HomeMy WebLinkAboutA5. Reach1
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Wendy Thomas, Community Development Director
SUBJECT: REACH, Inc., request for financial support from the Community Housing Fund
for the payment of $31,989.93 in impact fees for the construction of six
affordable rental units serving 10 residents at or below 30% AMI units on property located on the southwest corner of Durston Road and Greenway
Avenue.
MEETING DATE: October 5, 2015
RECOMMENDATION: Authorize the use of Community Housing Funds supporting the REACH,
Inc., for the construction of 10 units of rental units affordable to household earning 30% or less of Area
Median Income (AMI).
BACKGROUND: REACH, Inc., has submitted a request for the City’s financial support of the
group’s construction of an affordable apartment complex, with 10 units affordable to households
earning 30% or less of area median household income.
The Community Housing Advisory Board (CAHAB) reviewed this item at their September 9, 2015 meeting and voted unanimously to recommend to the City Commission that $31,989.93 be allocated
from the Community Housing Fund to support the project. The developer requested the full funding
amount for the impact fees for the proposed development. The proposed project will move the
community further toward the five year goal of creating 200 multi-family affordable rentals.
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Based on the Action Plan, the community goal between 2012 and 2016 is to create 200 multi-family
units using LIHTC to make rents affordable to households earning between 30 and 60% AMI. In this
case, REACH, Inc., has been granted funding through HOME to fund a majority of the cost of
construction. This project will address housing needs for households earning 30% or less of AMI. We now have the following rental housing projects seeking approval or under construction:
Project Name Units Status
Stoneridge Apartments 48 Under construction
Larkspur Commons Apts 136 Seeking site plan approval
REACH Apts 6 Site plan approved
Rose Park Apts 42 Seeking tax credit approval
The Affordable Housing Action Plan 2012-2016 recommends that the Green Building standards outlined in Appendix C be required of applicants requesting funds. During the review process for the
site plan the applicant stated the green building requirements of the Action Plan will be met. In fact,
the application was modified in order to use permeable pavers within a watercourse setback.
The Action Plan states that an evaluation criteria be used to determine if an application should be supported. In 2014, the City Commission approved the application and scoring sheet recommended
for use by CAHAB. You will find the scoring sheet as an attachment to this report. The draft minutes
of the September CAHAB meeting are attached for your reference.
ALTERNATIVES: 1) Authorize the use of Community Housing Funds to support REACH request;
2) Do not authorize the use of Affordable Housing Funds to support the REACH
request; or
3) As determined by the Commission. . FISCAL EFFECTS: The Community Housing Fund currently has a balance of $319, 734. Current
obligations for the fund are $247,200. If the REACH, Inc., application is approved the committed
funds will total $279,189.93. The three mils approved by the City Commission for the Community
Housing Fund for FY 2016 have not yet been allocated to the fund.
Attachments: Application Packet from REACH, Inc.
Application Scoring Sheet September 9, 2015 CAHAB Draft Minutes Affordable Housing Action Plan 2012-
2016
Report compiled on: September 28, 2015
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 1
City of Bozeman
Affordable Housing Action Plan: 2012-2016
Final Draft, May 14, 2012
By
Werwath Associates
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 2
TABLE OF CONTENTS
PART 1: OVERVIEW AND BACKGROUND
Executive Summary ................................................................................................................................. 2
Guiding Principles of This Affordable Housing Plan ................................................................................ 3
Housing Needs and Market Conditions .................................................................................................. 4
Regulations Affecting Affordable Housing .............................................................................................. 5
Affordable Housing Programs in Bozeman ............................................................................................. 6
PART 2: AFFORDABLE HOUSING STRATEGIES AND ACTION ITEMS
1. Increase and Preserve the Supply of Affordable Housing in Bozeman .............................................. 7
2. Consider Amending City Regulations to Support Production and Preservation Goals .................... 10
3. Assure Financial and Organizational Capacity ................................................................................. 13
4. Share Crucial Market Data and Report on Progress ........................................................................ 14
APPENDICES
A. Affordable Housing Results and Five-Year Goals ........................................................................... 16
B. Requirements for City Support of Affordable Housing Activities ................................................... 17
C. Green Building and Renovation Guidelines for Affordable Housing .............................................. 21
D. Criteria for Reconsideration of Inclusionary Zoning ....................................................................... 23
E. Capacity Building Goals for Local Nonprofit Housing Organizations ............................................... 24
F. Suggested Scope of Work for a Rental Housing Survey ................................................................... 25
Planning Consultants: Peter Werwath and Daniel Werwath
Werwath Associates
Columbia, Maryland and Santa Fe, New Mexico
www.werwathassociates.com
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 3
Part 1: Overview and Background
Executive Summary
During the recent recession, home prices and rents became more available and affordable, although
rental housing has since become somewhat more expensive and harder to find. A decline in the number
of people employed reduced incomes and demand for housing. But at the same time, losses of income
made housing harder to afford for some Bozeman residents.
According to the 2010 census, the number of Bozeman households paying over 30% of their incomes for
housing increased substantially during the 2000s. Over 6,000 households—28% of homeowners and
49% of renters—were living in unaffordable housing, measuring by that widely accepted 30%-of-income
benchmark. The numbers of homeless people and special populations needing affordable housing also
increased in recent years.
This affordable housing action plan identifies four major strategies to carry out over the next five years:
Increase and preserve the supply of affordable housing. The goals of this plan include building 240
affordable rental units. A more tentative goal is set for construction of subsidized homes for sale – only
25 homes—and that number to be built only if the market strengthens. To help strengthen the for-sale
home market, the plan calls for providing down payment assistance to 100 low- and moderate-income
buyers of modestly priced existing and new homes. The plan also calls for helping 125 low-income
Bozeman homeowners repair their homes, weatherizing 350 homes and rental units in the tri-county
area, adding 25 transitional housing units for people with special needs, and repairing or replacing some
existing special needs housing. Green building guidelines that apply exclusively to City-supported
affordable housing are included in this plan.
