors. Stable
neighborhoods encourage reinvestment, both financial and emotional that strengthens and
builds the community.
Objective 1.1 - Encourage and support the creation of a broad range of housing types in
proximity to services and transportation options.
Objective 1.3 - Promote the provision of a wide variety of housing types in a range of
costs to meet the diverse residential needs of Bozeman residents.
Objective 1.4 Recognize the role of housing in economic development.
Goal H-2: Promote the creation of housing which advances the seven guiding land
use principles of Chapter 3.
Rationale: Housing is the land use which consumes the greatest land area in the
community. It is critical in advancing and achieving the community’s aspirations. Choice
of housing location and type strongly influences other issues such as mode of travel and
participation in the society building aspects of the community.
Objective 2.1 - Encourage socially and economically diverse neighborhoods.
Objective 2.2 - Promote energy efficiency and incorporation of sustainable features in
new and existing housing.
Objective 2.3 - Support infill development and the preservation of existing affordable
housing and encourage the inclusion of additional affordable housing in new infill
developments.
Goal H-3– Encourage an adequate supply of affordable housing and land for
affordable housing.
Rationale: There will always be a portion of the population which earns less than the
median income. This may be for many reasons. This affects the ability to find market rate
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housing which is adequate for basic housing needs. Lack of adequate housing effects
health, social stability, and many other issues which can have severe negative and inter-
generation effects.
Objective 3.1 – Encourage the provision of affordable housing.
Objective 3.2 – Encourage the preservation and rehabilitation of the existing housing
stock to protect the health, safety, and welfare of Bozeman residents.
Objective 3.3. – Promote the development of a wide variety of housing types, designs,
and costs to meet the wide range of residential needs of Bozeman residents.
Objective 3.4 – Encourage development of education and employment opportunities
which increase incomes so that the cost of housing and ability to pay for housing are
more closely matched.
Objective ED-1.1: Support business creation, retention, and expansion. Emphasize small
businesses, ‘green’ businesses, and e-businesses.
Goal ED-2: Support balanced policies and programs to encourage a durable, vigorous,
and diverse economy.
Rationale: A lack of balance in economic policy can lead to loss of community
viability by sacrificing high long term value community assets for short term,
“quick fix” benefits. It is important to recognize the economic importance of the
social, cultural, and natural assets of Bozeman.
Bozeman’s Economic Values:
• Strengthen and further diversify the local economy
• Increase economic activity
• Create higher paying jobs
• Create high quality employment in Bozeman to match the high quality of life
• Support our homegrown business community
(Source: Bozeman Economic Development Plan)
The Bozeman Economic Development Plan indicates that affordable housing for workers
was the highest rated community concern for furthering economic development when the
plan was drafted.
Affordable Housing for Workers: The need for affordable housing for workers was rated as a
priority for all groups with the other business leader group rating this the highest at 3.51, the
community members at 3.47, and the in-person business leaders at 3.21.
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B. The effect on motorized and non-motorized transportation systems.
Neutral. The proposed amendments address affordable housing. No changes to transportation
standards are proposed. However, the creation of affordable units within the City of
Bozeman may have an impact on the transportation network by reducing the number of trips
on local roads by allowing households who work in Bozeman the ability to live in Bozeman.
C. Secure safety from fire, panic, and other dangers.
Neutral. The proposed amendments will not materially affect safety from fire, panic and
other dangers.
D. Promote public health, public safety, and general welfare.
Yes. The proposed amendments do not change the requirements for provision of water or
sewer systems, provision of emergency response capability, or similar existing standards.
The provisions will ensure the creation of housing opportunity within proximity to services
including employment and transportation. Creation of housing opportunities within the city
reduces the average daily trips created on city streets which result in decrease emissions and
reduced impact from Stormwater run-off on water resources. In addition, creating housing
opportunity enhances the general welfare by creating a diverse community that allow
residents the option to live in the community within which they are working; as such, the
provision of affordable housing is critical to the economic vitality of the city. Jobs and
housing are integrally linked and together they create a diverse economy that contributes to
the overall welfare of the community.
E. Reasonable provision of adequate light and air.
Neutral. The amendments will allow for increased density by allowing for the creation of
smaller lot sizes, however these lots will not result in diminished access to adequate light and
air because minimum setbacks and open space requirements will be required.
F. Prevention of overcrowding of land.
Neutral. These amendments may have an impact on density by encouraging density at levels
that are consistent with the City’s adopted Community Plan (Growth Policy) but the
amendments will not allow density at a level that exceeds the existing provisions within the
Unified Development Code.
G. Avoiding undue concentration of population.
Yes. The proposed amendments will not result in an adverse concentration of population.
The intent in the program is to provide adequate housing opportunities for households within
the City while ensuring the creation of affordable housing units are dispersed throughout the
City.
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H. Facilitate the adequate provision of transportation, water, sewerage, schools,
parks, and other public requirements.
Neutral. The amendments do not alter the requirements for mitigation of infrastructure
impacts. The site plan, conditional use, or subdivision review procedures remain as presently
constituted and are adequate to analyze and mitigate demands for services.
