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HomeMy WebLinkAbout8.2 Afford Hous Implem Prg CITY CLERK File # 0430-80 AGENDA STATEMENT CITY COUNCIL MEETING DATE: April 4, 2000 SUBJECT: Affordable Housing Implementation Program - Workshop One Report Prepared by Carol R. Cirelli, Senior Planner ATTACHMENTS: Workshop Agenda Background Report RECOMMENDATION: ~ FINANCIAL STATEMENT: 1. Conduct workshop; and 2) provide staff input. None. DESCRIPTION: Planning staff and hoUsing consultants Vernazza Wolfe Associates, Inc., will be conducting the first Affordable Housing Implementation Program workshop. The purpose of the workshop is to solicit comments from the Council and the public. The agenda for the workshop will cover (also see Attachment 1): · The current status of the City's affordable housing policies and programs; · A comparative review of other cities' affordable housing options and programs; Options for implementing the programs (i.e., targeting special groups; options for changing the Inclusionary Zoning Ordinance; options for spending in-lieu fees; and cost effectiveness of options); and The City Council's recommendations for meeting the State's affordable housing mandates. Attachment 2 provides detailed background information for each agenda topic. A second workshop will be held sometime in late April or early May for the City Council to provide final direction to staff regarding changes to the City's affordable housing policies and programs. COPIES TO: In-House Distribution ITEM NO. g:\housing\implementation program\CC Staff Report - Workshop 1 II. AFFORDABLE HOUSING IMPLEMENTATION PROGRAM CITY COUNCIL WORKSHOP ONE CURRENT STATUS OF AFFORDABLE HOUSING POLICIES AND PROGRAMS OPTIONS FOR IMPLEMENTING pROGRAMS a. Targeting Special Groups First-Time Homebuyers · Seniors · Persons with Disabilities · Low-Income Renters · Work Force (police, fire fighters, teachers, service industry workers, retail clerks, etc.) b. Options for Changing Inclusionary~ Zoning Ordinance · Change in-lieu policy. · Change the threshold project size from 20 units to a smaller project size. · Increase the percentage of inclusionary units from 5% to a higher percentage. · Create a Linkage Fee that could be levied on new commercial developments. e. Options for Spending In-Lieu Fees · Assist affordable housing developers build new housing. · Assist non-profit organizations acquire/rehabilitate existing rental housing. · Purchase land that could be used for affordable housing development (land banking). · Create a first-time homebuyer program or participate in existing programs. · Purchase affordability covenants on existing rental housing. · Expand the housing rehabilitation program. ATTACHMENT / · Preserve at-risk housing (Section 8 or other). d. Cost Effectiveness of Options III. CITY COUNCIL PREFERENCES BACKGROUND REPORT CURRENT STATUS OF AFFORDABLE HOUSING POLICIES AND PROGRAMS a. Affordable Housing Policies Adopted By The City Of Dublin Include The Following: The Inclusiona~_ Zoning Ordinance authorizes the Below Market Rate Housing (BMR) Program. This Ordinance was established in 1996. Developers of 20 or more units are required to provide either one below market rate unit for each 20 units or pay an in-lieu fee. Thus far, 57 BMR rental units have been or are about to be completed by Park Sierra Apartments under Dublin's Inclusionary Zoning Ordinance. Units at Park Sierra meet the "Very Low" inclusionary requirement that restricts these units to residents whose income levels do not exceed 50% of the median annual median income for Alameda County. In conjunction with lower land costs from the Alameda County Housing Authority, Park Sierra received 4% tax credits and bond financing. Developers of other residential projects have elected to pay the in-lieu fee. As of March 2000, the City has collected $3 million in in-lieu fees. A Density Bonus Ordinance was also adopted in the 1990's. This Ordinance grants a density bonus up to a 30% increase in the number of dwelling units authorized for a given parcel, if the housing development consists of five or more units and one or more of the following criteria apply: · Twenty percent of total units are designated for lower income households (under 80% of area median income), or · Ten percent of the total units are designated for very low income households (under 50% of area median income), or · Fifty percent of the units are designated for seniors. For developments meeting these criteria, in addition to the density bonus other concessions and incentives are available from the City. Subject to the Dublin Zoning Ordinance, the concessions and incentives include the option for a reduction in site development standards, approval of certain mixed used zoning projects, and applicable fee waivers. Thus far, no units have been developed under this