Consider amendments to City regulations. This plan endorses a continued suspension of the City’s
Workforce Housing Ordinance, but sets out criteria for considering reinstatement of the ordinance when
the for-sale housing market strengthens. The plan also calls for consideration of other regulatory
changes: (1) deferring or subsidizing impact fees for affordable housing, (2) allowing the creation of
smaller lots with narrower frontage, (3) re-platting of existing subdivisions that have requirements that
builders consider burdensome, (4) reviewing current ordinances regulating accessory dwellings, (5)
clarifying the zoning status of group homes and (6) studying possible ordinance changes to encourage
preservation of mobile home parks.
Assure financial and organizational capacity. To carry out the goals of this plan, local nonprofit housing
organizations will need to access a substantial amount of currently-available federal funds managed by
the State of Montana. The federal Low-Income Housing Tax Credits are a major resource for building
affordable rental housing but have not been used in Bozeman for seven years; a goal was set to
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 4
encourage the development of 200 rental units using this program, as well as funding from other
sources to build 40 affordable apartments for seniors. Another goal is to maximize the effectiveness of
the City’s Workforce Housing Fund, by establishing new requirements and priorities for distributing
funding. The plan also calls for an increased effort to provide technical assistance to nonprofit housing
organizations in Bozeman, to increase their capacity.
Share crucial market data and report on progress. Lastly, to better assure that the plan is successfully
implemented, several other goals are established: (1) following new, definitive protocols for updating
targets for affordable home prices and rents, (2) implementing, if feasible, an annual rental market
survey to better inform developers and nonprofits about demand, and (3) publishing an annual report
on progress versus the goals of the action plan.
Guiding Principles for This Affordable Housing Plan
The housing element of Bozeman’s Community Plan, adopted in 2009, declared certain principles that
broadly define what is meant by affordable housing, why it is important, and what kinds of actions
should be taken, as follows.
All residents should have access to decent and affordable housing.
Successful delivery of affordable housing should not be measured only by sale prices and rents,
but its performance in terms of minimizing energy use and maintenance costs.
There is no single home price or rent benchmark that defines “affordable” housing.”
Affordability for residents of various incomes levels should be based on ability to pay, since
affordability is a function of both housing costs and income.
The solutions to providing affordable housing should involve using diverse approaches and
mechanisms.
Availability of housing for residents of all income levels is essential for attracting and retaining
the employers that provide the jobs that are essential to the community’s prosperity.
These continue to be sound, comprehensive principles to guide the community’s affordable housing
initiatives and the goals of this Affordable Housing Action Plan. For purposes of this plan, affordable
rental housing is defined as having rents not exceeding 30% of household income, and affordability for
homeowners is a housing payment not exceeding 33% of household income. The affordable housing
activities proposed in this plan are intended to serve residents who, without interventions, pay more
than that, are homeless, or at risk of being homeless.
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Housing Needs and Market Conditions
An Affordable Housing Needs Assessment was conducted for the City of Bozeman and published March
6, 2012. The study’s findings about housing needs and market conditions form the basis for this plan.
Following are key excerpts. Go to this web page to download the complete report.
http://www.bozeman.net/Departments-(1)/Planning/Reports-and-Documents.aspx
Economic conditions. Bozeman experienced exceptionally rapid growth in employment, households and
its housing stock during the first decade of the 2000s, even considering a serious economic decline that
began in 2007. The number of Bozeman residents at work declined from 2007-2010 but stabilized in
2011, although the local unemployment rate was still near its 10-year peak in January, 2012. Reduced
employment tends to reduce demand and housing costs, but also makes housing less affordable to
households with reduced incomes.
Lack of affordability. Home prices and rents declined from their peaks as result of the recession. But
even so, the number of Bozeman households paying over 30% of their incomes for housing increased
substantially during the 2000s—placing 28% of homeowners and 49% of renters in this category. In
other words, housing affordability became a more acute problem. The numbers of homeless people and
special populations needing affordable housing also increased in recent years.
Needs of homeless people and special populations. The needs study determined that homelessness is
on the rise, especially among families. For example, the Haven domestic violence shelter reported a six-
fold increase in the total number of shelter nights since 2008. Similar high demand was reported for
other special needs categories—such as for people with chronic mental illness and other disabilities. A
lack of affordable rental housing is the major contributing factor, but service providers also see a need
for more transitional housing with attached services to help residents find employment and otherwise
become more self-sufficient. Nonprofit providers see a need for 20 to 35 additional transitional housing
units.
Affordable housing price points. The City’s affordable needs study indicated a need for more rental
housing priced to be affordable to households within incomes at or below 40% of area median income
(AMI), corresponding to an affordable rent price point of $600. The study indicated affordability gaps for
homebuyers with incomes at or below 65% of AMI, corresponding to an affordable housing price point
of $152,000, with the most acute gaps at or below 50% of AMI, corresponding to a price point of
$109,000. See Appendix B for an explanation of how these price points are calculated. The HUD-
calculated area median income for Gallatin County in 2012 is $60,900 for a family of three.
Rental market. A sample survey of low- and moderately-priced apartment properties in January 2011
indicated that average rents for two-bedroom apartments in Bozeman are currently $738, with average
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three-bedroom rents much higher, at $977—considerably higher than the affordable price point of
$600. Survey data indicates a tightened supply and rising rents especially in the affordable price range—
and thus a need for rental construction. During the past seven years, federal subsidies for rental
housing have been available to Bozeman rental housing developers but not used due to a severe drop in
demand during the recession. By the end of 2011, demand for subsidized and unsubsidized rentals was
once again very strong, as indicated by an overall vacancy rate of 2%. A vacancy rate of 5% is considered
a healthy balance between supply and demand, allowing for normal turnover and profits, while
preventing excessive inflation of rents.