I. Conserving the value of buildings.
Neutral. The proposed amendments will not have an adverse impact on the value of
buildings within the community. The building codes adopted by the City will ensure that
needed safety features are included with any new development that includes a residential
component within a building which will prevent fire or other hazards from being a detriment.
J. Character of the district.
Yes. The amendments apply to the B-1, B-2, B-3, M-1, M-2, HMU, UMU, REMU, R-S, R-1,
R-2, R-3 and R-4 zoning districts. These amendments are carefully constructed to allow the
character of the district to be preserved. The affordable housing program encourages the
development of affordable units in all zone districts that allow residential uses. Diversity in
housing stock and opportunities integrated into a comprehensive development where
households of different incomes have an opportunity to live with create diverse and vibrant
neighborhoods that do not fundamentally alter their character.
K. Peculiar suitability for particular uses.
Neutral. The proposed amendments do not make material changes to the various zoning
districts.
L. Encourage the most appropriate use of land throughout the jurisdictional
area.
Yes. The proposed amendments do encourage creative design opportunities to enhance
housing opportunities, however there will be no change to existing zoning districts. These
districts themselves have previously been found acceptable. The current application does not
alter the zoning map.
M. Promotion of Compatible Urban Growth.
Neutral. The proposed amendments do not alter the ability of the City to expand. They do not
change the character of the affected districts in a way that would cause them to be a problem
to adjacent areas. The amendments do not affect provision of any municipal services.
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APPENDIX A –AFFECTED ZONING AND GROWTH POLICY
PROVISIONS
Zoning Designation and Land Uses:
The adopted Workforce (affordable) Housing program, as codified in Chapter 10 Section 8 of
the Bozeman Municipal Code will be rescinded. A new Affordable Housing program will be
created and incorporated into the Unified Development Code (UDC) in Chapter 38, Section
43. The proposed ordinance does not include a major incentive, the development of an
“Innovative Housing Ordinance” that will be incorporated into the UDC. The Innovative
Housing Ordinance has been incorporated into the scope for the UDC update as a part of
Phase One.
38.42. (Definitions),
38.43. (Affordable Housing)
Adopted Growth Policy Designation:
The proposed amendment will not directly affects the implementing regulations for any
growth policy designations. The proposed new regulations and definitions associated with the
Inclusionary Housing Ordinance are not expected to have any material impact on the
character of any of the land use designations or implementing zoning districts. For
discussion about conformance of the proposed amendments to the Bozeman Community plan
please see review criterion A.
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APPENDIX B – ADVISORY BOARD REVIEW
The incentives proposed as part of the new Article 43 of the Unified Development Code have
been reviewed by the Community Affordable Housing Advisory Board (CAHAB) and the
Subdivision review subcommittee of the Recreation and Parks Advisory Board (RPAB). The
minutes for the advisory boards are attached to this staff report. The draft program will be
taken to the full RPAB in September prior to the September 21, 2015 City Commission
public hearing. The proposal was also presented to the Inter-Neighborhood Council (INC)
on July 9, 2015.
The advisory boards supported the program; however there were concerns expressed by each
of the advisory boards regarding reduction in dedication of parkland. The CAHAB felt that
this incentive was crucial to the success of the incentives. RPAB felt parkland dedications
generally should not be reduced, but supported the incentive tied to creation of only the most
affordable units because the goal for creation of units within this price point is modest and
the incorporation of the units into developments with modest and market rates homes would
not result in neighborhoods without access to parkland. RPAB also reviewed the proposal
for a tiered dedication of parkland. After reviewing the proposal, they recommended the
parkland reduction for only the units affordable to 70% AMI households.
The CAHAB will conduct a meeting on September 9, 2015 when they will make the final
recommendation to the City Commission on the draft ordinance.
APPENDIX C – NOTICING AND PUBLIC COMMENT
Noticing for a text amendment is provided by publication in the legal advertisement section
of the Bozeman Daily Chronicle on August 2nd and September 6th. Notice will be provided
at least 15 and not more than 45 days prior to the Zoning Commission and City Commission
public hearings. At the time of the drafting of the staff report, no public comment has been
received.
APPENDIX D - OWNER INFORMATION AND REVIEWING STAFF
Applicant: City of Bozeman, PO Box 1230, Bozeman MT 59771
Representative: Department of Community Development
Report By: Wendy Thomas, Director of Community Development
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Attachment A, Ordinance 1922
Attachment B, Inclusionary Housing Goals and Incentives Handout
Attachment C, Werwath Report
Attachment D, Cottage Development Example
Attachment E, SWMBIA Incentives Paper
Attachment F, Application for Code Amendment
Attachment G, Changes to UDC to Update References to Chapter 10
Attachment H, Sample Affordable Housing Plan/Developer Agreement
Attachment I, Securing Community Investment in Affordable Housing White Paper
Attachment J, CAHAB July Meeting Minutes
Attachment K, RPAB Subdivision Subcommittee Meeting Summary