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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/06/2018 - SECOND READING OF ORDINANCE NO. 037, 2018, AMENDINAgenda Item 6 Item # 6 Page 1 AGENDA ITEM SUMMARY March 6, 2018 City Council STAFF Sue Beck-Ferkiss, Social Sustainability Specialist Ingrid Decker, Legal SUBJECT Second Reading of Ordinance No. 037, 2018, Amending Article XIII of Chapter 23 of the Code of the City of Fort Collins Regarding the Land Bank Program. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on February 20, 2018, amends City Code to add flexibility to the Land Bank Program, broaden the income levels of targeted populations and to allow mixed-use beyond solely residential affordable housing when requested by the City. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. BACKGROUND / DISCUSSION During the discussion at First Reading on the Land Bank Policy refresh on February 20, 2018, two issues were raised that will be addressed here. 1. Existing City Code language lists five facilities, at least three of which need to be located within one-half mile of the proposed land bank parcel now or in the reasonable future for the City to purchase the parcel for this program. These listed facilities are not defined terms. Language has been added to clarify these terms: • Now it is clear that transit routes and schools must be public in nature. • Parks must be designated and posted by the City. • The term “employee center” is now defined as employment, industrial, campus, or downtown districts as shown on the City’s Structure Plan Map. • Lastly, the term commercial center is further described to include shopping centers and retail developments. 2. Council asked how many additional people would be eligible for home ownership on a land bank parcel by raising the maximum income from 60% area median income (AMI) to 80% AMI. This is a hard question to answer. It is important to note that while this change will increase the number of household that will qualify for home-ownership product on land bank parcels, supply is still constricted. The need for units for residents making no more than 80% AMI greatly out paces the amount of housing the City could build on all the Lank Bank parcels combined. While this change does add flexibility to the target incomes, affordable home ownership has many constraints limiting how many families might qualify for a mortgage, find available units, meet funding source requirements and overcome other financial issues. Agenda Item 6 Item # 6 Page 2 Another reason staff recommended raising the income target for home-ownership is because the current housing market is experiencing price escalation and there is not much housing available that folks earning 60% AMI could purchase. Illustrative of these points are the mortgages these incomes could support. Below are examples of 2 and 4-person households at 60% and 80% AMI that shows mortgages supported by these incomes: 4-Person Household Percent AMI AMI HUD Classification Maximum Affordable Rent (including utilities) Mortgage Supported by same Monthly Payment 80% $ 61,450 Low Income $ 1,536 $ 240,000 60% $ 46,100 Low Income $ 1,153 $ 180,000 2-Person Household Percent AMI AMI HUD Classification Maximum Affordable Rent (including utilities) Mortgage Supported by same Monthly Payment 80% $ 49,200 Low Income $ 1,230 $ 193,000 60% $ 36,900 Low Income $ 923 $ 145,000 Since the average family size in Fort Collins is 2.3 persons, even with 80% AMI income, a household could only afford a mortgage of about $193,000 which is lower than most of what is available in our market. At the 60% AMI level, the subsidy provided by discounted land would likely be insufficient to provide home ownership opportunities without significant additional public investment. The current median home price is over $300,000. Sustainable home-ownership requires enough income to withstand the burdens of maintenance, repairs and unexpected expenses. The 80% AMI income level provides more disposable income to meet these demands. Appropriate income levels will lead to successful home ownership and lessen the risk of foreclosure. Another way to look at how many additional households could be eligible by this change is to look at household income generally. The chart below organizes all City households by income and then separates this into different types of households. The highlighted income range mirrors the incomes of two-person households in the 60-80% AMI category. This means the increase in the pool of eligible households is less than 14.2% of all households. How many of those households are ready for home-ownership is harder to predict. Household Income All Households Families Married-couple Families Nonfamily Households Less than $10,000 7.5% 3.1% 0.9% 13.7% $10,000 to $14,999 4.4% 1.9% 1.0% 7.4% $15,000 - $24,999 10.3% 5.6% 3.4% 16.4% $25,000 - $34,999 8.5% 6.2% 4.1% 12.0% $35,000 - $49,999 14.2% 10.7% 9.4% 19.0% $50,000 - $74,999 16.0% 17.3% 17.1% 14.1% $75,000 - $99,999 13.6% 17.1% 18.8% 8.7% $100,000 - $149,999 14.5% 21.0% 24.8% 5.8% $150,000 - $199,999 6.3% 9.3% 11.1% 1.9% $200,000 or more 4.8% 7.8% 9.5% 1.0% Agenda Item 6 Item # 6 Page 3 Lastly, additional end-user income will be very helpful in attracting development partners trying to build affordable communities. Even with subsidy in terms of reduced land costs, it will be difficult for builders to make the numbers work to serve low income households with home ownership at mortgages they can afford. ATTACHMENTS 1. First Reading Agenda Item Summary, February 20, 2018 (w/o attachments) (PDF) Agenda Item 22 Item # 22 Page 1 AGENDA ITEM SUMMARY February 20, 2018 City Council STAFF Sue Beck-Ferkiss, Social Sustainability Specialist Ingrid Decker, Legal SUBJECT First Reading of Ordinance No. 037, 2018, Amending Article XIII of Chapter 23 of the Code of the City of Fort Collins Regarding the Land Bank Program. EXECUTIVE SUMMARY The purpose of this item is to present potential changes to City Code to add flexibility to the Land Bank Program, broaden the income levels of targeted populations and to allow mixed-use beyond solely residential affordable housing when requested by the City. