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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 21, 2015
Project Description: A text amendment to the Unified Development Code to create an
Inclusionary 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 Provisional
Adoption of Ordinance 1922, creating an Inclusionary Housing Program.
Report Date: Wednesday, September 16, 2015
Staff Contact: Wendy Thomas, AICP, Community Development Director
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...................................................................................................... 2
BACKGROUND ...................................................................................................................... 3
PROGRAM COMPONENTS ................................................................................................... 3
SECTION 1 – RECOMMENDATION AND FUTURE ACTIONS ........................................ 7
SECTION 2 - STAFF ANALYSIS........................................................................................... 8
Section 76-2-304, MCA (Zoning) Criteria ......................................................................... 8
APPENDIX A –AFFECTED ZONING AND GROWTH POLICY PROVISIONS ............. 12
APPENDIX B – ADVISORY BOARD REVIEW ................................................................. 14
APPENDIX C – NOTICING AND PUBLIC COMMENT ................................................... 14
APPENDIX D - OWNER INFORMATION AND REVIEWING STAFF............................ 14
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EXECUTIVE SUMMARY
Text in italics are additions to the staff report from the staff report provided to the Planning
Board, Zoning Commission, Community Affordable Housing Advisory Board and the
Recreation Parks Advisory Board.
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. The customary effective date for an ordinance is 30 days
after final adoption. In this case, staff is recommending a 60 day effective date in order to
provide adequate time to prepare all administrative documents and drafting of follow up
resolutions for City Commission action.
The draft ordinance has been reviewed by the following advisory boards:
• Recreation and Parks Advisory Board, recommended approval
• Community Affordable Housing Advisory Board, recommended approval
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• Planning Board, motion to approve failed
• Zoning Commission, motion to approve failed
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.
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.
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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.
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. According the schedule for the UDC update the first phase is scheduled to be
completed in four months. The update commenced on September 10, 2015. 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.
A critical component of the incentives is the reduction in parkland dedication. This incentive
is being proposed for only the homes in the 70% AMI price point. This incentive is the only
incentive that is limited by the goal for creation of housing units, as established by the City
Commission annually. The goal, as proposed is extremely modest, three units, for several
reasons. The goal is modest goal due to the proportional amount of incentives that are
needed to create the units. Maximum incentives are needed for the minimum price point
homes. The community opinion regarding the dedication of parkland, supports giving
parkland for these homes, up to a limited number and only when the homes are constructed
as part of mixed income housing where parkland will be or was dedicated. The Recreation
Parks Advisory Board was clearly supportive of the reduction in the dedication of parkland
only if these two conditions were incorporated into the ordinance.
The Southwest Montana Building Industry Association (SWMBIA) worked with city staff
with regard to the proposed incentives. Through the ordinance development process,
SWMBIA has worked constructively with interested parties, however, they are proposing a
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series of incentives that are different from those incorporated into the ordinance. The
SWMBIA incentives are included in this report as Attachment E.
Definitions: The proposed ordinance defines Affordable Housing as well as Lower Price
Homes and Moderate Priced Homes. The program seeks to create housing in both the lower
and moderate price home ranges. The lower price home definition encompasses homes in
the 65-80% AMI. The incentives are divided into three categories, 70, 80 and 90% AMI
because it is important to recognize the lower the price point of the housing the more
incentives are needed in order to make the home construction financially feasible. A critical
component of the program is the allowance for the reduction in the dedication of parkland
for the homes in the 70% AMI price range. The reduction in parkland dedication was a
divisive component in the prior Work Force Housing Ordinance. In an effort to craft a
program that aligned with the priorities of the community, the draft ordinance proposes only
limited use of this incentive and therefore use of three incentive ranges within the two
definitions.
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.
Under a mandatory program the ordinance allows for alternate compliance by allowing the
dedication of cash in lieu of construction of homes or the dedication of land. The dedication
of land, as currently proposed, directs the dedication be given to the City of Bozeman. At the
Community Affordable Housing Advisory Board, public comment was received requesting
that the ordinance be modified in order to allow the dedication of land to a qualified not for
profit that is also an approved Community Housing Development Organization (CHDO). A
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CHDO is a private non-profit, community based, service organization that has, or intends to
obtain, staff with the capacity to develop affordable housing for the community it serves.
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. This goal is also incorporated into the draft ordinance as the contingencies,
please see page 38 of the draft ordinance. The Commission may wish to consider increasing
or decreasing the target number of units. A minimum to consider may be 30 units to be
created over the course of the two year phase in period with 25% of those units qualifying as
Lower Priced Homes. The goals as shown on Attachment B focus primarily on housing
creation in the 90% AMI range. Per the recommendation of Werwath and Associates, this is
the housing price point that is most in demand in Bozeman. In addition, this price point
requires fewer incentives, has limited restrictions on sales/occupancy and has no resale
restrictions or repayment provisions.
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:
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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
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: Inclusionary 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 60 days after the final approval by the City Commission
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 conducted a public hearing on the proposed text amendment on
September 8, 2015. The meeting minutes are attached to this report. The Zoning
Commission voted 0-3 on an affirmative motion to recommend approval of Ordinance 1922.
The draft ordinance was also presented to the Planning Board seeking input on the program
for the benefit of the City Commission. The Planning Board voted 3-5 on an affirmative
motion to recommend approval of Ordinance 1922. Both the Planning Board and the Zoning
Commission found that the incentive package was a key component of the program; however,
both bodies did not support the mandatory provisions that would become effective if the
contingencies were not met. There was discussion regarding the repayment provisions in the
ordinance if a property was refinanced. The Planning Board recommended the ordinance be
revised to only require the payback for a cash out refinance and not for a term refinance.
Additionally, the Board recommended that section 38.43.090 be amended to clarify that the
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section is intended to address bedroom count and not bedroom size. Finally, the Board
sought clarification on why the program was focused on first time homebuyers.
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.
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
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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
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.
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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.
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
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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.
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
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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.
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
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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 conducted a meeting on September 9, 2015 when they made a favorable
final recommendation to the City Commission on the draft ordinance. CAHAB recommended
that the City Commission hold an additional public meeting prior the effective date of the
mandatory provisions.
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, August and September Meeting Minutes
Attachment K, RPAB Subdivision Subcommittee Meeting Summary
Attachment L, Planning Board and Zoning Commission Meeting Minutes
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Ordinance 1922 Page 1 of 39
ORDINANCE NO. 1922
AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN,
MONTANA REPEALING CHAPTER 10, ARTICLE 8 OF THE BOZEMAN MUNICIPAL
CODE, ADOPTING A NEW ARTICLE REGARDING AFFORDABLE HOUSING TO
TERMINATE ONLY UPON THE OCCURRENCE OF CERTAIN CONTINGENCIES,
AND ADOPTING AN ARTICLE REGARDING AFFORDABLE HOUSING TO BE
EFFECTIVE ON THE OCCURRENCE OF SPECIFIC CONTINGENCIES AND
PROVIDING EFFECTIVE DATES
NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY
OF BOZEMAN, MONTANA:
Section 1
Chapter 10, Article 8 of the Bozeman Municipal Code is repealed in its entirety.
Section 2
A new article shall be added to Chapter 38, BMC to be entitled “Affordable Housing” to read as follows:
“[(Temporary) ARTICLE 43
DIVISION 1. – FINDINGS AND PURPOSE.
38.43.010. - Legislative findings.
The city commission hereby finds:
A. The Bozeman Community Plan establishes a goal to encourage an adequate supply of
affordable housing and land for affordable housing in Bozeman. A lack of affordable
housing affects the ability of many residents to find housing which is adequate for their
basic housing needs. A lack of adequate housing affects health, social stability, and other
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issues which can have negative and intergenerational effects. To fulfill this goal, the
Community Plan establishes an objective to promote the development of a variety of
housing types, designs, and costs to meet the wide range of needs of Bozeman residents.
B. The Affordable Housing Action Plan: 2012 - 2016 (Action Plan) analyzed housing needs
and existing market conditions and determined housing affordability has become an acute
problem as demonstrated by the number of households paying over 30% of their incomes
for housing. A 2015 update to the city’s housing needs analysis (Action Plan Update)
concluded that the group of homebuyers with significant affordability gaps have incomes
at or below 80% of the area medium income and are in need of subsidies and/or below-
market home prices. The Action Plan Update also determined that buying opportunities are
increasingly scarce for homebuyers with incomes between 60% and 100% of AMI, and
that housing and land prices have increased faster than incomes for many of Bozeman’s
residents.
C. Since the adoption of the Bozeman Community Plan and the Action Plan, the median sales
price of housing has continued to climb. According to the Action Plan Update, as of the
end of November 2014, the median home price was $287,000.
D. The Action Plan Update states that the number of detached homes priced below $250,000,
a rough indicator of housing affordability for a family of three at 100% of AMI, has fallen
from 48.4% of the market in 2012 to just 18.6% in 2014.
E. There is a critical shortage of for-sale housing affordable to Bozeman households with
incomes at and below the area median income, as currently calculated by the U.S.
Department of Housing and Urban Development. As a result, some residents pay excessive
amounts of income for housing, reducing the amounts available for other necessities and a
decent and adequate standard of living.
F. Limited housing opportunities within the city requires households to seek housing outside
of the city limits which has a negative impact on transportation infrastructure by adding
unnecessary trips to the network. Increased driving distance to affordable housing also
negatively impacts air and water quality. To maintain a sufficient resident workforce in all
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fields of employment, and to ensure the public safety and general welfare of the residents
of the city of Bozeman, affordable housing needs must be addressed.
G. The city can achieve its goals of promoting the development of more affordable housing
and its goal of achieving an economically balanced community only if part of the new
housing built is affordable to households with low and moderate incomes.
H. The inclusionary housing regulations codified in this ordinance will substantially advance
the city’s legitimate interest in assuring that additional housing is built in the city that is
affordable to residents, including low- and moderate-income households and dispersed
throughout the city in order to encourage economic integration of the city’s residents.
I. This ordinance is adopted pursuant to the city’s self-governing powers and the city’s
independent general police power to protect public health, safety, and welfare.
Encouraging the construction of affordable housing within certain developments is
consistent with the community’s housing goals of protecting the public welfare by fostering
an adequate supply of housing for persons at all economic levels and maintaining both
economic diversity and geographically dispersed affordable housing.
J. Providing housing affordable to low and moderate-income households is reasonably
related to the impacts of newly created market-rate housing projects because:
1. Rising land prices are a key factor in preventing development of new affordable
housing. New market-rate housing construction in Bozeman has generally created
strong and increasing demand for a finite stock of unbuilt land within the city, and thus
continues to drive up the price of remaining land. New development without affordable
units reduces the amount of land development opportunities available for the
construction of affordable housing.
2. New residents of market-rate housing place demands on services provided by both
public and private sectors, creating a demand for new employees. Some of these public
and private sector employees needed to meet the needs of the new residents earn
incomes only adequate to pay for affordable housing. Because affordable housing is in
short supply in the city, such employees may be forced to live in less than adequate
housing within the city, pay a disproportionate share of their incomes to live in adequate
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housing in the city, or commute ever increasing distances to their jobs from housing
located outside the city. These circumstances harm the city's ability to attain
employment and housing goals articulated in the Community Plan and place strains on
the city's ability to accept and service new market-rate housing development.
38.43.020. - Purpose.
The purpose of this article is to promote the public health, safety, and welfare by
encouraging the creation of affordable housing for the residents of Bozeman. In addition, the
purpose of this article is to promote the dispersal of quality affordable housing throughout
Bozeman’s neighborhoods for households of a variety of income levels including low- and
moderate-income residents to meet the goals of the Community Plan and the Action Plan by
encouraging a mix of housing types throughout the city and integrating affordable housing so as
to not concentrate affordable housing in a particular area.
In addition, the ordinance is intended to alleviate the impacts that would result from the use of
available residential land solely for the benefit of households that are able to afford market-rate
housing and to mitigate the service burden imposed by households in new market-rate residential
developments by making additional affordable housing available for service employees. The
ordinance is also intended to mitigate environmental and other impacts that accompany new
residential development by reducing traffic, transit and related air quality impacts, promoting
jobs/housing balance and reducing the demands placed on transportation infrastructure.
The ordinance provides incentives for housing developers to ensure houses are constructed and
sold in a manner that furthers the city’s affordable housing goals.
DIVISION 2. – APPLICABILITY AND DEFINITIONS.
38.43.030. – Applicability.
This article applies to developments seeking to use incentives to develop affordable housing.
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38.43.040. – Definitions.
1. Affordable housing or affordable home – A dwelling for purchase by an owner-occupant
that requires no more than 33% of a household’s income for housing payments and meets
the definition of a lower-priced home or moderate-priced home.
2. Area Median Income or AMI – As calculated by the U.S. Department of Housing and
Urban Development (HUD), AMI is the median income for a family of four within a
specific geographical area, such as Gallatin County. For each such region, HUD adjusts
this AMI calculation for households of different sizes and updates the calculations
annually based on estimated changes in area incomes. For purposes of this article, the city
hereby adopts HUD’s AMI calculations as an equitable and reasonable method to
determine affordability, based on percentages of AMI specified in this article.
3. Developer – For purposes of this article, a developer is the person or legal entity, or their
successor(s) in interest who: (a) submits an affordable housing plan for a subject property
along with other submissions required for land use approvals, zoning, or permit reviews
by the city, and/or (b) is the owner of property subject to this article during the
development phase or a successor in title, such as a builder, obligated to implement an
approved affordable housing plan with respect to one or more lots or parcels of land
and/or (c) receives incentives for the production of affordable housing.
4. Lower-priced home – Newly created dwelling for purchase, determined by the city in
accordance with this article to be affordable to a household with an income between 65%
and 80% of AMI.
5. Market-rate home – Any dwelling subject to this article which is not an affordable home,
including detached dwellings, attached town houses, and condominium units but not
including housing units that are developed for exclusive use as a rental.
6. Moderate-priced home – Newly created dwelling for purchase, affordable to a household
with an income between 81% and 100% of AMI.
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DIVISION 3. – Reserved.
38.43.050. – Pricing of affordable homes.
A. The city will calculate on an annual basis the maximum sales price a developer may charge
for each category of affordable home included in a developer’s affordable housing plan as
follows:
1. Lower-priced homes. The sales price for lower-priced homes affordable to buyer-
households with incomes from 65% to 80% of AMI will be calculated based on a
household income of 70% of AMI.
2. Moderate-priced homes. The sales price for moderate-priced homes affordable to
buyer-households with incomes from 81% to 100% of AMI will be calculated based
on a household income of 90% of AMI.
B. Affordable home sales price schedule.
1. The city will annually publish a schedule of sales prices for low-priced homes and
moderate-priced homes within 30 calendar days of the HUD’s annual publication of
updated AMI calculations. The sales price schedule will be effective on the date of
publication by the city. The new sales price schedule will apply to applications for
building permits received after the effective date of the new sales price schedule. A
developer may request that a new sales price schedule apply to the sale of an affordable
home approved under a previous sales price schedule.
2. The city, at the city’s sole discretion, may recalculate the sales price schedule if
prevailing mortgage interest rates have increased by 50 basis points or more over the
assumption used for the previous schedule.
3. Considerations. The following factors will be considered by the city in calculating the
sales price schedule. The Planning Director may make de minimis exceptions to
application of these factors:
a. AMI for the Bozeman area;
b. Gross monthly income will be calculated as the appropriate HUD AMI
calculations income divided by 12;
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c. The maximum monthly payment will be 33% of gross monthly income. The
maximum monthly payment will include costs directly applicable to a mortgage
such as payment of principal, interest, as well as assumptions for typical costs of
taxes, public assessments, property insurance premiums, mortgage insurance
premiums (assuming the higher of either government or private mortgage insurance),
and homeowner/condominium association fees;
d. The interest rate will be determined by the city by a survey of at least three local
mortgage lenders, averaging their current rates for loans for homes with price
ranges within the low-priced homes range and the moderate-priced homes range;
e. The financing will be a conventional or government-insured fixed-rate loan with
a term of 15 to 30 years; and
f. A borrower will typically provide a down payment of 3% of the purchase price.
C. Household occupancy assumptions. To determine the maximum sales prices of affordable
homes with different numbers of bedrooms, the city will base its calculation on the AMIs
for households of different sizes, as follows:
1. Zero bedroom or studio unit – AMI for a one-person household;
2. One bedroom unit – AMI for a two-person household;
3. Two bedroom unit – AMI for a three-person household; and
4. Three bedroom unit or larger – AMI for a four-person household.
38.43.060. – Timing of delivery of affordable homes.
Affordable homes included in an approved affordable housing plan must be provided in
accordance with the following:
A. In each development in which more than one affordable home is proposed to be sold, the
affordable housing plan shall specify that affordable homes are to be sold concurrently and
in proportion to the sale of unimproved lots or market-rate homes. Such timing will be
represented in an affordable homes pricing and delivery schedule as described in section
38.43.080.
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B. A developer may sell affordable homes earlier than required in an affordable housing plan.
38.43.070. – Minimum design and construction standards for affordable homes.
A. Required numbers of bedrooms in affordable homes. In each development subject to the
requirements of an approved affordable housing plan, affordable homes shall represent a
mix of bedrooms per unit as similar as possible (given rounding of numbers) to the mix of
bedroom of the market-rate homes in the development.
B. Standards for design and construction. The city shall define reasonable standards for the
design and construction of affordable homes to ensure livability and compatibility with
nearby market-rate homes in the development. Affordable homes may have different
interior finishes and features than other dwellings within the development, as long as the
finishes and features are functionally equivalent and of good quality. Finishes include, but
are not limited to, design and materials, the provision of appliances, cabinets, and floor
treatment. Features include, but are not limited to, the numbers of bathrooms, garages and
parking areas, mechanical equipment and hookups, and green building features.
C. Amenities. Affordable homes shall have the same amenities as the market-rate homes in
the development, including the same access to and enjoyment of common open space and
facilities in the development.
38.43.080. – Submission of affordable housing plan; approval.
A. Affordable housing plan. The applicant for any development seeking to utilize the
incentives to create affordable housing must submit an affordable housing plan in a form
provided by or approved by the city that describes how the provisions of this article will
be satisfied. When approved by the city, the affordable housing plan must be incorporated
by reference in the recorded subdivision plat, site plan or annexation agreement.
B. Affordable housing plan as binding agreement. An affordable housing plan approved by
the city will be considered a binding contract between the developer and the developer’s
successors in interest to the lot or dwelling. Such plan will be included in a separate
recorded written agreement between the developer and the city, or incorporated into
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another recorded document wherein the developer is required to implement the affordable
housing plan.
C. Contents of affordable housing plan. The affordable housing plan submitted by the
developer must include, at a minimum:
1. Number of affordable homes proposed in each affordable home category;
2. The number of bedrooms in each affordable home;
3. Number of market-rate homes in the development;
4. The number of bedrooms in each market-rate home;
5. Location of affordable homes in the development (lots in the plat or units within a site
plan);
6. Timing of delivery of the affordable homes in relation to the market-rate homes in the
development;
7. Marketing plan describing how affordable homes will be offered to the public; and
8. Any other information that is reasonably necessary to evaluate the compliance of the
affordable housing plan with the requirements of this article.
D. Pricing and delivery schedules in affordable housing plans. The affordable homes pricing
and delivery schedule shall be in the form of a chart that contains the numbers of required
affordable homes by bedroom count and affordable home category, and shall indicate the
current affordable home prices as calculated by the city.
E. Approval of affordable housing plan. The affordable housing plan will be reviewed as part
of the initial application approval process for the type of development proposed. A
condition shall be attached to the approval of any subdivision plat or site plan to require
recordation of the affordable housing plan or other separate agreement obligating the
developer to meet the requirements of this article.
38.43.090. – Marketing, sales and occupancy of affordable homes.
Developers subject to this article shall market and sell affordable homes in accordance with
provisions described in the city’s published instructions for preparing affordable housing plans.
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These provisions will address factors such as waiting list management, marketing materials,
responsibilities for marketing affordable homes, actions to be taken in the event of inability to
identify qualified buyers, procedures for certification of buyer eligibility, purchase contracts, and
full disclosures to buyers of their obligations and rights under this article.
38.43.100. – Recording requirements upon sale of affordable home.
A developer selling an affordable home shall cause to be recorded in the offices of the Gallatin
County Clerk and Recorder, simultaneously with the recording of the deed of conveyance, a
restrictive covenant, deed of trust or other legal instrument, approved as to form by the Bozeman
City Attorney that fulfills the resale and recapture requirements described in section 38.43.130.
DIVISION 4 – INCENTIVES
38.43.110. – Incentives available for affordable housing.
Developers may apply for incentives in conjunction with a development application by submitting
an affordable housing plan pursuant to section 38.43.080.
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Incentives Description Lower-priced homes
Moderate-
priced homes
70% AMI 80% AMI 90% AMI
Impact fee subsidy
Full or partial subsidization of impact fees,
paid from municipal funds if such funds are
available; such subsidization must be secured with a lien instrument due upon
sale, transfer or non-rate/term refinance of
the home.
X X
Down payment
assistance
Subject to the availability of funds, the city
will provide on a first-come first-served basis, down payment assistance not to
exceed $10,000 per home benefiting households. Down-payment assistance will only be provided directly to the qualifying
homebuyer. This assistance shall be secured with a lien instrument due upon sale, transfer or non-rate/term refinance of the
home.
X X
Waiver of subdivision pre-
application
Waive pre-application for subdivision when
10% of units are designated for lower price homes.
X X
Reduction of parkland 1
Allow a 1:1 square foot reduction in the amount of parkland dedication required per square foot of lot size for lower homes. If a
developer provides more than the required number of lower priced homes, the lot area
square footage of the additional lower
priced homes shall not further reduce the required parkland dedication.
X
Reduced Minimum Lot Sizes
Per the provisions in this chapter, affordable homes may utilize reduced setback
requirements and reduced sized lots. The 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.
X X X
1 This incentive is available only until the city has approved affordable housing plan(s) that include the number of
lower-priced homes at 70% AMI as established by commission resolution. In addition, a developer seeking to use
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Incentives Description Lower-priced homes
Moderate-
priced homes
70% AMI 80% AMI 90% AMI
Concurrent infrastructure housing construction
Concurrent construction of infrastructure
and housing development at the installation
of gravel-base roads, provided the developer has provided assurance through a
performance bond, letter of credit or other
financial security acceptable to the City Attorney ensuring the completion of
infrastructure.
X X
Expedited
review for affordable housing
1+1
Detached homes and attached homes in
groups of less than 6 units will receive expedited (3 business day) building permit
review for affordable housing. For each
building permit for an affordable home, a market rate unit will receive the same
expedited review.
X X X
Reduced
parking requirements
Reduced parking requirement of two spaces per three-bedroom dwelling. X X
DIVISION 5 – BUYER QUALIFICATION AND SUBSIDY RECAPTURE
38.43.120. – Qualification of buyers of affordable homes.
A. Lower-priced homes. To qualify for purchase of a lower-priced home, a buyer must meet
the following criteria:
1. A household income in the 65%-80% AMI range, as verified and certified by the city;
such certification must have been provided no more than one year prior to the closing
date of the purchase. Income verification will be performed using HUD’s online
income certification tool or a similar method that meets Code of Federal Regulations
this incentive may only do so if the affordable homes at 70% AMI constitute no more than 10% of the total units in a
development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not previously been provided.
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(CFR) 24 part 5, as amended, which adjusts gross incomes based on extraordinary
expenses and imputation of assets to income.
