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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 01/23/2018 - AFFORDABLE HOUSING CAPITAL FUNDDATE: STAFF: January 23, 2018 Sue Beck-Ferkiss, Social Sustainability Specialist Dean Klingner, Transfort and Parking Interim General Manager WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION The Affordable Housing Capital Fund. EXECUTIVE SUMMARY The purpose of this item is to gain direction from Council for the use of the Affordable Housing Capital Fund and update Council on the work of the City’s Internal Housing Task Force. The voters approved an Affordable Housing Capital Fund (AHCF) as part of the Community Capital Improvement Program (CCIP) to be used for the capital costs of one or more affordable housing community. Over ten years the fund will accumulate $4 million. Staff will present suggested strategies for the use of this fund for Council direction and feedback. Council Finance Committee provided guidance at their October 2017 meeting. Staff will also update Council on the work of the Internal Housing Task Force. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Does Council support staff developing a policy to deploy the Affordable Housing Capital Fund in support of: i. Fee Waiver (CEF) backfill ii. Land Bank Program iii. Direct Subsidy iv. A combination of 2 or all 3? BACKGROUND / DISCUSSION In 2015, the voters approved the Affordable Housing Capital Fund (AHCF) as part of the dedicated sales tax initiative for City capital projects. The approved language states: This project will fund capital costs of development or rehabilitation of one or more public or private housing projects designated specifically for low-income individuals or families. Housing is a key issue in City Plan. Funding, supporting and developing affordable housing is called out specifically. The City’s Strategic Plan in Neighborhood Livability and Social Health contains direction to improve access to a broad range of quality housing that is safe, accessible and affordable. The AHCF was considered in the City’s current Affordable Housing Strategic Plan (AHSP). The plan’s guidance was to use the fund for Land Bank Program, backfilling fee waivers, and/or investing in new housing. The production goal for this plan is 188 units per year. The leverage ratio goal is 1:10. Current production since 2015 is about 161 new units, and 404 additional units are currently in the development review process. While City’s production is not yet meeting the goal, production has been increasing each year. All these are targeted to incomes of no more than 60% and many to lower incomes. Currently, needs exist for all low-income demographics including families, seniors, permanent supportive housing and all special populations as described in the City’s AHSP. The AHCF funds accumulate over time according to the following schedule: 2016 $200,000 2017-2018 $250,000 2019-2020 $400,000 2021-2015 $500,000 January 23, 2018 Page 2 The current fund balance is $587,500, which is the sum of the 2016, 2017, and 2018 allocations, less the $112,500 appropriated as a match to General Fund Reserves for backfilling fees waived for the Village on Horsetooth development. The fund will accumulate a total of $4 million over 10 years. There are no additional sources contributing to this fund presently, but that could change if the City decides to impose an affordable housing impact fee or pursues other dedicated funding sources, as suggested in the City’s Housing Affordability Policy Study. Staff was directed to look at the most effective way to use this fund to incentivize one or more affordable housing projects. This task was given to the Internal Housing Task Force (Task Force) which is a multi - departmental group with representatives from over 10 City departments including: City Manager’s Office, Communications and Public Involvement Office, Economic Health Office, Environmental Services, Engineering, Finance, Planning, Social Sustainability, Utilities (Community Engagement, Finance, and Water). Other departments’ expertise is also tapped as needed. This group was created in recognition of the importance of the issue of affordable housing to our community and the fact that many City departments are involved in this type of development. The task force is also looking at additional ways (including non-financial) to incentivize the affordable housing needs of our community as expressed in the City’s Affordable Housing Strategic Plan. Those options fall generally into the following categories: • Land Use, including the development review process • Financial, in addition to the specific AHCF strategies and including new funding sources • Policy • Affordable Housing Programs and Education The task force will continue to vet these options and present the best ideas to Council at a Work Session on June 26, 2018. In analyzing the voter approved language for the AHCF, staff focused on the capital costs purpose and the low- income target population. Staff looked at trying to maximize the productions of units while at the same time leaving flexibility to respond to future opportunities that present while also striving for innovation. That said, $4 million does not go far in the production of affordable housing units that often cost more than $200,000 per unit to construct and not much less to rehabilitate units for preservation. With that in mind, the AHCF must be a leveraging tool and something to be added to the way the City is already supporting affordable housing projects. To further illustrate that point, here are examples of recent construction projects total development costs: Community Total cost Units City investment Source of investment Redtail $12.5 M 60 $1.68M CDBG/HOME $1,085,856 AHF (City) $229,416 Fee Waivers $288,000 ($233,781 