Home sales market. The median sale price of all homes sold in Bozeman in 2011—including
condominium units—was $207,000 having peaked in 2006 at $258,000. In 2011, over 80% of all homes
sold were priced above the affordable price point of $152,000. Homes priced under $152,000 were
subsidized or tended to be older and smaller homes. Distress sales of properties in foreclosure have
added to the inventory of for-sale homes and undoubtedly reduced the median sale price, but this trend
abated in 2011. Several dozen new or recently built condos were on the market in early 2012 at very
affordable prices ($95,000 to $130,000)—nearly half of them subsidized. New construction of
subsidized homes by nonprofits will not be justified until most of this inventory is sold. Several for-profit
builders expect the market for unsubsidized, lower-priced detached homes to accelerate and are
offering homes priced in the range of $120,000 for a 760-square-foot two-bedroom homes up to
$215,000 for a 1,500-square-foot three-bedroom home. This positive trend can be encouraged by
ramping up homebuyer counseling and down payment assistance programs—in order to help lower
income homebuyers meet today’s more stringent underwriting standards.
Reduced construction activity. Due to reduced demand—especially for new homes—and difficulties in
obtaining bank financing, housing construction starts were reduced in 2008 through 2011 to levels that
are about half that of 2000-2001, and less than a quarter of the starts in 2004 and 2005.
Mobile homes. A survey of selected mobile home parks in Bozeman indicated an average rent of $530,
with only four vacancies out of 106 rental homes surveyed, most of them three-bedroom models.
Mobile homes are thus an important source of very affordable rental housing, as well as affordable
home ownership. Some mobile home parks located just outside Bozeman are endangered by failing well
and septic systems. Many older mobile homes are in poor condition.
Regulations Affecting Affordable Housing
Due to the substantial decline in residential construction, the drop in home prices, and concerns with
technical complexities as well as administrative costs, Bozeman’s Workforce Housing Ordinance dating
from 2007 was suspended for one year in September 2011, having resulted in no production of
affordably-priced homes.
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Selected homebuilders who were interviewed pointed to Bozeman’s impact fees as a major factor in the
costs of constructing homes. The fees average about $11,000 per home. The Workforce Housing
Ordinance had provisions for full or partial reimbursement or deferral of these fees for income-
restricted and price-restricted homes, but no such provisions are now in effect.
Concerns were also expressed about newer subdivisions that include “restricted-size lots” or “RSLs”—
lots sized less than 5,000 square feet that were intended to encourage the construction of smaller
homes that would remain relatively more affordable. The requirements for including RSLs in new
subdivisions are no longer in effect, but apply to approximately 14 approved subdivisions. Several
builders stated that it is difficult, given current market conditions, to sell smaller, low-cost homes on
small lots, and the dispersal of these small lots throughout subdivisions makes it more difficult to market
higher-priced homes. But other builders welcomed the opportunity to build smaller houses on small lots
and expressed a desire that these be allowed—even if not required—in new subdivisions.
In public comments, some advocates of affordable housing expressed views that City ordinances
permitting accessory dwellings, cooperative housing, group homes should be more flexible.
Affordable Housing Programs in Bozeman
This plan recognizes that private, for-profit builders and landlords are the primary providers of housing,
offering homes and rental units over a broad range of pricing—including homes affordable to low-
income households. Some of the action items in this plan are intended on encouraging private-market
activity to provide more housing at the low end of the price spectrum. But more of the action items are
focused on specific housing programs and financing sources that can reduce rents and homeowner
housing payments to levels that are below market rates.
Following is a brief summary of the cumulative results of years of efforts by nonprofits and for-profits
using special financing to produce below-market-rate housing in Bozeman. See Appendix A for details of
these results from the inception of programs to date.
HRDC is a major provider of affordable housing and related services in Bozeman. It provides pre-
purchase counseling to lower-income homebuyers and recently built 36 of the affordable condos
referred to above. Habitat for Humanity has built 61 affordable homes countywide since its inception.
HRDC, Family Promise, Haven and other organizations currently operate 49 emergency shelter beds,
along with facilities and rent subsidies for 67 families and individuals in transitional and supportive
housing.
No affordable, subsidized rental housing has been built in Bozeman since 2005, to add to the current
stock of 368 apartments for low-income families and 161 apartments for low-income seniors. Federal
rent subsidies are provided to 273 very low income households and individuals.
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Part 2: Affordable Housing Strategies and Action Items
Strategy 1: Increase and Preserve the Supply of Affordable Housing
Strategies Action Items
1.1. Build
affordable,
income-
restricted for-
sale housing
(nonprofits)
Goal: Over five years, build 25 newly constructed, energy efficient affordable
homes, targeting households with incomes from 40% to 80% of area median
income (AMI).
Implementers: HRDC and possibly Habitat for Humanity
Considerations: Construction projects will begin only when market demand for
detached homes or condos are clearly indicated by market-rate sales and
effective demand shown by homebuyer assistance program (see 1.3 below).
1.2. Build and
sell “low market-
rate” homes (for-
profits)
Goal: Amend City regulations and impact fee structure to encourage
construction of energy-efficient homes priced to be affordable to homebuyers
with incomes of 40% to 100% of AMI. See Strategies 2.2 to 2.5 below.
Implementers: City and Homebuilders
Considerations: To overcome demand-side challenges that currently limit sales,
homebuilders and homebuyer assistance program (see 1c) should cooperate.
1.3. Increase
homebuyer
assistance to
solve demand-
side challenges
Goal: Over five years, provide homebuyer education and counseling to 750
prospective buyers with incomes from 40% to 100% of AMI—to assist in
obtaining home loans.
Goal: Over five years, provide 100 buyers with incomes up to 80% of AMI with
“soft second” mortgages for home purchases. Over five years, help enable 50
buyers with incomes over 80% of AMI buy homes with counseling only.
Implementer: HRDC
Considerations: Expansion of efforts is subject to funding availability. Efforts will
be made to overcome restrictions on first mortgage financing for condos.
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1.4. Build rental
housing with
below-market
rate rents
Goal: Over five years, build and rent 200 multifamily units using the federal
Low-Income Tax Credit (LIHTC) and other federal subsidies to make rents
affordable to households with incomes from 30% to 60% of AMI. The City will
encourage and support projects that meet the City’s criteria for quality and
affordability. Encourage the inclusion of supportive housing units where feasible.
Implementers: For-profit and potentially nonprofit developers.