Ordinance. · Second Units are permitted under Dublin's Zoning Ordinance. These are often referred to as granny flats. During the 1990's, four units were built under the Second Unit Ordinance. Since these are smaller units, their rents are more affordable. City Of Dublin Affordable Housing Implementation Program In addition, the City participates in or assists the following programs operated either by Alameda County or the Dublin Housing Authority. · Rehabilitation and Minor Home Repair is administered by Alameda County and paid for by CDBG funds. Fewer than ten households annually benefit from this program. Funds are provided directly to homeowners who repair/rehabilitate their homes following program regulations established by the County. · Mortgage Credit Certificate Program (MCC) is also administered by Alameda County and provides homebuyer assistance through income tax credits for a portion of the participant's mortgage interest. Normally, mortgage interest is treated as a deduction on the homeowner's tax return. If the buyer participates in the MCC program, a portion of the interest paid is treated as a tax credit and effectively lowers monthly mortgage expenses. This program benefits moderate- income, first-time homebuyers. · The Section 8 Program provides vouchers to eligible households. These vouchers subsidize the difference between market rents and 30% of a participating household's income. The Alameda County Housing Authority administers the Section 8 Program. In Dublin, some Section 8 vouchers are used for helping low-income tenants at the Springs apartment complex. The number of vouchers available to City of Dublin residents depends on allocations made by the U.S. Department of Housing and Urban Development. Currently, thirty-one (31) Dublin residents receive housing subsidies from the Section 8 Program. Finally, there are additional sources of assisted housing. The Springs is a privately funded apartment complex that provides 36 affordable housing units. Arroyo Vista provides 150 conventional public housing units. The Dublin Housing Authority maintains an office at Arroyo Vista to manage these units. This office is staffed by the Alameda County Housing Authority. Shelters for Women and Children (Tri-Valley Haven for Women and Shepherds Gate) These shelters, located in Livermore, are the closest shelters to the City of Dublin. As the above summary indicates, the City of Dublin has several affordable housing programs. Thus far, aside from the conventional public housing units at Arroyo Vista, the BMR program has provided the greatest number of affordable housing units. Although the City has been approached by many of the area's non-profit housing developers, such as Bridge, Eden Housing, and Mid-Peninsula Housing, the City has not recently sponsored new affordable housing developments. 2 City of Dublin Affordable Housing Implementation Program b. Current Policy Within The Context Of The New Regional Housing Needs Numbers In order to comply with ABAG's "Regional Housing Needs", the City of Dublin will annually need to produce 103 very low-income housing units and 71 low-income housing units between January 1, 1999 and June 30, 2006. With the exception of the 57 very low- income units developed at Park Sierra, private and non-profit developers in the City of Dublin have not produced housing units affordable to these two income groups. Assuming that the same levels of production continue in Dublin, the City will be unable to meet even a fraction of ABAG's targeted production goals. (See Table 1.) Although the City has requested that these housing needs numbers be lowered, achieving even these reduced targets is unlikely given the current rate and cost of housing development. Table 1: Comparison of Dublin's Actual Housing Production with Regional Housing Needs Income Category Dublin's Actual ABAG's Annual City of Dublin's Annual Housing Regional Housing Annual Preferred Unit Production Needs Allocation (1993-1999)~ Very Low-Income 0 103 77 Low-Income 4 71 53 Moderate-Income 91 184 137 Above Moderate 91 342 255 Income II. OPTIONS FOR IMPLEMENTING PROGRAMS There are several options for the City Council to consider when planning for affordable housing programs in Dublin. These include the following: · Which groups should be served by the City's affordable housing programs? · Should the Inclusionary Zoning Ordinance be modified to make it an even more effective mechanism to develop affordable housing? · What are options for spending in-lieu fees already collected and how relatively cost- effective is each option? City of Dublin Affordable Housing Implementation Program a. What Groups Should be Served? There are several groups of residents who have greater housing needs than the population as a whole. These include the following: First-time homebuyers encounter