2. Maximum assets of $25,000. Assets will be determined using 24 CFR part 5.603, as
amended.
3. The household occupying the lower-priced home must meet the definition of
“Household” in 38.42.1420.
4. The buyer must meet one of the following definitions of “First-Time Homebuyer”:
a. An individual who has had no ownership interest in a principal residence during
the 3-year period ending with the date of purchase; or
b. A single parent whose only prior home was owned with a former spouse while
married; or
c. An individual who is a displaced homemaker and has only owned with a spouse;
or
d. An individual who has only owned a principal residence not permanently affixed
to a permanent foundation in accordance with applicable regulations; or
e. An individual who has only owned a property that was not in compliance with
state, local or model building codes and which cannot be brought into compliance
for less than the cost of construction a permanent structure.
5. The buyer must contribute at least three percent of the home purchase price towards
the purchase of the home unless waived in writing by the city because of extraordinary
circumstances, such as death of primary or secondary income earner or qualification
as displaced homemaker.
6. The buyer must utilize conventional or government-insured fixed-rate first-mortgage
financing with a term of 15 to 30 years.
7. The household in a lower-priced home must occupy the home as its primary residence.
Lower-priced homes may not be rented to another party, since the intent of the
program is to provide these homes only for income-qualified owner occupants, with
the exception of rentals for a limited period of time necessitated by a family hardship
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or a temporary move for one year or less, if approved in advance by the city.
B. Moderate-priced homes. To purchase a moderate-priced home, a buyer must occupy the
home as his primary residence. The developer must provide evidence satisfactory to the
city verifying the initial owner will use the home as their primary residence at time of sale.
38.43.130. – Subsidy recapture for lower-priced homes.
To ensure that the community investment in affordable housing is perpetuated and that
beneficiaries of affordable housing programs do not receive a windfall financial benefit, the city
requires repayment of subsidies as follows:
A. Requirement for repayment of cash subsidy. The buyer of a lower-priced home that
received cash support in the form of funds from the Affordable Housing Fund or other
funding through the city, including but not limited to down payment assistance, impact fee
payment, or other funding shall be required to repay the subsidy, at 0% interest, when the
dwelling or property is sold, transferred, refinanced or when the initial buyer who qualified
for the subsidy has failed to abide by the requirements of this article. The subsidy will be
recorded as a lien against the property at the Gallatin County Clerk and Recorders office.
B. Requirement for repayment of non-cash subsidy. Because most or all lower-priced homes
will be sold at a discount from market value, defined as the difference between the
appraised value and the maximum allowed price of a lower-priced home at the time of the
initial sale to a qualified buyer, the city commission finds that it gives a subsidy with cash
value to the initial buyer which may be recaptured under certain circumstances. Therefore,
upon resale or transfer of a lower-priced home, the city aims to further its housing
affordability goals by recapturing the principal amount of the subsidy by use of a lien in
favor of the city in that amount, which will be due and payable to the city, at 0% interest,
when the home is sold or transferred or when the initial buyer who qualified for the
affordable home has failed to abide by the terms of this article. The appraisal used to
calculate the amount of subsidy may be the appraisal obtained by the buyer’s mortgage
lender or, if that is not available, a professional appraisal provided by the purchaser.
C. Use of repayments to the city. The city shall only use repayments of the lien amounts to
fund:
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1. Down payment assistance for buyers of new or existing homes in Bozeman with
household incomes at or below 80% of AMI;
2. Affordable rental opportunities for residents of Bozeman with incomes at or below 60%
of AMI; or
3. Any other use approved by the city commission that increases affordable
homeownership opportunities for residents of Bozeman with income at or below 80%
of AMI.
DIVISION 6 – ADMINISTRATION AND ENFORCEMENT
38.43.140. – Administration.
A. Planning director authority. The planning director or an agent designated by the city
commission shall have authority to promulgate and enforce all reasonable rules and
regulations and take all actions necessary to the effective operation and enforcement of this
article, unless such authority is expressly reserved to the city commission or another city
official, including but not limited to:
1. Reviewing a developers’ affordable housing plan for compliance with this article;
2. Adopting all forms and prescribing the information to be given therein;
3. Monitoring developers’ compliance with their approved affordable housing plan,
notifying the developer of noncompliance, and ordering compliance;
4. Imposing any and all sanctions permitted by this article; and
5. Calculating the annual pricing targets for affordable homes and causing a sales price
schedule to be published. The planning director may make de minimis exceptions to
the factors considered in calculating the price targets.
B. Administrative manual. The city will publish administrative rules and instructions
approved by the city commission, including but not limited to instructions for completing
the affordable housing plan, valuations required by this article, and the distribution of the
required number of affordable homes between the two affordable home categories and
required number of bedrooms. Such distribution by affordable home category shall be
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based primarily upon an assessment by the city of housing needs among the income groups
corresponding to each affordable home category, but shall take into account the economic
impact on developments subject to the requirements of this article.
C. Verification of sales prices and income certification prior to closing. The City Manager
may create standards for documentation the city will use to verify the sale price of a home
created pursuant to this article. For the initial sale of an affordable home, the seller must
provide the city with a copy of the HUD-1 form prepared by an attorney or title company
indicating the sales price. The final sales price on the HUD-1 form may not exceed the
maximum price for a specific affordable home as described in the current price schedule
pursuant to section 38.43.050 plus an allowed maximum of $3,000 in buyer selected
upgrades, if allowed by the first mortgage lender underwriters. In addition, the city shall
require certification satisfactory to the city of homebuyer income qualification.
D. Monitoring completed sales. Upon receipt of a settlement statement for an affordable home,
the city will determine if the completed affordable home sale complies with the approved
affordable housing plan and the requirements of this article, and if not, respond to the non-
compliance as provided in section 38.43.150.
38.43.150. – Noncompliance; sanctions.
A. Cancellation of incentives provided. If a developer fails to comply with the terms of the
approved affordable housing plan or any other recorded documentation obligating
developer to comply with this article, the developer must, prior to the release by the city of
the dwelling from the affordable housing plan or binding agreement, pay the city the cash
in lieu fee for each unconstructed dwelling or any dwelling not sold to an income qualified
household as defined in this article.
B. Discovery of noncompliance. If the city determines a developer subject to an affordable
housing plan has failed to comply with any terms or conditions of the affordable housing
plan or this article, the planning director or authorized agent shall notify the developer of
the noncompliance in writing and order compliance by the most reasonable and expeditious
means as determined by the city. Notification shall describe a date certain by which the
developer must be in full compliance (which may not be less than one week or more than
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one year from the date of the notice), and shall describe: (i) the exact nature of the
noncompliance; and (ii) the possible sanctions for noncompliance with this notification.
C. Sanctions for noncompliance. In addition to other remedies available to the city pursuant
to this article, if on a date certain by which compliance has been ordered by the planning
director or authorized agent, the developer remains in noncompliance, the planning director
or authorized agent shall notify the City Attorney of the noncompliance and request that
sanctions be imposed. The city shall have the authority to impose one or more sanctions
including but not limited to the following which the city deems most effective and
appropriate considering the nature of the noncompliance:
1. Withholding or revoking building permits,
2. Issuing stop-work orders, and/or
3. Withholding or revoking certificates of occupancy.
(temporary)]”
Section 3
A new article shall be added to Chapter 38, BMC effective upon the occurrence of contingencies as stated
in Section 10 of this Ordinance to be entitled “Affordable Housing” to read as follows:
“[(Effective upon the occurrence of the contingencies provided for in Section 10 of this Ordinance)
ARTICLE 43
DIVISION 1. – FINDINGS AND PURPOSE.
38.43.010. - Legislative findings.
The city commission hereby finds:
A. The Bozeman Community Plan establishes a goal to encourage an adequate supply of
affordable housing and land for affordable housing in Bozeman. A lack of affordable
housing affects the ability of many residents to find housing which is adequate for their
basic housing needs. A lack of adequate housing affects health, social stability, and other
issues which can have negative and intergenerational effects. To fulfill this goal, the
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Community Plan establishes an objective to promote the development of a variety of
housing types, designs, and costs to meet the wide range of needs of Bozeman residents.
B. The Affordable Housing Action Plan: 2012 - 2016 (Action Plan) analyzed housing needs
and existing market conditions and determined housing affordability has become an acute
problem as demonstrated by the number of households paying over 30% of their incomes
for housing. A 2015 update to the city’s housing needs analysis (Action Plan Update)
concluded that the group of homebuyers with significant affordability gaps have incomes
at or below 80% of the area medium income and are in need of subsidies and/or below-
market home prices. The Action Plan Update also determined that buying opportunities are
increasingly scarce for homebuyers with incomes between 60% and 100% of AMI, and
that housing and land prices have increased faster than incomes for many of Bozeman’s
residents.
C. Since the adoption of the Bozeman Community Plan and the Action Plan, the median sales
price of housing has continued to climb. According to the Action Plan Update, as of the
end of November 2014, the median home price was $287,000.
D. The Action Plan Update states that the number of detached homes priced below $250,000,
a rough indicator of housing affordability for a family of three at 100% of AMI, has fallen
from 48.4% of the market in 2012 to just 18.6% in 2014.
E. There is a critical shortage of for-sale housing affordable to Bozeman households with
incomes at and below the area median income, as currently calculated by the U.S.
Department of Housing and Urban Development. As a result, some residents pay excessive
amounts of income for housing, reducing the amounts available for other necessities and a
decent and adequate standard of living.
F. Limited housing opportunities within the city requires households to seek housing outside
of the city limits which has a negative impact on transportation infrastructure by adding
unnecessary trips to the network. Increased driving distance to affordable housing also
negatively impacts air and water quality. To maintain a sufficient resident workforce in all
fields of employment, and to ensure the public safety and general welfare of the residents
of the city of Bozeman, affordable housing needs must be addressed.
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G. The city can achieve its goals of providing more affordable housing and its goal of
achieving an economically balanced community only if part of the new housing built is
affordable to households with low and moderate incomes.
H. The inclusionary housing regulations codified in this ordinance will substantially advance
the city’s legitimate interest in assuring that additional housing is built in the city that is
affordable to residents, including low- and moderate-income households and dispersed
throughout the city in order to encourage economic integration of the city’s residents.
I. This ordinance is adopted pursuant to the city’s self-governing powers and the city’s
independent general police power to protect public health, safety, and welfare. Requiring
affordable housing within certain developments is consistent with the community’s
housing goals of protecting the public welfare by fostering an adequate supply of housing
for persons at all economic levels and maintaining both economic diversity and
geographically dispersed affordable housing.
J. Requiring developers of newly created market-rate housing to provide some housing
affordable to low and moderate-income households is reasonably related to the impacts of
their projects because:
a. Rising land prices are a key factor in preventing development of new affordable
housing. New market-rate housing construction in Bozeman has generally created
strong and increasing demand for a finite stock of unbuilt land within the city, and thus
continues to drive up the price of remaining land. New development without affordable
units reduces the amount of land development opportunities available for the
construction of affordable housing.
b. New residents of market-rate housing place demands on services provided by both
public and private sectors, creating a demand for new employees. Some of these public
and private sector employees needed to meet the needs of the new residents earn
incomes only adequate to pay for affordable housing. Because affordable housing is in
short supply in the city, such employees may be forced to live in less than adequate
housing within the city, pay a disproportionate share of their incomes to live in adequate
housing in the city, or commute ever increasing distances to their jobs from housing
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located outside the city. These circumstances harm the city's ability to attain
employment and housing goals articulated in the Community Plan and place strains on
the city's ability to accept and service new market-rate housing development.
38.43.020. - Purpose.
The purpose of this article is to promote the public health, safety, and welfare by ensuring
that the affordable housing needs of the residents of Bozeman are addressed. In addition, the
purpose of this article is to ensure that quality housing is dispersed throughout Bozeman’s
neighborhoods for households of a variety of income levels including low- and moderate-income
residents to meet the goals of the Community Plan and the Action Plan by encouraging a mix of
housing types throughout the city and integrating affordable housing so as to not concentrate
affordable housing in a particular area.
In addition, the ordinance is intended to alleviate the impacts that would result from the use of
available residential land solely for the benefit of households that are able to afford market-rate
housing and to mitigate the service burden imposed by households in new market-rate residential
developments by making additional affordable housing available for service employees. The
ordinance is also intended to mitigate environmental and other impacts that accompany new
residential development by reducing traffic, transit and related air quality impacts, promoting
jobs/housing balance and reducing the demands placed on transportation infrastructure.
The ordinance provides residential developers with a menu of options from which to select
alternatives to the construction of inclusionary units on the same site as market-rate residential
developments, and provides incentives for housing developers to ensure houses are constructed
and sold in a manner that furthers the city’s affordable housing goals.
Finally, the ordinance provides incentives for housing developers who are not legally required to
comply with the requirements for construction of inclusionary housing, but nevertheless choose to
construct affordable housing.
DIVISION 2. – APPLICABILITY AND DEFINITIONS.
38.43.030. – Applicability.
A. This article applies to:
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1. Subdivisions and site plans which propose 10 or more market-rate homes, to be created
through development, new construction, substantial improvement or reuse.
2. Annexations where the net developable area of the annexing parcel when considering
the applicable zoning could result in 10 or more dwellings. In such a case, the
annexation agreement shall require the provision of affordable housing pursuant to this
article.
3. Developments seeking to use incentives to develop affordable housing.
B. Contiguous tracts under common ownership and control. A developer may not avoid the
requirements for construction of affordable homes by submitting piecemeal applications
for development. At the time of the initial application for approval of a subdivision or site
plan, the developer shall identify all contiguous property under common ownership and
control in the affordable housing plan required by section 38.43.100.
C. Development applications approved prior to the effective date of this article. A site plan or
subdivision having received sufficiency approval as of the effective date of this article or
a preliminary site plan or preliminary plat granted approval prior to the effective date of
this article may apply for one or more of the incentives described herein. Only that portion
of the amended preliminary plat or site plan pertaining to the request for approval of one
or more incentives will be subject to review. The requirements of section 38.19.130 for the
amendment of plans will not apply.
D. Newly proposed residential developments which include affordable housing in excess of
this article’s requirements for building affordable homes are eligible for incentives as
provided in section 38.43.130. Such request shall require the preliminary plat or site plan
to evidence compliance with all other requirements of this article.
E. Exemptions. Developments comprised exclusively of rental housing units are exempt from
these requirements.
38.43.040. – Definitions.
1. Affordable housing or affordable home – A dwelling for purchase by an owner-occupant
that requires no more than 33% of a household’s income for housing payments and meets
the definition of a lower-priced home or moderate-priced home.
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2. Area Median Income or AMI – As calculated by the U.S. Department of Housing and
Urban Development (HUD), AMI is the median income for a family of four within a
specific geographical area, such as Gallatin County. For each such region, HUD adjusts
this AMI calculation for households of different sizes and updates the calculations
annually based on estimated changes in area incomes. For purposes of this article, the city
hereby adopts HUD’s AMI calculations as an equitable and reasonable method to
determine affordability, based on percentages of AMI specified in this article.
3. Common ownership or control – “Common ownership or control” refers to property
owned or controlled by the same person, persons, or entity, or by separate entities in
which any shareholder, partner, member, or family member of an investor of the entity
owns ten percent (10%) or more of the interest in the property.
4. Developer – For purposes of this article, a developer is the person or legal entity, or their
successor(s) in interest who: (a) submits an affordable housing plan for a subject property
along with other submissions required for land use approvals, zoning, or permit reviews
by the city, and/or (b) is the owner of property subject to this article during the
development phase or a successor in title, such as a builder, obligated to implement the
affordable housing plan required by this article with respect to one or more lots or parcels
of land and/or (c) receives incentives for the production of affordable housing.
5. Lower-priced home – Newly created dwelling for purchase, determined by the city in
accordance with this article to be affordable to a household with an income between 65%
and 80% of AMI.
6. Market-rate home – Any dwelling subject to this article which is not an affordable home,
including detached dwellings, attached town houses, and condominium units but not
including housing units that are developed for exclusive use as a rental. The number of
market-rate homes in a development is used to determine the required number of affordable
homes, as described in this article.
7. Moderate-priced home – Newly created dwelling for purchase, affordable to a household
with an income between 81% and 100% of AMI.
DIVISION 3. – REQUIREMENTS.
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38.43.050. – Requirement to build and sell affordable homes.
All development subject to this article must include affordable homes.
38.43.060. – Number of affordable homes required.
The number of affordable homes a developer is required to build is a percentage of the total
dwellings in the development plan.
A. The developer may:
1. Build and sell low-priced homes. 10% of the total dwellings constructed within the
subdivision or site plan must be built and sold at price targets as established by the city
pursuant to section 38.43.070 to households with incomes at or below 80% of AMI; or
2. Build and sell moderate-priced homes. 30% of the total dwellings proposed must be
sold at price targets as established by the city pursuant to section 38.43.070 to
households with incomes from 81% to 100% of AMI; or
3. Build and sell a mix of both types of homes. If a developer proposes a mix of both low-
priced and moderate-priced homes, the developer starts with the 10% calculation for
low-priced homes. For each low-priced home eliminated from the resulting number,
the developer may substitute three moderate-priced homes.
The distribution of homes between the two categories of affordable homes will be
identified in the affordable housing plan required by section 38.43.100. In some cases, the
city may prescribe the distribution of affordable homes to be built between the two
categories pursuant to section 38.43.170.
B. Fractions. If the calculation of the required number of affordable homes results in a
fraction of a home, this obligation will be satisfied by payment of a fee-in-lieu pursuant to
section 38.43.140 or by providing an additional moderate-priced home.
C. Calculating number of affordable homes in phased developments. It is anticipated that in
developments being built in phases, the number of market-rate homes may not be certain
at the time the developer submits the affordable housing plan pursuant to section 38.43.100.
In such cases, the developer must estimate the number of market-rate homes and number
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of affordable homes required for all phases. If the number of homes in the first phase of
such development is certain at the time of the city’s approval of the affordable housing
plan, a separate affordable homes pricing and delivery schedule for that phase shall be
incorporated in the affordable housing plan at the time of development or construction of
each subsequent phase. As the number of homes in future phases becomes certain, the
affordable housing plan shall provide for subsequent affordable homes pricing and delivery
schedules for future phases of the development, consistent with the affordable housing plan
and section 38.43.070.B.
38.43.070. – Pricing of affordable homes.
A. The city will calculate on an annual basis the maximum sales price a developer may charge
for each category of affordable home required by this article as follows:
1. Lower-priced homes. The sales price for lower-priced homes affordable to buyer-
households with incomes from 65% to 80% of AMI will be calculated based on a
household income of 70% of AMI.
2. Moderate-priced homes. The sales price for moderate-priced homes affordable to
buyer-households with incomes from 81% to 100% of AMI will be calculated based
on a household income of 90% of AMI.
B. Affordable home sales price schedule.
1. The city will annually publish a schedule of sales prices for low-priced homes and
moderate-priced homes within 30 calendar days of the HUD’s annual publication of
updated AMI calculations. The sales price schedule will be effective on the date of
publication by the city. The new sales price schedule will apply to applications for
building permits received after the effective date of the new sales price schedule. A
developer may request that a new sales price schedule apply to the sale of an affordable
home approved under a previous sales price schedule.
2. The city, at the city’s sole discretion, may recalculate the sales price schedule if
prevailing mortgage interest rates have increased by 50 basis points or more over the
assumption used for the previous schedule.
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3. Considerations. The following factors will be considered by the city in calculating the
sales price schedule. The Planning Director may make de minimis exceptions to
application of these factors:
a. AMI for the Bozeman area;
b. Gross monthly income will be calculated as the appropriate HUD AMI
calculations income divided by 12;
c. The maximum monthly payment will be 33% of gross monthly income. The
maximum monthly payment will include costs directly applicable to a mortgage
such as payment of principal, interest, as well as assumptions for typical costs of
taxes, public assessments, property insurance premiums, mortgage insurance
premiums (assuming the higher of either government or private mortgage insurance),
and homeowner/condominium association fees;
d. The interest rate will be determined by the city by a survey of at least three local
mortgage lenders, averaging their current rates for loans for homes with price
ranges within the low-priced homes range and the moderate-priced homes range;
e. The financing will be a conventional or government-insured fixed-rate loan with
a term of 15 to 30 years; and
f. A borrower will typically provide a down payment of 3% of the purchase price.
C. Household occupancy assumptions. To determine the maximum sales prices of affordable
homes with different numbers of bedrooms, the city will base its calculation on the AMIs
for households of different sizes, as follows:
1. Zero bedroom or studio unit – AMI for a one-person household;
2. One bedroom unit – AMI for a two-person household;
3. Two bedroom unit – AMI for a three-person household; and
4. Three bedroom unit or larger – AMI for a four-person household.
38.43.080. – Timing of delivery of affordable homes.
Required affordable homes must be provided in accordance with the following:
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A. In each development in which more than one affordable home is required to be sold, the
affordable housing plan shall specify that affordable homes are to be sold concurrently and
in proportion to the sale of unimproved lots or market-rate homes. Such timing of
compliance will be represented in an affordable homes pricing and delivery schedule as
described in section 38.43.100.
B. A developer may sell affordable homes earlier than required in an affordable housing plan.
38.43.090. – Minimum design and construction standards for affordable homes.
A. Required numbers of bedrooms in affordable homes. In each development subject to the
requirements of this article, affordable homes shall represent a mix of bedrooms as similar
as possible (given rounding of numbers) to the mix of bedrooms of the market-rate homes
in the development.
B. Standards for design and construction. The city shall define reasonable standards for the
design and construction of affordable homes to ensure livability and compatibility with
nearby market-rate homes in the development. Affordable homes may have different
interior finishes and features than other dwellings within the development, as long as the
finishes and features are functionally equivalent and of good quality. Finishes include, but
are not limited to, design and materials, the provision of appliances, cabinets, and floor
treatment. Features include, but are not limited to, the numbers of bathrooms, garages and
parking areas, mechanical equipment and hookups, and green building features.
C. Amenities. Affordable homes shall have the same amenities as the market-rate homes in
the development, including the same access to and enjoyment of common open space and
facilities in the development.
38.43.100. – Submission of affordable housing plan; approval.
A. Affordable housing plan. The applicant for any development seeking to utilize the
incentives to create affordable housing or subject to the requirements of this article must
submit an affordable housing plan in a form provided by or approved by the city that
describes how the requirements of this article will be satisfied. When approved by the city,
the affordable housing plan must be incorporated by reference in the recorded subdivision
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plat, site plan or annexation agreement. The applicant will provide only one affordable
housing plan to meet the requirements of this article.
B. Affordable housing plan as binding agreement. An affordable housing plan approved by
the city will be considered a binding contract between the developer and the developer’s
successors in interest to the lot or dwelling. Such plan will be included in a separate
recorded written agreement between the developer and the city, or incorporated into
another recorded document wherein the developer is required to implement the affordable
housing plan.
C. Contents of affordable housing plan. The affordable housing plan submitted by the
developer must include, at a minimum:
1. Number of affordable homes proposed in each affordable home category;
2. The number of bedrooms in each affordable home;
3. Number of market-rate homes in the development;
4. The number of bedrooms in each market-rate home;
5. Location of affordable homes in the development (lots in the plat or units within a site
plan);
6. Timing of delivery of the affordable homes in relation to the market-rate homes in the
development;
7. Marketing plan describing how affordable homes will be offered to the public; and
8. Any other information that is reasonably necessary to evaluate the compliance of the
affordable housing plan with the requirements of this article.
