The planning commission has made a recommendation that the city council initiate amendments to the Hermiston zoning code to address housing needs.

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1 Staff Report For the Meeting of April 24, 2017 MAYOR AND MEMBERS OF THE CITY COUNCIL Agenda Item # NO SUBJECT: Planning Commission Housing Recommendation Subject The planning commission has made a recommendation that the city council initiate amendments to the Hermiston zoning code to address housing needs. Summary and Background At the January 2017 goal setting session, the city council established that promotion and construction of housing will be a top priority for the city. To establish a baseline of issues facing the development community, the planning commission held a workshop in March. Several members of the development and real estate community attended to discuss what are seen as the biggest issues facing residential development. The discussion was very productive and informative for the city in shaping policy in the future. There are three issues that were identified as central to creating an economically viable housing market. 1. The cost of bare land is not commensurate with the true value of the available property. The asking price for bare land is much higher than the actual worth of the property. 2. The available construction labor force does not charge competitive wages. 3. Infrastructure costs, especially water, are limiting development. One of the ideas considered to alleviate the housing shortage is to consider solutions promoting infill in existing residential areas. Infill is a planning concept where property which has some existing development, or is within an existing developed neighborhood, is considered for future, denser development. Infill has several advantages. The cost of development is lower due to established infrastructure in the vicinity. It creates an efficient use of land by allowing development on land which would otherwise lie fallow. Infill can also help property owners to capitalize on existing equity in their property by selling unused portions of their property. Infill is often used in places which are constrained in some way in order to facilitate development. Staff has prepared five case studies of lots identified as potential infill lots. The case studies are attached to this memo. Each study identifies a lot, constraints (if any), and attempts to determine the cost of developing the lot in compliance with the city s current regulations.

2 In Oregon infill is often used as a zoning tool. A city may identify neighborhoods or large areas which are underdeveloped and write a unique zoning code for that area which attempts to alleviate some of the shortcomings holding the property from fully developing. The case studies and a general study of potential infill sites in Hermiston has revealed that the traditional zoning district framework is not the most efficient solution in Hermiston. Potential infill sites are widely distributed and rarely clustered in neighborhoods. A vacant lot may be entirely surrounded by a fully developed neighborhood but the neighborhood is 50 years old and no street improvements were ever installed. A lot may sit at the end of a 300-foot street entirely separated from existing sewer and water services. The type of undeveloped or underdeveloped lots found in the city are almost always unique in their constraints. A zoning district is almost impossible to tailor to shortcomings when one lot might be 15 feet too narrow to accommodate a house and another lot 150-feet away has a canal occupying half the buildable area. After discussing the issue with development staff and land use counsel, staff recommends that infill continue to be pursued as an exception or special designation process rather than a zoning process. Cities can grant exceptions for needed housing under ORS and 307. If the city council agrees with the planning commission recommendation, staff will begin developing a code provision for inclusion in the zoning ordinance which allows land owners to apply for an infill designation for a piece of property. The underlying process would be similar to a variance. It would be a land use decision with notice to adjacent property owners and a hearing before the planning commission. A parcel proposed for designation as infill property would have to demonstrate compliance with a set of objective criteria and would not be applicable to accessory dwellings. The criteria have not yet been developed, but some of the concepts discussed at the staff level include: A property is served by inadequate water, sewer, or street access and extension/construction of standard utilities is not practical, possible, and/or logical. A property has been platted for more than 50 years and no development has occurred in that time. A property has been in continuous ownership by one party for more than 50 years and no development has occurred in that time. A property is surrounded on at least two sides by development which does not meet current lot size, lot width, lot coverage, or setback requirements. A property can be developed with at least 80% of the current lot size, lot width, and/or lot depth requirements

