City of Ferndale PLANNING COMMISSION STAFF REPORT

Transcription

1 City of Ferndale PLANNING COMMISSION STAFF REPORT MEETING DATE: _February 14, 2018 BILL # AGENDA SUBJECT: Multifamily Fringe/Infill Zone (Re-introduction/ workshop) DATE: February 14, 2018 FROM: Jori Burnett PRESENTATION BY: Jori Burnett EXHIBITS EXHIBIT 1 RMM ZONING (EXISTING 2017) EXHIBIT 2 POTENTIAL MULTIFAMILY FRINGE AREAS EXHIBIT 3 GRIFFINTOWN PARCELIZATION EXHIBIT 4 SALES ANALYSIS RECOMMENDATIONS: Re-initiate discussions related to a potential new zone/ rezone of multifamily areas surrounding the Downtown core. A workshop has been scheduled. No final decisions are expected. BACKGROUND: The 2016 Comprehensive Plan updates anticipated that the City would review its existing zoning regulations in order to identify potential changes that would ensure that the City s zoning was achievable, that the zoning met the overall goals of the plan, and that the zoning made sense 1. Throughout much of 2017, the Planning Commission discussed new multifamily zoning towards the periphery of the city, focusing on large-lot properties where an applicant could build a development concept more or less from scratch. These efforts resulted in the City s RMM Zone (Residential Multifamily Medium see Exhibit 1). The City did not focus on those areas currently zoned for multifamily development that are in close proximity to the City s core, as well as some smaller properties that carry existing Residential Office (RO) or Residential Multifamily (RM 1.5) zoning. These areas, shown in Exhibit 2, are generally located west of the core (Sterling, Hamlin Streets), in Griffintown east of Second Avenue, south of Cherry Street in close proximity to the Boys and Girls Club, and in certain other locations of the City generally on smaller lots. See Exhibit 3 for an example of the underlying lots within Griffintown. 1 Long-term Planning Commissioners are familiar with the term planning by computer, or planning by spreadsheet. This refers to long range plans or growth projections that are based only on mathematical assumptions: a parcel of land of a certain size could, and therefore will in time, support a certain number of people. Often these projections ignore other important factors, including the cost of delivering services, which is the focus of this staff report. Page 1 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

2 To various degrees these areas have been previously developed with single family residences. With the exception of some parts of Second Avenue south of Cherry Street, the areas have already been subdivided into individual lots. As was typical for that era of development, internal alleyways were also included in the original subdivisions. Though the areas have been zoned for multifamily uses for decades, redevelopment has occurred in fits and starts. And while some legacy single family neighborhoods in other cities (Lettered Streets, Eldridge Avenue in Bellingham, Queen Anne Hill in Seattle) have not been wholly redeveloped with multifamily due in part to the historic 2 nature of the existing residences, with few exceptions the same cannot be said for Ferndale s neighborhoods. Staff believes that the City long-ago recognized the advantages of allowing denser residential development in these neighborhoods. Such development would further support the Downtown core, would place more residents in proximity to transit, schools, and parks, and could respond to an emerging housing need by bridging the gap between single family developments and large apartment buildings. We do not suggest revisiting these conclusions. Instead, Staff would like to initiate a discussion of zoning in this area by asking why the existing zoning has not worked, prior to discussing what new zoning could work. We believe it is reasonable to conclude that after forty years in a growing city, the success or failure of a zone would be clear. ANALYSIS: Staff has a number of theories as to why redevelopment of these areas has not occurred. Of course, the underlying assumption is that almost any zone will work if it pencils out (and that no zone will work if it doesn t). So why has development not occurred? Since the majority of land in these areas has already been developed in some manner, the costs for a land use developer are typically higher than they would be for undeveloped land. While the developer may see value only in the land, the seller values the existing structure that has been built onsite as well. A developer must then pay more to acquire the land but must also pay to demolish the structure. These are basic market-driven costs that the City recognizes it cannot control. All else being equal, development will be drawn to undeveloped properties due to the lower cost to develop. 3 The areas in question do have a limited advantage when compared to undeveloped properties at the periphery of the City, in that they are in close proximity to existing parks and services. Some of these amenities, particularly in Griffintown, have only been added recently. Once there is a critical mass of 2 Many of the residences in Ferndale s neighborhoods are older, and by virtue of that fact alone may be considered historic and worthy of preservation an issue that the Planning Commission may wish to discuss. 3 Staff has talked to a number of developers in order to clarify their expectations for profit on infill projects. While different developers will have a range of profit expectations, it appears that an overall profit/overhead of 10% (8% profit, 2% overhead) on a project is on the low side of the norm. This means that in a twelve-month project with a total cost of $750,000 (for instance, a fourplex development), the developer would expect to earn approximately $60,000. When there are significant unanticipated costs, this twelve month profit could be reduced in half or more. Page 2 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

