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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/16/1999 - ITEMS RELATING TO AFFORDABLE HOUSING AGENDA ITEM SUMMARY ITEM NUMBER: 11 A-B DATE: February 16, 1999 FORT COLLINS CITY COUNCIL Ken Waido/ STAFF: Ann E. Watts SUBJECT: Items Relating to Affordable Housing. RECOMMENDATION: Staff, the Affordable Housing Board and the Planning and Zoning Board recommend adoption of these Ordinances on Second Reading. EXECUTIVE SUMMARY: A. Second Reading of Ordinance No. 19, 1999, Revising the Definitions for "Affordable Housing Project"and"Affordable Housing Unit,"Revising the City's Development Review Fee Waiver Provisions for Affordable Housing and Revising the City's Impact Fee Delay Program for Affordable Housing. • Ordinance No. 19, 1999, which was unanimously adopted on First Reading on February 2, 1999, revises the definitions for Affordable housing project, Affordable housing unit for rent and "Affordable housing unit for sale" in the Land Use Code, the Transitional Land Use Regulations, and the City Code. It revises Fort Collins' Development Review Fees Waiver for Affordable Housing in both the Land Use Code and the Transitional Land Use Regulations. Finally, this Ordinance revises Fort Collins'Impact Fee Delay Program for Affordable Housing in the City Code. B. Second Reading of Ordinance No. 20, 1999, Repealing Article IX of Chapter 5 of the City Code Regarding the Offset of Impact Fees for Affordable Housing. Ordinance No. 20, 1999, which was unanimously adopted on First Reading on February 2, 1999, eliminates the Rebate Program to eventually be replaced with a competitive process, except for eleven(11)projects that have received preliminary planning approval and have financially relied on receiving a rebate of fees from the City. • AGENDA ITEM SUMMARY ITEM NUMBER: zz A-B DATE: February 2, 1999 FORT COLLINS CITY COUNCIL STAFF: Ken Waido/ Ann E. Watts SUBJECT: Items Relating to Affordable Housing. RECOMMENDATION: Tl Staff, the Affordable Housing • oardrl d Z 'ng Board recommend adoption of these Ordinances on First Read . S f dable Homg Board recommend elimination of the City's Development Impact ee Reba el rogram to eventually be replaced with a competitive process to allocate the City's Affordable Housing Fund. FINANCIAL IMPACT: Definitions of Affordable Housing co#cts and A ortlab Housing Units: The financial impact from this change is described low, as, affec the Impact a°Delay Program. Other programs are not significantly affected this revi ,on. Development Review Fee Waiver: There will be no significant impact. Impact Fee Delay: To qualify as an Affordable Housing Project under the revised definition, a residential project would have to make at least 10% of its units affordable and restrict them for at least 20 years so they could only be sold (at an affordable price)to low-income households. Any project that meets that standard would be eligible for the delay of all impact fees on the entire project. Previously, at least 50% of the units had to be affordable to be eligible for this program, without any restrictions on occ panc r dtirafiq o ity: Piesumably,the reduction from the 50%to the 10%standard sh"uld increase the urg a eh "' projects. However,the addition of the 20-year occupancy/affor bility re5tnctio my cause pate for-profit developers of for-sale housing to avoid the program en ely. ` Financial impacts from a deferral of certain impact fees fall into three categories: (1) permanent reduction in the fiscal year spending base(2)lost interest income for all funds,and(3)reduced debt service coverage for bonds. Lost interest income is the most significant impact to the City. However, this loss to the City is less than the savings generated for the developer. This program saves a typical project about $500 per unit, at a cost to the City of about $300-350 per unit. Over $150 is"created"by the difference in interest rates between construction interest loans and the City's investments. City staff knows of 590 rental units and 167 for sale units that either were built in 1997-1998 or will be built in 1999,for an average annual production of about 250 units. All of them would be eligible DATE: February 2, 1999 2 ITEM NUMBER: 22 A-B for this program under the proposed regulations. If production continues at that level, Impact Fee Delays could cost the City roughly $80,000 annually,but would save developers over$120,000. City staff hopes that there will be an increase in affordable housing production with the implementation ofthe"Goals and Strategies"detailed in the"Priority Affordable Housing Needs and Strategies report. The ultimate goal is to fund 3,087 rental units