Considerations: The City should assist nonprofit and for-profit developers in
seeking federal HOME and CDBG subsidies, as well as assistance from the City’s
Workforce Housing Fund, to make some units affordable at 30% and 40% AMI.
The City will use the evaluation criteria in Appendix B to determine whether to
endorse applications for LIHTC, HOME and CDBG, to provide assistance from
Workforce Housing Fund and sponsor HOME and CDBG applications to the State
of Montana.
1.5. Provide
more housing for
people with
special needs
Goal: Over five years, create access to at least 10 “transition in place”
opportunities. Open Amos House, creating 16 additional units for single adult
males and females. Construct at least 9 other transitional units suitable for
families. HRDC’s warming center will continue to operate in the winters.
Goal: Rehabilitate or replace existing 13 emergency shelter beds for domestic
violence and increase total beds by no fewer than three.
Goal: Replace 16 units of Behavioral Health Supportive Housing, increase
behavioral health units by three.
Implementers: Haven, Family Promise, HRDC, WMMHC, REACH.
Considerations: Collaborative efforts between service providers, including
funding applications and development projects, should be utilized for
transitional housing. “Transition-in-place” models that don’t require the
construction of new units should be pursued. Where possible, inclusion of
transitional units should be integrated into LIHTC rental projects.
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1.6 Repair
existing
affordable
homes
Goal: Over five years, finance complete repairs of 25 homes in older,
substandard Bozeman neighborhoods for owners with incomes at or below 50%
of AMI, using deferred payment and forgivable loans.
Goal: Over five years, finance emergency repairs of 25 homes and mobile
homes that are not feasible for complete repairs. To include repairs of
emergency conditions of roofs, heating systems, wiring, plumbing, etc.
Goal: Weatherize 400 homes occupied by low-income owners and renters.
Implementers: HRDC for all activities; Rotary Club for some of the
weatherization and limited repair work.
Considerations: To be fully implemented, these goals require that federal funds,
or program income from federal grants, be obtained.
1.7 Encourage
energy-efficient
residential
construction and
retrofits
Goal: Apply the newly adopted Green Building/Renovation Guidelines (see
Appendix C) to all affordable housing construction and renovation work
supported by the City and incorporate in the action items in this plan.
Goal: Before the end of 2014, review the costs, benefits and implementation
considerations of these criteria, for possible amendments.
Implementers: City and housing providers assisted by the City.
Considerations: The guidelines would not apply to any new housing
construction or renovations, except those supported by the City.
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Strategy 2: Consider Amendments to City Regulations
Strategies Action Items
2.1. Continue the
suspension of
inclusionary
zoning
Goal: Maintain the suspension of the Workforce Housing Ordinance until such
time as the housing market has recovered from the current recession.
Considerations: Use the criteria in Appendix D to determine when, whether and
how to re-instate inclusionary zoning requirements. If reinstated, the
requirements should be made clearer and economically feasible for land
developers and builders and projected administrative costs should be taken into
account.
2.2 Defer or
subsidize impact
fees for
affordable
housing
construction
Goal: With input from the public and a special committee evaluating impact fees
more generally, Planning Department staff will draft a policy for the City
Commission’s consideration for subsidizing some or all of the impact fees for
homes sold to households with incomes at or below 60% of area median income
or rental units restricted to households with incomes at or below 40% of area
median income. See Appendix B for a suggested approach to subsidizing impact
fees, subject to annual budget caps.
Considerations: The method described in Appendix B calls for subsidizing the
fees and imposing a lien when homes are sold and buyers’ incomes are verified.
For rental units, fees would be subsidized upon completion of construction and
execution of an agreement placing caps on rents and tenant incomes for the
dwelling units that are subsidized.
2.3 Allow the
creation of
smaller lots with
more flexible
dimensional
standards
Goal: Based on input received through the affordable housing needs study
process, Planning Department staff will draft ordinance amendments for the City
Commission’s consideration for allowing, but not requiring, smaller lots in new
or amended subdivision plans and rescinding the Restricted Size Lot
requirements that are currently suspended.
Considerations: Input received in the needs study process confirmed the
development and marketing challenges that resulted from requirements, now
suspended, that mandated some smaller sized lots. Yet, some builders want to
build and market lower-priced homes on smaller lots.
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2.4 Consider
more flexible
requirements for
re-platting
subdivisions
Goal: The City Commission should consider whether to change existing policy to
allow subdivisions with “restricted-size lots” to be re-platted administratively
through the exemption process. The existing policy requires subdivisions with
RSLs to replat only through a preliminary plat process, which requires public
review and hearings before the Planning Board and the City Commission.
Considerations: The City already allows for administrative approval of amended
plats, exercising what limited flexibility the City has under state law. Amending a
plat administratively is substantially less costly and time consuming for
developers than starting over through the preliminary plat process. However,
the City Commission has not, to date, waived these full review requirements if a
subdivision contains “restricted-size lots” (RSLs). Some developers contend that
RSLs make the entire subdivision less marketable. They are also concerned with
the current costs to remove the RSLs, especially given the lingering real estate
recession and insufficient profits to fund a full re-platting process.
2.5 Review
ordinance
requirements for
accessory
dwelling units
Goal: Planning Department staff will review the current ordinance requirements
for permitting construction or adaptive reuse that results in an accessory
dwelling unit. Staff will recommend either no changes or ordinance amendments
to clarify where and under what conditions accessory dwelling units are allowed.
Considerations: Several participants in the housing needs study process
indicated support of a liberal permitting process with regard to accessory
dwelling units as a means of expanding affordable housing opportunities.
2.6 Clarify
zoning status of
group homes
Goal: Planning Department staff will study current zoning requirements for
group homes and possibly propose appropriate amendments to clarify where,
under what conditions, and through what process new group homes are
allowed.
Considerations: Concerns about lack of clarity were raised by a supportive
housing provider during the needs study process.
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2.7 Study
possible
ordinance
changes to
encourage
preservation of
mobile home
parks
Goal: Planning Department staff will review the current ordinance requirements
that relate to mobile home park uses, including policies for annexation of
existing parks. Staff will recommend either no changes or amendments that
would tend to reduce the incentives for converting existing parks to other uses –
such as a special zoning district.
