Loading...
HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/27/2014 - HOUSING AFFORDABILITY POLICY STUDYDATE: STAFF: May 27, 2014 Sue Beck-Ferkiss, Social Sustainability Specialist Bruce Hendee, Chief Sustainability Officer Mary Atchison, Director of Social Sustainability WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Housing Affordability Policy Study. EXECUTIVE SUMMARY The Housing Affordability Policy Study began in January 2014. Denver based Economic & Planning Systems, Inc. (EPS) is the lead consulting firm assisting staff with defining the current community housing needs and identifying future trends for the purpose of proposing recommendations on policy and regulatory programs the City might use to provide housing choices for all residents. EPS has presented options for Council consideration. Staff will present these options for direction on which merit further inquiry and whether there are additional options that should be considered. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Has the study identified all the best options? 2. Which of these options would best support a socially sustainable housing market in the City? BACKGROUND / DISCUSSION Staff is providing a summary of the work that has been completed so far on the Housing Affordability Policy Study. We are seeking guidance at a relatively early stage in this project for maximum efficiency. Council direction will determine how many options staff should research further and design program recommendations around. In the City’s agreement with Alberta Development Partners for the redevelopment of Foothills mall, a provision was included that reads: The Project shall pay any affordable housing fees that may be enacted by the City Council on or before December 1, 2014, as if such fees had been in place and applicable to the Project. Any affordable housing impact fee that may be adopted as part of such requirements shall be paid by the Developer when due for the Project, except that for any portion of the Project developed prior to the imposition of the fee, such fee shall be paid no later than sixty days after adoption. Because of this provision and because Council had identified Affordable Housing as a priority area, Social Sustainability was asked to submit an interim budget offer for a study on the effectiveness and feasibility of adding inclusionary zoning ordinances for the purpose of increasing the available housing inventory in the City of Fort Collins, and to determine if this is the best strategy to pursue. When defining the scope of the study, both City leadership and the consultants determined that the original inquiry was too narrow. The scope of this study was broadened to look at numerous affordable housing program options and the study name was changed from the Inclusionary Housing Ordinance Study to the Housing Affordability Policy Study. The deadline to have a solution in place by December 1, 2014 remains and has been driving the timing of this project. May 27, 2014 Page 2 The citizens of Fort Collins agree with Council that affordable housing is a critical issue affecting our community. Affordable housing was identified as one of the top issues in the most recent Citizen’s Survey administered by the City. Interest in this topic was echoed in further City public outreach though the City’s online IdeaLab and in group discussions, including more than 350 feedback cards collected from 15 different groups in eight different segments of the population. Also, the issue of lack of affordable housing was raised in the Social Sustainability Gaps Analysis which will be used to prioritize the work of the Social Sustainability Department. Research conducted by EPS confirms that sales prices and rent rates have increased in our community. They found that home prices increased at a rate of 2.8% annually from 2000 to 2012 for a total average increase of 42%. For rental rates, EPS found an annual increase of 3.2% since 2000, but anecdotally, many landlords state they have increased their rental rates between 8 to 10% in the last few years. A technical team of City staff was created to assist EPS in their work. Representatives from Economic Health, Finance, Environmental Services, Planning, City Attorney’s Office, Communications and Public Involvement, as well as Social Sustainability serve on that team. Three Stakeholder Workshops were held to inform the study. Specifically invited stakeholders were from the development community, government and CSU personnel, and housing advocates. Stakeholders were also asked to invite up to two additional people to participate in the process. This was to insure that all interested parties were included as early in the process as possible. All three workshops were well attended with up to 50 people at each workshop. The first workshop focused on regulatory programs, alternative funding sources and best practices from around the country. The second workshop looked at current conditions and future trends. This was organized into four topic areas: Ownership and Commuting Patterns; Rental and Student Housing; Housing Cost Components; and Distressed Populations. In the final workshop, EPS had stakeholders respond to options that might help Fort Collins produce more affordable housing units and provide more housing choice to all residents. In addition to the Stakeholder Workshops, staff has presented, or will present, information about this study to several City Boards and Commissions including: the Affordable Housing Board (who is acting in an advisory capacity); the Senior Advisory Board, the Planning and Zoning Board, the Economic Advisory Commission, the Community Development Block Grant Commission, as well as the Council Finance Committee. Staff has also presented, or plans to present, to outside groups such as: the Fort Collins Board of Realtors, Vida Sana, Circles Leaders with the Education and Life Training Center, and the Fort Collins Chamber of Commerce. It is anticipated that multiple presentations may be needed at different stages of this study. One public open house was held on May 14 that attracted about 30 attendees, and another public open house is scheduled for May 21. See Public Engagement Summary (Attachment 1). A triple bottom line analysis was conducted. Since this issue is so complex, more assessments will be required as the project proceeds. Staff tested the City of Eugene Triple Bottom Line Analysis Tool on one of the presented options - relaxing the current occupancy rule. The tool concluded that the impact on social equity and economic prosperity were slightly positive, and the impact on environmental health was positive. The completed tool is attached as Attachment 2. EPS has completed extensive research and is in the process of compiling their report. They have completed the chapter of the report providing recommendations for policy options. (Attachment 3). EPS found that generally our housing system is healthy but there are distressed populations that do not have adequate housing choice. Also, there are trends that suggest housing costs are escalating which is translating into higher purchase prices and rents. With current low vacancy rates, rents have increased causing more Fort Collins residents to pay more than 30% of their income on rent. According to the Social Sustainability Gap Analysis, 59% of renters and 28% of home owners are rent burdened, meaning the amount they must pay for housing makes it difficult to have enough income for the rest of their needs. EPS looked at both home ownership and rental markets. They found seniors, people with disabilities, homeless individuals and people with household income less than $25,000 to be distressed populations. First time home buyers are also having trouble finding affordable homes, especially as the local market heats up with winning offers for homes coming in above asking price and even above appraised value. This is further aggravated by the lack of inventory for for-sale attached products such as condominiums and town homes. EPS also analyzed data about our community and tried to estimate the impact of students on our overall housing inventory. Providing affordable housing is difficult and complex. This is a local and national problem. There is no one May 27, 2014 Page 3 solution that fits all communities. After reviewing many regulatory programs and alternative funding sources with the City technical team and the stakeholders, EPS reduced the number of strategies for Fort Collins to consider. EPS have provided options to be considered by the City to address the needs of the identified distressed populations and create more housing choice for all residents. These options fall into the following categories: Legislative; Cost Reductions; Regulatory; and Alternative Funding Sources. Important to note as well is that EPS is not offering inclusionary housing ordinances or commercial/residential linkage programs as relevant options. Based on their analysis of the current conditions in Fort Collins, EPS found that the gaps in home ownership opportunity were not as prevalent as gaps in the rental market. This is important because Colorado has legal impediments to the use of inclusionary housing ordinances for the purpose of developing rental housing. One of these reasons is that rent control is unconstitutional in Colorado. EPS found that inclusionary housing was best used in cities with many second homes, with very large homes, or when the gap in affordability is extreme. Because the gap between what is affordable based on area median income and what the market is offering is not that large currently or historically in Fort Collins, EPS does not find the conditions in our city appropriate for a mandatory inclusionary housing ordinance or policy. It might make it difficult to sell units with affordability restrictions if their offering price is too close to what buyers can find in unrestricted units. As detailed later, EPS does present the option of an incentive policy ordinance as a voluntary regulatory choice. Furthermore, EPS is not recommending a linkage program based on many of the same factors and because they face extreme opposition from the development community and are not deemed positive in a city with a competitive economic development culture. Legislative options include:  Lobbying the State Legislature about construction defect litigation legislation that is limiting the production of attached for-sale housing products;  Supporting a State Low Income Tax Credit program; and  Supporting any additional state-wide affordable housing funding since cities throughout the state are experiencing difficulties providing housing to the lowest income categories. Cost reduction options include:  Revisiting the City’s current fee waiver eligibility requirements. Currently, only Fort Collins Housing Authority projects providing housing for disabled, formerly homeless or households making 30% or less of the area median income are eligible for fee waivers. Other jurisdictions provide fee waivers based on the nature of the project as affordable housing regardless of whether the developer is a for-profit, a not- for-profit or a housing authority;  Creating a streamlined process for affordable housing projects;  Examining the marginal cost structure for permit and plan check fees to build in incentives, or remove disincentives, to building smaller units; and  Reduce or remove minimum square footage requirements for homes to allow for new housing types. Regulatory options are offered in four categories. 