and 1,329 homebuyers between 1999 - 2008. If this goal is realized, Impact Fee Delays on these units could cost the City about $1.44 million over 10 years, or an average of roughly$144,000 per year. The program could save developers almost $2.16 million, or$216,000 per year. The chart on the following paCd n tes es ula ns:Financial Impact Analysis op Fe Progra PER UNIT AL FOR ALE F R ALE j restrict R(min 10% unrestriR (max 0%) Estimate amount of fees delaye 7, 14,000 14,OD0 Lengt o e y construction can term 5 5 j Interest Saved by Developers 9% 473 525 5 Cost to ity o f To—re—gomg mterest R. 350 50 Dt erence 158 175 175 ESTIMATED ANNUAL P ODU IUN- L F M, RSALE TOTAL 10% nc tricted(max 90%)J Number of units built or planned 199.-,1999 590 72 i 95 '2 757 avetageperyear - 97 - 24 32 j 252 -- Interest saved by Developers 9% 92,925 12,600 16,625 122,150 Cost m City of foregoing interest 6-/ —T1,950 —8,400 —11,083 81,433 DIf erence 30,975 4,200 5,542 40,717 To-YEAR PRoDuCTI ON GOALS RENTAL FOR ALE FOR ALE TOTAL restricted(min 10%) unrestricted(max 0 ° t Funding goal for 1999-2008 3,087 133 3 1,196 (° 4,416 Interest save y Deve opers /o 1,45 ,608 773 27,953 2,156,333 Cost to tty o oregoing mterest AOA 97 q05 46 51. 18,635 j 1,437,555 Di erence 203 58 09,318 71 ,77 Only units that are restricted as affordabie for 20,yeais`tare incllYHedhis column. j Units in this column are unrestricted.but ehgili�e because tt ey are part of an affordable project. 'r The City's goal is to fund 1,329 homebuyers,but that does little to create new construction. Therefore this ':. estimate is very high. ',. Assumes the maximum,90%,of the eligible for sale production will be unrestricted., . _, DATE: February 2, 1999 3 ITEM NUMBER: 22 A-B Impact Fee Rebate: The current annual average of rebates is about $113,000 per year. If the • Ordinance is adopted,the Rebate Program would be eliminated except for eleven(I I)proj ects which have received preliminary planning approval from the City and have financially relied on receiving a rebate of fees from the City. Thus, $816,410 from the Affordable Housing Fund will need to be earmarked to cover the costs from these projects if they are completed. Assuming the Affordable Housing Fund continues to receive a budget of at least$283,000 a year,there will be sufficient funds to cover the estimated costs. EXECUTIVE SUMMARY: A. First Reading of Ordinance N , 1LH �Re isi t e tions for"Affordable Housing Project" and "Affordable Hous evrsing ity's Development Review Fee Waiver Provisions for or a in and Re ng the City's Impact Fee Delay- Program for Affordable Io�ng. On August 18, 1998, City Council adopted Resolution 98-125 identifying the City's priority affordable housing needs. The City Council intends to target City resources on priority needs. The existing affordable housing incentives offered in the Land Use Code and the City Code do not necessarily target those priorities. They do not share a common defmition of affordable housing and so, in some ways,they function at odds with one another. Staff has worked with the Affoda e , omg oars o rNn7sthroughout tions of an affordable housing project, rental unit and for sae unit. ? plyin h exdfi the Codes will help clarify the City's affordable ho> ngc tive grams ana them easier to work with. Staff and the Affordable Housing Board'have s agreeii fo propose revising the Development Review Fee Waiver so that the proportion of fees waived would equal the proportion of affordable units within an affordable housing project. The Planning and Zoning Board reviewed the proposed changes at its November 19, 1998 meeting. That Board requested the addition of a 20-year minimum affordability period and a more detailed analysis of financial impacts. The result is Ordinance No. 19, 1999,which revises the definitions for"Affordable housing project," "Affordable housing unit for rent" and"Affordable housing unit for sale" in the Land Use Code,the Transitional Land Use Regulations, and the City Code. It revises Fort Collins' Development Review Fees Waiver for Affordable Housin fi oth `t!