D. Pricing and delivery schedules in affordable housing plans. The affordable homes pricing
and delivery schedule shall be in the form of a chart that contains the numbers of required
affordable homes by bedroom count and affordable home category, and shall indicate the
current affordable home prices as calculated by the city.
E. Approval of affordable housing plan. The affordable housing plan will be reviewed as part
of the initial application approval process for the type of development proposed. A
condition shall be attached to the approval of any subdivision plat or site plan to require
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recordation of the affordable housing plan or other separate agreement obligating the
developer to meet the requirements of this article.
38.43.110. – Marketing, sales and occupancy of affordable homes.
Developers subject to this article shall market and sell affordable homes in accordance with
provisions described in the city’s published instructions for preparing affordable housing plans.
These provisions will address factors such as waiting list management, marketing materials,
responsibilities for marketing affordable homes, actions to be taken in the event of inability to
identify qualified buyers, procedures for certification of buyer eligibility, purchase contracts, and
full disclosures to buyers of their obligations and rights under this article.
38.43.120. – Recording requirements upon sale of affordable home.
A developer selling an affordable home shall cause to be recorded in the offices of the Gallatin
County Clerk and Recorder, simultaneously with the recording of the deed of conveyance, a
restrictive covenant, deed of trust or other legal instrument, approved as to form by the Bozeman
City Attorney that fulfills the resale and recapture requirements described in section 38.43.160.
DIVISION 4 – INCENTIVES
38.43.130. – Incentives available for affordable housing.
Developers may apply for incentives in conjunction with a development application by submitting
an affordable housing plan pursuant to section 38.43.100.
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Incentives Description
Lower-priced
homes
Moderate-
priced homes
70%
AMI
80%
AMI 90% AMI
Impact fee subsidy
Full or partial subsidization of impact fees, paid from municipal funds if such funds are available; such subsidization must be secured with a lien
instrument due upon sale, transfer or non-rate/term refinance of the home.
X X
Down payment assistance
Subject to the availability of funds, the city will
provide on a first-come first-served basis, down
payment assistance not to exceed $10,000 per home
benefiting households. Down-payment assistance will only be provided directly to the qualifying
homebuyer. This assistance shall be secured with a
lien instrument due upon sale, transfer or non-rate/term refinance of the home.
X X
Waiver of subdivision
pre-application
Waive pre-application for subdivision when 10% of
units are designated for lower price homes.
X X
Reduction of parkland 1
Allow a 1:1 square foot reduction in the amount of
parkland dedication required per square foot of lot
size for lower homes. If a developer provides more than the required number of lower priced homes, the
lot area square footage of the additional lower priced homes shall not further reduce the required parkland dedication.
X
Reduced Minimum Lot
Sizes
Per the provisions in this chapter, affordable homes
may utilize reduced setback requirements and
reduced sized lots. The 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.
X X X
1 This incentive is available only until the city has approved affordable housing plan(s) that include the number of lower-priced homes at 70% AMI as established by commission resolution. In addition, a developer seeking to use
this incentive may only do so if the affordable homes at 70% AMI constitute no more than 10% of the total units in a development or the unit is to be constructed on a single lot wherein the parkland dedication requirement has not
previously been provided.
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Incentives Description
Lower-priced
homes
Moderate-
priced homes
70%
AMI
80%
AMI 90% AMI
Concurrent infrastructure housing
construction
Concurrent construction of infrastructure and housing development at the installation of gravel-base roads, provided the developer has provided
assurance through a performance bond, letter of credit or other financial security acceptable to the
City Attorney ensuring the completion of
infrastructure.
X X
Expedited
review for affordable housing 1+1
Detached homes and attached homes in groups of less than 6 units will receive expedited (3 business day) building permit review for affordable housing. For each
building permit for an affordable home, a market rate unit will receive the same expedited review.
X X X
Reduced parking
requirements
Reduced parking requirement of two spaces per three-
bedroom dwelling. X X
DIVISION 5 – ALTERNATIVE MEANS OF COMPLIANCE
38.43.140. – Alternative means of compliance; payments of fees-in-lieu.
A. Alternatives to building lower-priced homes. The city may authorize a developer otherwise
required to provide affordable homes within a development to provide an alternative means
of compliance of equal value to the affordable homes otherwise required to be constructed
pursuant to this article.
B. Allowable alternative means of compliance. If approved by the city, a developer may
satisfy the affordable housing requirements of this article by providing (i) a cash or in-kind
payment in lieu or (ii) a donation of land.
1. Payment of cash in lieu. Payment shall be made to the city of a payment of cash-in-
lieu per a fee schedule adopted annually by the city commission. For each required
affordable home not built, the cash-in-lieu amount will be the difference between the
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sales price of a lower-priced home according to the then-current schedule of affordable
home prices and the sales price of a market-rate home. The sale price for the market-
rate home will be based on a median sale price of dwellings of a similar type, location
and square footage for the prior two years. Cash-in-lieu payments shall be paid prior to
issuance of a certificate of occupancy for any dwelling or building in the development
subject to this article.
2. Donation of land. Credits for donation of house lots or multi-family parcels. At the
city’s discretion, it may accept donations of: (a) ready-to-build house lots; or (b)
parcels of land suitable for construction of affordable multifamily housing. Such
donations, if approved, will provide credits against this article’s requirements for
building lower-priced homes. The credits will be determined as follows:
a. House lots. The value of the lot or lots, as determined by the city, will be divided by
the city’s then-current average of cash-in-lieu payments for homes of different sizes.
The product of that division to two decimal points will constitute the credit against
the otherwise required number of lower-priced homes.
b. Parcels of land. The city shall periodically adopt a valuation for donation of parcels
of land intended for multifamily development, for purposes of determining credits
against the number of affordable homes that would otherwise be required in a
development subject to this article. The parcel of land must be zoned R-4.
C. Timing of delivery of alternative means of compliance.
1. Timing of providing in-lieu contributions. In-lieu contributions when permitted shall
be due and deliverable to the city before the recordation of the affordable housing plan.
A developer may propose an alternative to this requirement in which staged
contributions are made upon the predicted occurrence of certain events, such as the sale
of lots, which alternative may be approved at the sole discretion of the city.
2. Staged delivery of in-lieu contributions. In the case of staged delivery of in-kind
contributions when permitted, the city’s determination of the value of each contribution
shall take into account the differential financial value of payments that are made later
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than recordation of the affordable housing plan using conventional methods of
discounting future cash flows to present value.
DIVISION 6 – BUYER QUALIFICATION AND SUBSIDY RECAPTURE
38.43.150. – Qualification of buyers of affordable homes.
A. Lower-priced homes. To qualify for purchase of a lower-priced home, a buyer must meet
the following criteria:
1. A household income in the 65%-80% AMI range, as verified and certified by the city;
such certification must have been provided no more than one year prior to the closing
date of the purchase. Income verification will be performed using HUD’s online
income certification tool or a similar method that meets Code of Federal Regulations
(CFR) 24 part 5, as amended, which adjusts gross incomes based on extraordinary
expenses and imputation of assets to income.
2. Maximum assets of $25,000. Assets will be determined using 24 CFR part 5.603, as
amended.
3. The household occupying the lower-priced home must meet the definition of
“Household” in 38.42.1420.
4. The buyer must meet one of the following definitions of “First-Time Homebuyer”:
a. An individual who has had no ownership interest in a principal residence during
the 3-year period ending with the date of purchase; or
b. A single parent whose only prior home was owned with a former spouse while
married; or
c. An individual who is a displaced homemaker and has only owned with a spouse;
or
d. An individual who has only owned a principal residence not permanently affixed
to a permanent foundation in accordance with applicable regulations; or
e. An individual who has only owned a property that was not in compliance with
state, local or model building codes and which cannot be brought into compliance
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for less than the cost of construction a permanent structure.
5. The buyer must contribute at least three percent of the home purchase price towards
the purchase of the home unless waived in writing by the city because of extraordinary
circumstances, such as death of primary or secondary income earner or qualification
as displaced homemaker.
6. The buyer must utilize conventional or government-insured fixed-rate first-mortgage
financing with a term of 15 to 30 years.
7. The household in a lower-priced home must occupy the home as its primary residence.
Lower-priced homes may not be rented to another party, since the intent of the
program is to provide these homes only for income-qualified owner occupants, with
the exception of rentals for a limited period of time necessitated by a family hardship
or a temporary move for one year or less, if approved in advance by the city.
B. Moderate-priced homes. To purchase a moderate-priced home, a buyer must occupy the
home as his primary residence. The developer must provide evidence satisfactory to the
city verifying the initial owner will use the home as their primary residence at time of sale.
38.43.160. – Subsidy recapture for lower-priced homes.
To ensure that the community investment in affordable housing is perpetuated and that
beneficiaries of affordable housing programs do not receive a windfall financial benefit, the city
requires repayment of subsidies as follows:
A. Requirement for repayment of cash subsidy. The buyer of a lower-priced home that
received cash support in the form of funds from the Affordable Housing Fund or other
funding through the city, including but not limited to down payment assistance, impact fee
payment, or other funding shall be required to repay the subsidy, at 0% interest, when the
dwelling or property is sold, transferred, refinanced or when the initial buyer who qualified
for the subsidy has failed to abide by the requirements of this article. The subsidy will be
recorded as a lien against the property at the Gallatin County Clerk and Recorders office.
B. Requirement for repayment of non-cash subsidy. Because most or all lower-priced homes
will be sold at a discount from market value, defined as the difference between the
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appraised value and the maximum allowed price of a lower-priced home at the time of the
initial sale to a qualified buyer, the city commission finds that it gives a subsidy with cash
value to the initial buyer which may be recaptured under certain circumstances. Therefore,
upon resale or transfer of a lower-priced home, the city aims to further its housing
affordability goals by recapturing the principal amount of the subsidy by use of a lien in
favor of the city in that amount, which will be due and payable to the city, at 0% interest,
when the home is sold or transferred or when the initial buyer who qualified for the
affordable home has failed to abide by the terms of this article. The appraisal used to
calculate the amount of subsidy may be the appraisal obtained by the buyer’s mortgage
lender or, if that is not available, a professional appraisal provided by the purchaser.
C. Use of repayments to the city. The city shall only use repayments of the lien amounts to
fund:
1. Down payment assistance for buyers of new or existing homes in Bozeman with
household incomes at or below 80% of AMI;
2. Affordable rental opportunities for residents of Bozeman with incomes at or below 60%
of AMI; or
3. Any other use approved by the city commission that increases affordable
homeownership opportunities for residents of Bozeman with income at or below 80%
of AMI.
DIVISION 7 – ADMINISTRATION AND ENFORCEMENT
38.43.170. – Administration.
A. Planning director authority. The planning director or an agent designated by the city
commission shall have authority to promulgate and enforce all reasonable rules and
regulations and take all actions necessary to the effective operation and enforcement of this
article, unless such authority is expressly reserved to the city commission or another city
official, including but not limited to:
1. Reviewing a developers’ affordable housing plan for compliance with this article;
2. Adopting all forms and prescribing the information to be given therein;
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3. Monitoring developers’ compliance with this article, notifying the developer of
noncompliance, and ordering compliance;
4. Imposing any and all sanctions permitted by this article; and
5. Calculating the annual pricing targets for affordable homes and causing a sales price
schedule to be published. The planning director may make de minimis exceptions to
the factors considered in calculating the price targets.
B. Administrative manual. The city will publish administrative rules and instructions
approved by the city commission, including but not limited to instructions for completing
the affordable housing plan, valuations required by this article, and the distribution of the
required number of affordable homes between the two affordable home categories and
required number of bedrooms. Such distribution by affordable home category shall be
based primarily upon an assessment by the city of housing needs among the income groups
corresponding to each affordable home category, but shall take into account the economic
impact on developments subject to the requirements of this article.
C. Verification of sales prices and income certification prior to closing. The City Manager
may create standards for documentation the city will use to verify the sale price of a home
created pursuant to this article. For the initial sale of an affordable home, the seller must
provide the city with a copy of the HUD-1 form prepared by an attorney or title company
indicating the sales price. The final sales price on the HUD-1 form may not exceed the
maximum price for a specific affordable home as described in the current price schedule
pursuant to section 38.43.070 plus an allowed maximum of $3,000 in buyer selected
upgrades, if allowed by the first mortgage lender underwriters. In addition, the city shall
require certification satisfactory to the city of homebuyer income qualification.
D. Monitoring completed sales. Upon receipt of a settlement statement for an affordable home,
the city will determine if the completed affordable home sale complies with the approved
affordable housing plan and the requirements of this article, and if not, respond to the non-
compliance as provided in section 38.43.180.
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38.43.180. – Noncompliance; sanctions.
A. Cancellation of incentives provided. If a developer fails to comply with the terms of the
approved affordable housing plan or any other recorded documentation obligating
developer to comply with this article, the developer must, prior to the release by the city of
the dwelling from the affordable housing plan or binding agreement, pay the city the cash
in lieu fee for each unconstructed dwelling or any dwelling not sold to an income qualified
household as defined in this article.
B. Discovery of noncompliance. If the city determines a developer subject to an affordable
housing plan has failed to comply with any terms or conditions of the affordable housing
plan or this article, the planning director or authorized agent shall notify the developer of
the noncompliance in writing and order compliance by the most reasonable and expeditious
means as determined by the city. Notification shall describe a date certain by which the
developer must be in full compliance (which may not be less than one week or more than
one year from the date of the notice), and shall describe: (i) the exact nature of the
noncompliance; and (ii) the possible sanctions for noncompliance with this notification.
C. Sanctions for noncompliance. In addition to other remedies available to the city pursuant
to this article, if on a date certain by which compliance has been ordered by the planning
director or authorized agent, the developer remains in noncompliance, the planning director
or authorized agent shall notify the City Attorney of the noncompliance and request that
sanctions be imposed. The city shall have the authority to impose one or more sanctions
including but not limited to the following which the city deems most effective and
appropriate considering the nature of the noncompliance:
1. Withholding or revoking building permits,
2. Issuing stop-work orders, and/or
3. Withholding or revoking certificates of occupancy.]”
207
Ordinance 1922 Page 37 of 39
Section 4
Contingent termination.
Section 2 terminates only on the occurrence of any of the contingencies provided for in Section
10 of this Ordinance.
Section 5
Savings clause.
Any approval or requirement applied to any subdivision or site plan created to Chapter 10, Article
8 (Workforce Housing) adopted, applied, imposed, or required prior to the effective date of this Ordinance
continues in full force and effect. Sections 1, 2, and 3 of this Ordinance does not affect the rights,
responsibilities, duties, or requirements imposed upon a subdivision or site plan pursuant to Chapter 10,
Article 8 (Workforce Housing) pursuant to a final approval of such prior to the date of this Ordinance. All
other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force
and effect.
Section 6
Repealer.
All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this
ordinance are, and the same are hereby, repealed and all other provisions of the ordinances of the City of
Bozeman not in conflict with the provisions of this Ordinance shall remain in full force and effect.
Section 7
Severability.
That should any sentence, paragraph, subdivision, clause, phrase or section of this Ordinance be
adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this
Ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal
or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole.
Section 8
Codification.
This Ordinance shall be codified as indicated in Sections 1 – 3.
Section 9
Cross references and codification orders.
Any necessary cross reference to any portion of this Ordinance that is necessary to be made
elsewhere in the municipal code is hereby amended to reflect this Ordinance. The City Attorney is
authorized to issue codification orders to implement this Section.
208
Ordinance 1922 Page 38 of 39
Section 10
Effective date – Contingent effective date.
Sections 1 and 2 of this Ordinance shall be in full force and effect sixty (60) days after final
adoption. Section 3 of this Ordinance shall be effective upon the occurrence of any one of the following
contingencies:
i. If less than 14 (fourteen) affordable homes, as defined in Section 2 of this Ordinance, are
constructed and sold as single household detached dwellings or townhomes and sold
cumulatively throughout the city prior to September 12, 2016 and of these 14 affordable
homes no less than four (4) qualify as lower-priced homes; or
ii. If less than 27 (twenty seven) affordable homes, as defined in Section 2 of this Ordinance, are
constructed and sold as single household detached dwellings or townhomes and sold
cumulatively throughout the city prior to June 12, 2017 and of these 27 affordable homes no
less than seven (7) qualify as lower-priced homes; or
iii. If less than 54 (fifty four) affordable homes, as defined in Section 2 of this Ordinance, are
constructed and sold as single household detached dwellings or townhomes and sold
cumulatively throughout the city prior to December 12, 2017 and of these 54 affordable
homes no less than 12 (twelve) qualify as lower-priced homes.
Section 11
Applicability.
This Ordinance applies to applications received by the City on or after [the effective date of this
Ordinance].
209
Ordinance 1922 Page 39 of 39
PROVISIONALLY ADOPTED by the City Commission of the City of Bozeman, Montana, on
first reading at a regular session held on the _____ day of ________________, 2015.
____________________________________
JEFFREY K. KRAUSS
Mayor
ATTEST:
____________________________________
STACY ULMEN, CMC
City Clerk
FINALLY PASSED, ADOPTED AND APPROVED by the City Commission of the City of
Bozeman, Montana on second reading at a regular session thereof held on the ___ of
____________________, 2015. The effective date of this ordinance is __________, __, 2015.
____________________________________
JEFFREY K. KRAUSS
Mayor
ATTEST:
_______________________________
STACY ULMEN, CMC
City Clerk
APPROVED AS TO FORM:
_________________________________
GREG SULLIVAN
City Attorney
210
7/20/2015
DRAFT Affordable Housing Incentives – 2015 ~ 2017
Goal: Create 54 Homes
90% AMI*
Max Purchase Price:
$213,000
$237,000
Goal: 75% of Units
• Innovative Housing Ordinance
• 1+1 Permit Review
*Area Mean Income - $55,600-$61,750
80% AMI*
Max Purchase Price:
$190,000
$210,000
Goal: 20% of Units
• Impact Fee Subsidy
• Down Payment Assistance
• Waive Subdivision Pre-application
• Simultaneous Construction of Housing
Infrastructure
• Reduced Parking
* Area Mean Income - $49,450-
$54,900
70 % AMI*
Max Purchase Price:
$161,000
$179,000
Goal: 5% of Units
• Reduction of Parkland
*Area Mean Income - $43,200-$48,000
+
18
22
5
6
1
2
+ Household Size Units Incentives Attachment B, Affordable Housing Incentives Handout - Page 1
211
Recommendations For Regulatory Changes To
Support Affordable Housing Development
A Report for the
City of Bozeman, Montana
By: Werwath Associates
January 30, 2015
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Recommendations,for,Regulatory,Changes,to,Support,Affordable,Housing,Development,,,,Page,1,
!
TABLE,OF,CONTENTS,,,
Executive,Summary,..................................................................................................................,2,
1.,,Project,Goals,........................................................................................................................,6,
2.,,Methodology,and,Acknowledgments,..................................................................................,7,
3.,,Regulatory,and,Policy,Background,......................................................................................,8,
4.,,Incomes,and,Affordability,....................................................................................................,9,
5.,,A,Revived,and,Less,Affordable,Market,for,Home,Purchases,.............................................,12,
6.,,Housing,Development,Activity,..........................................................................................,16,
7.,,Public,Input,on,Housing,and,Affordability,Issues,,..............................................................,19,
8.,,Recommended,Definition,of,Affordable,Housing,..............................................................,22,
9.,,Recommended,Requirements,for,Providing,Affordable,Housing,......................................,25,
10.,,Recommended,Incentives,for,Building,Affordable,Housing,............................................,30,
11.,,Other,Strategies,to,Promote,Affordable,Housing,Production,.........................................,35,
Appendix:,,Individuals,Interviewed,&,Organizations,That,Provided,Input,
,
Project,team:,Daniel,Werwath,and,Peter,Werwath,
Werwath,Associates,
Santa,Fe,,New,Mexico,and,Columbia,,Maryland,
www.werwathassociates.com,,,,
,,
,,
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Executive,Summary,
!
The,City,of,Bozeman,adopted,an,inclusionary,zoning,ordinance,,titled,the,Workforce,Housing,
Ordinance,(WFHO),,which,was,in,effect,from,2007,until,its,suspension,in,2011.,The,WFHO,
required,residential,developments,to,provide,moderate^priced,homes.,The,ordinance,was,
reviewed,in,2012,as,part,of,the,City’s,Affordable,Housing,Needs,Assessment1,and,the,Affordable,
Housing,Action,Plan2.,The,Action,Plan,called,for,the,continued,suspension,of,the,Workforce,
Housing,Ordinance,until,the,housing,market,strengthened.,,
,
In,November,,2014,,the,firm,of,Werwath,Associates,was,engaged,by,the,City,to,evaluate,if,key,
market,data,indicate,that,the,time,is,ripe,to,consider,reinstating,the,WFHO.,,In,addition,,
Werwath,Associates,was,asked,to,recommend,what,policy,or,regulatory,changes,should,be,
considered,to,support,the,production,of,affordable,housing.,,
,
Recommendations!
The,study,determined,that,Bozeman’s,housing,market,is,in,the,midst,of,a,robust,recovery,and,
recommends,inclusionary,zoning,requirements,be,reinstated.,,Many,aspects,of,the,original,
WFHO,ordinance,were,considered,well,designed,,and,the,consultants,recommend,carrying,over,
those,provisions.,The,major,recommended,changes,are,as,follows.,,,
,
1.#Apply#inclusionary#requirements#to#a#broader#range#of#housing#developments##
The,original,WFHO,applied,to,subdivisions,with,10,or,more,lots.,,The,requirements,should,
also,apply,to,applications,for,annexations,and,site,plans,that,include,10,or,more,residential,
units,of,any,type:,detached,homes,,townhomes,and,condominiums.,
#
2.##Have#two#simplified#price#tiers#for#affordable#homes####
Developers,should,be,given,two,simplified,options,for,providing,affordable,homes,within,
each,new,residential,development.,It,is,assumed,that,future,residential,developments,will,
represent,a,mix,of,both,options,,thus,serving,a,broad,range,of,low^,and,moderate^income,
homebuyers.,Each,developer,would,choose,one,of,these,options:,
,
¥ Provide,Low^Priced,Homes,^,A,development,could,choose,to,provide,one,unit,out,of,
every,ten,at,a,price,affordable,to,families,at,70%,to,80%,of,area,median,income,,
translating,to,a,current,three^bedroom,home,price,of,$198,000;,or,
,
¥ Provide,Moderate^Priced,Homes,^,A,development,could,opt,to,provide,30%,of,the,
subdivision,affordable,to,families,at,100%,of,area,median,income,,translating,to,a,
current,three^bedroom,home,price,of,$255,000.,
,
3.##Simplify#requirements#for#buyer#income#restrictions#
The,low^price,tier,of,homes,will,typically,have,below^market,prices,and,thus,represent,price,
concessions,by,the,developer,,according,to,the,consultants’,analysis.,Since,buyers,of,low^
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1!Affordable!Housing!Needs!Assessment!for!the!City!of!Bozeman,!March!6,!2012,!Werwath!Associates!
!
2!City!of!Bozeman!Affordable!Housing!Action!Plan:!2012D2016,!April!12,!2012,!Werwath!Associates!