1. EPS suggests reviewing the City’s 3 unrelated occupancy rule and consider: a) relaxing the rule to 4 unrelated city-wide; b) relaxing to 4 unrelated in certain zones or for certain populations such as seniors; c) streamlining the process for exception from the 3 unrelated rule for owner-occupied housing or for seniors; or d) consider a Landlord Licensing Program. 2. EPS suggests considering an incentive policy ordinance that would provide for the production or affordable units or payment-in-lieu for projects receiving specified exceptions or adjustments permitted by code, or when a non-housing public financing subsidy is negotiated. 3. Also, EPS suggests that we consider changing our Growth Management Area or alternatively look at ways to remove impediments on available land. Specifically, they recommend looking at providing infrastructure improvements in the northeast quadrant of the city (Mountain Vista area). May 27, 2014 Page 4 4. Lastly, EPS urges the City to address manufactured housing and mobile homes as a valuable source of affordable housing. One option to do this is to consider the creation of an affordable housing preservation easement program that would allow the owner of a mobile home park to agree to use their land as a mobile home park or for affordable housing for a period of time. This would be a voluntary program and the city could decide to offer this only to parks without failing infrastructure. Other options would be to explore additional ways to preserve existing high quality mobile home parks and/or streamline current regulations to promote the creation of new manufactured or mobile home communities. Alternative funding sources were put forward as potential long term options by EPS to raise funds to be used for affordable housing. These options would require voter approval. Any of these options could be time limited. These options include:  A new excise tax;  A dedicated sales tax; or  A new mill levy property tax. Also, in the category of alternative funding sources, is the question of what is the best use of the land the City holds currently in the Land Bank Program. ESP states that we can put this land into a Community Land Trust or a foundation similar to the Urban Land Conservancy whereby ownership of the land is held in perpetuity with development conducted through long term land leases. It may be time to consider selling all or some of the properties for the development of affordable housing and putting the proceeds of such sale back into the affordable housing fund for the purpose of purchasing more land. The Affordable Housing Board has recently toured the Land Bank Program properties and has plans to review this program in their 2104 work plan. Staff is using this Council work session to obtain council direction relatively early in the process to assure the study is providing Council with the right information, especially since this study is on an accelerated time line. With Council input, staff and EPS can focus on a reduced number of options to develop into detailed program recommendations. It is anticipated that many, if not all, boards and commissions may request a follow-up visit when this project is further along. Staff has not formulated recommendations at this juncture. ATTACHMENTS 1. Public Engagement Summary (DOCX) 2. Triple Bottom Line Analysis (PDF) 3. Policy Options Recommendations - May 21 2014 (DOCX) 4. Powerpoint presentation (PPTX) Housing Affordability Study 4/01/14 Public Engagement Plan 1 PUBLIC ENGAGEMENT SUMMARY PROJECT TITLE Housing Affordability Policy Study OVERALL PUBLIC INVOLVEMENT LEVEL Very high – Collaboration level (see attached Public Engagement Spectrum) BOTTOM LINE QUESTION What role should the City play in ensuring housing affordability for our community? PUBLIC ENGAGEMENT ACTIVITIES A broad range of approaches and techniques will be used to engage members of the public, key stakeholder groups, City departments led by Social Sustainability, City boards and commissions, and City Council in the Housing Affordability Policy Study – including public events, advisory committees, online engagement, and broadcast notification and outreach as appropriate. Planning Key Activities:  Gather input from City staff and consultant on Housing Affordability project goals, planning process, and relation to other previous and current planning efforts including but not limited to Economic Health, PDT, Finance, Environmental Services.  Seek to understand current and potential future opportunities, issues, and needs to address affordable housing Key Messaging:  We know affordable housing is an issue of importance to our community. The Housing Affordability Policy Study has begun to dive into this matter in the hopes of finding creative solutions and tools to create housing opportunities for all.  Consultants leading the project are Denver-based Economic & Planning Systems, Inc.  This study has only just begun. Materials presented at the first Stakeholders meeting on March 12, 2014, are available at fcgov.com/socialsustainability. 1. Who are the identified stakeholders? List. Residents, business leaders, CSU, property owners, local developers, multi-family housing managers, Fort Collins Housing Authority and other non-profit organizations, Fort Collins Board of Realtors, City boards and commissions, City departments, and other interested organizations and members of the public. 2. Will it be easy or difficult to engage “average” citizens? Explain. Ironically, while this issue directly affects many “average” citizens, this will be a tough issue to communicate to a broad audience. The key will be illustrating for average citizens examples that make it personal for people, businesses, etc. Illustrating the problem through a wide range of lenses – e.g. income levels – will help people understand the issue. Housing Affordability Study 4/01/14 Public Engagement Plan 2 3. Is this a technical issue? Explain. Possibly, depending on the potential solutions that are selected through community input and stakeholder meetings. 4. What is the outreach timeline? Tie to project management timeline (For example, spring/summer so policy can be developed and possibly adopted by the end of 2014) 5. Which engagement tools seem most effective for this issue? Public engagement marketing materials could include but are not limited to:  Fact sheet  Press release  Social media (Facebook, Twitter)  Video  Road show materials (PP, posterboards, etc.)  Develop template for public meetings (assigned to CPIO)  Infographic(s) 6. Is there a media plan associated? If so, explain. Yes – but will depend on the results of Council work session and existing public outreach. 7. What are the biggest hurdles to this issue and process? Capturing multiple viewpoints from a broad audience about a very complicated issue 8. What are the resource issues? To be determined Stakeholder meetings February-April  Build initial stakeholder list (Sue/staff)  Hold two stakeholder workshops (Sue/staff)  Update fcgov.com/socialsustainability (Emily/Dianne)  Develop list of potential public outreach visits (Sue)  Develop initial messaging about process/conclusions to date (Emily)  Write memo to Council through Bruce re: update on process before press release is issued (Sue/Mary)  Write press release about public meetings (Emily)  Develop fact sheet about housing metrics/community dashboard info that illustrates the problem (Emily)  Reserve space in newsletters for stories drafted from press release (Emily) o Neighborhood News o Development Review newsletter o Economic Newsletter o Utilities newsletters, etc. Public outreach meetings: Senior Advisory Board (Sue) Fort Collins Board of Realtors Coloradoan Community Conversation Housing Affordability Study 4/01/14 Public Engagement Plan 3 Circles Program leaders listening session April 24 May  Stakeholder meetings on March 12, April 16, May 7 (Sue/staff)  Public meetings: o May 2 Planning and Zoning Board o May 14, 10 a.m. to noon, Northside Aztlan Center o May 19, Council Finance Committee o May 21, 5:30-7:30 p.m. at Timberline Church. o May 27 work session  Issue social media announcements/reminders (Facebook, Twitter, Nextdoor, Idea Lab) (Emily)  Send out followup media advisory closer to each event (Emily)  Update fcgov.com/socialsustainability (Dianne)  Spotlight on fcgov.com  When appropriate, create feedback form for website (Emily through IT) o October 7, City Council  Follow up with web information after City Council work session (May 27) Public outreach meetings: Board of Realtors Government Affairs Committee (Sue) Economic Advisory Board May 21 Vida Sana Key Messages:  Based on the vision and frameworks developed by the community in previous phases, specific policy guidance, projects, and implementation strategies will be developed to achieve the direction initiated by City Council Housing Affordability Study 4/01/14 Public Engagement Plan 4 •Email Blasts •Newsletters •Flyers •Press Releases •Fact Sheets/FAQs •fcgov.com/socialsustainabili ty •Facebook, Twitter, Idea Lab, YouTube, etc. •Online Surveys •Videos/Multimedia Event Coverage •Internal technical advisory team •Affordable Housing Board •Stakeholder Workshops •Open Houses •Roadshow Presentations Public Events Advisory Committees Broadcast Notification & Outreach Online Engagement 1 HAPS City of Eugene TRIPLE BOTTOM LINE ANALYSIS TOOL (TBL ) - July 09 Modified for use by the City of Fort Collins, CO (January 2014) Creating a sustainable community Vision: To provide world-class municipal services through operational excellence and a culture of innovation Mission: Exceptional