the greatest obstacles in purchasing homes, since they lack equity from the sale of a prior home. Frequently, first-time homebuyers lack savings for down payments, although they may have adequate incomes to pay for monthly mortgage costs. It is hard to quantify the need for first-time homebuyer assistance, since information from the census does not identify potential first-time homebuyers as a separate group. There is some evidence of the need for first time homebuyer assistance based on calls made to the City. The City of Dublin receives calls from potential first-time homebuyers, inquiring as to whether there are programs to assist them. In the past six months (September 1999 to March 2000), City staff received approximately 24 calls. Rising interest rates today will increase the affordability problem. The County's MCC program is designed to assist first-time homebuyers, but this program helps reduce the effective costs of monthly payments and does not address the problem of limited savings, except in those cases where the MCC program is matched with a downpayment assistance program. In order for a buyer to purchase the average priced house in Dublin in 1999 ($286,982 according to the Bay East Association of Realtors), the buyer would need savings of at least $29,000 (for a 10% downpayment). If this buyer wanted to avoid mortgage insurance, then a 20% downpayment would be required. This translates into the need for at least $58,000 in savings. Lacking sufficient savings to cover down payments, ' moderate-income households may be prevented from becoming homeowners, if they wish to remain in Dublin. ~ This column does not include Park Sierra, which will contribute an additional 57 very low-income rental units to the City's housing inventory. City o.[ Dublin A[~'ordable Housing Implementation Program The number of seniors as a population group is one of the fastest growing in the country, in large part due to the aging of the baby boomers. As of 1990, there were 438 Dublin households where the head was over 65 Years of age. This represented 6.4% of the population. When the 2000 census results are tallied, it is likely that this percentage will be higher.2 There are several factors to consider when planning for senior housing needs. These include the supply of market rate, smaller units (e.g., Townhomes, patio homes, etc.), housing affordability, and supportive housing that enables seniors to remain independent. Oftentimes, the senior household requires both affordable and supportive housing. Table 2 presents selected 1990 census variables that compare seniors with the overall population. Before interpreting this table, it is important to know that there are only 82 renter households headed by a senior, in comparison to 356 senior owner households. However, among those renters, almost 60% are paying more than 30% of their gross incomes for rent, in comparison to 38% of all households. Table 2 also shows that there is a much lower percentage of seniors with incomes above $50,000 and a much higher percentage of seniors with incomes below $15,000. Limited incomes and high housing cost burdens go hand and hand. In addition, seniors are more likely to have mobility and other self-care limitations. While the actual percentage of seniors with these limitations is approximately 12%, only a fraction of all seniors in Dublin, the rate of disability is approximately four times that of persons between the ages of 16 and 64. Therefore, according to the information presented in Table 2, Dublin seniors could benefit from both special housing and rental assistance. In addition, some seniors need services to help them stay in their homes and programs to retrofit and repair their homes. 2 The 1990 Census may not reflect current conditions in Dublin due to the rapid growth of the City during the past ten years. Between 1990 and 1999, the population in Dublin is estimated to have increased from 23,229 persons to 28,707 persons, for an increase of 24%. 5 City of Dublin Affordable Housing Implementation Program Table 2: Selected 1990 Census Variables, City of Dublin 1990 Census Indicator All Households Households Headed by a Person Over the Age of 65 Affordability ?ercent with incomes $50,000 & Over 55.2% 21.3% ?ercent with incomes below $15,000 5.7% 21.1% Dercent Paying more than 30% of 38.0% 58.5% Income for Gross Rent Number Paying more than 30% of 900 48 Income for Gross Rent Households Paying More than 30% ot Number Percentage of Total Income for Gross Rent Households Earning below $20,000 295 84.0% Households Earning Between $20,000- 445 74.8% $34,999 Households Earning $35,000 and Over 160 11.6% Mobility/Self-Care Limitation Persons 16-64 Persons Over 65 years Years of Age and Older Number % of Number % of Total Total Mobility and/or Self-Care Limitation 421 3.1% 89 12.1% Sources: 