Considerations: Affordable housing advocates are concerned about possible
future losses of affordable housing in mobile home parks due to conversion of
the land to other uses.
2.8 Investigate
possible policies
to reduce the
cost impacts of
open space
requirements on
affordable
housing
Goal: The Planning and Parks and Recreation Departments’ staff will investigate
alternatives to current open space requirements that could reduce the cost
impacts on affordable housing development—such as reduced requirements or
subsidies of in-lieu fees for affordable homes or rental units within a new
development.
Considerations: Based on interviews and comments from developers and
subdividers, the cost impact of parks dedication requirements or in-lieu fees is
reportedly in the range of $10,000 per home.
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Strategy 3: Assure Financial and Organizational Capacity
Strategies Action Items
3.1 Maximize
Bozeman’s
access to federal
funding and
private grants for
affordable
housing
Goal: Local and regional nonprofit housing organizations will collectively
maximize their efforts to obtain the federal and private grants needed to achieve
the housing production and related goals in this plan.
Goal: By offering incentives and support letters, the City will encourage
developers to seek allocations of the Low Income Housing Tax Credit (LIHTC) in
order to produce below-market-rate rental housing.
Considerations: The primary federal sources are managed by the state of
Montana: Community Development Block Grants and the HOME Program. The
Affordable Housing Needs Study indicated that these programs as well as the
LIHTC program have been underutilized in recent years.
3.2 Make
efficient use of
the City’s
Workforce
Housing Fund
Goal: The City’s Workforce Housing Fund will be used, sparingly, to provide last-
resort gap funding for affordable housing activities that help meet the goals of
this plan.
Considerations: In April, 2012, the balance remaining in the fund was
approximately $250,000. See Appendix B for the requirements to be used to
award these funds.
3.3 Build the
capacity of local
nonprofit
housing
organizations
Goal: Increase access to technical assistance for affordable housing providers in
the areas of program development, housing development, fundraising, grant-
writing and subsidy layering. Identify third-party funding sources and/or direct
City support for these activities. . See Appendix D for specific capacity-building
goals for the 6 primary local organizations that produce and manage affordable
housing.
Considerations: Technical assistance can help maximize existing services and
bring new resources into the community. This is particularly important for
organizations that are experts at providing very specialized services but may not
have extensive experience with housing construction and the myriad funding
sources available.
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 15
Strategy 4: Share Crucial Market Data and Report on Progress
Strategies Action Items
4.1 Follow new
protocols for
updating income
and price targets
Goal: City Planning Department Staff or its delegate will annually update a
Schedule of Affordable Housing Rents and Home Prices. This will include tiers of
rents and sale prices affordable to low- and moderate-income Bozeman
households at corresponding income levels.
Considerations: A spreadsheet tool has been provided to the Planning
Department to update affordability calculations based on changes in interest
rates, area median income (as calculated by HUD), and the prevailing rents and
sale prices at the low end of the unsubsidized housing market. The goals are: (1)
to establish the income tiers that have affordability gaps and need subsidies (and
how much subsidy generally) and (2) to encourage the development of lower-
priced housing that doesn’t require subsidies.
4.2 Obtain and
share current
rental market
data
Goal: Annually, the City Planning Department in cooperation with local housing
industry organizations, will conduct a survey of rental housing. This will identify
the prevailing rent levels and shortages indicated by low vacancy rates. See
Appendix E for a suggested scope of work for the survey.
Considerations: While many cities benefit from rental housing surveys
conducted by state or local government—or industry organizations—Bozeman
does not. This makes it difficult for private sector developers to determine what
types of rental housing, at what rent levels, are needed. Thus, the knowledge
gap can be a deterrent to needed housing production—both subsidized and
unsubsidized.
4.3 Publish an
annual report on
Action Plan
progress versus
goals
Goal: Publish a report in February of each year, 2013 through 2017, indicating
progress in relation to the goals in this report. See Appendix A for goals for
specific housing production and related outcomes that will serve as a benchmark
for tracking progress year-by-year.
Considerations: The recently completed Affordable Housing Needs study
provided the historical baseline data on production and other related outcomes
of “intentional” affordable housing programs. Nonprofits manage many of these
programs. For-profit developers participate in some federal programs. Appendix
A combines this baseline data with goals for the next five years.
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4.4 Complete a
new needs study
and housing plan
in 2016
Goal: Subject to funding availability, the City endorses a goal to complete and
adopt a new affordable housing needs study and plan by the end of 2016.
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Appendix A - Affordable Housing Results and Five-Year Goals
Affordable Housing Activities Sponsor Service
Area
Outcomes
Through
2011
2012-2016
Goals for
Additions*
HOMEOWNERSHIP PROGRAMS
Build and sell new homes HRDC City 20 24
Build and sell new homes Habitat City 59 1
Acquisition and sales of home HRDC City 15 0
Homeowner rehab assistance HRDC Tri-County 37 50
Down payment assistance loans HRDC Tri-County 104 100
Weatherization of homes & rentals HRDC Tri-County 431 350
Weatherization/repairs for
homeowners (with volunteers)
Rotary Bozeman
+ Belgrade
Not avail. 50
Emergency repairs HRDC City Not avail. 25
Pre-purchase counseling cases HRDC Tri-County 1779 750
Foreclosure counseling cases HRDC Tri-County 200 200
RENTAL/SPECIAL NEEDS
PROGRAMS
LIHTC rental housing built - seniors HRDC City 161 0
LIHTC rental housing built - families Multiple City 344 200
Other rental housing built HRDC City 24 0
Transitional housing provided Haven/FP City 0 9
Transitional housing provided HRDC City 2 16
Permanent rental- behavioral
health
WMMHC City 4 0
Transitional - developmental
disabilities
REACH City 16 16 Replace
3 New
Supportive Housing -
developmental disabilities
REACH City 25 Replace or
repair
Emergency shelter/warming center
beds
HRDC City 24 0
Emergency shelter beds - families Family Promise City 12 0
Domestic violence shelter beds Haven City 13 13 Replace
3 New
OTHER PROGRAMS
Section 8 rent subsidies (no federal
budget increase is expected)
HRDC City 273 0
Transitional rent subsidies HRDC/Haven/FP City 0 10
*A zero under 1012-1016 Goals indicates that no additions are considered feasible at this time.