- *and-Use"Gode-and the Transitional Land Use Regulations. Finally,this Ord ance rev es ForWokns�Am t. ee Delay Program for Affordable Housing in the City Code s B. First Reading of Ordinance No.20, 1999,Repealing Article IX of Chapter 5 ofthe City Code Regarding the Offset of Impact Fees for Affordable Housing. One of the programs established by the City of Fort Collins to promote the development of affordable housing units inside the city limits is known as the Development Impact Fee Rebate Program. The program provides a partial rebate to an affordable housing developer of the impact fees paid to the City, other governmental entities,and/or special purpose utility districts. Currently, the amount of per unit rebate is based on a graduated scale dependent upon the commitment of the developer to provide units as certain income levels, with higher rebates given for housing units reserved for lower income families. In mid-1996, the City Council asked the Affordable Housing Board to re-examine the Rebate Program and to consider making rebates based on a percentage of fees paid instead of flat dollar amounts. The Board has reexamined the Program and in the context DATE: February 2, 1999 4 ITEM NUMBER: 22 A-B of the recently completed"Priority Affordable Housing Needs and Strategies" report now believes the Rebate Program should be eliminated and eventually replaced with a competitive process. Elimination of the Rebate Program would not affect the Development Impact Fee Delay Program. If adopted, the proposed Ordinance would eliminate the Rebate Program except for eleven (11) projects that have received preliminary planning approval and have financially relied on receiving a rebate of fees from the City. Thus, $816,410 from the Affordable Housing Fund will need to be earmarked to cover rebates for these projects if they are completed. Assuming the Affordable Housing Fund continues to receive a budget of at least$283,000 a year,there will be sufficient funds to cover the estimated costs. BACKGROUND: A. First Reading of Ord' Ce '19 99 ,R 'sing ytherfinitions for"Affordable Housing - Project" and "Affordable Housing Unit", Revising the City's Development Review Fee Waiver Provisions for Affordable Housing and Revising the City's Impact Fee Delay Program for Affordable Housing. The 1997-99 Staff Work Plan calls for an Affordable Housing Needs Study to be completed in the summer of 1998. The "Draft Priority Affordable Housing Needs and Strategies Study" was presented to City Council at its Study Session on June 9, 1998. This phase of the Study included an investigation of what kind of affordable housing exists in this community,what kinds are needed, and what the most urgent nee , e revise " to IJre � or "Goals and Strategies," was presented to City Council at s Study essio ctcib1998. Since then, staff and the Affordable Housing Boazd ha been rkin oger t the "Goals and Strategies" and prepare them for adoption by City ouncil. Staff believes there is sufficient information from the research to form a reasonable recommendation in regard to the community's priority affordable housing needs. City Council,at its August 18, 1998 meeting, approved Resolution 98-125 Establishing Affordable Housing Priorities. To implement these priorities,staff and the Affordable Housing Board worked together to propose revisions to the City's existing Affordable Housing Programs. The Affordable Housing Board voted to support these revisions at itsB, epte`bel`- `3'9 8 e j tirirAfter learning of the Planning and Zoning Board's recomm ahons, voted� pl reiung minimum 20 Year occupancy and affordability periods at its uary 71999. gnu meeting's.+ Changes to the definitions of"Affordable housing project" and "Affordable housing unit," as well as revisions to the Development Review Fees Waiver and Impact Fee Delay Program for Affordable Housing are included in this Agenda Item. Definitions of Affordable Housing Projects and Affordable Housing Units: All programs are proposed to use the same definition of affordable housing. This requires revision to the Land Use Code,the Transitional Land Use Regulations and the City Code. Staff and the Affordable Housing Board recommend changing the definition of"Affordable housing project as it exists in Section 5.1.2 of the Land Use Code. Currently, a project qualifies as affordable if 30%of its units will be affordable. The revised definition would decrease that to 10%, and would add 20-year occupancy and affordability restrictions. It would read as follows: DATE: February 2, 1999 5 ITEM NUMBER: 22 A-B Affordable Housing Project shall mean a development project in which: (1)at least seventy-five(75)percent of the gross acreage to be developed under the plan is to be developed as residential dwelling units or mobile home park spaces; (2)thirty (3O) at V en p, percent of said dwelling units or spaces (the MEM units") are to be available for rent or purchase on the terms described in Seetion 5 anti-(3) the construction of the dwelling units or spaces is to occur as part of the initial phase of the project and (i) prior to the construction of the market rate units or (ii) on a proportional basis, according to the same r o as : umb; o f 'da u bears to the number of the market rate units "; d Staff and the Affordable Housing Board also recommend adding new definitions of an"Affordable housing unit for rent" and an "Affordable housing unit for sale" to Section 5.1.2 of the Land Use Code. A variety of definitions of an"Affordable housing unit" are now found in different sections of the Land Use Code and the City Code. Instead, each program should adhere to a single, commonly accepted definition of an "Affordable housing unit." The new definitions would read as follows: t Gi. N Tin , �:.