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priced,homes,will,benefit,from,price,discounts,not,available,elsewhere,in,the,market,,the,
requirements,for,income,certifications,and,long^term,affordability,controls,should,apply.,,
However,,moderate^priced,homes,are,expected,to,sell,at,low^market^rate,prices,,and,
therefore,no,income,certification,requirements,or,long^term,affordability,controls,are,
proposed.,The,moderate^price,tier,is,essentially,designed,to,offer,a,much^simplified,“safe,
harbor”,for,developers,who,normally,target,this,niche.,
,
4.##Focus#on#providing#homes#
Complex,requirements,for,offering,designated,lots,for,sale,would,be,eliminated.,We,propose,
that,the,developer,provide,the,required,,price^capped,homes,or,pay,a,substantial,penalty,
unless,an,alternative,means,of,compliance,is,approved,by,the,City,as,a,result,of,extreme,
hardship.,,,
5.##Encourage#donations#of#land#for#affordable#rental#housing##
Donations,of,larger,tracts,of,land,for,affordable,housing,construction,should,be,an,option,
that,most,developers,could,use,to,meet,all,or,part,of,their,affordable,housing,requirements.,
Donations,of,large,tracts,of,land,(3,to,4,acres),for,very,affordable,rental,projects,would,help,
the,City,meet,its,Action,Plan,goals,for,aiding,low^income,renters.,Donation,of,house,lots,to,
nonprofits,should,also,be,allowed.,
6.##Simplified#standards#for#providing#homes#of#different#types#and#sizes#
The,types,of,housing,and,bedroom,mix,of,the,price^capped,homes,should,mirror,the,product,
mix,of,the,market^rate,homes,or,condos.,This,will,make,it,more,likely,that,the,price^capped,
homes,fit,in,seamlessly,with,the,market^rate,homes,and,will,widen,the,choices,of,price^
capped,homes,to,include,studio,and,one^bedroom,condos.,,,
7.##Strengthen#incentives#for#building#lowF#and#moderateFpriced#homes#
The,City,should,continue,the,incentives,in,the,current,Workforce,Housing,Ordinance,,as,
listed,below:,,,,,
¥ Impact,fee,deferral,
¥ Partial,financing,for,infrastructure,development,
¥ Reduction,or,waivers,in,subdivision,and,building,fees,
¥ Reduced,parkland,requirements,
¥ Density,bonus,
¥ Reduced,lot,sizes,
¥ Allowance,for,simultaneous,infrastructure,and,housing,construction,
¥ Study,of,narrower,street,options,
¥ Expedited,review,for,100%,affordable,projects,,
¥ Streamlined,review,of,smaller,subdivision,applications,
¥ Lower,parking,requirements,
,
8.##Make#incentives#more#widely#available#
Incentives,should,apply,,as,appropriate,,to,any,construction,of,low^,and,moderate^priced,
homes,and,rental,units—such,as,100%,affordable,projects,or,portions,that,exceed,the,
minimum,number,of,price^capped,homes,required,by,the,ordinance.,,,
,
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9.##Increase#Capitalization#of#the#Affordable#Housing#Fund#
Long^term,deferrals,of,impact,fees,and,low^cost,financing,for,infrastructure,development,are,
identified,in,the,study,as,important,incentives,in,terms,of,reducing,out^of^pocket,costs.,,Both,
of,these,incentives,will,require,increased,capitalization,of,the,City’s,Workforce,Housing,Fund,
through,general,revenue,or,full,use,of,the,voter^authorized,mil,rate,for,affordable,housing.,
,
Other!Recommended!Strategies!to!Promote!Affordable!Housing!Production!
Regulations,alone,cannot,be,relied,upon,to,solve,the,affordable,housing,challenges,facing,the,
community.,In,addition,,this,report,reiterates,key,strategies,in,the,City’s,current,Affordable,
Housing,Action,Plan,,as,well,as,new,strategies,to,compliment,the,recommended,regulatory,
changes.,These,strategies,include:,
¥ City,support,for,new,,subsidized,affordable,rental,housing,developments,
¥ Promotion,of,employer^sponsored,affordable,housing,development,
¥ New,strategies,for,the,preservation,of,mobile,homes,
¥ Evaluation,of,options,for,new,rental,subdivisions,
¥ Reassessment,of,the,restrictions,around,accessory,dwelling,units,
¥ More,encouragement,for,innovation,in,the,design,and,production,of,affordable,homes,,
Evaluation!Process!Leading!to!the!Recommendations!
Werwath,Associates,analyzed,demographic,and,housing,market,data,that,shows,which,owners,
and,renters,are,being,adequately,served,by,the,current,housing,market,and,,conversely,,what,
income,groups,are,priced,out.,This,involved,analysis,of,trends,in,the,numbers,of,home,sales,,
housing,development,costs,,median,home,prices,,building,permits,issued,,and,new,subdivisions,
approved.,,
,,
This,“supply,side”,data,was,then,compared,to,the,demand,side—to,determine,what,income,
groups,can,afford,rents,and,sale,prices,at,different,price,points.,,Data,analysis,identifies,the,gaps,
in,the,current,housing,supply,and,helps,determine,potential,changes,in,regulations,that,will,
increase,the,availability,of,low^,and,moderate^price,housing.,,,
!
Housing!Market!Findings,
Median,sales,prices,dropped,to,a,six^year,low,of,$207,000,in,2011—a,rough,indicator,of,the,low,
point,in,demand,for,home,purchases,during,the,recession.,Builders,were,starting,construction,of,
detached,homes,at,only,about,half,the,rate,seen,in,the,early,2000s.,,
,
By,contrast,,in,2013,,Bozeman,had,issued,50,more,detached,home,permits,than,the,most,recent,
peak,of,344,homes,,in,2003.,For,the,11,months,ending,November,30,,2014,,the,median,home,
price,increased,by,a,very,strong,7.5%—surpassing,the,peak,median,sale,price,set,in,2006,to,settle,
at,$287,000.,This,constitutes,the,highest,median,home,sales,prices,for,any,metropolitan,area,in,
the,state.,This,also,presents,a,market,paradox,,where,prices,continue,to,escalate,rapidly,,despite,
record,supply.,
,
While,this,is,good,news,for,existing,homeowners,and,the,building,community,,many,members,of,
Bozeman’s,workforce,are,being,priced,out,of,the,market.,The,number,of,detached,homes,priced,
below,$250,000,,a,rough,indicator,of,housing,affordability,for,a,family,of,three,at,100%,of,the,
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area,median,income,,has,gone,from,48.4%,of,the,market,in,2012,to,just,18.6%,in,this,previous,
year.,Even,among,the,far,more,affordable,condo,and,townhome,segment,,the,percentage,of,
units,below,$200,000,has,shrunk,from,87.4,%,in,2012,to,75.6%,for,the,previous,year.,,
,
These,are,dramatic,market,changes,to,have,occurred,in,the,span,of,just,two,years.,,Citizens,are,
well,aware,of,this,trend.,In,an,online,survey,conducted,as,part,of,this,study,,92.6%,of,
respondents,identified,lack,of,affordable,housing,as,a,community,problem.,,,
,
With,such,a,dramatic,shift,in,the,market,conditions,,new,approaches,to,creating,and,preserving,
affordable,housing,must,be,pursued.,The,following,sections,of,this,report,describe,those,market,
conditions,and,recommendations,in,more,detail.,,
,,
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1.,,Project,Goals,
!
In,November,2014,,the,City,of,Bozeman,commenced,an,evaluation,of,possible,changes,in,City,
regulations,to,increase,the,production,of,affordable,housing.,The,scope,of,work,for,the,
evaluation,included,the,following:,
,
1. Review,and,assess,the,City’s,currently,suspended,Workforce,Housing,Ordinance,(WFHO),and,
Planned,Unit,Development,(PUD),Ordinance,with,regard,to,points,awarded,for,affordable,
housing.,
2. Review,regulatory,changes,since,2012,and,current,housing,market,data.,
3. Provide,recommendations,regarding,the,efficacy,of,the,WFHO,and,PUD,Ordinance.,,
4. Provide,recommendations,on,the,appropriateness,of,an,Inclusionary,Zoning,program,for,the,
City,of,Bozeman.,
5. Provide,recommendations,for,other,alternatives,to,current,City,policies.,
6. Analyze,affordable,housing,outcomes,associated,with,recommended,policies.,
The,primary,focus,of,this,study,is,the,suspended,WFHO,,which,required,newly,approved,
subdivisions,to,offer,a,portion,of,the,homes,for,sale,at,affordable,prices.,Because,of,the,WFHO’s,
focus,on,homes,for,sale,,the,analysis,of,market,conditions,and,affordability,in,this,report,focuses,
primarily,on,homeownership,opportunities.,,
,
Regarding,Goal,#5,above,,the,City,has,authorized,an,evaluation,of,other,regulatory,changes,to,
increase,the,production,of,affordable,housing,including:,deferring,or,subsidizing,impact,and,
permit,fees,for,affordable,priced,homes,,changing,development,code,to,allow,higher,residential,
densities,,changes,in,regulations,to,make,development,of,Accessory,Dwelling,Units,(ADU’s),
easier,,examination,of,ways,to,preserve,mobile,home,parks,,and,exploration,of,ways,to,reduce,
the,financial,impact,of,parkland,and,open,space,requirements,on,affordable,housing,
development.,
,,
!!
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2.,,Methodology,and,Acknowledgments,
,
The,City,engaged,an,affordable,housing,consultant,firm,,Werwath,Associates,,to,conduct,this,
evaluation.,Key,sources,of,information,for,the,study,were,as,follows.,,
,,
1. A,review,of,relevant,City,regulations,,residential,building,permits,,and,data,on,
subdivision,activity.,,,
2. Trends,in,home,sales,and,median,home,prices,,from,the,Gallatin,Association,of,Realtors.,
3. Interviews,with,real,estate,industry,professionals,including,builders,,developers,,real,
estate,brokers,,and,lenders.,
4. Interviews,with,public,sector,employees,,housing,service,providers,,and,elected,officials.,
A,list,of,individuals,who,were,interviewed,and,organizations,that,provided,input,can,be,
found,in,the,Appendix,to,this,report.,
5. An,online,survey,of,the,general,public,regarding,their,concerns,and,hopes,for,affordable,
housing,,which,to,date,has,received,187,responses.,
6. A,second,online,survey,sent,individually,to,housing,industry,professionals,to,gather,data,
about,new,residential,construction,building,volumes,and,costs,,which,only,received,two,
responses.,,
7. A,third,online,survey,sent,to,building,industry,professionals,that,gathered,input,about,
potential,regulatory,changes,,which,garnered,39,responses.,,
8. A,second,public,input,survey,aimed,at,the,general,public,and,housing,industry,
professionals,requesting,ratings,and,opinions,about,possible,regulatory,changes.,This,
survey,has,received,115,responses.,,,
9. In,addition,,the,City,and,its,consultants,have,conducted,two,widely,announced,public,
meetings,to,obtain,feedback,on,the,goals,of,the,evaluation,and,preliminary,findings.,
Approximately,30,people,attended,the,first,meeting,on,December,9,,2014.,A,second,
community,meeting,was,held,on,January,13,,2015,with,attendance,of,approximately,45.,!
10. Background,and,finding,presentations,and,question,and,answer,sessions,were,conducted,
at,the,December,10,,2014,and,January,14,,2014,Community,Affordable,Housing,Advisory,
Board,(CAHAB),meetings,,which,are,also,advertised,public,meetings.!
Acknowledgments!!
Both,the,City,of,Bozeman,and,the,researchers,wish,to,acknowledge,and,thank,the,Gallatin,
Association,of,Realtor,(GAR),and,the,Southwest,Montana,Building,Industries,Association,
(SWMBIA),for,providing,data,and,input,,along,with,members,of,City,staff,,elected,officials,,real,
estate,professionals,,and,community,members,who,provided,input,during,the,process,,without,
which,this,evaluation,would,be,impossible.##
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3.,,Regulatory,and,Policy,Background,
,
Since,the,early,1980’s,,the,City,of,Bozeman,has,formally,acknowledged,the,need,for,affordable,
housing,and,supported,the,creation,and,preservation,of,affordable,housing,in,the,following,
ways:,,,
,,
¥ In,1985,,the,City,established,the,first,rental,rehabilitation,Community,Development,Block,
Grant,program,in,Montana.,,
¥ In,1993,,the,City,appointed,an,Affordable,Housing,Task,Force.,This,led,to,the,City,
committing,$200,000,in,general,revenue,to,a,new,Affordable,Housing,Fund,,adoption,of,
an,Accessory,Dwelling,Unit,ordinance,,as,well,as,more,active,support,to,affordable,
housing,developers,in,obtaining,state,and,federal,funds.,
¥ Starting,in,1994,,a,succession,of,regulatory,and,process,reforms,that,included,the,
allowance,of,accessory,dwelling,units,,restricted,size,lot,requirements,,reduced,size,
street,standards,,reduced,setbacks,,reduction,in,minimum,apartment,size,,reduced,
affordable,housing,parking,requirements,,affordable,housing,“scoring”,incentives,for,
planned,unit,developments,,and,other,process,streamlining,measures,designed,to,
reduce,the,cost,of,supplying,affordable,housing.,
¥ Since,2000,,the,City,has,used,portions,of,Big,Box,economic,impact,mitigation,fees,to,help,
fund,affordable,housing.,
¥ In,2007,,the,City,enacted,a,Workforce,Housing,Ordinance,(WFHO),that,required,new,
subdivisions,with,10,or,more,residential,lots,to,provide,0.4,affordable,dwelling,units,per,
net,acre,of,developed,land.,Due,to,the,substantial,decline,in,residential,construction,,the,
drop,in,home,prices,,and,concerns,with,technical,complexities,as,well,as,administrative,
costs,,the,ordinance,has,been,suspended,since,August,30,,2011,,having,resulted,in,no,
production,of,affordably^priced,homes.,,
,
The,City’s,Affordable,Housing,Action,Plan,,adopted,in,2012,,set,two,benchmarks,to,trigger,
consideration,of,reinstating,the,Workforce,Housing,Ordinance—each,of,these,signifying,different,
aspects,of,the,strength,of,the,housing,recovery,,including:,,
,
(1) Median,sales,prices,of,all,types,of,homes,(detached,,townhomes,,and,condos),would,
have,to,climb,to,$246,000,,and,,
,
(2) The,annual,number,of,building,permits,issued,for,detached,homes,would,have,to,equal,
or,exceed,300,permits.,,
,
As,described,in,Section,5,of,this,report,,these,thresholds,were,exceeded,by,the,end,of,2013.,
!!
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4.,,Incomes,and,Affordability,
,
Generally,,for,renters,,industry,standard^setters,such,as,the,U.S.,Department,of,Housing,and,
Urban,Development,(HUD),consider,a,rental,housing,payment,(including,utilities),as,affordable,if,
it,is,at,or,below,30%,of,a,household’s,income.,For,low^,and,moderate^income,homebuyers,,there,
is,no,such,“official”,standard.,However,,nonprofit,and,local,government,programs,assisting,
homebuyers,have,set,various,affordability,benchmarks,for,housing,payments—typically,at,or,
near,33%,of,income.,The,definition,of,“housing,payment”,comes,from,the,underwriting,rules,of,
mortgage,lenders.,It,typically,includes,mortgage,principal,and,interest,payments,,taxes,,
insurance,,and,condo/homeowner,association,fees.,,,,,
,
Using,these,guidelines,,affordable,rents,and,home,prices,can,be,determined,for,any,income,
level.,HUD,and,most,housing,agencies,use,percentages,of,the,“area,median,income”,(AMI),for,
the,purposes,of,designing,and,operating,housing,assistance,programs.,Here,,another,affordability,
factor,comes,into,play:,household,size.,Small,families,need,smaller,,less,expensive,homes,,while,
larger,families,need,more,space,,which,of,course,costs,more,money.,To,account,for,this,factor,,
each,year,,HUD,publishes,income,limits,for,federal,programs,that,vary,by,household,size,as,
shown,in,Figure,1,below.,Consequently,,larger,households,have,higher,income,limits.,,
,
The,City,of,Bozeman,and,its,affordable,housing,partners,use,these,income,standards,,and,we,
recommend,that,they,continue,to,do,so,in,land,use,policies,,as,well,as,rental,and,sales,programs.,,,
,
Figure 1: Incomes by HUD AMI Levels for Bozeman, by Household Sizes
,,Number,of,Persons,in,Household:,,,
,Median,1,2,3!4,5,6,
50%,$24,900,$28,450,$32,000,$35,550,$38,400,$41,250,
65%,$32,370,$36,985,$41,600!$46,215,$49,920,$53,625,
80%,$39,850,$45,500,$51,250!$56,900,$61,500,$66,050,
100%,$49,800,$56,900,$64,000!$71,100,$76,800,$82,500,
,
Using,the,33%^of^income,formula,described,above,and,assumptions,for,interest,rates,and,
monthly,payment,components,appropriate,for,Bozeman,,we,calculated,affordable,home,prices,
for,households,of,various,sizes,at,three,income,levels,in,Figure,2,below.,
,
Figure 2: Maximum Home Prices Affordable at 4 AMI Levels in Bozeman
,,Number,of,Persons,in,Household:,,,
,Median,1,2,3!4,5,6,
65%,$113,129,$134,427,$155,124,$176,619,$187,183,$211,493,
80%,$148,989,$176,102,$202,565!$244,562,$254,234,$278,929,
100%,$212,988,$251,523,$283,008!$321,543,$337,165,$368,102,
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The!Target!Market!for!Homeownership:!LowS!and!ModerateSIncome!Renters!
Current,City,policies,and,public,input,for,this,study,both,indicate,that,a,high,value,is,placed,on,
homeownership,opportunities.,As,a,practical,matter,,most,of,the,beneficiaries,of,any,new,
affordable,homes,built,as,a,result,of,City,policies,will,be,renters.,Most,affordable,homeownership,
programs,focus,almost,exclusively,on,first^time,homebuyers,(i.e.,renters),or,households,that,
meet,have,not,owned,a,home,for,at,least,three,years,,a,definition,used,by,the,Federal,Housing,
Administration,(FHA).,Figure,3,analyzes,the,most,feasible,housing,strategies,for,households,at,
income,tiers,,as,expressed,in,percentages,of,area,median,income,,along,with,the,number,of,
Bozeman,renter,households,in,those,income,groups.,,
,,
Figure 3: Analysis of Affordable Housing Opportunities for Renters in Bozeman
Income!
Range!
Number!of!
Households!
!
0^30%,AMI,2,628,
Includes,a,large,percentage,of,renter,households.,Building,new,
rental,units,affordable,to,this,group,requires,substantial,grants,,rent,
subsidies,,and,below^market^rate,investments,to,achieve,affordable,
rent,levels.!
30^65%,
AMI,2,385,
Renter,households,can,be,feasibly,assisted,through,federal,
programs,such,as,the,Low,Income,Housing,Tax,Credit,program,,and,
limited,homeownership,opportunities,through,construction,of,low^
cost,homes,by,non^profits.,
65^80%,
AMI,950,
Market,rents,are,generally,affordable,to,this,group.,Many,would^be,
homeowners,in,this,group,face,a,scarce,supply,of,affordable,
townhomes,and,condos.,,The,upper,income,limit,for,federal,
affordable,housing,assistance,is,80%,of,AMI.!
80^100%,
AMI,567,
Would^be,homeowners,have,limited,options,for,detached,homes,on,
the,open,market,,while,most,condos,and,townhomes,are,affordable,
to,this,group.,Most,rental,housing,is,affordable.,
100%+,AMI,2211,
Would^be,homeowners,have,opportunities,for,detached,homes,,
condos,and,townhomes.,Virtually,all,rental,housing,is,affordable.,
However,,this,affordability,could,be,eroded,in,the,future,if,home,
prices,rise,faster,than,incomes,or,mortgage,interest,rates,increase,
significantly.,,
,
To,better,understand,income,distribution,in,Bozeman,,we,compiled,the,most,recent,American,
Community,Survey,data,and,interpolated,the,income,data,into,segments,based,on,the,HUD,area,
median,income,levels.,Figure,4,,on,the,following,page,,shows,the,comparative,numbers,of,
homeowners,and,renters,in,different,income,groups.,,
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,
This,data,in,Figures,4,and,5,indicate,some,important,market,realities,about,the,low,rate,of,
homeownership,among,Bozeman,households.,,
¥ At,44.6%,the,homeownership,rate,is,dramatically,lower,than,most,communities,and,
more,than,20%,less,than,both,the,statewide,(67.3%),and,national,(64%),homeownership,
rates.,,
¥ By,far,,the,highest,homeownership,rate,in,Bozeman,(55%),is,for,households,with,
incomes,higher,than,the,median,income.,,,
¥ Correspondingly,,households,with,incomes,below,the,median,,have,only,a,34.7%,
homeownership,rate.,,
,
Figure 5. Homeownership Rates
Bozeman,
<100%,AMI,
Bozeman,
>100%,AMI,
Bozeman,
Combined,
Montana,
Statewide,United,States,
34.7%,55%,44.6%,67.3%,64%,
Source:,2013,ACS,Survey,3^Year,Estimates,
,
Clearly,,the,lack,of,housing,affordability—particularly,for,households,with,incomes,below,80%,of,
area,median,income—is,holding,down,the,homeownership,rate,in,Bozeman,to,an,exceptionally,
low,level.,Certainly,,other,factors,are,involved,,such,as,university,students,driving,an,above^
average,demand,for,rental,housing.,However,,while,students’,demand,for,rental,housing,is,not,a,
factor,that,the,City,of,Bozeman,can,influence,,the,City,can,encourage,more,construction,of,
affordable,housing.,,,,
,,
,,
798,895,
530,774,
4,147,
2,628,2,385,
950,
567,
2,211,
0,
500,
1,000,
1,500,
2,000,
2,500,
3,000,
3,500,
4,000,
4,500,
<,30%,AMI,30%^65%,AMI,65%^80%,AMI,80%^100%,AMI,100%+,AMI,
Owners,
Renters,
Figure 4: Numbers of Owners and Renters by AMI Groups
Source:,,2013,U.S.,Census,Bureau,ACS,3^Year,Esqmates,interpolated,to,AMI,levels,by,Werwath,Associates,
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5.,,A,Revived,and,Less,Affordable,Market,for,Home,Purchases,
!
The,trends,in,two,key,market,indicators—annual,permits,for,new,homes,and,median,sale,
prices—demonstrate,a,very,strong,recovery,in,the,housing,development,sector,and,at,the,same,
time,,a,sharp,decline,in,housing,affordability.,,
!
Figure 6: Market Indicators-Median Sales Price and Homes Permitted
,2006,2011,2013,2014,
New,detached,homes,permitted,303,156,399,309,
Median,sale,price,–,all,types,,$258,000,$207,000,$270,000,$287,000,
Source:,City,of,Bozeman,(permits),and,Gallatin,Association,of,Realtors,(median,sale,prices),
,
Median,sales,prices,dropped,to,a,six^year,low,in,2011—a,rough,indicator,of,the,low,point,in,
demand,for,home,purchases,during,the,recession.,See,Figure,7,for,details.,Builders,were,starting,
construction,of,detached,homes,at,only,about,half,the,rate,seen,in,the,early,2000s.,,
,
By,contrast,,in,2013,Bozeman,had,a,larger,number,of,single^household,dwellings,permitted,(399),
than,during,the,boom,years,of,2003,,2004,and,2005.,For,the,11,months,ending,November,30,,
2014,,the,median,home,price,increased,by,a,very,strong,7.5%—surpassing,the,peak,median,sales,
price,set,in,2006.,The,housing,market,has,clearly,recovered,and,is,sprinting,ahead.,This,is,good,
news,for,existing,homeowners,and,builders.,However,,the,recovery,is,at,the,point,where,low^,
and,moderate^income,homebuyers,are,being,priced,out,of,the,market.,,,,,
!