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Appendix B
Requirements for City Support of Affordable Housing Activities
Applicability
These criteria apply to proposals for use of City funds for affordable housing activities and requests for
formal City endorsement of projects for the purposes of obtaining federal, state and private grants and
tax incentives. All project and program proposals will be reviewed by City staff or their delegates and
recommendations made by the Community Affordable Housing Advisory Committee. Final decisions will
be made by the City Commission.
Calculation of Affordable Housing Prices and Rents
Target affordable housing prices and rents should be based on the following assumptions:
Rental housing: Maximum affordable rents are assumed to be 30% of income for rent and tenant-paid
utilities. Special financing programs for affordable rental housing make reference to approved schedules
of typical utility costs, which are based on market surveys. In these programs, an affordable monthly
rent amount is assumed to be 30% of gross income minus the typical utility costs expected to be paid by
tenants. Most such programs, such as the Low Income Housing Tax Credit rental program, do not ensure
that each tenant pays exactly 30% of income, but rather, rents are modeled for “tiers” of income such
as: under 30% of area median income (AMI), 30-40% AMI, 40-50% AMI etc. Since rents are calculated
at the high end of those ranges, most tenants pay somewhat more than 30% of income.
For-sale homes: It is assumed that 33% of income is the benchmark for an affordable housing payment,
which includes principal, interest (at current rates), real estate taxes, property insurance, association
fees, and (where applicable) monthly mortgage insurance payments. Target pricing will vary depending
on the goals of particular programs for construction, down payment assistance, pre-purchase counseling
or other activities.
The City’s most recent housing needs study (2012) concluded that the group of homebuyers with
significant affordability gaps, based on current data, have incomes at or below 50% of area median
income and are in need of subsidies and/or below-market home prices. Buying opportunities are scarce
for homebuyers with incomes below 65% of AMI. Homebuyers with incomes up to 80% of AMI are
qualified for federally-funded home purchase assistance. The needs study also indicated that the City
should encourage new construction of homes at prices affordable up to 100% of area median income.
The City’s Planning Department has been provided with a spreadsheet tool with which to calculate
affordable home price points and affordability gaps as market conditions change and for different
purposes, as described above. The primary variables are changes in median income and mortgage
interest rates.
Threshold Criteria for Real Estate Development Projects
1. Locations. Projects must be proposed for suitable locations for the intended use. There must be
no substantial environmental factors that would adversely affect health and safety. Projects
must be within reasonable walking distance of bus routes.
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2. Green building/renovation guidelines. The proposed developer must commit to meeting the
City’s Green Building/Renovation Guidelines for Affordable Housing (see Appendix C).
3. Respond to affordable housing plan goals. The proposed project must address one or more of
the affordable housing production or preservation goals in this plan and address targeted
income groups, unless the Community Affordable Housing Advisory Board grants an exception
after a thorough review of the proposal.
Evaluation Criteria
To provide funding or a letter of support for a project, the City must receive and evaluate the following
data.
1. Market data. This will consist of credible and detailed market data, waiting list data or other
information indicating demand for the proposed housing or services.
2. Project financial data. This will consist of a detail project development budget showing all
proposed sources and uses of capital financing. If the project will provide rental or supportive
housing, an operating budget forecasting revenues and expenses over at least 10 years must be
provided. For projects in which supportive services are crucial, the operating budget must
include forecasts of proposed revenue and forecast expenses for these services.
3. Capacity of project or program team. The project’s proposer must identify all key firms and
individuals involved in the project or program and provide resumes and corporate qualifications
indicating their capacity to carry out the program. Exceptions to this requirement may be made
by City staff for proposers who have successfully operated similar programs or developed similar
projects previously in Bozeman. For a new program, resumes must be provided for the
organization’s chief executive and the program manager. For development projects, resumes or
corporate qualifications statements must be provided for the developer, the individual
proposed as project manager, architect, and building contractor.
Eligible Activities and Funding Criteria
Funding from the Workforce Housing Fund or other City sources may be provided, at the City’s sole
discretion and with the recommendation of the CAHAB, for the following activities. Periodically, the City
and CAHAB may solicit concept proposals from housing programs and housing developers. They may
also accept unsolicited proposals from nonprofit and for-profit organizations. Based on funding
availability, the City and CAHAB will create a preliminary budget for use of City affordable housing funds
over the following 12 months. Subsequently, the City will accept proposals for:
1. Rental projects serving extremely low-income renters and special needs clients, only for up to
four dwelling units per project, which will be restricted to renters/clients with incomes at or
below 30% of area median income, and only when either a federal HOME, CDBG and/or other
available federal and private grants have been applied for and committed and a feasibility gap
remains. Funding may not exceed the amount of the feasibility gap, or $20,000 per unit,
whichever is less. Projects must have a minimum 30-year affordability period.
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2. Home purchase assistance funding of up to $10,000 per homebuyer, restricted to buyers with
incomes at or below 65% of area median income, only if it is demonstrated that CDBG and
HOME funds from the state of Montana are insufficient for this activity. The income target may
be adjusted upwards if home prices rise. Funds may be combined with HOME and CDBG funds
in a single loan or grant to a homeowner, if necessary to make the home purchase affordable.
3. Pre-purchase counseling program funding of up to $40,000 per year, only if it is demonstrated
that federal funds are insufficient for this activity. Funding will be based on specific annual goals
for completions of pre-purchase counseling, homebuyer education and foreclosure counseling.
4. Emergency housing repairs by volunteer groups for up to $1,000 per home in materials costs.
To be provided only to public service organizations that leverage this funding at least 2 to 1 with
donated labor and materials.