1990 Census and Vernazza Wolfe Associates Persons with Disabilities is another group often requiring special housing. According to information presented in Table 2, as of 1990, there was a total of 421 persons of working age that experienced either a mobility or self-care limitation. Although it is hard to gauge what percent of these individuals actually need specially designed housing, this is an area for further investigation, if Dublin is interested in encouraging development of special housing for persons with disabilities. Low-Income Renters generally pay a higher percentage of their incomes for rents. As indicated in Table 2 above, 84% of households earning below $20,000 pay more than 30% of their incomes for gross rent. This totals 295 households. In comparison, only 11.6% of households earning above $35,000 pay more than 30% of their incomes for rent. An additional indicator of need is the number of phone calls received by the City. In the Past six months, 15 calls were received by City staff inquiring about affordable housing opportunities. Low-income renters who have high housing cost burdens are at risk of becoming homeless, if they lose their jobs or experience some other financial setback. 6 City o[ Dubtin A[fordable Housing Implementation Program Work Force Housing (police, fire fighters, teachers, service industry workers, retail clerks, etc.) is always needed in areas with high housing costs. The increase in homeownership costs makes it increasingly difficult for Dublin's work force to buy homes in the area. Since there are advantages to having police, fire fighters and other critical workers living nearby, this lack of affordability is a problem. The problem is more acute for entry level employees. For example, assuming an entry level teacher earns $30,000 per year, and assuming the teacher can obtain a 30 year,' 7.5% mortgage and makes a 20% downpayment, this teacher can afford to purchase a home that costs slightly below $142,500.3 (This is below both the 1999 median price of $226,000, and the average price of $286,982.) Purchasing the $142,500 home would also require savings of over $30,000 to cover the downpayment and closing costs. If the City of Dublin is interested in promoting work force housing, then additional research will be needed to find out what segments of the work force should be targeted, and whether there are potential partnerships for development of this housing. MCC and downpayment assistance could also be targeted to this group. b. Should the Inclusionarv Zoning Ordinance be modified to make it an even more effective mechanism to develop affordable housing? Many cities have discovered that in-lieu fee payments do not generate as many affordable units as do actual provision of units on site. Table 3 compares BMR programs in several San Francisco Bay Area Communities. In Dublin, for example, the developer can choose to pay the in-lieu fee as an alternative to providing a BMR unit. However, in Menlo Park, the developer is required to provide a BMR housing unit and does not have an in- lieu fee option. To date, sixteen (16) planned or executed projects were subject to Dublin's Inclusionary Zoning Ordinance. Most of the developers in Dublin chose the in- lieu fee option as opposed to providing a BMR unit. Since the BMR Program is an important source of housing funds, the City of Dublin may wish to consider increasing the 5% requirement for projects over 20 units. Recently, the City of Livermore proposed strengthening its Inclusionary Zoning Ordinance. Specifically, if a developer elects not to provide required BMR units, then he/she needs to try harder to locate suitable sites for affordable housing. In addition, the City Council voted to increase the in-lieu fee from $1,833 per unit to a maximum of $9,697 per unit. 3 Since interest rates are now higher than 7.5% for a fixed interest loan, this same teacher could not afford to buy even the $142,500 home. 7 Cit~ of Dublin Affordable Housing Implementation Program Ways to change the BMR policy include the following: · Change in-lieu policy. One way the in-lieu policy could be changed would be to require that the developer provide the units on-site, rather than pay an in-lieu fee. · Change the threshold project size from 20 units to a smaller project size. This change has the advantage of increasing the number of BMR units and/or in-lieu fees. Increase the percentage of inclusionar~ units from 5% to a higher percentage. This change, like the decrease in threshold project size, will produce a higher number of BMR units. As the attached table indicates, the City of Dublin has the lowest percentage of inclusionary units required among the cities surveyed. Create a Linkage Fee that could be levied on new commercial developments. This is a new direction. In comparison to BMR ordinances, fewer