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION Land banking is the practice of buying and holding land for a future use. In Fort Collins, it is an important strategy for preserving sites for affordable housing in areas where land is currently relatively inexpensive but where price inflation is likely. Securing significant parcels before land prices rise makes affordability possible with fewer subsidy dollars. Strategic selection of sites to bank can also shape the character of the community by ensuring that affordable housing will be well distributed within the City. The Land Bank Program is the City’s only long term affordable housing incentive. History of the Fort Collins Program After a feasibility study conducted in 2000, the City established the land bank program by Ordinance in 2001 (Attachment 1). The Land Bank Code language was amended by City Council in April 2016. This amendment reinforced the program parameter that rental housing be targeted to households earning 50% of the area median income (AMI), however it specified that some units could be targeted to 60% AMI if the overall community still averaged no more than 50% AMI. That program adjustment was the first since the program’s inception. Recognizing that the development environment had changed since the program was established in 2001, City Council directed staff to conduct a comprehensive review of the program. The staff recommendations proposed here are a result of this review. (Attachment 2) The Land Bank acquired 5 parcels totaling about 50 acres between 2002 and 2006. In 2009, the properties were appraised to see if they had appreciated beyond their purchase price as one indication of whether a parcel should be sold. Adequate appreciation was not found. When the parcels were appraised again in 2014, adequate appreciation was determined. In 2015, a full market analysis was conducted on each of the 5 parcels. At least 3 were determined to be development ready. City Council supported selling a parcel at that time for the first time. (Attachment 3) ATTACHMENT 1 Agenda Item 22 Item # 22 Page 2 The Horsetooth parcel was offered for sale through a competitive Request for Proposal (RFP) process and, the Fort Collins Housing Authority (FCHA), doing business as Housing Catalyst (HC), was chosen as a development partner. The sale of the Horsetooth parcel was completed in 2017 and construction is underway on a 96-unit affordable housing community. Acquisition options of one or more parcels with the proceeds of that sale are being actively investigated. Upon completion of this program review, staff is also preparing to offer another Land Bank parcel for sale for ownership product pursuant to City Council direction and priority. Land Bank Program’s Alignment with Plans and Policy Land banking is established City policy in Fort Collins. City Plan speaks to the need for affordable housing generally and supports the Land Bank program specifically:  Policy LIV 8.7 Maintain a Supply of Land - Maintain an adequate supply of land for future affordable housing development by maintaining the Land Bank Program and acquiring additional properties as funding permits. This policy is explored in the Housing Affordability Policy Study and incorporated into the 2015-2019 Affordable Housing Strategic Plan. Current Land Bank Ordinance Criteria The Land Bank program was designed to serve the housing needs of low income residents. Very specific program parameters are specified by City Code and criteria established for the use, acquisition and sale of land bank parcels. In addition, City policy required that 3 additional conditions must be met for a parcel to be ready for sale. They include:  A verified need for developable land  Appreciation such that the parcel will sell for more than it was purchased for  Development-ready in terms of mitigation of any major development impediments. City Code Chapter 13, Article XIII. Land Banking establishes the program. It sets certain acquisition criteria for land purchase:  From a willing seller without condemnation  At a cost that does not exceed fair market value  Located in the City Growth Management Area  The location is now, or will be in a reasonable future within 1/2 mile of at least three of the following: 1. Transit Route 2. School 3. Park 4. Employment Center 5. Commercial Center Sale of the parcels to a housing provider for affordable housing development is governed by the following criteria:  For the purpose of developing a rental community where the average income target of the community is no more than 50% AMI.  For the purpose of developing ownership housing targeted to buyers making no more than 60% AMI.  Solely residential development.  Affordable in perpetuity.  Land sale price not to exceed 90% of fair market value.  