backfilled) Legacy $14.7 M 60 $717,000 CDBG/HOME $688,261 AHF (City) $28,890 Horsetooth $26.5 M 96 $1.5 M+ HOME $1.1M Fee Waivers $352,319 ($292,345 backfilled) Discounted land 20% Oakridge Crossing $22 M 110 PAB allocation City assigned part of state allocation of bond capacity Revenue Sources Community Development Block Grants (CDBG) and HOME funding is federal funding from the Department of Housing and Urban Development. The Affordable Housing Fund (AHF) is City general funds. Waivers of capital expansion fees are typically reimbursed with General Fund reserves. The Private Activity Bond support is assigning tax free debt capacity and not actual funding. January 23, 2018 Page 3 Recent rehabilitation projects have had similar big budgets. Below are examples of a large and a small rehabilitation projects: Community Total cost Units City Investment Source of investment Village on Shields $64M 285 $3.14 CDBG/HOME/AHF Village on Matuka $1.1M 20 $380,000 CDBG Fee waivers are an incentive provided by City Code at the discretion of City Council. They are only available for units targeting households with income of no more than 30% area median income (AMI) which is currently about $16,150 for a single person or $24,600 for a family of 4. Since the City recently expanded eligibility of this incentive to all developers of units for this income there may be more requests for this type of support. That would require additional City resources because the City’s custom is to reimburse City departments for capital expansion fees that are waived. This has typically come from General Fund Reserves. The expansion of this incentive may require additional funding sources. Staff will also continue to compare the utility of the fee waiver policy with all incentives under consideration. It may be that this policy could change or become an aspect of the direct subsidy process. The last 4 projects that received waivers and backfill of CEFs were: 1. In 2011, $509,896 was backfilled for CARE Housing’s Provincetowne 2. In 2014, $288,000 was backfilled for Redtail Ponds 3. In 2017, $100,708 was backfilled for Village at Redwood 4. Also in 2017, $292,345 was backfilled for Village at Horsetooth. In considering the best use of the AHCF, the Task Force considered many things including: • Immediacy - How quickly do we want to use these funds? • Number of investments - One project or multiple? • Flexibility - How do we respond to funding or innovation opportunities? • Metrics for success - Just more units or innovation factor? • Target population - The Lowest wage earners or more of the housing spectrum? In addition to regular monthly meetings, the Task Force conducted two focused sessions on the best use of the AHCF. a developer’s focus group was convened to get industry input early in the process and to test the Task Force’s ideas. The following strategies were presented to the Council Finance Committee (CFC). The Task Force looked at existing programs as ways to deploy these funds quickly, and also proposed some ideas for new programs that may take some time to develop. Lastly, it was noted that since the funds come in over time, strategies requiring more money may have to wait until more funds accumulate. Staff identified five strategies for CFC consideration. Noting the relatively small fund size, CFC directed staff to use the fund for the first three options listed below. The other two options were determined too ambitious at this time. Proposed Preferred Strategy details: 1. Fee Waiver Backfill: • Existing program that targets households making no more than 30% AMI. • Responds to assist developers already bringing affordable housing projects and relies on those projects coming forward. • Total contribution to project is limited to waivable fees. Since total capital expansion fees are not typically more than 9% of total project cost, impact of fee waiver is relatively small - typically around 3%. 2. Land Bank Program: • Existing program that could use fund if land is identified and would serve incomes in the affordable ranges. Program specifies limit what may be constructed. January 23, 2018 Page 4 • Securing land guards against price escalation and provides dedicated location. • Relies on developers’ response to City issued Request for Proposals • Offers discounted land value, financial impact small to overall costs. 3. Direct Subsidy: • New program with parameters to be determined. Time would be required to develop. • Two Possible approaches: i. Two pronged program with the City Code providing specific amounts per unit in income ranges up to a maximum amount or the ability to ask Council for more than the amounts per unit if that is what is required. For instance, $15,000 per 30% AMI unit, $10,000 per 40% AMI unit and $5,000 per 50% AMI unit or a discretionary ask of Council for $4 million to close a funding gap in one development. This could be first money in and help the project compete for and attract other funding. ii. Another approach would be to use the fund as the last money needed to complete the funding package for a project - also known as a gap filler. This could be patterned on the Urban Renewal Authority’s “but for” policy adapted for affordable housing issues. • Could target specific incomes, for example up to 60% AMI. • Responds to assist developers already bringing affordable housing projects and relies on those projects coming forward. • Total contribution and impact to each project would vary. Proposed Non-Preferred Strategies: 1. Social Innovation Grant: • New program with parameters to be determined. Time would be required to develop. • A competition approach for innovation in addition to affordable housing units. This could be innovation in an existing affordable housing concept and assist a developer bringing housing to the market, or it could be a new concept that traditional funding sources could not support. • Could serve the affordable housing income ranges and possibly include mixed income options. • Total contribution to development costs would depend on how much of the fund is offered. 