,
,
Figure 7: Trends in Median Sale Prices of Homes
!
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Major!Differences!in!Prices!of!Detached!Vs.!Attached!Homes!
The,home,sales,data,in,Figure,7,shows,that,condominiums,and,townhomes,have,increased,in,
price,,but,are,significantly,more,affordable,that,detached,homes.,Following,are,details,on,the,
steep,decline,and,rebound,of,home,prices,over,the,past,eight,years.,,,
¥ 2006:,Median,sales,price,for,detached,homes,and,condos/townhomes,in,Bozeman,and,
surrounding,areas,were,$340,851,and,$202,400,respectively,with,the,combined,median,
sales,price,for,all,home,types,at,a,then^record,$257,875.,,,
¥ 2011:,The,median,sales,price,had,declined,to,a,low,of,$252,250,for,detached,homes,and,
$150,000,for,condos/townhomes.,
¥ 2014:,For,sales,through,November,,the,median,price,was,$326,000,for,detached,homes,
and,$197,000,for,condos/townhomes,and,the,combined,median,for,all,homes,types,is,
$287,000,,nearly,$30,000,higher,than,the,highest,combined,median,from,2006.,
It,is,important,to,note,that,median,sales,prices,of,condos,in,Bozeman,,as,elsewhere,in,the,nation,,
are,being,held,down,by,the,difficulty,of,obtaining,mortgage,financing.,Regulators,reacted,to,the,
subprime,lending,debacle,by,tightening,various,lending,standards—among,them,,much,higher,
standards,for,condos,that,qualify,for,conventional,and,government^insured,mortgages.,The,
result,is,that,homes,in,condominium,associations,without,a,significant,majority,of,owner^
occupants,and,very,sound,governance,and,finances,do,not,qualify,for,conventional,financing.,,,,,
The!Number!of!LowerSPriced!Homes!is!Dwindling!
When,home,sales,data,is,divided,into,price,segments,,it,becomes,clear,that,the,supply,of,
affordable,homes,is,shrinking.,In,2012,,there,was,relative,parity,between,detached,homes,priced,
under,$250,000,and,those,priced,over,$250,000,,with,those,under,$250,000,making,up,a,little,
over,48%,of,all,homes,sold,that,year.,See,Figure,8,below.,This,segment,declined,to,just,over,
35.1%,in,2013,and,precipitously,dropped,to,18.6%,for,2014,sales,through,November,of,this,year.,,,
,
!
!
!
!
!
!
!
!
!
!
!
,
,
Figure 8: Sales of Detached Homes in Two Price Segments
!
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Even,more,dramatic,is,the,sharp,drop,in,the,number,of,detached,homes,sold,at,prices,below,
$200,000—from,62,units,in,2012,to,eight,units,in,2014.,The,implication,is,that,the,supply,of,
affordable,detached,homes,has,nearly,evaporated,for,households,with,incomes,below,
approximately,80%,of,the,area,median.,
,
While,the,price,increases,for,condominiums,and,townhomes,have,been,more,muted,,the,supply,
of,affordable,units,is,dropping,rapidly.,For,the,following,comparative,analysis,we,used,a,lower,
affordability,threshold,of,$200,000,to,compensate,for,higher,monthly,costs,such,as,homeowners,
association,dues,,which,significantly,lower,the,borrowing,capacity,of,buyers.,In,2012,,
condominium,and,townhome,sales,below,$200,000,constituted,81.4%,%,of,all,
condominium/townhome,sales.,This,slipped,only,slightly,to,75.4%,in,2013,,but,dropped,rapidly,
to,59.5%,in,2014,sales.,It,is,also,important,to,note,that,many,of,the,sales,in,the,sub^$200,000,
range,represent,income,restricted,affordable,housing,developed,by,the,Human,Resources,
Development,Council,(HRDC).,,
,
!!!!!!!!!!!!!!!!!!!!!
!
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,
,
,
Taken,together,there,is,a,clear,and,dramatic,trend:,homes,affordable,to,low^,and,moderate^
income,buyers,are,dwindling,at,an,alarming,rate,and,this,decline,is,particularly,acute,for,
detached,homes.,,
,
Another,important,indicator,of,housing,affordability,is,a,snapshot,of,housing,currently,listed,for,
sale.,As,of,December,9,,2014,,there,were,29,units,listed,below,$200,000.,Of,these,,four,were,
townhomes,and,the,rest,were,condominiums,,12,of,which,were,in,the,same,development.,There,
were,no,detached,homes,listed,below,$200,000.,The,most,affordable,unit,was,a,two^bedroom,
condo,listed,for,$147,500.,There,were,no,four^bedroom,units,currently,listed,in,this,price,range.,,,
Figure 9: Sales of Condos/Townhomes in Two Price Segments
!!Source:,Gallatin,
Association,of,Realtors,
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Statewide!and!National!Context!
A,mid^year,analysis,produced,in,July,of,2014,by,the,Montana,Association,of,Realtors,indicates,
that,Bozeman,has,the,highest,median,home,prices,of,any,metropolitan,area,in,the,state,,with,
prices,for,detached,homes,nearly,$50,000,higher,than,Missoula,,the,second,highest^cost,market.,,
!!
Figure 10. Median Home Prices By City
,,Detached,Condo/Townhome,
Bozeman,$275,000,$199,900,
Missoula,$225,250,$159,900,
Helena,$219,950,$156,900,
Billings,$207,000,$169,900,
,Source:,Montana,Association,of,Realtors,2014,Midyear,Housing,Statistics,
!
Median,sales,prices,in,Bozeman,are,much,more,in,line,with,median,sales,prices,seen,in,similar,
resort,area,communities,in,the,Western,states.,Figure,11,depicts,the,2014,median,sales,price,of,
home,types,for,the,respective,communities.,,
,
Figure 11. Comparable Median Sales Prices
Bozeman,,Montana,,$287,000,
Durango,,Colorado,,$338,728,
Santa,Fe,,New,Mexico,$299,150,
Bend,,Oregon,$289,950,
,Source:,Gallatin,Association,of,Realtors,,Santa,Fe,Association,of,Realtors,,Central,
Oregon,Association,of,Realtors,,Durango,Realtor’s,Association,
,
,
!!
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6.,,Housing,Development,Activity,
!
Building,permits,and,creation,of,house,lots,through,the,subdivision,of,land,are,two,primary,
indices,that,help,us,better,understand,development,activity,and,the,future,housing,development,
pipeline.,Figure,12,depicts,building,permit,activity,in,the,City,of,Bozeman,by,housing,type.,,
,
,
,
While,the,total,number,of,building,permits,issued,has,not,yet,reached,the,peak,of,895,set,in,
2005,,it,is,important,to,note,that,the,total,number,of,permits,from,that,time,period,was,largely,
driven,by,multi^unit,housing,development.,When,we,isolate,permits,for,detached,homes,,we,find,
that,399,permits,were,issued,in,2013,,which,exceeds,the,peak,of,344,permits,issued,in,2003,by,
55,housing,units.,While,not,as,robust,,there,were,309,permits,issued,for,detached,homes,in,the,
first,11,months,of,2014,,a,number,that,exceeds,all,but,the,years,from,2003,to,2006,,the,peak,of,
the,mortgage^driven,housing,boom.,,
,
The,lack,of,multifamily,housing,construction,starts,is,clear,in,the,statistics,showing,permit,
issuance.,But,this,trend,should,soon,be,reversed.,,A,significant,number,of,multifamily,housing,
units,are,scheduled,to,start,construction,soon.,A,pending,private,student,housing,development,is,
slated,to,produce,more,than,700,beds,,with,499,beds,coming,on,line,in,the,first,phase,scheduled,
open,in,the,fall,of,2015.,There,is,also,a,new,residence,hall,that,will,provide,400,more,beds,,
planned,for,a,fall,2016,opening.,Lastly,there,are,several,residential,multi^family,projects,currently,
seeking,occupancy,,which,will,provide,around,100,additional,rental,units.,The,Stoneridge,
affordable,rental,development,was,awarded,Low,Income,Housing,Tax,Credits,and,will,provide,48,
income,and,rent^restricted,apartments.,,,
,
While,building,permits,provide,an,understanding,of,the,immediate,housing,development,
pipeline,,the,rate,of,applications,and,approvals,of,new,subdivisions,give,us,an,understanding,of,
843,895,
651,
,
750,
242,180,208,179,
295,
504,431,
0,
250,
500,
750,
1000,
2004,2005,2006,2007,2008,2009,2010,2011,2012,2013,2014,Permits!5,or,More,
3^4,Family,
Two^Family,
One^Family,
Source:,Census,Bureau,,Building,Permits,Survey/City,of,Bozeman,
Figure 12: Permit Data by Housing Type
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the,longer^term,housing,development,pipeline,,which,is,driven,by,the,availability,of,developable,
home,lots.,The,subdivision,of,land,is,regulated,through,the,City,,which,requires,a,two^step,
approval,process,,preliminary,plat,and,final,plat,,the,latter,being,when,a,subdivided,parcel,has,
received,appropriate,approvals,to,proceed,with,development.,,
,
,
,
In,2014,,930,lots,had,received,preliminary,plat,approval,,a,higher,number,than,all,but,2005,
(1,637),and,2007,(1,434).,This,indicates,a,trend,toward,more,robust,future,housing,development,
activity.,However,,some,of,these,lots,are,from,re^platting,of,existing,subdivisions,,so,do,not,
necessarily,add,to,the,total,inventory,of,home,lots.,,
,
Housing!Development!Costs!
The,major,components,of,new,home,costs,are,land,,infrastructure,,construction,materials,and,
labor.,To,determine,typical,costs,of,building,homes,in,Bozeman.,Data,was,obtained,from,several,
members,of,the,Southwest,Montana,Building,Industry,Association,(SWMBIA).,,
,
A,key,factor,driving,up,new,home,construction,costs,in,Bozeman,is,the,relatively,large,average,
size,of,homes,being,built,here:,2,300,square,feet.,This,exceeds,the,average,in,most,other,similar,
markets,,and,is,far,higher,than,the,typical,size,of,new,entry^level,homes.,,
,
We,worked,with,several,members,of,the,Southwest,Montana,Building,Industries,Association,to,
determine,the,minimum,cost,to,develop,a,modest,home,in,the,Bozeman,market.,For,the,
purposes,of,assumptions,,building,cost,estimates,were,based,on,a,1,200,square,foot,“affordable”,
home,being,built,in,Bozeman,city,limits.,The,lowest,estimate,of,development,costs,resulted,in,a,
total,hard,cost,,including,12.5%,overhead,and,profit,,of,$205,155,for,the,1,200,square,foot,home,,
a,total,cost,of,$171,per,square,foot.,This,exceeds,the,2013,National,Association,of,Homebuilders,
Construction,Cost,Survey,estimate,of,$145,a,square,foot,by,18%.,,
0,200,400,600,800,1000,1200,1400,1600,1800,
2004,
2005,
2006,
2007,
2008,
2009,
2010,
2011,
2012,
2013,
2014,
Final,Plat,Preliminary,Plat,
Source:,City,of,Bozeman,
Figure 13: Subdivision Activity: Newly Platted Lots
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Interviews,with,members,of,the,building,community,indicated,issues,with,labor,availability,as,a,
major,factor,driving,up,local,construction,costs.,,With,high,demand,for,labor,in,the,Bakken,oil,
fields,,competent,construction,labor,is,scarce,and,command,higher,wages.,Likewise,,high,
demand,for,subcontracting,services,driven,by,the,current,high,level,of,home,construction,activity,
also,drives,up,costs,for,essential,services,such,as,plumbing,,concrete,and,electrical,work.,,
,
To,summarize,,while,construction,costs,per,square,foot,are,above,average,in,Bozeman,,builders,
can,substantially,reduce,the,cost,of,entry^level,homes,by,reducing,square,footage.,In,many,U.S.,
markets,,builders,are,constructing,and,selling,very,livable,small,homes,by,designing,floor,plans,
that,use,space,very,efficiently.,
,
,,
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7.,,,Public,Input,on,Housing,Affordability,Issues,
As,part,of,this,evaluation,,several,online,public,input,surveys,were,conducted,as,well,as,two,
surveys,specifically,directed,at,building,industry,professionals.,,
,
The,primary,public,input,survey,was,activated,on,December,9,,2014,,and,as,of,January,27,,2015,
had,received,over,187,responses,,a,very,robust,response,rate,for,a,survey,of,this,type,in,a,
community,of,this,size.,Consistent,with,public,discussions,during,community,meetings,held,on,
December,9,,2014,and,January,13,,2015,,and,the,vast,majority,of,stakeholder,interviews,,there,is,
little,disagreement,about,the,reality,of,housing,affordability,issues,currently,facing,the,
community.,The,survey,asked,for,basic,information,about,respondents,,then,offered,the,
opportunity,for,open^ended,comments.,,
,
Lack!of!Affordable!Housing!Seen!as!a!Community!Problem!
Of,the,164,total,responses,to,the,survey,,86%,of,respondents,live,in,Bozeman,,and,of,the,14%,
who,did,not,,82%,responded,that,they,would,like,to,live,in,Bozeman.,The,vast,majority,of,
respondents,(76%),also,work,in,the,Bozeman,with,responses,split,almost,evenly,at,48%,renters,
and,52%,owners.,Fifteen,responses,,or,approximately,10%,of,all,responses,,were,from,members,
of,the,real,estate,or,homebuilding,industries.,,
,
Of,the,176,respondents,who,provided,narrative,responses,,only,7.4%,of,respondents,expressed,
that,there,was,no,issue,with,housing,affordability,in,Bozeman.,,
,
Leading,the,general,comments,were,issues,with,homeownership,,which,was,specifically,
mentioned,in,57,responses.,Close,behind,were,comments,referring,to,issues,with,affordable,
rental,housing,which,garnered,51,comments.,Third,most,prominent,were,references,to,low,
wages,being,a,large,factor,in,housing,affordability,with,26,people,offering,responses,to,this,
effect.,In,addition,to,these,general,sentiments,,several,other,themes,arose,that,have,bearing,on,
our,analysis.,,
,
Numerous,respondents,noted,that,it,was,entry,level,professionals,who,were,not,being,served,by,
the,current,market,,stuck,between,subsidized,housing,offerings,from,organizations,like,HRDC,
and,Habitat,for,Humanity,,and,entry^level,market,rate,homes.,Several,self^identified,young,
professionals,indicated,that,lack,of,housing,might,push,them,to,move,to,other,communities,
where,housing,costs,were,more,in,line,with,wages.,,
!
The,impact,of,the,Montana,State,University,on,the,housing,market—the,demand,pressure,from,
employees,and,students—was,a,frequent,topic,of,comment.,Another,reoccurring,theme,for,
many,respondents,was,the,desire,for,less,sprawl,within,the,valley,,which,implies,the,need,for,
more,dense,housing,approaches.,Also,noted,by,numerous,respondents,was,the,shrinking,
availability,of,mobile,homes,as,a,viable,affordable,housing,option,,suggestions,included,updating,
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the,current,regulations,to,allow,for,new,mobile,home,park,development,or,other,factory^built,
construction,options.,,
,
On,the,more,technical,side,,several,respondents,cited,the,need,for,a,dedicated,funding,source,
for,affordable,housing,,with,suggestions,ranging,from,a,real,estate,transfer,tax,,local,option,sales,
tax,,airline,ticket,surcharge,,and,water,bill,surcharge.,The,overarching,theme,of,these,comments,
was,a,desire,to,spread,the,burden,across,multiple,sectors,of,the,local,economy,,and,not,simply,
rely,on,the,new,construction,housing,industries,to,support,affordable,housing,development.,
Increased,funding,was,also,cited,as,a,critical,mechanism,to,amplify,current,affordable,housing,
development,activities,by,groups,such,as,HRDC,and,Habitat,for,Humanity.,,
,
A,second,public,survey,on,affordable,housing,regulatory,and,incentive,options,was,released,
January,13,,2015,and,had,returned,118,responses,as,of,January,27,,2015.,A,majority,of,
respondents,to,this,survey,(72%),were,members,of,the,general,public,,with,14%,representing,
affordable,housing,organizations,,and,13%,representing,building,or,real,estate,industry,
professionals.,In,this,survey,,respondents,were,asked,to,rank,various,options,on,a,scale,of,
“undesirable”,,“moderately,undesirable”,,“neutral”,,“desirable”,,and,“very,desirable”.,
,
Majority!of!Survey!Respondents!in!Favor!of!Affordable!Housing!Requirements,
The,central,question,was,whether,the,City,should,create,a,requirement,for,affordable,housing,in,
new,development,,with,the,caveat,that,it,would,be,balanced,with,incentives,,to,which,54.2%,of,
respondents,indicated,that,this,policy,was,either,desirable,or,very,desirable.,This,proposal,was,
seen,as,moderately,or,completely,undesirable,to,37.5%,of,respondents,indicated,that,it,was,
moderately,or,completely,undesirable,and,,8.3%,were,neutral,to,the,idea.,,
,
This,survey,also,asked,participants,to,rank,various,potential,incentives,for,the,creation,of,
affordable,housing.,The,most,desirable,strategies,were,easing,restrictions,on,the,creation,of,
accessory,dwelling,units,,which,was,seen,as,undesirable,or,very,undesirable,by,only,16.5%,of,
respondents,,followed,closely,by,creating,strategies,for,creation,of,new,mobile,home,parks,,
which,was,seen,as,undesirable,or,very,undesirable,by,only,18.8%,of,respondents.,None,of,the,
strategies,mentioned,were,found,undesirable,or,very,undesirable,by,a,majority,of,respondents,,
with,the,least,popular,strategy,being,the,elimination,of,parkland,requirements,for,small,
subdivisions,,which,was,undesirable,or,very,undesirable,to,47%,of,respondents.,,
,
Mobile!Home!Parks!and!Relief!on!City!Fees!Seen!as!Very!Important!
A,similar,survey,about,regulatory,incentives,was,posed,to,the,development,community,,
(released,December,19,,2014),,and,had,received,39,responses,by,January,27,,2015.,This,survey,
asked,respondents,to,rank,various,incentive,strategies,based,on,their,potential,to,lower,costs,,
with,options,including,“no,potential”,,“little,potential”,,“average,potential”,,“high,potential”,,and,
“very,high,potential”,for,lowering,costs.,Among,this,subset,of,respondents,with,specialized,
knowledge,in,housing,development,costs,,the,easing,of,restrictions,governing,the,creation,of,
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new,mobile,home,parks,was,the,most,popular,with,82%,of,respondent,indicating,that,this,posed,
an,average,to,very,high,potential,to,lower,housing,development,costs.,This,was,followed,in,order,
of,priority,by,lowering,or,eliminating,permit,and,subdivision,fees,for,affordable,units,(74%),,as,
well,as,deferring,impact,fees,for,affordable,units,(74%),,revision,of,subdivision,regulations,(68%),,
easing,requirements,around,accessory,dwelling,units,(67%),and,streamlined,replatting,of,existing,
subdivisions,(56%).,
,
When,asked,to,rank,the,importance,of,strategies,,allowing,for,lot,creation,for,affordable,housing,
with,reduced,parkland,dedication,requirements,was,the,most,important,to,builders,with,73%,
reporting,that,this,was,“important”,to,“extremely,important”.,This,was,followed,by,lot,size,
reductions,,which,were,found,to,be,important,to,extremely,important,for,62%,of,respondents.,,
,
It,should,be,noted,that,a,subdivision,activity,survey,was,sent,out,to,10,housing,developers,in,
early,December,2014,with,the,aim,of,determining,projected,future,housing,starts,in,different,
price,categories,,as,well,as,typical,development,costs.,Unfortunately,only,two,responses,were,
received,,too,few,to,provide,reliable,results.,,
,
,,
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8.,Recommended,Definition,of,Affordable,Housing,
!
This,report,recommends,that,the,City,of,Bozeman,adopt,both,incentives,and,requirements,to,
increase,the,production,of,affordable,housing.,To,provide,the,incentives,and,administer,the,
requirements,the,City,must,have,a,clear,definition,of,“affordable,housing.”,
,
Challenges!of!Current!City!Definitions!!
The,City’s,original,Workforce,Housing,Ordinance,(WRHO),refers,to,two,classes,of,housing,needs:,,,
,
¥ Affordable,Housing:,housing,for,persons,earning,less,than,65%,of,the,area's,median,
income,for,rental,housing,and,less,than,100%,of,the,area,annual,median,income,for,
purchased,housing.,
¥ Workforce,Housing:,housing,for,persons,earning,less,than,120%,of,the,area,median,
income,for,purchased,housing.,
There,are,several,problems,with,these,two,terms,,the,concepts,behind,them,,and,the,targeted,
income,groups.,
,
1. The,definitions,are,not,consistently,applied,in,the,original,ordinance.,For,example,,
certain,sub^sections,of,the,WFHO,refer,to,homebuyers,at,70%,and,80%,of,area,median,
income,(AMI),as,“workforce,housing,units.”,But,housing,at,the,70%,AMI,level,is,
“affordable,housing”,according,to,the,definitions,in,the,same,ordinance.,
2. Public,input,received,in,this,study,indicated,no,consensus,on,the,definitions,of,
“affordable,housing”,and,“workforce,housing.”,For,example,,some,officials,interviewed,
considered,“affordable,housing”,to,only,refer,to,rental,housing,targeted,at,incomes,
below,30%,AMI.,,
3. In,promulgating,new,policies,and,regulations,,the,City,lacks,an,all^encompassing,term,for,
housing,that,is,needed,and,in,short,supply,in,Bozeman.,Since,the,universal,problem,is,
lack,of,affordability,,many,communities,set,goals,for,producing,rental,and,owner^
occupied,“affordable,housing”,at,rents,and,sale,prices,which,are,at,and,below,the,
bottom,end,of,the,residential,real,estate,market.,
4. This,study,and,the,City’s,adopted,Housing,Needs,Study,and,Housing,Plan,,completed,in,
2012,,identifies,100,percent,of,AMI—not,120%,AMI—as,the,top,end,of,the,income,group,
that,is,facing,shortages,of,affordably^priced,housing.,Market,conditions,have,changed,
since,that,120%,AMI,limit,was,set,in,2007,and,will,likely,change,again.,That,is,why,the,
City,should,periodically,adjust,its,income,and,pricing,targets,as,the,market,changes.,,
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5. There,are,more,direct,,effective,ways,to,assure,that,members,of,the,workforce,benefit,
from,any,required,affordable,homes.,Language,could,be,carried,over,from,original,
ordinance,that,requires,buyers,of,discount^priced,homes,to,be,employed,in,Bozeman.,
6. To,clearly,articulate,its,vision,and,goals,,the,City,would,benefit,from,having,one,all^
encompassing,term,for,housing,that,meets,the,needs,of,all,of,its,citizens,who,face,
housing,challenges.,The,City’s,Affordable,Housing,Action,Plan,uses,the,term,“affordable,
housing.”,,,,
Applicability!of!Proposed!New!Definitions!