•�, ' ���... �� a� l# o , � §"�' "Sri, '�-��c�. T L 45am 1 d NS.n All three definitions should be added to Section 29-1 of the Transitional Land Use Regulations. They should also replace Section 26-631 of the City Code, which affects the Impact Fee Delay Program. Affordable gross rents will be established by the City's Advanced Planning Department based on the Department of Housing and Urban Development's (HUD) estimate of Area Median Family DATE: February 2, 1999 6 ITEM NUMBER: 22 A-B Income,which is generally released each January. The calculation of affordable gross rents assumes an average of 1.5 persons per bedroom. In 1998, affordable rents were: A FORDABLE GROSS MO KIT HLYRINITS (including utilities) NUMBER OF—BEDROOMS �_ INCOIvfE E 0 BR 1-BRJ —2BRT 3 _4 BR BR 5 BR 86- AMI 713.00 764.00 916.00 1,059.00 1,181.00 1,303.00 %AMI 60 534A 3A .00 0 570 687 T94A0 886.66 977.00 50%—AM I 445.00 -,Z 77.0 573 fi62.00 738.00 814.00 1 4. Affordable home sale prices 1 be esti ated b the 1 'XAVanced Planning Department based on the Department of Housing nd�Jr$an ev opment'sstimate of Area Median Family Income,which is generally released each January. The calculation may be modified more frequently to reflect changes in prevailing interest rates or other terms. In 1998,estimated affordable sale prices were calculated as follows: ESTEUTA AFFORDABLESALEPRICES UMBER OF PE ONS IN HOUSEHOLD 1 person 2 people 3 people 4 people) 5 peop a peo lei 7peoplel 8 people Sale Price $ 96,200 $ 110,300 $ 1 ;30, $ 38 2 D 1 . 00 i 0,000 $ 170,800 $ 181,700 Dpmt(5°/u) 4,810 5,51-y 6, £5 4 tl 76Q< 8,000 8,5401 9,085 Principle 11,390 104,78 - 118,0 5 2 0 141,7 152,000 162,260 172,615 Rate(7% 0.0058 0.005 OOS8; U.OQ58. 0.1lp R_ 0.0058 0.0058 0.0058 Term 360 360 360 360 360 360 360 360 Payment 608 692 786 -873 943 1,080-i 1,148 PMI 62 71 80 89' 96 ( 103 110 117 taxes 80 92 104 115 124 133 142 151 ---- insurance 32 37 41' 46 SO ` 53 57 I 61 PITItotal 782 897 1,010 1,123 1,213 1,301 1,388 1,477 utilities 120 135 150 165 180I 195 210 225 Total Wnt-1ly -- --- --� --- Hsg Cost 902 1,03 1,160 1,288 11393 1,496 1,598 1,702 ,�- . Development Review Fee W3rver. SeL 2 (�F3)bf the" and Use Code and Section 29-3(c) s ro of the Transitional Land Use Kegulatfo vnde for an "Afft rdable Housing Exemption" from Development Review Fees. It currently allows for these fees to be reduced by one-half('/2)if at least fifty-one percent(51 Vo)of the dwelling units within the project are affordable to individuals earning between 80%and 95%of median income. This is no longer consistent with the City's definition of affordable housing. There is no need for these sections to contain the definitions of "Affordable housing project," "Affordable housing unit for rent," and"Affordable housing unit for sale." Readers should refer to the definitions in Section 5.1.2 of the Land Use Code or Section 29-1 of the Transitional Land Use Regulations (as applicable). Staff and the Affordable Housing Board propose that fees be waived in direct proportion to the number of dwelling units within the project that are affordable. At least 10%of the dwelling units DATE: February 2, 1999 7 ITEM NUMBER: 22 A-B must be affordable in order to meet the definition of"Affordable housing project" and receive any waiver. For example, if a project proposes 75% of its units as affordable housing, then the City would waive 75% of its normal development review fees and the project would pay only 25% of those fees. The program would continue to require that the project verify the percent of units that are affordable prior to the issuance of a certificate of occupancy. If the project composition has changed so that fewer units meet the definition of affordable housing,then the developer would be required to pay development review fees for those units that are no longer affordable. If the project mentioned above drops from 75% affordable to 50% affordable, then it would owe an additional 25% of its normal development review feer'belge ' co e v a c ificate of occupancy. Impact Fee Delay: "Deferral Fees o o a I- ;Housing" urrently exists in two places in the- City Code. Section 7.5-26 authorizes the�deferral of"...fees established under this Article..." No specific fees are mentioned in