Development must occur within a specified time period. Agenda Item 22 Item # 22 Page 3 What does this preclude? Mixed-income and mixed-use developments are not permitted. Market rate housing cannot be included on the land bank parcels at all. There is no provision for selling a parcel out of the program if it no longer is appropriate for the program’s goals. Assuming a sale out of the program is permitted, the provision requiring the sale price be 90% of market value would not allow the program to recapture the full value of the land to go into purchasing the next parcel and would give a windfall to the buyer. The fixed AMI levels established for rental and home ownership programs do not align with the City’s definition of affordable housing or the major funding sources currently being used by developers of affordable housing. For instance, Low Income Housing Tax Credit funding allows for rental projects to go up to 60% AMI, but the program only allows up to an average of 50% AMI. Home ownership targeted to incomes at 60% and below may be unrealistic in our current real estate market without support services that are not provided for in this program. The need for affordable home ownership opportunities exists at least to 80% AMI households and even to people with more income than that. This change recognizes that home price escalation has outpaced income increases so that a bigger pool of residents are priced out of market housing. Proposed Changes It is important to note that this program is successfully providing land for future affordable housing development as designed and is viewed as favorable to most internal and external stakeholders. Overall, the program review reinforced that. The fact that the changes are small tweaks and not major direction shifts reinforces that too. Staff has the following recommendations: 1. Allow mixed-use development when specifically requested by the City as a subordinate supportive use.  Mixed-use is considered a best practice in affordable housing development where site appropriate and where the non-residential use supports the affordable housing development or the surrounding community.  Sometimes zoning or development requirements can push developers to include commercial elements and the current Code language precludes this. Not all sites are large enough for mixed use and some site sites are best maximized as affordable residential development. For that reason, staff recommends that mixed-use development should be permitted when specifically requested.  Lastly, allowing the use of some of the parcel to bring needed services or amenities to a neighborhood can help the neighborhood more readily accept the affordable housing.  Staff is not recommending allowing mixed-income including market rate housing. While this type of development is beneficial, most stakeholders did not want land subsidy being passed to market rate units. Other City affordable housing programs do allow this type of development, so precluding it from this one program does not rule out developments of this type in the City. 2. Remove specific Area Median Income levels and tie populations targets to the goals of the Affordable Housing Strategic Plan with an explicate exception for rental housing.  When the City sought proposals for the development of the Horsetooth parcel, a City Code change was required to accept the best development proposal. This experience demonstrated how limiting the specific AMI levels in City Code could be. The idea emerged that if the income levels were tied to the Affordable Housing Strategic Plan it would add dynamism to the criteria and be reviewed on a regular basis with the plan’s five-year updates. The effect of this would be to broaden the allowable range for homeownership from a maximum of 60% AMI to 80% AMI. This is considered a more sustainable target population for this housing type. Allowing homeownership up to 80% AMI aligns with the City’s Home Buyer’s Assistance program too.  However, the need for rental product for lower wage earners paired with the fact that most major funding sources currently being used by developers of affordable housing allow units to reach up to 60% AMI steered staff to recommend that rental development be targeted to households with income of 60% AMI or less. This still increases the range of residents the program can serve without subsidizing rental ranges that are being served by market rate Agenda Item 22 Item # 22 Page 4 housing. 3. Allow some or all of a parcel to be sold or traded out of the program if it is determined to be unsuitable for affordable housing development. Possible reasons for selling part or all of a parcel out of the program could be:  a market study found the location unsuitable:  the City seeks development partners and does not get a response;  the parcel is too difficult to develop for this purpose;  The anticipated neighborhood amenities did not materialize within ten years. Also, land bank parcels cannot be sold for more than 90% of their market value under existing Code. This incorporates the purpose of using some of the value of the land to subsidize the development project. If the land is sold out of the program, there is no reason to limit the sale price to 90% of the market value. 4. Allow for notice and opportunity to cure for the reverter provisions. Current Code has automatic provisions for failure to develop timely or for failure to use for the intended purpose that would have ownership of the land revert to the City. Financial interests have suggested that customary provisions for notice and opportunity to cure such failures would be beneficial to the financing of developments on land bank parcels. 