cities have linkage fees. Since employment growth in a community creates additional employment, some cities feel that commercial developers should help offset the demand for affordable housing created by these new employees. Given the amount of commercial development planned in Dublin, this will be increasingly critical. c. What are the various options for spending in-lieu fees already collected ($3 million) and how relatively cost-effective is each option? · Assist affordable housing developers to build new housing and leverage the City's funds with other funds/programs for affordable housing development, such as low- income tax credits and HUD Section 202 (seniors) loan program. · Purchase land that could be used for affordable housing development (land banking). When considering program options to increase the supply of affordable housing, it is important to note that development of new housing will generally be the most expensive per unit cost. Furthermore, locating suitable sites and obtaining neighborhood support is often challenging. Although building new affordable housing is the most costly option, it has the advantage of adding units to Dublin's existing inventory of affordable units. Various types of assistance can be provided by Dublin to encourage new development, all of which lower development costs. Some of these include land write-downs, silent second mortgages (interest free), fee waivers, etc. Generally, cities work with a non-profit developer that seeks additional financing assistance from other loan programs and the tax credit program. · City o,f Dublin Affordable Housing Implementation Program · Assist non-profit organizations to acquire/rehabilitate existing rental housing through special programs, such as HOME. Purchase affordability covenants on existing rental housing. Although the use of existing rental housing does not expand the housing supply, it converts market rate housing to affordable housing on a permanent basis. When rehabilitation is involved, an acquisition/rehabilitation approach also upgrades existing stock, a positive benefit to the community. Per unit costs that apply to an acquisition/rehabilitation approach are generally lower than for new construction. However, one of the challenges with this approach is locating suitable projects to acquire. Purchasing affordability covenants on existing rental housing is less ambitious than acquiring and rehabilitating an entire project. Instead of solely depending on the BMR program to create affordable units, the City can encourage either the Housing Authority or a non-profit to purchase some units in a new or existing multifamily complex. In this case rehabilitation will not be involved, nor locating the "right" project. Per unit costs should be lower. The challenge in this strategy is obtaining cooperation from an owner or developer. · Preserve at-risk housing (Section 8 or other) At this time, there is only one affordable project (the Springs) at risk of conversion to a market rate project. According to Dublin's Housing Element the earliest date for subsidy termination was in 1991. The Section 8 contract was renewed an additional 10 years until June 23, 2001. Tenants at the Springs are continuing to receive Section 8 vouchers. · Create a first-time homebuyer program or participate in existing programs. There are a variety of ways to create a first-time homebuyer program. The most cost effective approach is for the City to work with Alameda County to provide downpayment assistance for Dublin homebuyers onto the existing MCC program or CHFA's homebuyer program (Affordable Housing Parmership Program). When participants in downpayment assistance programs sell their homes, the financial assistance provided by the City can be returned to a revolving loan pool. Thus, these funds can be used again and again to assist first-time homebuyers. 9 City of Dublin Affordable Housine lmt~lementation Program · Expand the housing rehabilitation program. The City of Dublin currently funds a housing rehabilitation program that is operated by Alameda County. Expanding this program could benefit more low-income homeowners maintain their homes. Housing rehabilitation programs do not expand the supply of housing; however, they extend the useful life of existing housing stock and are not that costly on a per unit basis. g:\housingXhousing implementation\workshop one background report 10 Table 3 SUMMARY OF SELECTED INCLUSIONARY HOUSING PROGRAMS City/ Unit BMR Income Limits Term BMR Units Yr. Began Threshold Percent To Date Notes Rental and Ownership Housing affordable to Most developers have paid in-lieu fees, instead of Dublin 20 units 5 % very low-, low- and 30,years 57 rental units providing BMR units or dedicating land in place 1997 moderate-income of constructing BMR units. households. Rental: Would like BMR % to be higher so that tnore Cupertino 10 units 50% to 80% of 4 ownership, 19 in units result. Also would like to have the time 1993 In-lieu fee for 10 % median 30 years process period for the affordability restrictions increased. smaller Owner: projects (4+ 80% to 120% of 76 rental, with 50 more units) median in process Half Moon 10 unit 20% Rental 30-55 years Rental -35 built, 28 City has growth control ordinance which restricts Bay In-lieu fee mix of low & very entitled, 68 senior in amount of growtb. 