service for an exceptional community. Values: Outstanding Service, Innovation and Creativity, Respect, Integrity, Initiative, Collaboration and Teamwork, Stewardship How to use the tool The TBL tool is designed to inform a deeper understanding of how policy and program choices will affect the social equity, environmental health and economic prosperity of the community. To facilitate a close and deliberate look at those effects, the tool should be used in the following circumstances: • When formulating a recommendation to the City Council about a policy, program, proposal or initiative in an Agenda Item Summary (AIS). Use this tool to inform the development of the proposal and then summarize the analysis in the AIS. • To aid in program reviews. • To help guide service improvements. • To evaluate the effects of significant budget changes. The TBL tool does not dictate a particular course of action; rather, the analysis provides policy makers and staff with a greater awareness of some of the trade-offs, benefits and consequences associated with a proposal, leading to more mindful decision-making. Brief description of Decision Please provide a brief description of your proposal – 100 words or less Relax the 3 unrelated occupancy rule to 4 unrelated and/or streamline existing exception process for 3 unrelated rule for certain populations. Staff lead(s): Please note staff name, position/division and phone number • Sue Beck-Ferkiss, Social Sustainability Specialist, 221-6753 2 NOTE: Reference documents -.The Housing Affordability Policy Study documents Social Equity Described as: Placing priority upon protecting, respecting, and fulfilling the full range of universal human rights, including civil, political, social, economic, and cultural rights. Providing adequate access to employment, food, housing, clothing, recreational opportunities, a safe and healthy environment and social services. Eliminating systemic barriers to equitable treatment and inclusion, and accommodating to differences among people. Emphasizing justice, impartiality, and equal opportunity for all. Goal/outcome: It is our priority to support an equitable and adequate social system with access to employment, food, housing, clothing, education, recreational opportunities, a safe and healthy environment and social services, as well as to provide equal access to services and avoid negative impact for all people regardless of age, economic status, ability, immigration or citizenship status, race/ethnicity, gender, relationship status, religion, or sexual orientation. Equal opportunities for all people are sought. A community in which basic human rights is addressed, basic human needs are met, and all people have access to tools and resources to develop their capacity. This tool will help indentify how the proposal affects community members and if there is a difference in how the decisions affect one or more social groups in the community. Areas of consideration in creating a vibrant socially equitable Fort Collins are: basic needs, inclusion, community safety, culture neighborhoods, and advancing social equity. Analysis prompts • The prompts below are examples of the issues that need to be addressed. They are not a check list. Not all of the prompts and issues will be relevant for any one project. Issues not covered by these prompts may be very pertinent to a proposal- please include them in the analysis • Is this proposal affected by any current policy, procedure or action plan? Has advice been sought from organizations that have a high level of expertise, or may be significantly affected by this proposal? Analysis/discussion The City has had an occupancy rule on the books since 1964. In the last decade this rule has been consistently enforced. It limits occupancy to “You plus 2”. This policy was designed as a good nuisance mitigation tool and has been successful for that purpose but has had some negative social impacts for housing affordability. 1. Meeting Basic Human Needs • How does the proposal impact access to food, shelter, employment, health care, educational and recreational opportunities, a safe and healthy living environment or social services? • Does this proposal affect the physical or mental health of individuals, or the status of public health in our community? • How does this proposal contribute to helping people achieve and maintain an adequate standard of living, including housing, or food affordability, employment opportunities, healthy families, or other resiliency factors? Allows some current housing stock to be used to its full potential. Seniors and students desire to live with peers and some houses are well suited to more than 3, but current policy limits this. This allows for more cost sharing which contributes to overall well- being, especially for low-income folks or those on a fixed income. Creating more flexibility allows more freedom to form larger households. Enhance stability for low-income families Paying less for housing frees up funds for other basic needs. Increased companionship usually increases sense of well-being Grandparents raising grandchildren could benefit from this. 3 2. Addressing Inequities and being Inclusive • Are there any inequities to specific groups of people in this proposal, if so how will they be addressed? • Does this proposal meet the standards of the American’s with Disabilities Act? n/a • How does this proposal support the participation, growth and healthy development of our youth? Does it include Developmental Assets? • If the proposal affects a vulnerable section of our community (i.e. youth, persons with disabilities, etc.) has their voice been heard in this proposal? • Does this proposal take into account language or cultural barriers? • If public comment is sought during development or implementation of this proposal what steps will be taken to include a wide variety of people (including disabled, non- English speakers, illiterate, working, etc)? Since student behavior is often the cause for complaints, arguably the current policy has a disparate impact on well-behaved residents. May affect development of youth if a low-income home owner is permitted to house more folks, increases household resources. May provide source of extra income. This is an issue that has polarized our residents and we have heard from them in both side of the issue. Certain cultures would embrace having larger households, although since “family” is permitted already this only applies to unrelated households. Public comment obtained from seniors, disabled and Spanish speakers, as well as development community and housing advocates through Stakeholder Workshops and Public Open Houses. If household income goes up too much, could reduce household’s access to public assistance (Cliff effect). Vulnerable populations could be impacted, positively or negatively. 3. Insuring Community Safety • How does this proposal address the specific safety and personal security needs of groups within the community, including women, people with disabilities, seniors, minorities, religious groups, children, immigrants, workers and others? • How does this proposal include crime prevention strategies, including environmental design? n/a • Does this proposal affect civil rights? Oversight the same as current policy. Increased crime potential from increased density. Potential for abuse. Not much difference from existing policy. Increase nuisances like parking violations and parties. 4. Culture • Is this proposal culturally appropriate and how does this proposal affirm or deny the cultures of diverse communities? • How does this proposal create opportunities for artistic expression, cultural celebration or education of a cultural exchange? n/a Public split on issue - Some would welcome more options, but many fear that too many occupants in one house has a negative spill over affect in terms of parking and partying issues. Allows people who are culturally inclined to live with more people. Adding one more person is marginal change over existing policy. 4 5. Addressing the Needs of Neighborhoods • How does this proposal impact specific Fort Collins neighborhoods? • How are community members, stakeholders and interested parties provided with opportunities for meaningful participation in the decision making process of this proposal? • How does this proposal enhance neighborhoods and stakeholders’ sense of commitment and stewardship to our community? Stakeholders included developers, CSU, and housing advocates who had a chance to opine at 3 Stakeholder Workshops. Two public open houses provided additional opportunities. Several boards and commissions were briefed and public comment was permitted then. While the public is not permitted to speak at City Council Work Sessions, they are permitted to observe and can contact the City Councilmembers directly either before or after the work session. May aggravate nuisance issues in neighborhoods with current high population of students. 6. Building Capacity to Advance Social Equity • What plans have been made to communicate about and share the activities and impacts of this proposal within the City organization and/or the community? • How does this proposal strengthen collaboration and cooperation between the City organization and community members? Outreach plan includes all mentioned above. This proposal will be seen as collaboration/cooperation by some and not others. There is a neighborhood awareness campaign run every fall for students that could be used to spread the word about any change. Social Equity summary Somewhat positive – Providing stable housing for more people is a marginal benefit in terms of number of residents affected, but allowing a homeless individual or others struggling to find any housing a place to call home is a social benefit. Overall, the effect of this proposal on social equity would be: Negative Somewhat Negative Neutral Somewhat Negative Somewhat Negative N Neutral Somewhat Negative Somewhat Positive Positive 5 Environmental Health Described as: Healthy, resilient ecosystems, clean air, water, and land. Decreased pollution and waste, low carbon emissions that contribute to climate change, lower fossil fuel use, decreased or no toxic product use. Prevents pollution, reduces use, promotes reuses, recycles natural resources. Goal/outcome: Protect, preserve, and restore the natural environment to ensure long-term maintenance of ecosystem functions necessary for support of future generations of all species. Reduce the adverse environmental impacts of all activities, continually review all activities to identify and implement strategies to prevent pollution; reduce energy consumption and increase energy efficiency; conserve water; reduce consumption and waste of natural resources; reuse, recycle and purchase recycled content products; reduce reliance on non-renewable resources. Analysis prompts • The prompts below are examples of the issues that need to be addressed. They are not a check list. Not all of the prompts and issues will be relevant for any one project. Issues not covered by these prompts may be very pertinent to a proposal- please include them in the analysis • Is this proposal affected by any current policy, procedure or action plan? Has advice been sought from organizations that have a high level of expertise, or may be significantly affected by this proposal? Brief analysis/discussion This concept is consistent with the concepts of Green Building, a program supported by the City of Fort Collins. Compact communities that efficiently use existing building stock have less negative impacts on many aspects of the natural environment including preservation of natural areas, water & air quality, water quantity, native habitat, habitat connectivity, and reduction of Greenhouse Gas (GHG) emissions that contribute to climate change. The magnitude of environmental impact is tied to amount of population impacted. 