3 The other short term housing solution which was discussed at length during the March meeting was a modification of the city s lot size, lot coverage, and setback requirements. Attached to this memo are three charts comparing these factors among other communities. Hermiston is generally more conservative than other towns on lot size and setback requirements. Modification of these requirements is something that could be considered to encourage more cost-effective development. Lot coverage and setbacks in particular are much more restrictive than in similar communities. Changes to the zoning standards will help but not entirely solve the issue of bare land costs. Liberalizing setback and lot coverage requirements allow for larger home sizes which decreases the cost per square foot in home construction. Smaller lot sizes allow for increased density which can help increase the number of lots per acre, recouping more of the investment in bare land. The issue of public infrastructure costs is very challenging. Adequate infrastructure is necessary for public safety and health. It is also important that every development have adequate utilities and services to function. All internal improvements are typically funded at the developer s expense. Off-site improvements and oversizing for future use are usually shared by the city and developer either through cash contributions or future permit credits. The planning commission recommended that the city council direct public works staff and engineering staff to consider innovative new financing methods for funding larger public works projects which can make development too expensive. Fiscal Information The code amendments have no fiscal effect on the city. Early analysis shows that all of the code work can be done by city staff in-house and no outside consulting help is likely to be needed. Alternatives and Recommendation The planning commission made three recommendations to the council at their April 12 meeting. 1. Direct staff to begin modification of the zoning ordinance to ease setback and lot coverage requirements, and to consider lowering the minimum lot sizes in each zone. 2. Direct staff to begin modification of the zoning ordinance to develop a process and criteria for undeveloped or underdeveloped residential property may be designated as infill property to encourage development of these underutilized properties. 3. Direct staff to consider new and innovative methods of financing public infrastructure construction to help encourage development in areas underserved by existing infrastructure. Requested Action/Motion

4 Staff recommends that the city council accept all three recommendations from the planning commission and consider making the following motion: That the city council accept the planning commission s recommendation and direct the city staff to begin the three processes to assist residential development. Reviewed by: Department Head Clinton Spencer, City Planner City Manager Approval

5 To: Planning Commission From: Clinton Spencer, City Planner Subject: Infill Case Study 4N 28 02CB Tax Lot 202 Date: March 16, 2017 The following identifies a potential infill parcel which is severely constricted but which also offers three potential single-family lots with minimal effort. The property is located on an undeveloped portion of NE 3 rd Street south of E Theater Lane. The attached map highlights the parcel, existing water and sewer lines, and shows the existing conditions on the ground. The parcel was originally platted in 1950 as part of the Elwood Tracts which were not incorporated into the city at the time of platting but the city limits has grown up around the parcels in the intervening years. NE 3 rd Street has been dedicated as a public street but has never been improved in any manner. It is a dirt road with severe encroachments of lawn and fencing into the right-of-way. Since the area was outside the city at the time of platting, and subsequently vacant, there was never a need to extend water and sewer lines into NE 3 rd Street as those lines were installed in E Theater Lane. The property itself is one tax lot, but the tax lot contains three lots from the original subdivision plat. These three lots are consolidated for tax purposes but still constitute three discrete parcels for potential building, meaning there is a potential for three single-family homes. It is also possible to replat the parcel and create a multi-family parcel capable of accommodating up to eight dwellings. Staff has consulted with the city engineer and determined that in order to develop this parcel in a conventional manner the following investments are required: Full width street paving (34 feet wide) 300 ft x $100 per foot = $30,000 Curb, gutter, sidewalk on east side 300 ft x $100 per foot = $30,000 8-inch public sewer line 300 ft x $75 per foot = $22,500 8-inch public water line 300 ft x $75 per foot = $22,500 Total Investment $105,000 From the above chart, it is difficult to justify an investment of $105,000 for three houses. Compliance with city requirements equates to an added investment of $35,000 per lot to bring the properties up to salable condition. The property itself raises some interesting concerns about whether strict application of development standards is appropriate. For instance, an eight-inch ductile iron water service is the city s standard, but is oversized for serving three houses with no potential for future extension. Similarly, an eight-inch sewer line is oversized. By 180 NE 2 nd Street, Hermiston, OR (541) PHONE (541) FAX hermiston.or.us 1

6 City of Hermiston PLANNING DEPARTMENT varying the city s public works standard in special circumstances, the cost of development can be lowered. Similarly, a narrow street standard may be appropriate as well when there is no possibility of extension or a very low number of dwellings served. For example, a flag lot can serve up to two dwellings with a single 25-foot wide driveway. Perhaps a full public street is not appropriate in this situation? This case study is an extreme example not of inadequate building area as discussed at the March 8 meeting, but of inadequate infrastructure. Developing a city-wide infill policy must take into account the fact that no two parcels are alike and face different challenges. 180 NE 2 nd Street, Hermiston, OR (541) PHONE (541) FAX hermiston.or.us 2

7 NE 2ND PL Infill Case Study #1 - NE 3rd Street E THEATER LN NE 3RD ST Legend Source: Esri, DigitalGlobe, GeoEye, Earthstar Geographics, CNES/Airbus DS, USDA, USGS, AEX, Getmapping, Aerogrid, IGN, IGP, swisstopo, and the GIS User Community Infill Case Study Municipal Sewer Line Municipal Water Line Property Line Feet I

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