The,original,Workforce,Housing,Ordinance,lists,14,different,incentives,for,construction,of,
“workforce,units”,in,newly^platted,subdivisions.,Only,one,of,the,incentives,(fee,waivers),is,
mentioned,as,being,available,to,“housing,projects,that,are,100%,affordable”—and,this,,only,at,
the,City’s,discretion.,,,
Construction,of,affordable,rental,housing—a,high,priority,in,the,City’s,Affordable,Housing,Action,
Plan—should,also,benefit,from,some,regulatory,incentives.,The,scarcity,of,very,affordable,rental,
housing,was,noted,in,public,comments,and,the,City’s,2012,housing,needs,study,and,throughout,
this,evaluation.,Yet,,none,of,the,incentives,in,the,original,WFHO,clearly,apply,to,affordable,rental,
housing.,,
These,major,changes,in,applicability,are,recommended:,
1. Some,incentives,should,apply,to,the,creation,of,affordable,rental,housing,projects—but,
as,with,the,original,ordinance,,new,construction,of,rental,housing,should,not,be,subject,
to,inclusionary,requirements.,,
2. Affordable,rental,housing,should,be,narrowly,defined—limited,to,dwelling,units,that,are,
contractually,restricted,for,at,least,20,years,to,occupancy,by,households,with,incomes,at,
or,below,65%,of,area,median,income,and,paying,affordable,rents.,,
3. Affordable,housing,incentives,and,requirements,should,apply,to,annexations,and,new,
site,plans,proposing,10,or,more,dwelling,units,,not,just,subdivisions,with,10,or,more,
dwelling,units.,,
Recommended!New!Definition!of!Affordable!Homes!For!Sale!
¥ Affordable,homes,for,sale,should,be,targeted,to,households,with,incomes,between,65%,
and,100%,of,area,median,income,(AMI),,based,on,the,City’s,2012,Housing,Needs,Study,
and,current,market,data,evaluated,for,this,report.,,
,
¥ Affordable,prices,should,be,calculated,based,on,a,homeowner,paying,a,maximum,of,33%,
of,income,for,mortgage,payments,,taxes,,insurance,,assessments,,and,condo,or,
homeowner,association,fees.,This,is,in,line,with,current,prevailing,standards,in,many,
successful,homebuyer,assistance,programs.,,
!
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Recommended!New!Definition!of!Affordable!Rental!Housing!
¥ Affordable,rental,housing,should,be,targeted,to,households,with,incomes,at,or,below,
65%,of,area,median,income,(AMI),,based,on,the,City’s,2012,Housing,Needs,Study,and,
current,market,data,evaluated,for,this,report.,For,purposes,of,qualifying,for,incentives,,
projects,should,be,contractually,obligated,to,follow,rent,and,income,restrictions,for,at,
least,20,years.,
,
¥ Affordable,rents,should,be,calculated,at,30%,of,a,tenant’s,income,for,rent,and,tenant^
paid,utilities.,This,is,consistent,with,the,contractual,requirements,of,federal,subsidies,for,
rental,housing,programs.,
!
!
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9.,,Recommended,Requirements,for,Providing,Affordable,Housing,
!
Regulations,,particularly,on,the,local,level,,play,an,important,role,in,the,cost,of,housing,creation.,
Subdivision,and,housing,development,is,a,highly,regulated,industry,,which,is,desirable,because,
these,regulations,are,designed,to,ensure,the,quality,and,safety,of,our,community.,These,
regulations,dictate,how,many,,and,what,types,of,housing,units,can,be,placed,in,a,given,area,of,
land,(zoning),,and,basic,standards,for,how,those,homes,are,built,(building,code),,and,often,
certain,regulations,about,how,homes,must,fit,into,their,surrounding,area,(design,guidelines),,all,
aspects,that,factor,heavily,into,the,cost,of,housing,production.,,
,
As,with,any,type,of,regulation,,there,is,always,the,potential,for,unintended,consequences.,For,
instance,,requirements,for,ample,open,space,can,lower,the,total,number,of,homes,that,can,be,
developed,on,a,given,piece,of,land,,thus,lowering,the,number,of,homes,that,can,share,the,
embodied,costs,of,development,such,as,roads,,infrastructure,,acquisition,and,financing,cost.,,
,
The,same,is,true,for,regulatory,mechanisms,,such,as,WFHO,,that,place,a,requirement,on,market,
rate,housing,developers,to,provide,a,certain,amount,of,affordable,housing.,If,a,requirement,is,
too,burdensome,,the,cost,of,compliance,can,be,pushed,onto,market,rate,homes,,raising,prices.,
In,the,most,extreme,cases,,too,stringent,a,requirement,can,function,to,slow,the,overall,
production,of,housing,by,making,housing,development,financially,unfeasible.,,
,
Because,of,these,risks,,any,mandatory,requirement,for,the,inclusion,of,affordable,housing,in,
market,rate,housing,developments,must,be,balanced,by,offering,significant,enough,financial,
incentives,to,developers,to,offset,losses,associated,with,the,sales,of,some,homes,at,below^
market^rate,prices.,,
!
Proposed!New!Articles!Proposed!for!City’s!Code!of!Ordinances!
This,report,recommends,replacement,of,the,original,Workforce,Housing,Ordinance,with,two,new,
articles,in,the,City’s,Code,of,Ordinances,,Chapter,10,,Buildings,and,Building,Regulations,,as,
follows:,
¥ Affordable!Housing!Definitions!and!Incentives,,as,described,in,sections,8,and,10,of,this,
report.,This,article,would,apply,to,both,required,provision,of,affordable,homes,,and,
voluntary,construction,of,affordable,housing,,including,affordable,rental,housing.,
,
¥ Affordable!Homes!Program,,which,would,focus,solely,on,requirements,for,building,and,
selling,lower^priced,homes,in,certain,new,residential,and,mixed^use,developments.,This,
Article,would,be,similar,in,some,respects,to,the,original,Workforce,Housing,Ordinance,,
but,simpler,and,with,some,key,differences,as,described,below.,,
,
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Applicability!of!Affordable!Housing!Requirements!
The,original,Workforce,Housing,Ordinance,(WFHO),applied,only,to,applications,for,new,
subdivisions,with,10,or,more,homes.,We,recommend,that,it,apply,more,broadly,to,the,following,
types,of,new,applications,for,development,approvals.,
1. New,subdivision,plats,with,10,or,more,homes,or,amendments,of,existing,such,plats,
affecting,more,than,30%,of,the,platted,lots.,,
2. Annexations,that,include,residential,zones.,
3. Applications,for,site,plans,for,construction,of,10,or,more,dwelling,units.,,
As,with,the,original,WFHO,,rental,housing,units,would,be,exempt,from,these,requirements.,The,
market,evaluation,that,was,part,of,this,study,indicated,that,a,majority,of,rental,housing,in,
Bozeman,has,rents,affordable,to,households,with,incomes,at,or,below,80%,of,the,area,median.,
Demand,pressure,that,drives,up,rents,should,be,relieved,by,the,upcoming,construction,of,
hundreds,of,new,rental,housing,units.,Even,so,,housing,with,rents,affordable,to,households,with,
incomes,at,or,below,65%,of,the,area,median,is,in,scarce,supply.,We,recommend,that,this,need,
be,addressed,by,the,incentives,described,in,Section,10,of,this,report,and,by,the,City,supporting,
qualified,developers,who,are,applying,for,federal,subsidies,for,below^market^rate,rental,housing,
as,described,in,Section,11.,,,,
Recommended!Requirements!for!Providing!Affordable!Homes!
Developments,that,meet,the,applicability,criteria,would,choose,from,one,of,two,options,,with,
the,assumption,that,new,developments,would,represent,a,mix,of,both,options.,,
1. Build!and!sell!“LowSPriced”!homes:,10%,of,the,total,housing,units,proposed,must,be,
built,and,sold,at,affordable,prices,to,households,with,incomes,at,or,below,80%,of,area,
median,income.,Current,pricing,for,a,three^bedroom,home,would,be,approximately,
$198,000;,or,
2. Build!and!sell!significant!portion!of!“ModeratelySPriced”!homes:,,30%,of,the,total,
housing,units,proposed,would,be,“naturally,affordable”—i.e.,market^rate,homes,built,
and,sold,at,prices,affordable,to,households,with,incomes,from,81%,to,100%,of,area,
median,income.,Income,qualification,of,buyers,would,not,be,required.,Current,pricing,for,
a,three^bedroom,home,would,be,approximately,$255,000.,,It,is,not,expected,that,this,
option,would,feasible,for,developments,offering,primarily,higher^priced,detached,homes,
or,condos.,It,is,intended,to,offer,a,much,simpler,“safe,harbor”,for,many,condo,and,
townhome,projects—and,perhaps,a,few,detached,home,projects,with,modestly,sized,
homes,and,lots.,,
With,regard,to,the,two,tiers,of,pricing,,the,major,difference,from,the,original,ordinance,is,to,
offer,a,“safe,harbor”,to,projects,that,build,and,sell,at,least,30%,of,the,homes,at,market^rate,
prices,that,are,calculated,to,be,affordable,to,households,below,100%,of,area,median,income,,
without,income,restrictions.,The,only,burden,on,these,projects,is,to,agree,to,deed,restrictions,
capping,initial,sale,prices,on,30%,of,the,house,lots,or,condo,units.,,
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No,special,marketing,requirements,are,proposed,,and,buyers,do,not,have,to,be,income^qualified.,,
We,assume,that,most,condo,and,townhome,developers,will,be,able,to,meet,this,requirement,
without,any,alteration,of,their,usual,marketing,and,pricing,strategies.,This,is,proposed,as,a,
vehicle,for,greatly,simplifying,compliance,for,a,subset,of,affected,projects,that,in,any,case,would,
have,had,prices,affordable,to,the,65%^100%,AMI,tier,or,can,be,nudged,by,incentives,to,achieve,
lower,price,caps,for,30%,of,the,homes.,,,,,
Other!Recommended!Changes!in!Compliance!Rules!
1. A,primary,goal,should,be,for,developers,or,successors,in,title,to,build,and,sell,affordable,
homes,,not,“affordable,lots”.,,The,WFHO,has,“bailout”,clauses,in,the,event,that,a,
designated,Workforce,Housing,lot,or,home,was,not,sold.,Such,bailouts,are,not,found,in,
most,inclusionary,zoning,ordinances.,The,result,in,Bozeman,during,the,brief,time,that,
the,WFHO,was,in,force,,several,lots,were,designated,for,price^capped,homes,,which,
were,marketed,but,not,sold—extinguishing,the,requirements,to,build,and,sell,the,
homes.,,,,
2. Accordingly,,references,to,the,mechanics,and,pricing,of,lot,sales,should,be,removed,,as,
irrelevant.,Developers,,successors,in,title,(builders),and,the,City,staff,should,keep,their,
eye,on,the,end,goal—selling,finished,homes,in,two,price,tiers,,Low^Priced,and,
Moderately^Priced.,It,should,be,the,responsibility,of,the,land,developer,to,assure,that,
the,required,affordable,homes,(at,discount,prices),are,built,and,sold,,providing,to,
builders,whatever,lot,price,concessions,are,reasonable,and,necessary.,As,for,the,
Moderately,Priced,homes,,the,developers,are,simply,agreeing,to,price^cap,a,significant,
number,of,the,homes,they,plan,to,sell.,
3. Enforcement,of,the,“build^and^sell^the^homes”,requirement,should,be,simple,and,tough.,,
Lots,or,condo,units,should,be,designated,as,subject,to,Low^Priced,or,Moderately,Priced,
requirements.,If,Low^Priced,homes,aren’t,sold,to,qualified,buyers,in,a,set,period,of,time,,
the,developer,or,successor,in,title,should,have,to,donate,the,lot,to,a,nonprofit,or,pay,a,
fee^in^lieu.,A,Moderate^Priced,home,should,be,subject,to,a,recorded,deed,covenant,
restricting,the,home,price,at,a,set,dollar,amount.,
4. The,fee^in^lieu,“penalty”,for,not,selling,a,Low^Priced,home,should,be,different,from,
those,in,the,Workforce,Housing,Ordinance.,The,WFHO,requires,a,payment,of,three,times,
the,“lot,cost”,if,no,affordable,home,is,built.,We,propose,that,the,builder,have,no,choice,
but,to,build,a,Low^Priced,home,unless,an,alternative,means,of,compliance,was,included,
and,approved,in,the,developer’s,Affordable,Housing,Plan,as,a,result,of,extreme,hardship.,
If,the,Low^Priced,home,does,not,sell,to,a,qualified,buyer,in,a,defined,period,of,time,,then,
the,developer,or,builder,would,have,to,pay,a,fee^in^lieu.,The,fee,would,be,calculated,as,
the,difference,between,the,appraised,value,of,the,home,and,the,discount,price,that,is,
required,by,the,Affordable,Homes,Ordinance.,The,rationale,is,that,this,amount,of,cash,
should,be,sufficient,to,subsidize,the,purchase,of,a,similar,market^priced,home,for,a,Low^
Priced^tier,buyer.,,,
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5. The,new,ordinance,should,incorporate,most,of,the,alternative,means,of,compliance,
allowed,in,the,WFHO,,with,the,exception,of,providing,offsite,home,lots,(as,opposed,to,
finished,affordable,homes),and,providing,existing,homes,presumably,bought,in,the,open,
market,and,resold,to,income^qualified,buyers.,We,recommend,that,the,fee^in^lieu,
alternative,be,offered,as,an,option,only,for,certain,projects—principally,luxury,home,or,
condo,projects,in,which,taxes,and,condo/HOA,fees,tend,to,be,unaffordable,to,low^,and,
moderate^income,homebuyers.,,,,
6. Donations,of,large,tracts,of,land,(3,to,4,acres),for,affordable,rental,projects,should,be,
strongly,encouraged,for,project,with,larger,affordable,requirements,,as,should,donations,
of,townhome,or,detached,home,lots,to,nonprofit,builders.,
7. Minimum,standards,for,“affordable”,homes:,The,original,ordinance,calls,for,30%,of,the,
required,WFH,units,to,be,detached,homes.,It,is,proposed,that,the,Low^Priced,homes,be,
provided,as,condos,,townhomes,,and/or,detached,homes,in,the,same,proportions,as,the,
market^rate,homes,in,the,development.,The,minimum,design,standards,for,affordable,
homes,in,the,original,WFHO—addressing,such,matters,as,housing,types,,numbers,of,
bedrooms,,design,features,,etc.—should,be,reviewed,if,the,City,decides,to,draft,a,new,
ordinance.,Some,provisions,can,be,simplified.,Minimum,square,footages,of,Low^Priced,
homes,should,be,included,for,homes,of,different,types,and,numbers,of,bedrooms.,,,
8. Structure,types,and,design,guidelines,for,Moderately^Priced,homes:,,Due,to,the,large,
percentage,of,homes,required,and,the,assumption,that,they,are,essentially,market,rate,
homes,with,no,price,discounts,,we,see,no,need,for,design,requirements,to,be,imposed,
on,this,price,tier.,,,
Qualification!and!Selection!of!Homebuyers!
It,is,recommended,that,buyer,qualification,requirements,apply,only,to,Low^Priced,homes.,A,
method,of,income,certification,should,be,prescribed,in,the,ordinance,,typically,conforming,to,
standards,used,by,federal,affordable,housing,programs.,As,noted,above,,there,would,be,a,much,
larger,percentage,requirement,(e.g.,30%,vs.,10%,for,new,subdivisions),for,the,Moderately^Priced,
home,option,with,price,caps,but,no,income,restrictions,on,buyers.,The,presumption,is,that,a,
significant,number,of,Moderately^Priced,homes,resulting,from,a,new,inclusionary,ordinance,
would,be,bought,by,buyers,with,incomes,at,or,below,the,median,income,in,Bozeman,,even,
though,there,would,be,no,formal,income,restrictions.,,
We,also,recommend,eliminating,the,lottery,requirement,in,the,original,ordinance,,which,tend,to,
instill,false,hopes,,preclude,realistic,expectations,and,circumvent,the,type,of,rational,planning,
that,should,accompany,a,consumer,decision,of,this,magnitude.,A,superior,method,is,to,maintain,
a,sequential,waiting,list,for,each,subdivision,or,condo,project,(first,come,,first,served),that,
includes,only,prospective,Low^Priced,home,buyers,that,meet,the,income,limits,,ordinance,
qualifications,,and,have,also,obtained,a,prequalification,letter,from,a,lender.,,
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Program!review!
We,recommend,only,minor,refinements,of,the,review,provisions,contained,in,the,original,WFHO.,
We,would,add,triggers,for,possible,review,of,the,program,more,often,than,every,two,years—
namely,an,annual,review,or,at,any,time,there,is,a,substantial,change,in,prevailing,mortgage,
interest,rates,and,in,the,numbers,of,homes,listed,and,sold,in,the,lower,price,tiers.,The,program,
should,also,be,assessed,annually,to,ascertain,if,developers,are,manipulating,their,subdivisions’,
composition,to,avoid,the,10^unit,threshold.,If,measurable,increases,occur,in,subdivision,of,nine,
units,or,less,,modifications,should,be,made,to,the,program,requirements,for,smaller,projects,to,
close,this,potential,loophole.,,
Administration!
As,with,the,original,WFHO,,requirements,for,providing,affordable,homes,should,be,detailed,in,a,
written,“affordable,housing,plan”,that,the,developer,presents,to,the,City,for,its,approval,as,part,
of,the,subdivision,or,site,plan,approval,process.,Fill^in^the^blanks,forms,for,different,options,can,
make,this,process,relatively,simple,and,predictable.,City,staff,knowledgeable,about,the,details,of,
the,requirements,should,be,available,to,work,with,developers,when,developing,their,plans.,,
,
In,most,communities,,we,do,not,recommend,that,day^to^day,program,functions,including,client,
management,and,income,qualification,be,handled,by,City,staff.,Rather,,these,functions,are,
typically,more,efficiently,administered,by,local,organizations,specializing,in,affordable,housing,
that,already,conduct,income,certifications,and,provide,requisite,homebuyer,training,and,
education,services.,These,activities,usually,involve,administrative,support,funding,from,the,local,
government,and,are,typically,awarded,competitively,based,on,an,annual,proposal,process.,,
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10.,,Recommended,Incentives,for,Building,Affordable,Housing,
The,table,on,the,following,page,depicts,a,range,of,incentives,identified,through,the,evaluation,process.,
These,options,include,some,incentives,from,the,original,Workforce,Housing,Ordinance,(WFHO),,others,
identified,by,stakeholders,in,the,context,of,the,evaluation,process,,as,well,as,opportunities,and,best,
practices,taken,from,our,work,in,other,communities.,In,addition,,we,provide,recommendations,about,
the,types,of,affordable,housing,development,that,should,receive,these,incentives.,,
We,are,recommending,that,these,incentives,be,made,available,to,all,affordable,housing,developments,
that,satisfy,defined,beneficiary,and,pricing,criteria,,a,key,deviation,from,the,approach,of,the,original,
WFHO,,which,only,made,incentives,available,to,mandatory,affordable,housing,creation.,The,key,
recommendations,are,those,that,offer,tangible,financial,incentive,to,those,producing,affordable,
housing,,as,these,mitigate,the,financial,losses,of,selling,homes,at,below^market,prices.,Among,these,are,
deferral,of,impact,fees,and,the,ability,to,create,additional,home,lots,for,affordable,housing.,Short,
discussions,accompany,each,of,the,following,recommendations,along,with,a,matrix,indicating,what,
income,range,and,housing,type,they,should,be,applied,to.