1. Environmental Impact • Does this proposal affect ecosystem functions or processes related to land, water, or air? • Will this proposal generate data or knowledge related to the use of resources? • Will this proposal promote or support education in prevention of pollution, and effective practices for reducing, reusing, and recycling of natural resources? • Does this proposal require or promote the continuous improvement of the environmental performance of the City organization or community? • Will this proposal affect the visual/landscape or aesthetic elements of the community? More complete use of existing building stock reduces impact to land use by decreased need for new construction. Consequently, there is less impact to existing wildlife habitat and less soil disturbance leading to loss of stored carbon in native vegetation. Also encourages more efficient use of water (e.g., less lawns and landscapes to water) 6 2. Climate change • Does this proposal directly generate or require the generation of greenhouse gases (such as through electricity consumption or transportation)? • How does this proposal align with the carbon reduction goals for 2020 goal adopted by the City Council? • Will this proposal, or ongoing operations result in an increase or decrease in greenhouse gas emissions? • How does this proposal affect the community’s efforts to reduce greenhouse gas emissions or otherwise mitigate adverse climate change activities? Reduced GHG emissions due to sharing of electricity, natural gas, and possibly transportation. Also significant reduction of lifecycle GHG emissions when there is a decreased need for new building construction. Aligns very well with City Carbon reduction goals May reduce commuting from outside city which reduces GHG emissions and air pollution. 3. Protect, preserve, restore • Does this proposal result in the development or modification of land resources or ecosystem functions? • Does this proposal align itself with policies and procedures related to the preservation or restoration of natural habitat, greenways, protected wetlands, migratory pathways, or the urban growth boundary • How does this proposal serve to protect, preserve, or restore important ecological functions or processes? Reduced impact to land and ecosystem functions when less need for new construction. Results in preservation of natural habitat, migratory pathways and less rapid urban growth. More efficient use of electricity, natural gas, and water reduces impacts to natural ecological functioning (in-stream flows, less production of solid and hazardous wastes and fewer emissions from minerals and oil and gas extraction that can impair air quality). 4. Pollution prevention • Does this proposal generate, or cause to be generated, waste products that can contaminate the environment? • Does this proposal require or promote pollution prevention through choice of materials, chemicals, operational practices and/or engineering controls? • Does this proposal require or promote prevention of pollution from toxic substances or other pollutants regulated by the state or federal government? • Will this proposal create significant amounts of waste or pollution? Less production of construction debris from manufacture of new buildings if existing building stock can be used more efficiently. Less air emissions of particulates, hazardous air pollutants, and GHGs associated with new construction. Less generation of solid waste by sharing of household products and food (e.g., occupants buy less appliances because they share them) 7 5. Rethink, replace, reduce, reuse, recirculate/recycle • Does this proposal prioritize the rethinking of the materials or goods needed, reduction of resource or materials use, reuse of current natural resources or materials or energy products, or result in byproducts that are recyclable or can be re-circulated? Likely that less new housing will be built because it more fully uses existing housing. Reduction of source materials for new construction is a significant benefit of this policy. Likely to enhance sustainable practices. 6. Emphasize local • Does this proposal emphasize use of local materials, vendors, and or services to reduce resources and environmental impact of producing and transporting proposed goods and materials? • Will the proposal cause adverse environmental effects somewhere other than the place where the action will take place? Does not appear to have a unique local perspective environmentally. Environmental Health summary Overall positive effect. Hard to find any downsides from an environmental point of view. Overall, the effect of this proposal on environmental health would be: Negative Somewhat Negative Neutral Somewhat Positive Positive 8 Economic prosperity Described as: Support of healthy local economy with new jobs, businesses, and economic opportunities; focus on development of a diverse economy, enhanced sustainable practices for existing businesses, green and clean technology jobs, creation or retention of family waged jobs. Goal/ outcome: A stable, diverse and equitable economy; support of business development opportunities. Analysis prompts • The prompts below are examples of the issues that need to be addressed. They are not a check list. Not all of the prompts and issues will be relevant for any one project. Issues not covered by these prompts may be very pertinent to a proposal- please include them in the analysis • Is this proposal affected by any current policy, procedure or action plan? Has advice been sought from organizations that have a high level of expertise, or may be significantly affected by this proposal? Analysis/discussion This concept, along with other affordable housing solutions, addresses the following areas from the Economic Health Strategic Plan:  Talent Development – specifically workforce retention; and  Income Disparity – specifically for low-income and fixed-income individuals 1. Infrastructure and government • How will this proposal benefit the local economy? • If this proposal is an investment in infrastructure is it designed and will it be managed to optimize the use of resources including operating in a fossil fuel constrained society? • Can the proposal be funded partially or fully by grants, user fees or charges, staged development, or partnering with another agency? • How will the proposal impact business growth or operations (ability to complete desired project or remain in operation), such as access to needed permits, infrastructure and capital?  The local economy will benefit from a greater number of the workforce being housed locally, especially true for low-income employees due to greater housing availability.  May have a slight negative impact on the construction industry if fewer residential units are constructed as a result of increased occupants per unit.  May potentially reduce in-commuting if more employees are able to find co-housing arrangements closer to their place of employment and possibly reduce transportation costs.  The administrative costs to the City will vary by option from neutral to a slight increase. 2. Employment and training • What are the impacts of this proposal on job creation within Larimer County? • Are apprenticeships, volunteer or intern opportunities available? • How will this proposal enhance the skills of the local workforce?  No direct impacts  Indirect impact may include increase “personal capacity” due to the reduced stress associated with finding adequate and affordable housing 9 3. Diversified and innovative economy • How does this proposal support innovative or entrepreneurial activity? • Will “clean technology” or “green” jobs be created in this proposal? • How will the proposal impact start-up or existing businesses or development projects?  Not Applicable 4. Support or develop sustainable businesses • What percentage of this proposal budget is for local services or products? Identify for Larimer County and State of Colorado. • Will this proposal enhance the tools available to businesses to incorporate more sustainable practices in operations and products? • Are there opportunities to profile sustainable and socially responsible leadership of local businesses or educate businesses on triple bottom line practices?  