5. Lastly in addition to the proposed City Code amendments, staff recognizes the benefit of continuing to work on refining program specific incentives and design standards to maximize the development opportunities of the land bank parcels. This work will be coordinated with the City Plan update effort currently underway as well as the work of the Internal Housing Task Force. Summary of proposed changes: Current Code Proposed Change Purpose 100% Residential development Allow mixed-use when requested Supports community and neighborhood Specific AMI levels Tie to Affordable Housing Strategic Plan, except limit rental to 60% Expands populations to be served, conforms to City definition of affordable housing and aligns with funding sources Sale only for Affordable Housing Allows sale or trade when no longer appropriate for program Adds flexibility if parcel not useful for program and provides guidance to make determination Automatic reverter provisions Allow notice and opportunity to cure Assurance to lenders that developer could cure technical failures without losing ownership of land CITY FINANCIAL IMPACTS This policy change does not impact the City financially. BOARD / COMMISSION RECOMMENDATION At its February 1, 2018, meeting, the Affordable Housing Board voted unanimously to recommend Council adopt the proposed Code changes recommended by staff. (Attachment 4) PUBLIC OUTREACH Agenda Item 22 Item # 22 Page 5 Extensive public outreach was conducted on the policy refresh for this program after the Council Work Session where the full market analysis was presented concluding that several land bank parcels were ready for deployment. It was conducted in 2 phases. The first phase was designed to determine whether changes in the program were warranted. The second stage was designed to determine what changes would be beneficial. (See Communication Plan (Attachment 5) and combined outreach summary packet (Attachment 6) Phase 1 1. 2 Focus groups of Stakeholders 2. Board tour including:  Affordable Housing Board  Community Development Block Grant Commission  Youth Advisory Board  Economic Advisory Commission  Natural Resources Advisory Board  Planning and Zoning 3. City Council work session Phase 2 1. Community Briefings - 3 offered at different locations and different times of day 2. Stakeholder Workshops - 2 offered at different times of day 3. Follow up interviews with Key Stakeholders 4. Super Issue Board Meeting - Lincoln Center 5. Public Hearing before the Affordable Housing Board 6. Business Community Presentations ATTACHMENTS 1. Ordinance No. 048, 2001, Land Bank Ordinance (PDF) 2. Council Work Session Summary, September 8, 2015 (PDF) 3. Council Work Session Summary, October 25, 2016 (PDF) 4. Affordable Housing Board minutes, February 1, 2018 (draft) (PDF) 5. Land Bank Communications Plan (PDF) 6. Outreach-Focus Groups Summary (PDF) 7. Powerpoint presentation (PDF) -1- ORDINANCE NO. 037, 2018 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING ARTICLE XIII OF CHAPTER 23 OF THE CODE OF THE CITY OF FORT COLLINS REGARDING THE LAND BANK PROGRAM WHEREAS, on April 17, 2001, the City Council adopted Ordinance No. 048, 2001, enacting Article XIII of Chapter 23 of the City Code regarding land banking; and WHEREAS, the purpose of the land bank program is to enable the City to acquire, hold and sell real property to assist housing providers in providing affordable rental and homeownership housing for low-income residents; and WHEREAS, on April 5, 2016, the City Council adopted Ordinance No. 034, 2016, which amended Section 23-354 of the City Code to provide some flexibility in income targets for the land bank program and facilitate the development of the land bank parcel on Horsetooth Road; and WHEREAS, in 2016 the City Council also directed City staff to conduct a comprehensive review of the land bank program and recommend updates; and WHEREAS, as a result of that review, staff is recommending amendments to the land banking Code provisions to: • clarify the City’s ability to dispose of land bank parcels that turn out to not be appropriate for development of affordable housing, • allow mixed use development under certain conditions, • modify the affordability restrictions on properties sold for affordable housing, • create a notice requirement before property that has not been developed in accordance with the requirements of the land bank Code provisions reverts to the City, and • clean up references to the affordable housing trust fund, as there is no such fund; and WHEREAS, City staff also plans to develop possible changes to the City’s Land Use Code to create program-specific incentives and design standards to maximize the development potential of the land bank properties; and WHEREAS, the City Council believes that the proposed amendments to the City Code are in the best interests of the City. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That Section 23-350 of the Code of the City of Fort Collins is hereby amended to read as follows: -2- Sec. 23-350. - Purpose. The purpose of this Article is to enable the City to acquire, hold and sell real property to assist housing providers (whether publicly affiliated, philanthropic or profit-motivated) in providing affordable rental and homeownership housing. This Article will assist the City in providing land that developers can feasibly purchase for affordable housing; will help to ensure that appropriate sites are available in the future for the development of such housing; will assist in the early identification of sites for affordable housing development so that adjacent property owners will be aware of the plans for such sites; and will systematically secure affordable housing sites so that such developments can be dispersed throughout the community by strategically selecting sites for affordable housing projects in desirable locations. Section 3. That Section 23-352 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 23-352. - Criteria. The City Manager shall acquire land under the authority granted in § 23-351 only if the acquisition complies with the following criteria: (1) The land is acquired from a willing seller (without the threat of condemnation). (2) The cost of acquiring the land does not, in the opinion of the City Manager, exceed the fair market value thereof. (3) Either at the time of acquisition the land is, or in the judgment of the City Manager, the land within ten (10) years likely will be, within one-half (½) mile of at least three (3) of the