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Recommended(
Incentives(Discussion(
0165%(
AMI(
Rental(
66180%(
AMI(for(
Sale(
811100%(
AMI(for(
Sale(
Impact(Fee(Deferral(
A,deferral,of,impact,fees,is,one,of,the,tangible,ways,that,a,municipality,can,directly,
reduce,the,hard,costs,associated,with,development.,The,original,WFHO,allowed,for,
sliding,scale,fee,deferral,based,on,income/price,targets,of,individual,homes,,with,
full,deferral,for,units,serving,70%,AMI,and,partial,deferral,for,units,priced,at,100%,
AMI.,We,recommend,full,deferral,of,impact,fees,for,units,serving,80%,AMI,and,
below,,by,means,of,the,Workforce,Housing,Fund,paying,for,the,full,cost,of,the,fees,,
and,securing,that,payment,with,a,lien.,Upon,the,resale,of,the,home,by,the,original,
incomeOqualified,buyer,,or,the,expiration,of,rental,restrictions,,the,original,amount,
of,impact,fees,would,be,paid,back,into,the,fund.,,
X(X((
Targeted,(Partial(
Financing(of(
Infrastructure(for(
Affordable(Homes(
The,City,should,consider,providing,lowOcost,or,deferred,loans,to,housing,
developments,providing,very,affordable,rental,and,forOsale,housing.,This,should,be,
restricted,to,affordable,rental,housing,and,LowOPriced,homes,for,sale.,The,most,
feasible,approach,would,be,for,the,City,to,apply,to,the,State,of,Montana,for,CDBG,
funds,that,would,be,used,by,the,City,for,this,purpose.,CDBG,has,matchOfunding,
requirements,,which,could,be,met,by,use,of,funds,from,the,City’s,Workforce,
Housing,Fund.,Criteria,would,need,to,be,made,defining,the,amounts,and,process,by,
which,these,are,made,available,and,to,what,specific,types,of,developments.,,
X(X((
Increased(
Capitalization(of((
Workforce(Housing(
Fund(
Key,to,any,major,increase,in,affordable,housing,production,in,Bozeman,will,be,
increased,capitalization,of,the,City’s,Workforce,Housing,Fund.,The,most,powerful,
incentives,(above)—impact,fee,deferrals,and,partial,funding,of,infrastructure,
costs—require,cash,investments,from,the,public,sector.,Due,to,legal,restrictions,,
the,City,cannot,waive,impact,fees,or,defer,them,for,more,than,a,short,period,of,
time.,However,,as,described,below,,the,Workforce,Housing,Fund,(which,might,be,
renamed,the,Affordable,Housing,Fund),can,pay,the,fees,and,take,back,a,lien,that,is,
due,when,an,affordable,home,is,resold.,Increased,capitalization,of,the,Workforce,
X(X((
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Recommended(
Incentives(Discussion(
0165%(
AMI(
Rental(
66180%(
AMI(for(
Sale(
811100%(
AMI(for(
Sale(
Housing,Fund,could,come,from,an,increase,of,the,affordable,housing,mil,rate,levy,
to,its,legal,maximum,,from,general,revenue,,or,from,a,general,obligation,bond.,,
Waiver(of(Subdivision(
and(Permit(Fees(
A,feature,of,the,original,WFHO,,a,waiver,of,subdivision,application,and,review,fees,
for,projects,that,build,affordable,housing,could,have,a,modest,impact,on,the,hard,
development,costs,of,a,subdivision.,Similarly,,waiving,building,fees,for,affordable,
units,could,also,have,a,positive,benefit,on,development,costs,of,individual,homes.,
The,cost,of,providing,this,incentive,would,be,borne,by,administrative,overhead,in,
applicable,City,departments,that,currently,rely,on,fees,to,offset,staff,costs.,Options,
include,deferring,all,fees,for,developments,that,create,affordable,units,,or,deferring,
fees,according,to,the,percentage,of,affordable,housing,created.,,
X(X((
Reduction(of(Parkland(
Requirements(For(
Developments(of(11(
or(More(Homes(
This,aspect,of,the,original,WFHO,allowed,for,a,reduction,in,parkland,requirement,
equal,to,the,minimum,lot,size,allowed,by,that,zoning,district,for,each,affordable,
unit,produced.,Allowed,only,for,developments,that,build,onsite,housing,,this,
provision,was,very,popular,with,the,building,community,and,has,the,potential,for,a,
very,tangible,impact,on,overall,development,costs.,Functionally,in,a,40Ounit,
subdivision,,with,a,minimum,5000,square,foot,lot,size,,that,provided,four,affordable,
units,,this,would,have,the,effect,of,lowering,the,parkland,requirements,from,a,
minimum,of,52,000,ft2,down,to,32,000,ft2.,
X(X((
Reduction(of(Parkland(
Requirements(for(
Developments(of(10(
or(Fewer(Homes(
Currently,,all,subdivision,developments,are,required,to,contribute,parkland,at,a,rate,
of,1,300,square,feet,per,unit.,The,state,minimum,is,11%,of,gross,subdividable,area.,
For,tenOunit,subdivisions,this,creates,parks,,which,are,approximately,⅓,acre.,This,
provision,would,lower,parkland,requirements,for,smaller,subdivisions,to,meet,only,
the,minimum,requirement,and,allow,for,automatic,cash,in,lieu,for,park,areas,
smaller,than,one,¼,acre.,
X(X(X(
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Recommended(
Incentives(Discussion(
0165%(
AMI(
Rental(
66180%(
AMI(for(
Sale(
811100%(
AMI(for(
Sale(
Density(Bonus(
This,provision,would,allow,developers,to,increase,the,maximum,number,of,housing,
units,per,acre,allowed,by,the,current,zoning,to,accommodate,inclusion,of,lots,for,
affordable,housing.,Generally,this,type,of,density,bonus,has,a,smaller,impact,on,
overall,development,costs,because,it,can,be,a,difficult,for,developers,to,truly,utilize.,
Even,with,allowed,increases,in,density,the,developable,area,for,an,affordable,unit,
must,still,be,taken,from,other,home,lots,and,the,overall,projectOlevel,unit,density,is,
often,limited,by,other,factors,such,as,terrain,and,wetlands.,
X(X((
Reduced(Lot(Size(
This,incentive,is,included,in,the,original,WFHO,and,allowed,for,smaller,detached,
home,lots,than,underlying,zoning,in,categories,(down,to,3,500,square,feet),where,
larger,lots,are,typically,required.,Most,developers,are,not,currently,utilizing,
minimum,lot,sizes,in,new,subdivisions.,But,this,should,be,kept,as,an,incentive,for,
those,developers,who,choose,to,use,it,,since,it,reduces,both,land,and,infrastructure,
costs.,,,
(X(X(
Simultaneous(
Infrastructure(
Housing(Construction(
The,original,WFHO,allowed,for,the,simultaneous,development,of,subdivision,
infrastructure,and,housing,for,projects,that,build,at,least,5%,of,the,total,number,
units,in,a,project,as,onOsite,affordable,housing.,Builders,also,referenced,this,as,a,
potential,incentive,to,help,lower,costs,with,the,trigger,for,permit,issuance,at,the,
installation,of,a,gravel,base,roads.,If,this,was,adopted,as,an,incentive,,the,City,
would,want,to,require,a,performance,bond,to,ensure,completion,of,the,road,
infrastructure.,
X(X((
Narrower(
Streets/Sidewalks(In(
Subdivisions(
Current,street,widths,are,relatively,small,,and,some,recent,PUD,approvals,have,
allowed,for,smaller,roads,in,recent,years.,Still,,some,builders,suggested,that,the,
cost,of,housing,could,be,reduced,by,more,liberal,approvals,of,narrower,streets.,The,
City,should,consider,convening,a,study,group,that,include,City,staff,and,local,
planners,,architects,,engineers,and,builders,to,assess,the,ways,in,which,narrower,
X(X(X(
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Recommended(
Incentives(Discussion(
0165%(
AMI(
Rental(
66180%(
AMI(for(
Sale(
811100%(
AMI(for(
Sale(
streets,and/or,right,of,ways,could,be,more,widely,allowed.,,
Streamlined(review(of(
smaller(subdivisions.(
Smaller,subdivisions,will,have,a,harder,time,meeting,mandatory,affordable,housing,
requirements.,While,state,law,dictates,many,aspects,of,the,subdivision,review,
process,for,“small,subdivisions”,,there,still,may,be,aspects,of,the,local,review,
process,that,can,be,streamlined.,The,City,should,consider,convening,a,group,of,
developers,,builders,,land,planners,,surveyors,and,civil,engineers,to,explore,ways,
that,smaller,subdivisions,could,be,created,more,quickly,and,cost,effectively.,,
X(X(X(
Expedited(Review(for(
Project(that(Build(
Affordable(Housing(
Expedited,review,for,all,departments,(planning,,engineering,,building),for,projects,
that,are,100%,affordable,was,another,aspect,of,the,original,WFH,Ordinance.,This,
could,prove,a,valuable,incentive,when,City,planning,is,experiencing,high,volume,of,
applications,for,review.,,
X(X(X(
Lower(Parking(
Requirements(
Current,requirements,dictate,that,parking,be,created,at,the,rate,of,one,space,per,
bedroom.,This,incentive,would,allow,for,a,reduced,parking,requirement,of,two,
spaces,per,threeObedroom,dwelling,for,incomeOcertified,homeowner,occupied,
units.,This,requirement,would,ensure,that,the,residents,of,homes,with,reduced,
parking,are,families,,and,not,cohabiting,adults,who,would,presumable,have,one,car,
per,bedroom.,This,could,also,include,other,criteria,regarding,proximity,to,public,
transportation,in,line,with,the,current,allowed,10%,parking,reduction.,,
(X((
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,
11.,Other,Strategies,to,Promote,Affordable,Housing,Production,
Regulations,alone,cannot,be,relied,upon,to,completely,solve,the,affordable,housing,challenges,
facing,the,community.,Through,the,evaluation,process,,a,number,of,new,ideas,were,brought,up,
that,could,help,to,support,affordable,housing.,It,is,also,an,opportune,time,to,reiterate,some,of,
the,more,pertinent,findings,from,the,2012,Affordable,Housing,Action,Plan.,,
,,
Rental'Housing'
A,reoccurring,theme,of,this,investigation,has,been,the,urgent,need,for,more,affordable,rental,
housing,,this,is,apparent,from,input,surveys,and,public,meetings.,While,there,is,a,significant,
pipeline,of,multiIfamily,housing,that,will,be,built,in,the,coming,year,,more,can,be,done.,The,
recent,award,of,Federal,Low,Income,Housing,Tax,Credits,(LIHTC),to,the,Stoneridge,affordable,
rental,project,is,an,important,model,for,future,projects,that,can,provide,more,very,affordable,,
incomeIrestricted,rental,units.,The,affordable,rental,development,recommendations,from,the,
City’s,Affordable,Housing,Action,Plan,called,for,development,incentives,,which,we,have,
addressed,to,an,extent,here,,but,more,can,be,done.,,
,
The,scale,of,affordable,housing,subsidy,for,Low,Income,Housing,Tax,Credits,is,without,
comparison,and,can,represent,between,$5,million,and,$10,million,in,affordable,housing,
development,subsidies,brought,into,the,community,for,each,successfully,awarded,project.,
Because,of,the,competitiveness,of,LIHTC,awards,,there,are,several,strategies,that,the,City,should,
employ.,,
,
• Support,applications,for,LIHTC,funding,every,year,,if,possible,,which,may,mean,actively,
seeking,out,development,partners.,
,
• Work,with,advocates,,affordable,housing,developers,,and,critically,,the,private,sector,
building,community,to,identify,development,constraints,unique,to,Bozeman,,which,could,
be,used,to,inform,changes,to,Bozeman,development,code,as,well,as,to,provide,
recommendations,to,the,Montana,Board,of,Housing,for,future,iterations,of,their,LIHTC,
Qualified,Allocation,Plan.,
,
• Use,suitable,land,donations,(CityIowned,land,,land,acquisitions,,or,land,acquired,through,
inclusionary,requirements),to,support,applications,for,LIHTC,funding,and,increase,the,
level,affordability,in,those,projects,
,
• Work,to,advocate,for,a,more,rational,allocation,method,,which,currently,does,not,
automatically,award,credits,to,the,highest,scoring,projects.,,
,
Employer'Assisted'Housing'
Some,of,the,most,vocal,proponents,of,affordable,forIpurchase,housing,are,administrators,and,
employees,of,major,institutions.,These,workers,may,earn,decent,wages,,but,still,face,challenges,
Attachment C, Recommendations for Regulatory Changes to Support Affordable Housing Development - Werwarth - Page 36
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Recommendations,for,Regulatory,Changes,to,Support,Affordable,Housing,Development,,,,Page,36,
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finding,homes,they,can,afford.,Major,Bozeman,employers,such,as,Montana,State,University,,
Bozeman,Deaconess,Hospital,,and,the,Bozeman,Public,Schools,all,possess,ample,land,for,housing,
development,,but,often,lack,the,skills,necessary,to,execute,high,quality,,efficient,,affordable,
housing,development.,,
,
The,City,should,work,to,assist,these,institutions,access,technical,assistance,,and,solicit,potential,
partners,in,the,private,sector,(forIprofit,and,nonIprofit,housing,developers),to,assist,with,this,
development.,The,City,can,then,offer,affordable,housing,incentives,for,qualified,units,to,help,
increase,affordability.,The,resulting,developments,can,then,be,reserved,for,employees,of,those,
institutions.,,
,
Mobile'Homes'
Mobile,homes,are,still,a,very,viable,affordable,housing,option,for,many,who,live,in,the,greater,
Bozeman,area.,They,also,offer,a,critical,step,between,renting,and,ownership,for,many,lower,
income,households.,There,are,major,issues,facing,the,preservation,of,existing,mobile,home,
developments,,including,pressure,to,convert,to,other,more,profitable,uses.,The,2012,Affordable,
Housing,Action,Plan,recommended,provision,of,City,water,and,sewer,services,to,aging,parks,that,
may,still,be,on,septic,systems,,particularly,those,just,outside,of,City,limits.,In,addition,to,this,
strategy,,the,City,should,investigate,affordable,housing,impact,fees,for,the,conversion,of,mobile,
home,parks,into,nonIresidential,uses,as,they,are,significantly,decreasing,the,community’s,
affordable,housing,inventory.,
,
Current,mobile,home,development,regulations,,technically,considered,the,creation,of,a,
“subdivision,for,rent,or,lease”,are,onerous,and,require,all,the,same,development,review,
requirements,of,a,forIsale,subdivision,,yet,this,method,lacks,the,tangible,increase,in,land,value,
associated,with,actual,subdivision.,This,,plus,the,site,plan,requirements,and,associated,
development,costs,are,so,burdensome,that,it,is,unlikely,landowners,would,undertake,the,work,
involved,with,approval.,,
,
The,City,should,convene,a,task,force,to,evaluate,mobile,home,preservation,and,the,subdivision,
for,rent,or,lease,elements,in,the,City,development,code.,Options,to,consider,could,include,the,
creation,of,byIright,mobile,home,parks,with,clear,performance,standards,,rather,than,the,
current,point,system,,particularly,for,projects,that,offer,innovative,improvements,over,
traditional,mobile,home,communities,such,as,energy,efficient,home,designs,and,onIsite,energy,
generation.,,
,
Accessory'Dwelling'Units'
The,creation,of,more,accessory,dwelling,units,(ADU’s),is,frequently,cited,as,an,important,means,
of,providing,affordable,housing,,which,dates,back,to,their,creation,in,1994.,The,public,survey,of,
regulatory,options,indicated,that,this,is,by,far,the,most,popular,of,all,the,regulatory,options,
provided.,There,are,currently,a,number,of,restrictions,that,could,be,considered,for,modification,
Attachment C, Recommendations for Regulatory Changes to Support Affordable Housing Development - Werwarth - Page 37
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to,make,ADUs,easier,to,create.,Current,development,code,dictates,that,to,develop,a,new,ADU,,
the,subject,property,must,be,owner,occupied,,and,ADU’s,must,comply,with,strict,limits,to,the,
size,and,bedroom,composition.,The,City,should,consider,modifying,these,requirements,to,lift,the,
ownerIoccupied,requirement,and,potentially,allow,modification,to,size,limits.,In,addition,,the,
City,should,work,with,the,private,sector,building,community,to,create,a,design,or,designs,for,
ADUs,that,could,be,preIapproved,for,design,review,in,neighborhoods,where,those,requirements,
exist.,,
,
Investing'in'Housing'Innovation'
The,average,home,size,in,Bozeman,is,much,larger,than,needed,for,a,modest,first,home,for,an,
affordable,buyer.,The,City,should,assist,local,industry,professionals,to,share,information,and,
learn,new,methods,of,designing,and,building,very,livable,smaller,homes,on,smaller,lots,that,
demonstrate,low,life,cycle,costs.,This,could,take,the,form,of,a,series,of,design,charrettes,,
informationIsharing,workshops,and/or,design,competitions.,Aside,from,traditional,detached,
dwellings,,other,types,of,housing,units,that,could,benefit,from,this,approach,include,modern,
designs,for,energy,efficient,and,visually,attractive,mobile,homes,as,well,as,preapproved,design,
plans,for,accessory,dwelling,units.,,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
Attachment C, Recommendations for Regulatory Changes to Support Affordable Housing Development - Werwarth - Page 38
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Recommendations,for,Regulatory,Changes,to,Support,Affordable,Housing,Development,,,,Page,38,
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Appendix:'Individuals'Interviewed'&'Organizations'That'Provided'Input'''
'
Interviewee'Affiliation'
Commissioner,Cynthia,Andrus,City,of,Bozeman,
Rob,Evans,Constructive,Solutions,
Heather,Grenier,Human,Resources,Development,Council,
Mayor,Jeff,Krauss,City,of,Bozeman,
Collette,Lang,Gallatin,Association,of,Realtors,
Anders,Lewendal,Sustainable,Building,Solutions,
Marie,Lowe,ERA,Landmark,Real,Estate,
Commissioner,Chris,Mehl,City,of,Bozeman,
Commissioner,IIHo,Pomeroy,City,of,Bozeman,
Brian,Popiel,Arete,Builders/Resource,Site,Services,
Jeff,Rupp,Human,Resources,Development,Council,
Chris,Saunders,City,of,Bozeman,
Sara,Savage,Human,Resources,Development,Council,
Kevin,Spencer,,North,Ranch,Homes,
Valerie,Sutton,City,of,Bozeman,
Sharron,Southard,Big,Sky,Western,Bank,
Commissioner,Carson,Taylor,City,of,Bozeman,
Wendy,Thomas,City,of,Bozeman,
Group'Meetings'Dates'
SWMBIA,12/9/14,
GAR,12/9/14,
CAHAB,12/10/14,,1/14/15,
,
Attachment C, Recommendations for Regulatory Changes to Support Affordable Housing Development - Werwarth - Page 39
250
Attachment D, Cottage Development Example – Page 1
251
Attachment E, SWIMBIA Incentives Paper – Page 1
Incentives
The following incentives shall be available for builders and land developers whose projects develop an
adequate amount of affordable housing. The adequate amount of affordable housing required will be
dependent on which incentives are being applied for as well as which AMI group is being targeted
Impact Fee Subsidy
Dwelling units benefitting households with incomes at or below 100% of AMI, shall be eligible
for a graduated subsidization of impact fees. The subsidy shall only benefit the dwelling units
indicated as affordable housing through a plat note. For dwelling units that benefit households
that earn up to 95% of AMI, two-thirds of the corresponding impact fees shall be waved.
Dwelling units that benefit households that earn up to 80% of AMI, 75% of the corresponding
impact fees shall be waved. For dwelling units that benefit households that earn up to 70% of
AMI, 100% of the corresponding impact fees shall be waved.
Down-payment Assistance
The City shall provide down-payment assistance funded from municipal sources not to exceed
$10,000 per dwelling unit benefitting households with incomes at or below 80% of AMI. This
assistance shall be secured with a junior lien.
Reduction of Parkland Requirements
The portions of development projects that include dwelling unit benefitting households at or
below 95% of AMI shall be eligible to receive a reduction of parkland requirements. Any
development outside of the quarter mile exemption zone, shall be required to produce only 650
square feet per affordable dwelling unit that benefits households earning up to 70% of AMI.
Affordable dwelling units that benefit households earning up to 80% of AMI shall only be
required to provide 870 square feet of parkland per affordable dwelling unit. Developments that
include affordable housing benefitting households earning up to 95% of AMI shall be required to
dedicate 1,000 square feet of parkland per affordable dwelling unit. In any development park if
a wetland or waterway occupies less than 40% of the parkland in a development, it shall be
counted as a portion of the parkland.
Reduced Minimum Lot Size
Projects that redevelop areas into denser housing or create infill housing shall be granted a
minimum lot size of 2000 square feet for detached single-family dwelling units, provided that
the dwelling units have direct access to allocated neighborhood park or open space and that at
least 50% of the development targets households that earn up to or less than 85% of AMI.
Developments that do not redevelop land or create infill housing, shall be subjected to other
guidelines. Portions of development that target households that earn 65-75% of AMI shall be
allowed a minimum lot sizes of 2000 square feet for those affordable dwelling units. Affordable
units that are targeting households that earn 76-85% of AMI shall be allowed a minimum lot size
of 2250 square feet. Affordable housing targeting 86-95% of AMI shall be allowed a minimum lot
size of 2500 square feet for any affordable housing unit. All townhouse projects that target
households earning up to or less than 95% AMI shall be allowed a minimum lot size of 2000
252
Attachment E, SWIMBIA Incentives Paper – Page 2
square feet, regardless of redevelopment or infill. All minimum lot size reductions shall apply to
any eligible construction, not just Planned Unit Development.
Simultaneous Infrastructure Construction
Simultaneous infrastructure construction shall be allowed for any projects that at least 10% of
the total development (all phases) shall be dedicated to the creation of affordable housing for
any household earning up to or less than 95% of AMI.
Expedited Review
All projects that 10% of the total development (all phases) are dedicated to the creation of
affordable housing targeting households that make up to or less than 95% of AMI shall be
eligible for an expedited review process.
Reduced Parking Requirements
Any dwelling units designated as affordable housing that are 3 bedrooms or more, shall only be
required to maintain sufficient parking space for a 3 bedroom residence pursuant to Sec. 38.25
of the Unified Development Ordinance. Only with special approval from the Commission may
this incentive be combined with the Street Width Reduction Incentive.
Expedited Building Permits
All projects that 10% of the total development (all phases) are dedicated to the creation of
affordable housing targeting households that make up to or less than 95% of AMI shall be
eligible for expedited building permits.
Open Market Sales
After 60 days of good faith sales effort of an affordable dwelling unit, that has benefitted from
any incentives as defined in this section, the developer will be allowed to market the unit to all
customers for normal sales procedure. Good faith sales effort shall include notifying the city and
any local buyer approval programs. If a lot that benefits from any incentives does not sell to a
builder willing to build an affordable unit within 90 days of a good faith sales effort, the lot shall
revert to being sold at the market value.
Accessory Dwelling Units
The city shall have preapproved plans available for homeowners to select. Any homeowner that
demonstrates a needed benefit from the added income shall have all permitting expedited.
Homeowners that demonstrate a need for the added income shall be allowed an ADU by right in
R2-R4. The principle property must be owner occupied to eligible for an expedited ADU.
253
Attachment F, Application for Code Amendment - Page 1
254
Attachment F, Application for Code Amendment - Page 2
255
Attachment G, Changes to UDC to Update References – Page 1
38.08.040 – Lot Area Width Residential
38.14.030 – Lot Area Width NEHMU
38.08.030 - Lot Coverage
38.23.020 – Park Area
38.08.020 – Residential Authorized Uses
2.06.1640 – Street Impact Fees
2.06.1670 – Waste Water Impact Fees
2.06.1660 – Water Impact Fees
38.22.090 – Standards for specific uses - condo
2.06.1650 – Fire Impact Fees
38.41.070 – Final Plat submittal materials
38.41.060 – Additional Subdivision Preliminary Plat Submittals
38.20.090 – PUD Performance
38.41.080 – Site Plan submittal materials
38.38.030 – Supplementary Documents - Covenants
38.23.030 – Development Standards
38.22.030 – ADU standards
38.12.020 – Industrial Zoning Authorized Uses
38.11.020 – Urban Mixed Use Authorized Uses
38.10.020 – Commercial Authorized Uses
2.06.1700 – Misc. Impact Fees
256
Attachment H, Fair Share Proposal Form 8/14/09 – Page 1
City of Durango
Fair Share Proposal Form
1. Applicant Information
Name of property owner (person or legal entity):
Name of designated contact person for Fair Share:
Mailing address:
Phone number: Email address:
Submission date of this proposal to RHA:
2. Property Information
Address of property (or adjacent streets):
Tax map number(s):
Number of acres:
3. Status of This Fair Share Proposal (check all that apply)
___ Draft submitted to RHA ___Recommended to the City by RHA as acknowledge by signature on last page
___Recommended by the Community Development Dept as indicated by signature on last page
4. Development Approval(s) Being Sought
Please check all that apply. If one or more are checked, Fair Share requirements apply.
___ Application for annexation unless the site was previously subdivided into residential lots and
not being re-platted
___ Application for rezoning
___ Application for a subdivision plat, including a plat for residential condominiums consisting
of existing or new dwelling units
___ Application for an increase in density for a property subject to an approved master plan or development plan
257
Attachment H, Fair Share Proposal Form 8/14/09 – Page 2
___ A site-specific development plan including, but not limited to, special use permit, and
conditional use permit applications ___ Application requesting the extension of or connection to city utilities submitted to the city
after December 10, 2008 for residential development located outside the city limits
If none of the items above is checked, no Fair Share Proposal is required.
5. Number of Residential Units Proposed and Recently Approved
a. Number of residential units proposed:
b. Number of residential units approved on same site during past 5 years:
c. Total of (a) plus (b): If total is three or less, no Fair Share Proposal is required.
6. Pre-Submission Conference with RHA
We have participated in a pre-submission conference with RHA: ___Yes __No
Date(s) of pre-submission conference(s) with RHA:
If no pre-submission conference has been conducted, the property owner may not submit a development proposal to the City.
7. Fair Share Compliance Features of Proposed Development Plan
Phase 1 or Entire Development Future Phases, if Any a. Total number of residential units
b. Number of Fair Share homes required
assuming no alternative compliance – 16% of line (a) rounded to hundredths
of dwelling units
c. Proposed number of Fair Share homes to be built and sold – from Section 9
below
d. Proposed number of Fair Share Homes
to be provided by payment of cash in
lieu - from Section 10 below
e. Proposed numbers of Fair Share
Homes to be provided by land
donation – from Section 11 below
f. Total number of Fair Share Homes to
be provided directly and through
258
Attachment H, Fair Share Proposal Form 8/14/09 – Page 3
allowed alternatives
8. Bedroom Mix of Project
The following is used to determine the bedroom sizes of Fair Share Homes to be built and sold.
Studio 1-Bedroom 2-Bedroom 3-Bedroom 4-Bedroom Total Number
Number of Units
Percentage of Units 100%
9. Pricing and Delivery Schedule for Fair Share Homes To Be Built and Sold
See Section 8.5.1 to determine method of distributing Fair Share Homes among Price Tiers and
bedroom sizes. The percentage of Fair Share homes of each bedroom size must match the
percentages in Section 8 as closely as possible.
Please note: Do not include Fair Share Homes that will be provided through in-lieu payments
and land donations. This schedule is required only for the first phase of multi-phase projects.