Not Applicable 5. Relevance to local economic development strategy  May increase the locally available workforce due to an increase in housing options and availability  Reduced individual costs for housing may result in greater income expended on other services or goods 10 Generally supports low-income earners. Overall, the effect of this proposal on economic prosperity would be: Negative Somewhat Negative Neutral Somewhat Positive Positive 11 Real impact is to potentially lower housing costs for a portion of the population. Overall, the effect of this proposal on all TBL considerations would be: Negative Somewhat Negative Neutral Somewhat Positive Positive Proposal triple bottom line analysis summary Economic & Planning Systems, Inc. 1 2660.docx CHAPTER 5: RECOMMENDATIONS The following policy options encapsulate a range of actions the City can take to address housing problems, recognizing the City’s purview regarding the related problems. Based on EPS’s analysis of economic, demographic, and housing market conditions in Fort Collins and the surrounding trade area, EPS recommends the City consider the following policy options. Magnitude of Housing Need In addition to documenting trends and conditions that establish where and to what degree problems exist, a critical component of the Housing Affordability Policy Study (HAPS) was to determine the magnitude of (ownership or rental) housing need and gaps. Cost-Burden A gap analysis, which is detailed in the full report, compares the City’s distribution of ownership and rental housing by cost against a distribution of the City’s owner and rental households by what they can afford in housing payment or rents. The analysis identifies the extent of the misalignment between housing inventory and households. The findings reveal that approximately 2,000 owner-occupied households are cost-burdened1 below incomes of $25,000, and approximately 8,000 renter-occupied households are cost-burdened below incomes of $25,000. To identify permanent-resident rental housing needs, the analysis nets out student- occupied units2 , yielding a net of between 1,100 and 2,300 renter-occupied households that are cost-burdened below incomes of $25,000. These findings do not imply that the City is in need of inventory per se – i.e. 2,000 more for-sale units and 1,100 to 2,300 more rental units. Rather, it provides context to understanding what the implications of future development may be if they are oriented solely to the upper-end of the market. That is, more high-end inventory can potentially exacerbate the cost-burden issues, but more middle- or affordable inventory can relax the cost-burden issue. Policy Objective Another approach to estimating the magnitude of housing need is from the policy perspective. That is, the objective would be for the community and its elected officials to identify a portion of the local workforce that the community believes it should target as a viable and ideal portion of its workforce that should live locally. 1 The term cost-burden refers to a situation in which a household is spending more than 30 percent of its pre-tax income on housing. This is a definition according to the Department of Housing and Urban Development, and used widely in housing policy research across the U.S. 2 Based on interviews and an extensive analysis of CSU data, EPS determined that there are between 5,700 and 6,900 CSU student-occupied households that fall into the category of household income below $25,000. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 2 2660.docx Recommendations Based on the analysis of economic, demographic, and housing market trends and conditions, as well as input and guidance from stakeholders involved since the HAPS project inception, EPS has tailored the following sets of recommendations for the City of Fort Collins to address housing needs and problems. Cost Reduction Options There are actions that the City can take to influence several aspects of overall ownership housing costs. While much of the discussion that follows concern the development of ownership housing, the recommendations have the potential to positively affect development costs of rental housing as well. A considerable effort was made to identify the extent to which these costs have changed over time, and discussions among stakeholders were lively and engaged on multiple levels of the implications of these findings. EPS’s analysis of affordability in this study incorporated not only an examination of affordability and housing price trends in Fort Collins and the surrounding communities, but also an examination of the components of the cost of housing in Fort Collins. Figure 1 depicts a combination of multiple data sources to illustrate the trends in a few of the largest overall cost components of housing – land, hard cost, and soft costs, including architecture and engineering, contractors, a floating amount for developer fee and profit, as well as city and county fees and taxes. By far, the largest components of housing costs fall outside of the City’s ability to control. Hard costs, such as labor and materials, account for 50 to 55 percent of total costs, but cannot be influenced by any policy solution of the City. Soft costs, which account for another 11 to 18 percent of total costs, such as architecture and engineering, general contractor fees, legal, insurance, and even developer fee, are also costs that the City cannot control directly. Land costs, which currently account for 25 percent of the overall cost of housing, while a significant component of the escalation in overall housing costs over the last 13 years, are also not directly in the City’s control. City fees and taxes, however, which account for 9 percent of overall housing costs, can be controlled directly by the City. 1) Marginal City Fee Structures Problem The marginal fee structure of the City’s fees discourage the construction of smaller, i.e. more affordable, units. Background The examination of overall costs associated with fees and taxes showed that this category of cost rose an estimated $7,500 over the time period analyzed. During this time, updates to the structure of the permit and plan check fees were made, as were updates to specific calculation of utility capital expansion fees. As noted by multiple stakeholders, the structure of the city’s fees and building code incentivizes the construction of larger units, because many are charged on a per-unit basis rather than a per square-foot basis. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 3 2660.docx Recommendation EPS recommends that the City re-examine the equitability of its fee structures and convert to a per square-foot basis where feasible and appropriate3 . As such, an equitable per square-foot fee would not disincentivize the construction of smaller and thus more affordable units. Figure 1 Trends in Housing Cost Components, 2000-2013 2) Fee Waivers for Affordable Housing Problem As illustrated above in Figure 1, City fees and taxes account for an estimated 9 percent of the cost of building a home. The impact of these fees on affordable housing is a disincentive to the construction of inventory without a waiver. 3 EPS recognizes that the permit and plan check fees were recently updated as of January 1, 2012 based on a cost-recovery analysis. It is also recognized that the City is in the process of updating its capital expansion fees, changes which have not affected the analysis of cost components in this study, however. Furthermore, EPS recognizes that the recommendation to re-examine the per square-foot basis of the capital expansion fees would require a legal nexus study to justify either differential fees based on the size of the unit, or a different analysis to establish the connection between capital facilities impacts and the size of a unit in terms of square feet. $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Average Housing Costs by Component City Fees & Taxes [Note 4] Other Soft Costs & Profit (Floating Amount) [Note 3] Hard Costs [Note 2] Land [Note 1] Source: City of Fort Collins; Larimer County Assessor; Elevations Real Estate; Economic & Planning Systems [Note 1]: Land dvalues are based on data compiled from the Larimer County Assessor's office. They represent the cost of a finished lot including infrastructure and water (as a portion of total housing sales prices). They accurately represent the portion (i.e. percentage) of land to housing sales price, but presented here, they have been calibrated down to fit the housing price data available. Actual lot sales prices, as with new unit sals prices are higher than depicted by these numbers. [Note 2]: This includes the cost of materials and labor. [Note 3]: This includes other soft costs, such as architeture and engineering, legal, and insurance. Developer profit is estimated as a floating amount, i.e. the difference between the other three components and the overall housing price data points. [Note 4]: These fees and taxes were estimated with the assistance of City of Fort Collins staff, including Development Review Services, Engineering, and the Building Department. [Note 5]: These totals represent the average of new and existing home sales throughout Fort Collins. They also represent detached (i.e. single-family) and attached (i.e. condominiums, townhomes, duplexes) housing and do not include rental. [Note 6]: This component analysis and trends were created for the purposes of discussing various cost components using best available data. Given the limitations and availability of new sales data trends, overall trends were used. As a result, the depicted overall costs will be noticeably lower than actual "costs to build". That is, these trends do not depict precise costs to build in Fort Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 4 2660.docx Background The City has had an affordable housing incentives policy with regard to the development of units by the Fort Collins Housing Authority on its books since 1988, but the policy has been modified several times since then to expand the scope of fees for which a project could receive a waiver. Most recently, however, the ordinance was revisited and modified to apply only to projects that provided housing for households earning less than 30 percent AMI and subject to City Council approval. One of the issues (according to Agenda Item Summary 13 dated March 5, 2013) was a concern over the City’s ability to back fill these fee waivers with General Fund dollars. Recommendation While the City should not over-commit General Fund resources, EPS recommends the City (in combination with the evaluation of alternative funding sources) should re-examine its ability to fund fee waivers for affordable housing projects. And as it currently applies only to projects of the FCHA that provide units below 30 percent AMI, EPS also recommends that the City reevaluate its definition of applicable affordable housing to include a spectrum of AMI levels more commensurate with standard affordable housing definitions and to consider eligibility criteria for non-Housing Authority developers. Regulatory 3) Incentive Policies The City should consider two types of incentives policies – one that is zoning or land use based, and another that applies when public financing incentives are given. Problem Currently City incentive policy failed to encourage the development of affordable housing inventory. Background One of the most commonly used tools used to encourage market driven production of affordable housing is a zoning-based incentive. That is, builders who commit to deed restricting X percent of their units at Y percent AMI for at least Z years receive a zoning benefit that allows them to build more units, or more efficiently build them, or to get approvals faster than those builders who do not make similar commitments. While a variety of zoning incentives can be offered, the most common ones are (a) additional building density, (b) additional building height, (c) additional lot coverage (less on-site open space), and (d) reduced on-site parking requirements. In theory, the additional revenue generated by being able to build more units on a given piece of property compensates the developer for the lower average per unit sales price they achieve when the sales prices for the affordable units are added in. In practice, that means the incentives generally need to be substantial, not simply token amounts (10 percent density incentives are sometimes criticized as tokens that will not change a builder’s pro forma enough to warrant incorporation of affordable units, while 25 to 30 percent incentives are sometimes considered large enough to achieve that result). While it is tempting to draft incentive provisions that are discretionary (i.e. requiring a showing or hearing before some body that awards the incentive), it is much more effective to make the incentives a part of code, so that builders know they will not need to go to the time, expense, and potential NIMBY (not-in-my-back-yard) battle, that a discretionary process involves. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 5 2660.docx Another structure that could be pursued is an incentive policy ordinance that provides a set of guidelines whereby a development receiving public financing, e.g. in the form of tax-increment financing, would provide affordable housing in return. Recognizing that such an incentive policy structure could require the completion of a nexus study4 and/or the identification of the magnitude of affordable housing need generated by a project, this option would be intended to apply to large-scale projects receiving public financing. It would not apply to developments already providing affordable housing that may be receiving public assistance, such as development fee waivers, for example, and would also exempt other affordable projects or developments that are meeting community objectives, such as housing. In practice, developments that receive a negotiated amount of public financing in an incentive package would likely negotiate for a higher public financing amount to compensate for the additional requirement. But since the source of public financing is typically related to a share-back of sales tax revenues to the development, this incentive policy structure could ensure that a portion of the benefit is returned to the City in the form of affordable housing infrastructure. Recommendation EPS recommends that the City pursue a policy that requires developments to provide affordable units or contribute to an affordable housing fund in exchange for the relaxation of development standards with economic value, such as height restrictions, density bonuses5 , or even a truly streamlined development review process. EPS also recommends that the City pursue a policy that requires a developer receiving public financing to provide affordable housing or contribute to an affordable housing fund. 4 A nexus study provides a quantitative basis for the establishment of an affordable housing requirement, such as a housing fee, that links the magnitude of the per square-foot fee to the estimated housing demand generated by each increment of land use in a development. These studies provide the legal basis for the establishment of a housing fee and a quantitative relationship between the fee and the scale of the development in the event. 5 Bonus densities are one of the more common development incentives used to encourage the construction of affordable housing units in urban and non-urban environments with regulatory or incentive housing policies. In stakeholder workshops and through discussion with City staff, however, it was determined that bonus densities, which are commonly the most valuable incentive economically to a development, would not be relevant to the Fort Collins market. They would also not be applicable in the historic districts. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 6 2660.docx 4) Modifications to 3-Unrelated Rule Problem The rental vacancy rate is extremely low and, according to the gap analysis, there is a need for more affordable rental housing inventory within the City. Rental housing is the City’s most significant problem, but not an alarming one. Background This highly controversial issue surfaced during discussions of rental housing needs where it was noted as a possible solution to solving or relieving some of the pressure on the existing rental inventory. The issue also surfaced during discussions of the housing needs of distressed populations, such as the elderly, but with regard to ownership housing, not rental housing. According to City Neighborhood Services staff, areas throughout the City already allow Extra Occupancy Rental Houses (EORH)6 , but through a disclosure process7 . In 2010, City Council decided against expanding the allowance of EORHs into two additional zones, which at the time were designated Neighborhood Conservation Medium Density8 . Research shows that policies such as these throughout the U.S. vary widely and do not provide any clear direction for the City of Fort Collins. A survey of communities throughout the U.S. shows that there seems to be no correlation between the size of a city and whether it allows three or four (or more) unrelated persons per rental unit9 . There are two communities, coincidentally in Colorado – Denver and Boulder, where three unrelated persons are the maximum allowable in single-family or low-density zones and four unrelated persons are the maximum allowable in multi-family or high-density zones. Recommendation While EPS recognizes that a full-blown expansion of the 3-unrelated rule to a 4-unrelated rule reflects a previously dismissed policy option, there may be some opportunities for the City to evaluate the streamlining of its EORH exemption process, as well as its expansion to include exceptions for owner-occupied housing units. There may also be an opportunity to establish a landlord licensing and training program, similar to those practiced in other university towns with rental occupancy restrictions. Such a program provides neighborhoods and residents with more assurance that landlords, and ultimately the tenants, are aware of relevant city regulations, e.g. nuisance ordinances. It is important to note that CSU and the City are actively engaged in ongoing efforts to mitigate nuisance problems arising from college students10 renting units within residential neighborhoods. As such, efforts such as a streamlined exemption process for 6 A copy of this map can be found at: http://www.fcgov.com/neighborhoodservices/pdf/occupancy-zone-map.pdf 7 Currently, the owner of a property who intends to lease the property to more than three unrelated persons within a designated zone in the City needs to file an Occupancy Disclosure Form with the City. 8 According to Neighborhood Services, City staff initially supported the allowance of EORHs in these proposed NCM zones, but after the findings of public outreach revealed that 72 percent of the respondents to a mail survey indicated their disapproval of such a prospect, City staff recommended in memo to the City Manager dated September 9, 2010, that the designation of EORH in the NCM zone not be pursued. 9 A list was compiled on the website www.collegetownlife.com, but is no longer an active website. PDFs of the survey data still exist, which were summarized in the research in this report. 10 Party Registration is an effort between CSU and the City to provide students hosting parties with an opportunity to receive a warning, providing a 20-minute window to voluntarily terminate a party after a noise complaint is received. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 7 2660.docx EORHs and landlord licensing programs are likely to work complementarily with existing City/CSU efforts. 5) Affordable Housing Easement Problem Manufactured housing represents an important part of the City’s existing affordable housing inventory. Losing decent manufactured housing would be a loss to the inventory of affordable housing. Background Property owners sometimes voluntarily agree to preserve a historic building, or to preserve open space in return for a public benefit. The restrictions imposed on their land are generally documented through an easement or an agreement that is recorded in the property records, which notifies the public and any potential property buyers that the future use of the land is restricted in certain ways. An easement is an interest in real property (technically, the owner has sold the right to tear down the historic building or build on the open space), while an agreement is a contract (the owner has agreed not to tear it down or build on open space in return for the public benefit). Both tools can be used to achieve the same result, and to bind future owners of the property. The same approach can be used to encourage preservation of existing affordable housing – i.e. the owner records in the land records a document pledging to keep X percent of the housing affordable at Y percent AMI for Z years – provided that the city can offer the property owner something of benefit in return. In the case of historic buildings or open space there are federal and/or state tax incentives that apply once the easement or agreement has been recorded, but that is generally not true of affordable housing. While the easement or agreement will potentially reduce the value of the property (its potential highest and best use may no longer be available), which reduces the owner’s property taxes, that is generally not enough of an incentive. Since the owner is essentially agreeing to preserve an existing asset, zoning incentives for development or redevelopment generally do not have value. That leaves tax/fee/assessment rebates – in other words, it often requires the local government to forego revenue that it would otherwise have available to pursue other priorities. Recommendation EPS recommends the City pursue a policy that provides for an easement or an agreement that is recorded in property records, which effectively bind future owners of certain manufactured home parks to preserve existing uses. This recommendation could potentially also be more broadly applied as a tool to preserve other types of affordable housing. EPS also acknowledges that there may be a multitude of different more market-based solutions, policies, or strategic direction that the City can explore with regard to this housing need. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 8 2660.docx Alternative Funding Options Except for the re-examination of fee waivers for non-housing authority affordable housing projects, the preceding options can be implemented without the City making monetary commitments, i.e. without needing to raise funds. On the other hand, were the City to pursue incentivizing affordable housing development, such as the pursuit of stimulating housing development to address the magnitude of affordable housing needs described at the beginning of this chapter, a funding source would be needed. The following are three funding sources, i.e. taxes, used by other communities to address affordable housing goals, such as the acquisition of land for affordable housing development, subsidies to leverage private-sector development, the rehabilitation of existing units, or other development needs. While some of these funding sources are used by communities on a permanent basis, others institute these measures on a time-limited basis, funding discrete projects and goals over a short period of time, such as three to five years. 6) Excise Tax Problem The City has no dedicated or permanent funding source for affordable housing. Background The excise tax is a tax on construction materials for all new development. Boulder’s excise tax, for example is $160 per 1,000 square feet of residential development and $340 per 1,000 square feet of commercial development. The excise tax is a preferable option by comparison to a linkage fee, because it does not require a complicated nexus study to establish its basis, and it does not require that funds collected be allocated to a specified set of improvements. It does, however, require voter approval. Recommendation As one possible option to explore, EPS recommends a modest form of this tax because it will more broadly distribute the burden of providing an alternative funding source for affordable housing. 7) Dedicated Sales Tax Problem The City has no dedicated or permanent funding source for affordable housing. Background The most broadly-based funding source is the sales tax. A number of communities have imposed a dedicated sales tax collected to fund affordable housing construction and programs, but many communities adopt this mechanism in a time-limited format. In 2013, Fort Collins collected more than $92 million in sales tax revenue based on an estimated $2.5 billion in total taxable sales. As an example of how much revenue could be raised under this alternative, at a Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 9 2660.docx similar level of taxable sales as 2013, a dedicated sales tax of ¼ cent in the City could generate approximately $6 million in funds for affordable housing goals11 . Recommendation Given the potential for strong resistance to an additional tax, EPS recommends that the City consider pursuing this option as a long-term strategy, but recognize its strength and potential to generate robust funds that could be used to support, subsidize, or leverage private-sector investment and development. EPS also recommends that the City consider this option only on a time-limited basis. 8) Dedicated Property Tax Problem The City has no dedicated or permanent funding source for affordable housing. Background The third taxing option EPS recommends the City explore is a dedicated and time-limited property tax mill. As of 2013, there was approximately $4.2 billion in total property valuation in Larimer County. To generate a similar $6 million in one year, a property tax mill of 1.400 could be adopted. Alternatively, to generate this amount over three years would require the adoption of a 0.47 mill property tax. Recommendation As with the pursuit of a dedicated and time-limited sales tax, EPS recommends that the City pursue a time-limited property tax dedicated to housing as a component of a longer-term funding strategy. Because this option is also anticipated to face community opposition, particularly from the business community, EPS recommends that a very small mill levy of 1 mill or less, as used in the example, be pursued because the burden of a property tax mill falls more heavily on non-residential assessed valuation than residential assessed valuation, based on the stipulations of the Gallagher Amendment. 9) 501(c)(3) Structure EPS also recommends exploring the potential to convert its existing Land Bank into a Community Land Trust12 model or a Community/Housing Foundation. This option would not generate 11 EPS has used the smallest common increment of a sales tax (¼ cent) to estimate the potential revenues from a time-limited dedicated sales tax. The $6 million figure is not necessarily representative of a determined amount according to an estimation of need, but a benchmark for comparison against what amount of mill levy would be necessary to assess to generate the same amount in property tax revenues. 12 A community land trust (CLT) is a non-profit corporation that provides permanently affordable housing units by acquiring land and removing it from the speculative for-profit real estate market. CLTs hold the land the own “in trust” forever for the benefit of the community by ensuring that is will always remain affordable for homebuyers. CLTs were enabled under Section 213 of the Housing and Community Development Act of 1992. There are currently over 250 CLTs in the US including the Lowry Community Land Trust in Denver and the Thistle Community Land Trust in Boulder. A CLT typically acquires land for affordable housing in its designated community. The land is transferred to a developer and ultimately a homeowner under a long term land lease. The CLT generally leases the land to a qualified homeowner at a reduced rate to subsidize the housing unit price. The CLT retains the option to repurchase the housing unit upon sale and the resale price is set by formula to give the homeowner a fair return on its investment but also to maintain affordability for future homeowners. One of the major differences between a land bank and CLT is that a land bank is merely established to purchase and sell land, whereas a CLT is set up to hold land in a long-term lease structure to provide and ensure long-term affordability. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 10 2660.docx funding, but could be used as a vehicle for preserving housing affordability by better facilitating the development of land currently owned by the City. Legislative Options 10) Work with Elected Officials to Remedy the Threat of Construction Defect Claims Problem The threat of construction defects claims lawsuits negatively affects the for-sale multi-family housing construction market. Background Solving problems stemming from the threat of construction defects claims falls outside a local policy decision and into the realm of a state-level concern. During the Colorado General Assembly’s last session, which ended on May 7th, a handful of bills had been crafted to deal with some of the City’s issues. While final approval from the Governor remains on HB 1017, which provided for a state level affordable housing funding source, SB 220, which would have provided arbitration as a means to resolving construction defects claims, did not advance in this session. Recommendation EPS encourages the City of Fort Collins to engage its elected officials and state representatives in the pursuit of a remedy to the issues surrounding construction defects claims in particular during the next legislative session. Not Recommended The following affordable housing policy options are not recommended at this time. Inclusionary Housing Ordinance An Inclusionary Housing Ordinance (IHO), as it applies to either ownership or rental housing, is not recommended for the following reasons:  An IHO directed at Fort Collins’ greatest housing need, i.e. rental housing, would face legal and logistical challenges13 ;  IHOs are effective where the supply of housing product affordable to low AMI levels is scarce;  IHOs are effective in markets saturated by high-end home sales, such as resort markets;  IHOs are inefficient tools when the price range of deed-restricted units is partially or completely overlapped by the presence of existing or new home sales prices elsewhere in the 13 The City of Boulder is the only urban municipality in Colorado to have an IHO for rental housing development. Because of the limitations on rent control identified by the case Lot 34 Ventures v. Telluride more than a decade ago, a municipality may not legally require a developer to provide rental units at a prescribed rent level. Only through a legal and administrative process that has to date not been legally challenged, and through the provisions of HB 1017, which clarified that municipalities may enter into a voluntary agreement regarding rents on private properties, the City of Boulder maintains its requirement that projects of more than 4 units must provide 10 percent affordable rental units. The City Attorney’s office also stipulates other requirements which must be met by a developer of affordable rental product, such as that the affordable rental inventory must be owned and operated by a housing authority or similar entity. In EPS’s work with the City of Boulder on this issue, it became apparent that, although developers were attempting to provide for the units on site, logistical, legal, and even lending issues arose such that made meeting all the requirements extremely difficult. Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 11 2660.docx competitive market area, which in the case of Fort Collins, extends to the surrounding towns, as shown in Figure 2.14 Figure 2 Affordability Gaps in Fort Collins and Surrounding Communities, 2013 Figure 3 depicts 99 percent of existing and new home sales in Fort Collins during 201315 . Illustrated in this graphic are more than 3,500 home sales, approximately 22 percent (more than 770) of which fell below $190,600, or affordable to households earning 100 percent of the Area Median Income ($53,400). Also shown are the typical price ranges for units that would be sold as deed-restricted (i.e. income-restricted) under a regulatory structure such as an inclusionary housing ordinance. The blue shaded area demarks the range of housing affordability typically targeted by an IHO for affordable housing – 80% to 100% AMI, or housing priced between $152,000 and $190,000. One of the problems this would create in Fort Collins would be that deed-restricted housing created by an IHO would compete directly with market-rate housing. Faced with the choice between free market and deed-restricted housing, a household inevitably chooses a free-market unit to benefit from the possibility of unrestricted housing value appreciation, whereas deed- restricted units have value appreciation limits. 