1996 for fractional low process above 10 Owner: mostly Owner-12 entitled, moderate, few low 50 in process Los Altos Only applies No absolute, Rental 30 year to buyer 6 ownership Negotiate on case by case basis 1995 to multi-unit strive for more 50-80 % 8 rental in process development than 10% Owner 80-120% Rental:' There have been no rental projects developed in Menlo Park 10 units 10 %1 80 % of median 55 years 18 ownership the city since the program began. 1986 Owner: 120% of median 10% Rental: 151ownership, The program is well supported politically. Palo Alto Rental: 15% on projects 60%-80% of median Development community accepts the program and 1974 5 units of 5 acres + or Owner: 59 years 38 rental is accustomed to developing under it. With future more if rental 80%-100% of median development of Stanford West project expect Owner: housing is additional 95- 155 BMR rental units. 3 units displaced San Carlos 10 units 10% Rental Permanent for 21 units City will consider increasing to 15-20% 1983 In-lieu fee Very low and low owners, 15 yr. requirement. In-lieu fee is 2% of cost. for 1-9 units inc. Minimum when in- Owner lieu fee Moderate inc. 03/28/00 SOURCES: Vernazza Wolfe Associates, Inc.; BMR program administrators at the selected cities Sunnyvale 1980 10 units Table 3 SUMMARY OF SELECTED INCLUSIONARY HOUSING PROGRAMS Rental: 10% 60% of median Owner: $67,4002 20 years 150 ownership 550 rental Would extend affordability term to 50 years. In-lieu fee required for fractional portion of unit (for example, if development is 22 units resulting in inclusionary requirement for 2.2 units). The limit started as 100% of median income. However, because of the big increases iu median income levels the City has chosen not to increase BMR income limits at the same rate. 03/28/00 SOURCES: Vernazza Wolfe Associates, Inc.; BMR program administrators at the selected cities City of Dublin - Affordable Housing Implementation Program SUMMARY OF TRI-VALLEY INCLUSIONARY HOUSING PROGRAMS City/ Unit BMR Income Limits Term BMR Units Yr. Began Threshold Percent To Date Notes Rental and Ownership Housing affordable to Most developers have paid in-lieu fees, instead of Dublin 20 units 5 % very low-, low- and 30 years 57 rental units providing BMR units or dedicating land in place 1997 moderate-income of constructing BMR units. households. Livermore In-lieu fee is possible, but only after developers Under current consider other options for building affordable 1978 None 10% Lower-Income 55 years proposed ordinance, 392 units. Livermore City Council recently increased To be revised affordable rental units the in-lien fee from $1,833 to $9,697, and greater 2000 and 7 single family restrictions will be placed on the option to pay units were developed, fees. The City wants developers to provide units The majority were built (on or off-site) or provide land for affordable with in-lieu fees. housing development. Pleasanton- Since the City is running out of developable land, Proposed an Inclusionary Housing Ordinance that is Inclusionary 15 units 15% Lower-Income In perpetuity Not Applicable consistent with the Growth Management Zoning Ordinance is now preferred over in-lien fees. Fees Ordinance, not can be paid only as a last resort under this yet adopted proposed ordinance. Pleasanton- Flat fee charged Fee has recently been increased and is now In-LieuFee per un it for $2,888 per single family unit and $963 per 1978, revised None residential and Lower-Income Not Applicable Not Available multifamily unit. Commercial space pays a 1999 per square foot $.50/sq. ft. fee. Since 1999, developers have the for commercial option of providing units instead of paying fees. development City helps some buyers by providing second mortgages and downpayment assistance. 'Pleasanton - Priority for project approval given to Growth developments that provide at least 25 % of units at Management None Not applicable Lower- and Moderate- 25 years More than 500 rental affordable rents/costs. Since more projects seek Ordinance- Income units, and 60-70 approval than are allowable under the Growth 1988, revised ownership units. Management Ordinance, developers cooperate by 1993 providing BMR units. San Ramon No BMR 4/4/00 SOURCES: Veruazza Wolfe Associates, Inc.; BMR program administrators at the selected cities.