5. Other emergency housing repairs costing up to $7,500 per home (including mobile homes) for
repairs or replacements of roofs, HVAC systems, plumbing, wiring etc., only if it is demonstrated
that CDBG funds are unavailable for this activity.
6. Coordination of CAHAB and housing plan monitoring activities may receive funding of up to
$50,000 per year.
Subsidies of Development-Related Fees for Affordable Housing
In the event the City enacts or amends existing ordinances allowing subsidies of some of all of the City-
required fees (such as impact fees) related to construction of affordable housing, and sufficient funds
are made available for any subsidies, the City will establish eligibility criteria and processing procedures
to implement any such policies. The following approach is recommended for consideration:
1. Annually, the City will establish a maximum amount of fee subsidies that may be granted in the
following year.
2. Through a process to be determined, builders may apply for an allocation of fee subsidies, until
the available funds have been fully allocated. Such allocations shall be for a specific number of
affordable homes or rental units, at specified addresses. In exchange for the allocation, builders
will enter into an agreement restricting the incomes of future buyers/renters as well as the sale
prices and rents of the subsidized dwelling units.
3. Qualified for-sale homes will be defined as those affordable to, and sold to, households with
incomes at or below 50% of area median income. Qualified rental units will be those restricted
for at least 10 years to occupancy by households with incomes at or below 40% of area median
income, at rents calculated to be affordable at that income level.
4. For homes or rental units that receive a subsidy allocation, fees will be paid by builders as
normally required and later subsidized as described below. (However, the City may wish to
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 21
consider enacting policies and procedures for deferral of fees until qualified homes or rental
units receive a subsidy as described below, although this would be more complex to administer.)
5. For each for-sale home subject to an allocation of subsidy, the builder must add an addendum
to the sale agreement obligating the buyer, at the time of sale, to execute a promissory note
and subordinate deed of trust obligating the buyer to repay the full amount of the subsidy,
without interest, upon resale of the property or in the event that the homeowner does not
continuously occupy the home for the five years following the purchase of the home.
6. For qualified home sales, the City will refund to builders any fees paid and qualified for a
subsidy. A qualified sale will consist of a sale to a buyer with a verified household income that is
at or below 60% of area median income, at a price calculated by the City or its agent to be
affordable to a household at that income level.
7. If a home is not sold in a qualified transaction, or if the buyer fails to execute a note and deed of
trust as described above, no fees will be refunded to the builder.
8. For rental units subject to a subsidy allocation, the fees will be similarly refunded by the City
when a Certificate of Occupancy is granted and the property owner executes a promissory note
and subordinate deed of trust obligating the owner to repay the subsidy upon sale of the
property or upon a failure by the owner to follow the required income and rent restrictions for
the specified number of rental units that received the subsidy.
Reporting Requirements
Organizations that receive City subsidies or other funding for affordable housing projects or programs
will be required to report on results versus program/project goals by the end of January of each year, for
activities in the previous year and one month after the end of the funding period or any extended
reporting period. This requirement applies to programs funded for one calendar year, multiple calendar
years, or parts of multiple calendar years.
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Appendix C
Green Building & Renovation Guidelines for Affordable Housing
Applicability
The following are guidelines recommended for use in all affordable housing and are requirements for
affordable housing that receives City funding or formal endorsement by the City for the purposes of
seeking funding or tax incentives.
New Residential Structures
In addition to meeting the requirements of the Montana Residential Building Energy Code, homes must
incorporate the following water conservation and “healthy housing” features:
1. Reduce energy consumption by installing only EnergyStar appliances and equipment. These are
to include:
Kitchen stoves and refrigerators
Dishwashers
Clothes washers and dryers
HVAC systems
New light fixtures should be installed with compact florescent or other high-efficiency bulbs.
Water heaters should be well-insulated to reduce heat loss.
2. Conserve water and reduce energy consumption from water and space heating by installing only
the following:
Showerheads — 3.0 gpm (gallons per minute) or less
Kitchen and bathroom faucets — 2.75 gpm or less
Toilets – 1.6 gallon per flush or less
Insulation of all hot water supply and heating pipes to an R-3 value or higher.
Seal all exposed hot air duct joints and add insulating wraps with an R-3 value or higher.
3. Assure good indoor air quality by incorporating the following measures:
Provide local mechanical exhaust ventilation to the outdoors in each bathroom and kitchen.
In addition, all bathroom ventilation fans shall be ENERGY STAR qualified unless multiple
bathrooms are exhausted with a multi-port fan.
Conventional clothes dryers shall be vented to the outdoors. Electric condensing dryers are
not vented and shall be plumbed to a drain according to the manufacturer’s instructions.
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Renovations
1. Prior to designing renovations, an energy audit should be completed by a qualified professional.
The audit should identify all improvements that individually are estimated to produce energy
savings over 10 years that exceed the costs of the improvements (i.e. a 10 year simple payback).
This does not apply to emergency repairs. Typical energy retrofits will include:
a. Increased attic insulation to an R-39 value if less than 6 inches is in place.
b. Caulking and weather-stripping to reduce heat losses through windows, doors, exterior
walls, and the uppermost ceilings. This will include electrical outlet gaskets on exterior
walls.
c. Replacement windows or added storm windows to reduce infiltration and increase the
R-value of window openings.
d. Replacement of incandescent light bulbs with more efficient products.
e. Insulating jackets installed on water heaters, with an R-12 value where manufacturers’
specifications permit.
f. Replacement of older HVAC equipment that has reached the end of its useful life.
g. Insulation of all hot water supply and heating pipes to an R-3 value or higher.
h. Seal all exposed hot air duct joints and add insulating wraps with an R-3 value or higher.
2. The improvements indicated by the audit should be incorporated in the rehab design to the
extent feasible and if cost estimates for individual improvements do not indicate a pay-back
period of 10 years or less. This guideline does not apply to emergency repairs.
3. Any replacement equipment and fixtures should meet requirements 1, 2 and 3 under New
Residential Structures, as applicable for replacements.
4. Any newly constructed or completely reconstructed areas of the home must meet the
requirements of the Montana Residential Building Energy Code, to the extent feasible.