14 Figure 2 illustrates the similarity of median housing sales prices in surrounding communities. While the main intent of this graphic is to illustrates that there are affordability gaps in several of the surrounding communities with respect to median household incomes, it also illustrates that because there are communities with more affordable housing, an IHO creating deed- restricted units in the market would: a) further encourage household choices to buy homes elsewhere in the trade area, and b) not be effective for reasons stated in the following discussion of price bands. 15 Sales of housing above $800,000 are excluded for simplicity of this illustration. $190,600 $261,900 $151,800 $273,500 $207,300 $200,800 $385,800 $256,700 $303,400 $54,400 $8,000 $15,575 $42,850 $18,200 $245,000 $269,900 $167,375 $232,513 $250,150 $219,000 $363,671 $215,600 $297,904 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 Fort Collins Berthoud Greeley Johnstown Longmont Loveland Timnath Wellington Windsor Affordable Price Gap Median Sales Price Source: U.S. Census; Economic & Planning Systems Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 12 2660.docx Another problem is that the cost to build a home, specifically lot values, in Fort Collins is too high. That is, without subsidy, housing cannot be built for less than $200,000. As a result, the gap between the cost to construct units and what they are required to sell for is often passed on to the market rate units built in the remainder of the project. This problem, however, would not be unique to Fort Collins. As a point of reference, Denver’s IHO is tailored to require residential developments to provide units at 80% or 95% of AMI, depending on type of construction. In Denver, not only is there a considerably greater gap in the availability of housing affordable to these household income categories, but the ordinance has faced considerable opposition from the development and building community since its inception more than 10 years ago. The alternative to an IHO targeted toward 80% to 100% AMI would be an IHO tailored to address 60% AMI. At this range, there is less competitive market inventory (approximately 7 percent of existing home sales were affordable between 60% and 80% AMI). At this level, however, the gap between the cost of construction and the target sales price is exacerbated, decreasing its practical effectiveness. The green shaded area indicates a common range of housing affordability typically targeted by an IHO tailored to address workforce housing needs – 100% to 120% AMI, or housing priced between $190,000 and $229,000. In Fort Collins, 20 percent of sales in 2013 fell between these AMI levels. Some communities, e.g. Davis, CA, have adopted IHOs that address their workforce housing needs. Again, this tool is most effective in markets where housing product in this range either is not being built or exists in scarce quantities in the supply. Figure 3 Spectrum of Existing and New Sales (2013) Against Deed-Restricted Housing $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 19% 60% 68% 76% 83% 89% 93% 97% 102% 105% 108% 112% 114% 117% 119% 121% 124% 127% 130% 134% 136% 140% 145% 150% 155% Fort Collins Housing Study - Draft Recommendations May 21, 2014 Economic & Planning Systems, Inc. 13 2660.docx Commercial Linkage Commercial linkage fees are a form of impact fee assessed on new commercial developments or major employers based on mitigating the need for workforce housing generated by the new or expanding commercial business or development providing commercial space for new business. Because they are basically an impact fee, linkage fees require a nexus study to establish the basis for the fee16 . EPS does not recommend a community-wide commercial linkage program for the following reasons:  Commercial linkage programs are more appropriate in markets without as much competition for sales tax revenues;  Linkage programs generally face opposition from the commercial development industry, because most of the burden is placed on non-residential development;  The Fort Collins market competes with surrounding municipalities for sales tax revenues, and the establishment of a linkage fee could potentially discourage development. It should be noted that this recommendation not to pursue a community-wide commercial linkage program differs from EPS’s recommendation to pursue an incentive policy ordinance that incorporates one of the mechanism of a nexus study that would be used as a part of the linkage program establishment. The major distinction is that EPS’s recommendation for an incentive policy ordinance applies only to developments where public financing is involved and not all developments. 16 This is the same type of nexus study as may be required to establish a basis for fees identified under the incentive policy ordinance option #3. The point of difference is that a full commercial linkage program would be assessed community-wide and not conditionally, as recommended. 4.25.14 Sue Beck-Ferkiss, Social Sustainability Socially Sustainable Housing Market A Housing Market Characterized by Equity and Diversity – Provides Opportunities For All Residents – Offers Housing Options for a Diverse Set of Incomes, Preferences and Life Stages Common Barriers – Market Failures in Terms of Affordablility, Accessibility and Special Needs Housing Resources ©Copyright 2014 City of Fort Collins. All Rights Reserved. 3 Questions for Council Consideration 1. Do you think we have identified all the best options? 2. Which of these options would best support a socially sustainable housing market for Fort Collins? ©Copyright 2014 City of Fort Collins. All Rights Reserved. 4 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 5 Interdepartmental City Team Economic & Policy Systems, lead consultants Three Stakeholder Workshops Two Public Open Houses (May) Board Involvement • Affordable Housing Board (Advisory) • Senior Advisory Board • Planning and Zoning Work Session • Council Finance Committee • Economic Advisory Commission City Council Work Session The Process ©Copyright 2014 City of Fort Collins. All Rights Reserved. 6 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 7 Stakeholder Workshops 1. Best Practices § Identified affordable housing tools, funding sources, comparable cities 2. What is the Need? § Defined, reviewed data and questions, identify and discuss trends 3. Options § Discuss policy and direction ©Copyright 2014 City of Fort Collins. All Rights Reserved. 8 Ownership Housing & Commuting Patterns § Sales Prices consistently increasing § In-commuting up / out-commuting flat Rental & Student Housing § Rents increasing every year since 2000 § Consistently low vacancy rates Housing Cost Components § Land values, hard costs, City/County fees and taxes increased § Soft Costs and profit decreased Distressed Populations Four Major Topic Areas ©Copyright 2014 City of Fort Collins. All Rights Reserved. 9 Sources: City of Fort Collins, Larimer County Assessor, Elevations Real Estate, Economic & Planning Systems $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Average Housing Costs by Component City Fees & Taxes Other Soft Costs + Profit Hard Costs Land Source: City of Fort Collins; Larimer County Assessor; Elevations Real Estate; Economic & Planning Systems 25% 55% 11% 9% As % of Total Escalation in Costs: City Fees & Taxes = 9% • ($7,500) Other Soft Costs + Profit = -6% • ($4,800) Hard Costs = 60% • ($50,200) Land = 37% • ($30,620) 20% 53% 18% 9% 2000-2013: Average Sales Price = 42% • ($83,500) Profit margins squeezed? Housing Cost Components ©Copyright 2014 City of Fort Collins. All Rights Reserved. 10 Escalation in Costs—Average Sales Price Increase 2000-2013: 42% = $83,500 Cost Components Percentage Increase/Decrease Direction Dollar Amount City Fees & Taxes 9% • $7,500 Soft Costs & Profit -6% • -$4,800 Hard Costs 60% • $50,200 Land 37% • $30,620 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 11 Who are they? § Cost-burdened Households § Fixed income folks: Disabled, Seniors § In-poverty: Homeless, Household income of $25,000 or less § First-time Homebuyers § Mobile Home Park Residents Issues Identified for both Ownership and Rental Homes Distressed Populations Preliminary Options Consultants § Economic & Planning Systems, Inc. § Clarion & Associates Denver, Colorado ©Copyright 2014 City of Fort Collins. All Rights Reserved. 12 LEGISLATIVE: Lobby State Legislature Legislative Options Cost Reduction Options COST REDUCTION: Waivers, fees, minimum size ©Copyright 2014 City of Fort Collins. All Rights Reserved. 14 Regulatory Options REGULATORY: Relax the 3-Unrelated Rule REGULATORY: Incentive Policy Ordinance REGULATORY: Evaluate Land Constraints REGULATORY: Address Manufactured Housing ©Copyright 2014 City of Fort Collins. All Rights Reserved. 15 Alternative Funding Source Options ALTERNATIVE FUNDING SOURCES: New Tax ALTERNATIVE FUNDING SOURCES: Land Bank Program ©Copyright 2014 City of Fort Collins. All Rights Reserved. 16 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 17 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 18 Remember why we Need affordable housing Questions for Council Consideration 1. Do you think we have identified all the best options? 2. Which of these options would best support a socially sustainable housing market for Fort Collins? ©Copyright 2014 City of Fort Collins. All Rights Reserved. 19 ©Copyright 2014 City of Fort Collins. All Rights Reserved. 20 For more information: Sue Beck-Ferkiss, Social Sustainability Specialist 970-221-6753 l sbeckferkiss@fcgov.com fcgov.com/socialsustainability 162% 168% 175% 184% 193% 202% 218% 237% 265% 312% Existing and New Home Sales Price Distribution, 2013 Distribution of Sales Affordable by Fort Collins Area Median Income Sales of Market-Rate Housing Available at 100% AMI or Below (22% of All Sales) Sales Price Range for Deed-Restricted AFFORDABLE Housing (at 80% to 100% AMI) Sales Price Range for Deed-Restricted WORKFORCE Housing (at 100% to 120% AMI)