Price
Tier 1
Price
Tier 2
Price
Tier 3
Price
Tier 4
Total
Number
Percentage
Of Units
Studio
1-Bedroom
2-Bedroom
3-Bedroom
4-Bedroom
Total number of Fair
Share Homes to be
built and sold
100%
I acknowledge that the preceding Fair Share Pricing and Delivery Schedule applies only to Phase
1 of the development if there are multiple phases, and that a Pricing and Delivery Schedule for a future phase must be approved by RHA and the City prior to such phases being platted. ___Yes
___No
259
Attachment H, Fair Share Proposal Form 8/14/09 – Page 4
Following are current Fair Share Home Prices for illustration purposes only. Prices of Fair Share
Homes will be those in effect at the time when the Homes are being marketed and sold. Fair Share Home prices and qualifying incomes of buyers are adjusted at least once annually to reflect changes in the area median income, interest rates and other affordability factors as
described in the Fair Share Administrative Procedures.
0 BR 1-2 BR 3 BR 4 BR
Tier 1 $116,000 $136,000 $175,000 $208,000
Tier 2 $141,000 $165,000 $213,000 $253,000
Tier 3 $173,000 $202,000 $260,000 $308,000
Tier 4 $206,000 $240,000 $307,000 $362,000
10. Pricing and Delivery Schedule for In-Lieu Payments
Include any fractional requirements in the cell below corresponding to Price Tier 2 and the weighted average bedroom size of homes in the development. Currently, payments may be made
only in lieu of building and selling studio, 1-bedroom and 2-bedroom condos.
Enter below the numbers of Fair Share homes provided through in-lieu payments
Price
Tier 1
Price
Tier 2
Price
Tier 3
Price
Tier 4
Total
Number
Percentage
Of Units
Studio
1-Bedroom
2-Bedroom
3-Bedroom
4-Bedroom
Total number of Fair
Share Homes to be built and sold
100%
Enter below the illustration dollar amounts of in-lieu payments –numbers of units times in-lieu payment amounts in the schedule below.
Price
Tier 1
Price
Tier 2
Price
Tier 3
Price
Tier 4
Total
Number
Studio
1-Bedroom
260
Attachment H, Fair Share Proposal Form 8/14/09 – Page 5
2-Bedroom
3-Bedroom
4-Bedroom
Total number of Fair
Share Homes to be
built and sold
I acknowledge that these in-lieu payment amounts are adjusted periodically and will be adjusted
to the amounts in effect at the time of final approval of my development proposal ___Yes
___No
Current schedule of in-lieu payment amounts
0 BR 1-2 BR 3 BR 4 BR
Tier 1 $90,000 $104,000 $132,000 $154,000 Tier 2 $65,000 $75,000 $94,000 $109,000 Tier 3 $33,000 $38,000 $47,000 $54,000
Tier 4 $0 $0 $0 $0
Average for all tiers $47,000 $54,250 $68,250 $79,250
Instructions:
a. When some Fair Share homes are provided, Tier 1-4 amounts above are for Fair Share
homes not provided.
b. The averages are the numbers to be used when no Fair Share homes are provided.
c. When no Fair Share homes are provided, a weighted average is calculated based on the
bedroom mix in the project.
I acknowledge that the preceding Fair Share Pricing and Delivery Schedule applies only to Phase
1 of the development if there are multiple phases, and that a Pricing and Delivery Schedule for a future phase must be approved by RHA and the City prior to such phases being platted. ___Yes
___No
11. Land Donation
Currently, land donations are permitted only as follows:
“Donation of land with all major infrastructure installed to the perimeter (or to be installed at the developer’s cost) suitable for building either a 30-unit senior apartment project meeting the
requirements of the federal Section 202 program, or a 60-unit rental apartment project meeting
the requirements of the federal Low Income Housing Tax Credit program.”
261
Attachment H, Fair Share Proposal Form 8/14/09 – Page 6
Number of Fair Share Homes to be provided through a land donation
12. Certifications and Signature
I hereby certify and attest to the following:
I am an authorized representative of the property owner.
I understand that this Fair Share Proposal, when approved, will become part of a recorded Fair
Share Agreement in which I will agree to comply with all requirements of the Fair Share
Ordinance and Administrative Procedures including but not limited to:
a. Requirements for design, timing of delivery, marketing and sale of Fair Share Homes,
b. Required Fair Share Prices and qualifying incomes of buyers that are in effect at the time
of marketing and sale of the homes, and
c. Requirements for timing and amounts of payment of in-lieu payments of in-lieu fees.
Submitted this ____th day of _______, 2009 by
______________________________________
Signature of Owner or Representative
______________________________________ Printed or typed name
13. RHA Recommendation for Approval
I hereby recommend this Fair Share Proposal for approval by the City of Durango
______________________________________ ____________ Signature of RHA Executive Director Date
______________________________________
Printed or typed name
14. Community Development Department Recommendation for Approval
I RHA hereby recommends this Fair Share Proposal for approval by the City of Durango.
______________________________________ ___________
Signature of Department Director Date
______________________________________
Printed or typed name
262
Santa Fe Homes Program
AFFORDABLE HOUSING PROPOSAL WORKSHEET
Attached
# of Units
Size Range (SF)
Detached
# of Units
Size Range (SF)
% OF TOTAL
The project is proposing __________ homes or manufactured home lots.
2BR 3BR 4BR
Overview
The purpose of these guidelines is to outline the topics that must be addressed in the Affordable
Housing Proposal. The Office of Affordable Housing will rely upon the applicant’s description of how
the requirements of Section 14-8.11 SANTA FE HOMES PROGRAM will be met. It is important to
understand that this proposal must address the Santa Fe Homes Program requirements and that the
proposal will be reviewed and approved by the Office of Affordable Housing (OAH). The proposal must
be approved by the OAH prior to submission to the Planning Commission or the appropriate
committees. This proposal will become the basis for executing the final Santa Fe Homes Program
Agreement.
Definitions
For the purpose of this Affordable Housing Proposal, the definitions used in the City of Santa Fe
Administrative Guidelines for the Santa Fe Homes Program shall be the same definitions for the terms,
phrases, words and clauses used in this proposal.
Project Description
Please provide:
1. Proposed Name of Development
2. Location - physical address and/or legal lot of record description
3. Contact Information
4. Current Development Plan that shows the affordable units integrated throughout the development.
5. A brief description of the proposed development that includes the total proposed number of
residential units, unit type(s), proposed bedroom mix and any special features of the development that
will assist the Office of Affordable Housing in evaluating this proposal. This should be a general
description of the proposed development that includes the an overview of the proposed design and
building type(s) and any special features, such as green design and building materials, ADA accessible
units, etc.
Market Rate – Proposed
Studios 1BR 2BR
Description of Homes
Please complete the following table. Put in the proposed number of market rate units by bedroom
configuration and square footage of units. Then complete the section with information on your
proposed Santa Fe Homes Program Units. This will help us to make sure your Santa Fe Homes Program
proposal is in compliance with the program requirements. Please complete a chart that contains the
following information.
3BR 4BR
Studios 1BR
Instructions
Please read through the document and fill in text where it is indicated by either a red font or an orange
highlighted cell. Also, please note that when you fill out line 1 of the Compute Santa Fe Homes
Requirement table, it will automatically calculate the bedroom mix on the "# of bedrooms" page, which
is its own tab at the bottom of this excel document. These numbers can then be used to fill out the
Santa Fe Housing Program Units - Bedroom Mix & Unit Size table.
Page 1 of 5
Attachment H, Sample Affordable Housing Plan - Page 1
263
Santa Fe Homes Program
AFFORDABLE HOUSING PROPOSAL WORKSHEET
51
15.30
15
5
5
5
15
5
5
5
0.30
$ 17,737
6. Determine fractional fee. Enter the remaining fraction resulting from the
calculation in line 2:
7. Multiply the fraction from line 6 by $59,1251. This is the total fractional fee that
is owed:
Compute Santa Fe Homes Program Requirement
4. Determine how many units are required in each applicable Income Range. Divide
number from Line 3 by 3. Enter the whole number result in each of the following
Income Ranges:
4a. Income Range 2:
4b. Income Range 3:
4c. Income Range 4:
1. Total number of all units to be built in development (fill in)
2. Multiply number from line 1 by 30%
3. Enter whole number result of line 2 calculation. This is the total number of
SFHP units that must be built in the development
5c: Income Range 4:
5a. Income Range 2:
5b. Income Range 3:
5. If the total of lines 4a, 4b and 4c does not equal the total required from line 3, add
one unit to the requirement for Income Range 3 (line 4b). If the new total still does
not equal the total required from line 3, add one unit to the requirement for Income
Range 2 (line 4a). Enter new totals on lines 5a, 5b and 5c. The total of lines 5a, 5b,
and 5c must equal the total from line 3. This is the total number of SFHP units
that must be provided in each Income Range.
1 The base fractional fee is updated when the AMI is updated and is equal to one-half the price of a 3
bedroom home for Income Range 2.
The following chart outlines how to compute the Santa Fe Homes Program Requirement. Please
complete this or a similar chart to indicate how the SFHP requirements were computed.
5.00
Page 2 of 5
Attachment H, Sample Affordable Housing Plan - Page 2
264
Santa Fe Homes Program
AFFORDABLE HOUSING PROPOSAL WORKSHEET
Attached
# of Units
Size Range (SF)
Detached
# of Units
Size Range (SF)
% of TOTAL
Required
Distribution2 25%
Santa Fe Housing Program Units – Bedroom Mix and Unit Size
2 The SFHP requires that 25% of the affordable units be studios/one/two-bedrooms; 50% are two-
bedrooms; and, 25% are four-bedrooms. However, a if the project will consist solely of one or two
bedroom types then the affordable units by bedroom configuration must be built in proportion to the
market rate units by bedrooms. For example, if market rate units will be 50% one-bedroom and 50% two-
bedroom units, then 50% of the affordable units must be one bedroom and 50% must be two-bedroom
units.
4BR
25%25%25%50%
Studios 1BR 2BR 3BR
1BR 2BRStudios 3BR 4BR
Unit Mix and Bedroom Configuration
Please describe the proposed unit mix and bedroom configuration for each of the homes to be provided
under the SFHP. This should include the number of units by bedroom type and size(s) of the proposed
SFHP homes. Please click the "# of bedrooms" tab within this spreadsheet. The bedroom mix (# of units)
should be automatically calculated for you on that page.
Page 3 of 5
Attachment H, Sample Affordable Housing Plan - Page 3
265
Santa Fe Homes Program
AFFORDABLE HOUSING PROPOSAL WORKSHEET
Proposed Pricing
Attached Price # Price # Price # Price # Price #
Income Range 1
Income Range 2
Income Range 3
Income Range 4
Detached
Income Range 1
Income Range 2
Income Range 3
Income Range 4
4BR
Santa Fe Housing Program Units - Pricing
Studios 1BR 2BR 3BR
Recommendations and Approvals
The Office of Affordable Housing will review the proposal provided by the developer/builder for
compliance with the requirements of the SFHP. Upon acceptance of this proposal, OAH Staff will
prepare a proposal agreement which outlines the proposal requirements and agreements.
The Builder will ensure all Households seeking to purchase a SFHP home have their income certified by
either Homewise or the Santa Fe Community Housing Trust. These two non-profit organizations are
under contract with the City of Santa Fe to provide this service, as well as homeownership counseling.
They work with buyers to locate suitable and appropriate financing and also ensure that the Shared
Appreciation Agreement and Deed of Trust is recorded. These two documents ensure that the home will
remain affordable in perpetuity or that if, in the future, the home is sold to a market rate buyer that any
net proceeds are placed into a fund that can only be used to increase the supply of affordable housing
units in the City of Santa Fe. All of the specific requirements outlined in the City’s Community Housing
Guidelines for income, co-ownership and co-signing, occupancy, and leave of absence must be met.
Phasing
Please describe the proposed phasing, if any for this development. This should include a description of
how affordable units will be constructed and sold in proportion to market rate homes.
Home Owners Association (HOA)
Describe the Homeowners Association, if any, including the proposed monthly dues and what these fees
are expected to cover (exterior maintenance, insurance, trash collection, etc.). The monthly amount of
the HOA fees must be included in the calculation of the monthly affordable home price.
Incentives
The SFHP provides several incentives that offset the cost of meeting the affordable housing
requirements. Incentives include a 15% density bonus and a reduction in the amount of submittal fees
for development review applications, waivers of the building permit fees, capital impact fees, sewer
extension fees proportional to the number of SFHP units, a reduction to the water utility extension fee
and an exemption from the retrofit and consumptive water rights requirements for the SFHP units.
Please indicate which incentives, if any, will be requested for this development:
____ Up to a 15% increase in density
____ Fee Waivers for Affordable Units
____ Water retrofit credits for Affordable Units
Sales Prices
Please describe the proposed maximum sales price for Santa Fe Homes Program Units. This should
include the proposed number of homes to be sold in these price ranges by bedroom configuration.
Page 4 of 5
Attachment H, Sample Affordable Housing Plan - Page 4
266
Santa Fe Homes Program
AFFORDABLE HOUSING PROPOSAL WORKSHEET
IN WITNESS WHEREOF, this Proposal is made on this date _____________ and year _______.
SFHP DEVELOPER:
__________________________________
STATE OF NEW MEXICO )
)ss.
COUNTY OF SANTA FE )
ACKNOWLEDGEMENT
The foregoing instrument was acknowledged before me this _____ day of ____________, _______,
by___________________________________________.
____________________________
NOTARY PUBLIC
My Commission Expires:
______________________
REVIEWED BY:
_______________________________________ ___________________
OFFICE OF AFFORDABLE HOUSING DATE
Attach: Exhibit 1 - Subdivision layout (proposed)
Page 5 of 5
Attachment H, Sample Affordable Housing Plan - Page 5
267
Recommendations
on
Securing
Community
Investment
in
Affordable
Housing
Provided
by
Werwath
Associates
7/23/15
at
the
request
of
City
Staff
The
City
of
Bozeman
is
currently
considering
policies
that
would
provide
incentives
for
the
production
of
affordable
housing
and
the
possible
enactment
of
an
inclusionary
housing
requirement
for
new
construction.
Staff
has
been
given
direction
to
investigate
ways
to
ensure
that:
(a)
community
investments
in
affordable
housing
provide
long-‐term
benefits
to
low-‐
and
moderate-‐income
people
who
can’t
afford
market-‐rate
housing
and
(b)
that
community
investments
in
affordable
housing
programs
are
continually
re-‐invested
to
ensure
long-‐term
benefit
to
the
community.
There
are
two
prevailing
approaches
to
achieving
long-‐term
affordability
controls:
1. Resale
controls:
restrictions
on
resale
prices,
incomes
of
future
buyers,
and
realization
of
appreciation
by
homeowner
at
sale,
or;
2. Recapture
and
recycling
of
subsidies:
the
required
repayment
of
subsidies
that
can
be
used
to
further
assist
the
creation
of
additional
affordable
housing,
or
allowing
the
continued
subsidization
of
a
current
affordable
unit.
The
two
different
approaches
are
analyzed
below,
in
terms
of
their
appropriateness
and
efficiency
in
connection
with
the
City’s
proposed
incentives
for
building
affordable
housing.
1.
Resale
Restrictions
The
original
Bozeman
Workforce
Housing
Ordinance
utilized
a
resale
restriction
that
limited
the
resale
of
homes
to
income-‐qualified
buyers
and
limited
the
amount
of
appreciation
that
could
be
realized
by
the
homeowner
at
sale.
This
type
of
approach
typically
utilizes
a
restrictive
covenant
that
runs
with
the
deed
to
the
property
in
perpetuity.
The
presumed
benefit
to
this
the
resale
approach
is
that
the
community
develops
a
pool
of
perpetually
affordable
homes.
But
this
approach
has
several
significant
shortcomings
that
undercut
the
benefits.
• Homes
with
resale
restrictions
can
prove
difficult
to
fund
through
conventional
mortgage
lending
programs.
• The
perpetual
caps
on
appreciation
that
can
be
earned
by
the
homebuyers
negatively
impact
the
marketability
of
homes
and
buyers
often
seek
out
moderately
priced
market
rate
alternatives.
• Owners
tend
to
invest
less
in
upgrades
and
ongoing
maintenance
and
upkeep
of
the
property
since
the
value
created
by
these
investments
do
not
increase
appreciation
realized
at
sale.
Attachment I, Securing Community Investment Memo 07/23/15 - Page 1
268
• Resale
restrictions
entail
a
high
level
of
administrative
complexity
and
cost
that
requires
a
much
larger
investment
of
time
and
money
than
the
recapture
and
recycle
mechanisms
that
will
be
discussed
below.
The
hardest
and
most
time-‐consuming
task
is
quickly
finding
qualified
buyers
for
the
priced-‐capped
homes
that
are
being
sold,
and
help
them
get
financing.
• The
benefits
of
the
price
caps
are
diluted
more
and
more
over
time.
Since
each
owner
is
allowed
to
benefit
from
a
fraction
of
the
appreciation,
the
prices
of
the
homes
inevitably
rise
over
time.
Typically,
the
incomes
of
low-‐moderate
income
buyers
rise
at
a
lower
rate
than
the
price
increases
requiring
additional
subsidies
to
keep
the
homes
affordable.
Perpetually
affordable
homes
become
impossible
without
increased
investment
over
time.
On
the
macro
level,
because
resale
restrictions
permanently
attach
the
community
investment
in
affordable
housing
to
a
single
home,
it
presents
a
severe
limitation
to
the
flexibility
and
effectiveness
of
a
community’s
affordable
housing
asset
over
time.
This
can
prove
problematic
in
situations
where
some
priced-‐capped
homes
prove
to
be
of
low
quality,
suffer
high
levels
of
deferred
maintenance,
or
are
located
in
neighborhoods
that
prove
fundamentally
incompatible
with
low-‐
and
moderate-‐income
homeowners.
Similarly
restrictive,
by
locking
community
investment
into
specific
housing
types,
it
fails
to
respond
to
shifts
in
housing
needs
and
community
housing
priorities
over
time.
2.
Recapture
and
Recycling
of
Subsidies
A
more
desirable
model
utilizes
a
recapture
and
recycling
mechanism,
meaning
the
community
investment
in
affordable
housing
is
secured
with
a
subordinate
mortgage,
and
recaptured
and
recycled
at
the
time
of
sale.
Under
this
approach,
a
home
would
be
sold
at,
or
just
under,
market
rate
pricing,
with
the
difference
between
the
market
sales
price
and
the
affordable
price
(the
effective
subsidy)
captured
in
a
second
mortgage.
This
mortgage
would
be
interest
and
payment
free
to
the
homeowner,
with
repayment
due
at
the
time
or
sale,
transfer,
or
cash-‐out
refinance.
• This
type
of
mechanism
is
simpler
to
understand
for
potential
homebuyers
and
does
not
significantly
impair
marketability.
• Ensures
the
beneficiaries
of
affordable
housing
programs
do
not
receive
a
windfall
financial
benefit
at
sale.
• Administration
of
these
types
of
programs
are
simpler
and
more
cost
efficient
because
the
city
is
not
responsible
for
finding
qualified
buyers
for
the
homes
and
they
do
not
require
complex
calculations
to
determine
appreciation
and
equity
gains
to
buyers.
Attachment I, Securing Community Investment Memo 07/23/15 - Page 2
269
• By
securing
the
affordable
discount
in
this
way,
the
community’s
affordable
housing
investment
can
be
leveraged
to
help
lower
income
homebuyers
more
easily
qualify
for
mortgages
by
lowering
the
loan-‐to-‐value
ratio,
and
can
increase
buying
power
by
eliminating
the
need
for
expensive
private
mortgage
insurance
(PMI)
where
the
subsidy
amounts
to
at
least
20%
of
a
home’s
value.
• A
“right
of
first
refusal”
provision
would
allow
the
City
or
its
agent
to
buy
back
homes
and
keep
them
affordable
on
a
case-‐by-‐case
basis.
Over
time,
as
homes
are
produced
either
through
incentives
or
inclusionary
programs,
the
community
portfolio
of
affordable
loans
grows
into
a
significant
flexible
asset
for
affordable
housing
that
can
serve
the
community
perpetually.
Recycling
of
Community
Investment
When
communities
elect
to
utilize
a
recapture
and
recycling
model
for
securing
investments
in
affordable
housing,
it
is
necessary
to
have
a
clear
and
transparent
model
for
the
administration
and
reinvestment
of
these
resources.
This
ensures
that
investments
in
affordable
housing
are
perpetually
dedicated
to
housing
uses
and
cannot
be
usurped
for
other
municipal
priorities
over
time.
It
also
ensures
that
housing
resources
are
directed
towards
the
most
pressing
housing
needs.
Most
communities
elect
to
have
recaptured
funding
secured
through
some
form
of
a
housing
trust
fund
that
has
a
regular
solicitation
of
proposals
based
on
demonstrated
community
housing
needs
with
funds
awarded
on
a
competitive
basis.
This
ensures
that
ongoing
recycling
of
funds
are
relevant
and
foster
innovative
approaches
and
the
development
of
new
housing
programs
over
time.
Example
Recapture
Calculations
Example
Subsidy
Calculation
Full
Appraised
Value
$250,000
Purchase
Price
(97%
of
appraised
value,
3%
equity
buffer)
$242,500
Affordable
Price
(dictated
per
ordinance)
$194,846
Effective
Subsidy
(purchase
price
minus
affordable
price)
$47,654
Repayment
Example,
After
10
Years
Ownership
Sales
Price
(assumed
increase
in
home
value
over
time)
$300,000
Minus
Sales
and
Closing
Costs
(9%)
$273,000
Mortgage
Principle
Repayment
$156,153
Repayment
to
City
$47,654
Equity
to
Homeowner
$69,193
Attachment I, Securing Community Investment Memo 07/23/15 - Page 3
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272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
Attachment K, RPAB Subdivision Subcommittee Meeting Summary – Page 1
Bozeman Recreation & Parks Advisory Board
P.O. Box 1230 · Bozeman, MT · 59771
Affordable Housing Discussion
SUBJECT: Workforce Housing
PLANNER: Wendy Thomas
FROM: Subdivision Review Committee
DATE OF REVIEW: July 31, 2015
OVERVIEW:
Planner Thomas laid out the basics of the affordable housing plan that she had developed as directed by the City Commission. The key points of this proposal, from the park perspective, were a 1 for 1 relaxation of the park dedication requirement for
the 70% AMI price only, and that the lost parkland be capped at the quota level.
We compared this to the SWMBIA proposal, which had a sliding scale of dedication
loss for the all three AMI target levels. The committee far preferred the 70% only plan.
We reviewed a list of incentives offered in the proposal the one most directly affecting
parks was the waiver of the pre-ap. This was a point of some concern as we feel this is
an important step in the subdivision review process.
COMMENTS:
We discussed the fact that those families that qualify for affordable housing are the
ones who need city parkland the most. They cannot afford ski passes or their own play
equipment or other pricey recreation. This is a difficult sacrifice.
RECOMMENDATION:
We discussed the importance of every stakeholder making a contribution and
grudgingly conceded that the proposed plan spread the pain around well, far better than the previous workforce housing ordinance.
Respectfully submitted,
Subdivision Review Committee of the Recreation and Parks Advisory Board
The full Recreation & Parks Advisory Board has not reviewed these findings and recommendations.
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298
299
300
301
302
303
304
305
306