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Appendix D
Criteria for Reconsideration of Inclusionary Zoning
The City’s Workforce Housing Ordinance spelling out requirements for inclusion of affordable housing in
certain newly-approved residential subdivisions is currently suspended. Following are: (1) “market
triggers” to be used to determine the timing of possible reinstatement of the ordinance, and (2) if
reinstated, what criteria would be used to amend the ordinance so that it would be more effective in
producing affordable housing and simpler to administer.
Market Condition Triggers for Reconsideration
The City should take into account the costs of administration versus the likely pace of new land
development that would produce the affordable units. The following improvements in residential
construction and sales market conditions must have occurred for the ordinance to be reconsidered.
1. Median sale prices for all types of homes sold must have increased to at least $238,000
(adjusted for inflation) at the end of a calendar year (measured by a previous 12-month period)
from the baseline of $207,000 at the end of 2011—an approximately 15% increase. For 2012
and subsequent years, the benchmark median sale price of $238,000 will be increased by
cumulative increases after December 31, 2011 based on the multi-year US consumer price index
report published by the U.S. Bureau of Labor Statistics.
2. The number of new building permits issued for detached, one-family homes must have
increased to at least 300 at the end of a calendar year, for the previous 12 months. This
compares to a baseline of 156 permits for one-family dwellings in Bozeman during 2011.
Criteria for Possible Amendment and Reinstatement of the Ordinance
Any amended ordinance drafted for consideration by the City Council must include these features, the
intent of which is to simplify compliance, minimize discretionary decisions on the part of the City and
thereby make the requirements uniform and predictable for all residential developers.
1. A concise and easily calculated formula for determining the percentage of affordable homes that
must be provided in a subdivision.
2. Precise schedules of affordable home prices and corresponding maximum incomes of buyers, in at
least two tiers of affordability.
3. Clear and concise standards for alternative means of compliance, to the extent allowed. Such
alternative means of compliance could include in-lieu payments of cash, land donations, or
construction of housing off-site.
4. Clearly defined “offsets” offered by the City, such as fee deferments or density bonuses.
5. No waiver or reduction of parkland requirements that are in force at the time of approval.
6. No restricted lot-size requirements.
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Appendix E
Capacity Building Goals for Local Nonprofit Housing Organizations
Program
Development
Real Estate
Development
Fund Raising
& Financing
Grant-writing Subsidy
Layering
Organization
Family Promise X X X X X
Haven X X X X X
Habitat X X X X X
HRDC X X
REACH – N/A
WMMHC – N/A
Explanation of Capacity-Building Needs
Family
Promise
With a desire to create new program such as a security deposit loan pool, Family
Promise could benefit from program development assistance as well as fund raising
and grant-writing assistance. With the goal of creating future transitional
development projects, subsidy layering and real estate development may also be
important areas of technical assistance.
Haven With the five-year goal of rehabilitating or replacing their current facility, as well as
contributing to the overall increase in transitional units, Haven has expressed a
need for technical assistance in all categories. Specifically, the need for assistance
with a capital campaign, the organization’s first, as well as assistance with housing
development and subsidy layering as it relates to the creation of transitional units.
Habitat With a desire to expand current housing services to include the development of
affordable rental, Habitat for Humanity would benefit from technical assistance in
the areas of program development, real estate development, subsidy layering and
grant-writing, all critical components for successful rental housing projects.
HRDC Due to this being a relatively new program—and due to the challenges in the
current real estate market—the Road to Home program could directly benefit from
program development assistance. Areas of particular importance are program
marketing to potential homebuyers, internal marketing and program integration
with HRDC rental programs and the further development of their services targeting
existing homes on the open market.
REACH No capacity building needs were expressed by REACH.
WMMHC With no immediate plans for stand-alone projects in the Bozeman area and a well-
developed programmatic approach and organizational infrastructure, WMMHC
does not appear to need technical assistance at this time. That said, their extensive
experience with housing development, and novel approaches to subsidy layering
and the creation of permanently affordable rental units for special needs, they are
uniquely positioned to provide technical assistance to other local housing providers.
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City of Bozeman Affordable Housing Action Plan for 2012-2016 Page 26
Appendix F
Suggested Scope of Work for Rental Housing Survey
The following scope of work is suggested for the proposed annual survey of rental housing properties in
Bozeman.
Market-rate rental housing: The surveyor will contact all managers of multi-family rental housing
properties with 10 or more dwelling units as well as all mobile home parks and make best efforts to
obtain the following information:
- Total number efficiency, 1-bedroom, 2-bedroom, 3-bedroom and 4+-bedroom units that are
rented and for-rent.
- Current number of vacancies and average rental rates by bedroom sizes of units.
Subsidized rental housing:
The surveyor will contact all managers of subsidized multi-family rental housing. In addition to the data
described above for market-rate rental housing, the surveyor will collect the following data:
- By bedroom size of units, the number of units with project-based rent subsidies.
- The number of prospective renters on the waiting list for the property.
Single-family rental housing:
The surveyor will obtain from the City a random sample of 100 owners of one- to four-family housing
that is presumed to be for rent, as indicated by the address of the property owner being different from
the property address. The surveyor will conduct a telephone survey of all owners to determine the
rental status of the properties, the bedroom sizes of the units for rent, the rental rates for all units by
bedroom size, and current vacancies by bedroom size.
Report:
All data obtained will be aggregated into a report with numerical tables indicating all of the data
described above that was obtained from each property, separated by the three categories above and in
a format (such as Excel) that can be sorted, filtered and cross-tabulated by the City or others if so
desired. A brief narrative report will be included to explain the number of non-responses or incomplete
responses in each category.
Summary tables will be provided for each category of housing (above) and for all categories combined
showing:
- The total number of units for which data was obtained (the survey universe).
- The numbers of dwelling units vacant by bedroom size and in total.
- The percentage vacancy rate by bedroom size and in total.
- Average, median and high-low rents by bedroom size.
- For subsidized rental units, the total number of units with project-based rent subsidies and total
waiting list numbers.
The estimated cost of performing this scope of work is $4,000 to $6,000 in the first year.
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