following five (5) existing or planned facilities: a. City bus or other public Ttransit route; b. Public/charter Sschool; c. Park, as designated and posted by the City; d. Employment, centerindustrial, campus or downtown district as shown on the City’s Structure Plan Map; and e. Commercial center, such as a shopping center or other retail development. (4) The land is located within the Fort Collins Growth Management Area. Section 4. That Section 23-353 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 23-353. - Funding. -3- The acquisition of land pursuant to this Article shall be funded from the Affordable Housing Fund, the General Fund, or other available funding source. Section 5. That Section 23-354 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 23-354. - Disposition of land bank property. In addition to the criteria established for the disposition of property in Article IV of this Chapter, no property or portion of a property acquired pursuant to this Article shall be sold by the City except in accordance with the following criteria: (1) Any disposition/sale of such property shall be to a housing provider legally bound to the City under the terms of such sale to provide, as the sole development purpose, "affordable housing", to be defined in accordance with stated objectives from the City’s Affordable Housing Strategic Plan, and with the following restrictions: a. Rental housing shall be restricted to households at or below sixty (60) percent of AMI. b. Homeownership housing shall be restricted to households at or below eighty (80) percent of AMI. Such sale shall not be made to any person for land speculation or appreciation, for the development of market rate housing, or for the development of nonresidential unless the City requests that the development include specific non-residential, secondary supportive uses. (2) Notwithstanding the requirements of subsection (1) above, the City may sell or trade property acquired pursuant to this Article for purposes other than affordable housing if the City Council, in its sole discretion, determines that the property is no longer appropriate for the land bank program because: a. an affordable housing project on the property is not supported by a market study obtained by the City; b. at least three (3) of the facilities described in Section 23-352(3) do not exist within ten (10) years of acquisition of the property; c. the City has not received a satisfactory response to a request for proposals to develop the property; or d. the property is too difficult or costly to develop as affordable housing due to the size, location, physical condition or other limitations on the property. -4- (3) Upon acquisition of the property from the City, the housing provider shall commence development of all housing within twenty-four (24) months of having acquired the land and shall obtain building permits for the construction of all such housing units within forty-eight (48) months of acquisition of the property. If all such building permits have not been obtained by the housing provider within the aforesaid periods of time, then title to that portion of the property for which building permits have not been issued shall revert to the City, provided that the City shall first give notice to the housing provider and any lenders of record of any violation of this requirement and allow a period of not less than sixty (60) days to cure the violation. Said possibility of reverter shall be contained in any deeds conveying said land to such housing provider. Any extension of the aforesaid periods of time shall be valid only if approved by the City Manager upon finding that the housing provider has exerted a good faith and diligent effort in pursuing the development but has suffered delays caused by unforeseen circumstances not reasonably within the control of the housing provider. (4) If any property sold by the City for affordable housing under the authority of this Section is subsequently resold by the original housing provider, the purchaser and any subsequent owners of such property must continue to use such property for affordable housing. If said property is ever not so used, then the City may re-enter and recover title to all such property, provided that the City shall first give notice to the record owner of the property and any lenders of record of any violation of this requirement and allow a period of not less than sixty (60) days to cure the violation. The deed conveying the property from the City to such housing provider shall contain such right of entry for condition broken, which provision shall run with the title to the property. (5) All land conveyed to a housing provider by the City pursuant to this Article shall be sold to such housing provider at no more than ninety (90) percent of its fair market value as determined by the City. Land sold out of the land bank program pursuant to subsection (2) above shall not be subject to this requirement. Section 6. That Section 23-355 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 23-355. - Proceeds of sale. All proceeds of any sale of land in accordance with § 23-354 shall be used for additional land acquisitions in accordance with this Article. -5- Introduced, considered favorably on first reading, and ordered published this 20th day of February, A.D. 2018, and to be presented for final passage on the 6th day of March, A.D. 2018. __________________________________ Mayor ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 6th day of March, A.D. 2018. __________________________________ Mayor ATTEST: _______________________________ City Clerk Total # of Households 60,132 33,158 26,162 26,974 Median Income $57,831 $82,237 $93,608 $35,318 Source: U.S. Census Bureau, 2012-2016 American Community Survey 5-Year Estimates