2. Affordable Housing Demonstration project: • New program with parameters to be determined. Time would be required to develop. • Concept is that the City would purchase land or a building for adaptive reuse to be offered to a partner for an affordable housing development that would meet the goals of several City programs in addition to providing affordable housing. For instance, it could need to meet the City’s Climate Action goals and/or include Nature in the City. • More flexible than the Land Bank Program. • Could serve affordable ranges and possibly include mixed income if the City desires. • Would require a substantial portion of the AHCF. • Total contribution to the project estimated in the range of 15-25%. Next Steps • Implement Council guidance on presented strategies. • Create program for direct subsidy option if directed by Council. • Continue to develop additional ways to incentivize affordable housing with and without the AHCF. ATTACHMENTS 1. 2017 Income Limits (PDF) 2. Powerpoint presentation (PDF) 2017 Income Limits Income Limits (effective 06/15/17) 2017 Median Income: $76,800 City of Fort Collins Household Members AMI = Area Median Income *80%, 50% & 30% are the Section 8 income limits published by HUD. Income 1 2 3 4 5 6 7 8 100% of AMI $53,800 $61,500 $69,200 $76,800 $83,000 $89,100 $95,300 $101,400 80% of AMI* $43,050 $49,200 $55,350 $61,450 $66,400 $71,300 $76,200 $81,150 60% of AMI $32,280 $36,900 $41,520 $46,100 $49,800 $53,460 $57,180 $60,840 50% of AMI* $26,900 $30,750 $34,600 $38,400 $41,500 $44,550 $47,650 $50,700 30% of AMI* $16,150 $18,450 $20,750 $24,600 $24,900 $26,750 $28,600 $30,450 ATTACHMENT 1 January 23, 2018 Affordable Housing Capital Fund Sue Beck-Ferkiss and Dean Klingner 1. What feedback do you have on the strategies staff presented? How many investments? How soon? 2. Are there additional strategies staff should explore? 2 Does Council support deploying the Affordable Housing Capital Fund to support: • Fee Waiver (CEF) backfill • Land Bank Program • Direct Subsidy • A combination of 2 or all 3? Questions to Consider Plan and Strategy Alignment 3 CITY PLAN CITY STRATEGIC PLAN AFFORDABLE HOUSING STRATEGIC PLAN Overarching Production Goal The increase ratio of affordable housing to all housing from 5% to 10% by City Build out. Affordable Housing Goals 188 Annual Goal UNITS In Development Pipeline 404 Units Built Since 2015 161 Steps up to 244 units per year starting in 2020 Affordable Housing Programs & Funding 5 • Land Bank Program • Land Use & City Code Incentives • Competitive Process • Federal Community Development Block Grants • Federal HOME funds • City Affordable Housing Fund • Affordable Housing Capital Fund 6 • Inform/educate on Housing Policy • Align policies/programs/processes impacting affordability with City Strategic Plan • Recommend financial & non-financial incentives and partnerships to promote housing options Citywide Task Force • City Manager’s Office •CPIO • Economic Health Office • Environmental Services • Engineering • Finance • Planning • Social Sustainability • Utilities - Community Engagement • Utilities - Finance • Utilities - Water 7 Citywide Task Force “This project will fund capital costs of development or rehabilitation of one or more public or private housing projects designated specifically for low-income individuals or families.” 8 Voter Approved Language Affordable Housing Capital Fund • Passed by the voters • $4 million over 10 years • Collected $700,000 • Allocated $112,500 for backfill of CEFs CURRENT BALANCE: $587,500 • Additional sources? 9 27% 24% 20% 11% 8% 4% 3% 2% 1% $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 LIHTC Federal Equity Permanent Loan LIHTC State Equity RAD Proceeds State Disaster Relief City Grant Funding Deferred Developer Fee Fee Waiver Owner Equity City Funding Debt supported by rents Other Sources Sample Funding Stack $25M Multifamily Rental Project 11 REDTAIL PONDS LEGACY SENIOR HOUSING VILLAGE ON REDWOOD City’s Role in New Construction Community Units Total Development Costs City investment Fee waiver CEF Backfill Redtail Ponds 60 $12.5 M $1.7 M $288,000 $233,781 Legacy 60 $14.7 M $717,000 n/a n/a Village on Redwood 72 $19.4 M $2.8 M $100,708 $80,132 Village on Horsetooth 96 $26.5 M $1.5 M $352,319 $292,345 Oakridge Crossing 110 $22 M Private Activity Bond $130,000 Estimate (Request expected) $100,000 Estimate 12 City’s Role in Financing Construction 13 VILLAGE ON SHIELDS VILLAGE ON MATUKA COURT VILLAGE ON PLUM City’s Role in New Construction City’s role in Financing Preservation Community Units Total Project Cost City Investment PAB assigned? Village on Plum 95 $16.1 M $950,000 yes Village on Matuka 20 $1.1 M $380,000 no Village on Shields 285 $64 M $3.14 M yes 14 • Number of investments • Target demographic to serve • Ultimate goal: Units and/or achieve multiple City goals • Development costs • Flexibility • Leveraging funds 15 Policy Considerations Fee Waiver Backfill Land Bank Direct Subsidy Timeline Immediate Immediate 12 months Population target 30% AMI and less 30‐80% AMI 30‐80% AMI % of total project cost No more than 10% Discounted land cost ‐ less than 5% Depends‐ up to 20% (entire fund) 16 Strategies - Existing Programs 1. What feedback do you have on the strategies staff presented? How many investments? How soon? 2. Are there additional strategies staff should explore? 17 Does Council support deploying the Affordable Housing Capital Fund to support: • Fee Waiver (CEF) backfill • Land Bank Program • Direct Subsidy • A combination of 2 or all 3? Questions to Consider