this section, but it is assumed that they include all capital improvement expansion fees, including Library, Community Parkland, Police, Fire, General Government, and Street Oversizing. Section 26-632 authorizes the deferral of fees related to utilities,and specifically lists"...the Water Plant Investment Fee("WPIF"),Sewer Plant Investment Fee("SPIF"),Storm Drainage Basin Fee and the Raw Water Requirement In-Lieu Cash Payment..." Each Section of the City Code that describes this program should use the same definition of "Affordable housing project " "; ' o v blle�io ing 1 of Y t"aiid "Affordable housing unit for sale" as the Land Use Code. erefore ection 6- . oul breplaced by those definitions. Ordinance No. 147, 1996,change ection 632 o e iminate a requirement to secure the future payment of deferred fees by means of a letter of credit or certificate of deposit. A similar change was not implemented for Section 7.5-26, although it may have been the intent of the City Council to do so. This change should be made to keep the two sections consistent with each other. Section 7.5-26 and Section 26-632 both state that"...fees...shall...be deferred until the date of issuance of a certificate of occupancy (whether temporary or permanent)..." There is an additional sentence at the end of Section 26-632 that states "The city shall not issue any certificate of occupancy, whether temporary or permanent;ffdr the ocdi1pation f7nj banding or structure for which a deferral of fees has been obtained pursuant to this Sectieh unti�l.6ch ' `as such deferred fees have been fully paid." That sentence is redundant° nd urpaec ssary. In a interest of matching sections, it should be deleted. Section 7.5-26 should be revised to read "With respect to any building permit for a dwelling unit which is contained within or which eentains constitutes an affordable housing project..." This would match the existing phrase in Section 26-632. B. First Reading of Ordinance No.20, 1999,Repealing Article IX of Chapter 5 of the City Code Regarding the Offset of Impact Fees for Affordable Housing. In 1994, the City Council established the Development Impact Fee Rebate Program as an administrative program permitting a partial rebate of City impact fees for the purpose of promoting the development of additional affordable housing units. Fees eligible for rebate include almost all City fees as well as fees from special purpose utility districts and the school district. DATE: February 2, 1999 8 ITEM NUMBER: 22 A-B The Affordable Housing Board considered proposing a series of changes to the Rebate Program but in the context of the recently completed"Priority Affordable Housing Needs and Strategies" report now believes the Rebate Program should be eliminated and eventually replaced with a competitive j process. This Ordinance would eliminate the Rebate Program except for eleven (11) projects which have received preliminary planning approval from the City and have financially anticipated rebates. The projects listed below, if completed,have an estimated cost of$816,410. $103,070 CARE Eagle T e (1 Ie uni 0'1 A I, a�45% & 14 @ 40%) 35,040 FCHA, Parkwa To es (1 h e ers units @ 50% AMI) 19,710 C&A Scenic ews, Sadle Rid e ( homeownership units @ 80% AMI) 10,220 Brandt, Willow ood(14 homeownership units @ 80% AMI) 207,450 Brisben,Buffalo Run(13 rental units @ 40%AMI & 73 @ 50%) 179,580 Brisben, Bull Run(35 rental units @ 50%AMI & 141 @ 60%) 96,360 FCHA,Via Lopez(33 homeownership units @ 50% AMI) 2,920 Habitat for Humanity,Albion Way (1 homeownership unit @ 50%AMI) 2,920 Habitat for Humanity,Albion Way (1 homeownership unit @ 50%AMI) 86,140 Brisben, Country Ranch(118 rental units @ 60%AMI) 73,000 CARE, Windtrail (50 rental units @ 55%AMI) $816,410 Approximate g Jtal F Assuming the Affordable Housin and co inuesr6receiveYaRudget of at least $283,000 a year, there will be sufficient funds to cover the estimated costs. AFFORDABLE HOUSING BOARD RECOMMENDATION: The Affordable Housing Board, at its regular monthly meeting on September 3, 1998, voted to support the proposed revisions to the Land Use Code and City Code. These revisions affect the definitions of"Affordable housing project"and"Affordable housing unit,"the Development Review Fees Waiver and the Impact Fee~Delay fdgram'fb�ro- x of ble-fIousing. After learning of the Planning and Zoning Board s'recomm dation� it'Jvo� to support requiring minimum 20-year xG occupancy and affordability periods at i� January 7,1999 regal, meeting. The Affordable Housing Board, at its regular monthly meeting on January 7, 1999, agreed that the Development Impact Fee Rebate Program should be eliminated and eventually replaced with a competitive process.