3 amenities, it is possible that demand for new development in these areas will increase. Or, once there is a scarcity of lots in other areas of the City, the willingness to pay for properties with existing buildings will increase. However, Staff is concerned that there are additional existing development costs that have not been fully considered. Up to this point in the discussion, Staff has made a number of observations that are very planning-based, but lessons learned from recent development in these areas point to a gap between the existing infrastructure in these areas and what would be required to support development of the type envisioned by the City s existing zoning. The Existing Neighborhood Whenever a zoning modification is proposed that projects very different land uses from what currently exists on the ground, it is important to be aware of and understanding of the property owners in the area, and how they might be impacted by the proposal. What are the demographics of the area? Are these areas that are already in transition, or are they an intact neighborhood, where the neighbors have been in place for years? Does the neighborhood/ type of development fill a need for the community, where if it were to be replaced, those residents (or others) would struggle to find similar accommodation elsewhere? Would the proposed changes occur incrementally, where an individual property owner would choose to sell their property without substantially altering the dynamics of the surrounding property? This staff report cannot answer all of these questions. But there are some factual statements that can be made. Exhibit 4 provides an analysis of several of these areas, based upon property sales data from the online real estate service, Zillow. With the possible exception of that area immediately west of Downtown, the subject areas appear to be relatively transitional: a significant percentage of the lots have been bought and sold (in some cases multiple times) over the last two decades. Yet for some reason, the homes continue to be used for single family purposes rather than making the transition to multifamily. The question of why this is has yet to be answered but Staff feels that the significant churn of ownership does tend to counter the argument that these are static, unchanging neighborhoods. While the purchase price of these lots is lower than the average sale price in Ferndale, it appears based on Whatcom County Assessor data that the value of the houses compared to the value of the land is less than in other areas. For example, it is not uncommon for the Whatcom County Assessor to value a house in a subdivision at approximately 2x the value of the underlying land (a developed property valued at $300,000 by the Assessor will often break down as $200,000 value for the house, $100,000 for the land). On many of the lots within the study area, the Assessor assumes almost an equal house/land valuation (For a $200,000 property, $100,000 value for the house and $100,000 for the land. Page 3 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

4 This suggests that the actual land sales are over-valuing the house, at least compared to the Assessor s 4 expectations. Whether the Assessor is right or wrong, it also means that a potential developer must compete against other buyers who place more value in the house. The Planning Commission should also consider the price point at which these properties are being sold: it is likely that many of these houses are being purchased by first-time home buyers, and/or by individuals or families that can no longer afford more-costly homes. If these low-cost single family residences were to be eliminated over time, is there a reasonable replacement elsewhere in the community? Or, do these ~$200,000-$225,000 lots get replaced with apartments/ rentals, with the closest comparable single family home lot in Ferndale costing $250,000 or more? What about Infrastructure? Much of the infrastructure in these areas was established many decades ago, with the goal of connecting the properties to urban services, rather than anticipating future growth. As a result many of the utilities are under-sized and/or cannot support additional connections. In these cases applicants must sometimes chase an undersized pipe back to the mainline that may be located hundreds of feet offsite from the project location. This creates additional costs in time and expense for the applicant. Redevelopment of properties in these areas is unlikely to yield a significant profit for developers. Unlike Seattle and Vancouver, there is not (yet) a market for luxury multifamily developments in Ferndale where a developer could substantially mark up the price per unit based on the real or perceived amenities, and the scale of redevelopment in these areas does not yield a volume-based profit. Therefore, when developers consider an infill development in Ferndale, they are doing so with the expectation of relatively small margins, and with the hope that the required improvements will take place only on the subject property or immediately in front of the property, in the form of frontage improvements (curbs, gutter, sidewalk). When there are additional infrastructure requirements the aforementioned utility pipe improvements, or the need to establish onsite stormwater the costs to an applicant may diminish or eliminate any sort of profit. A good point can be made that applicants who argue that their profits have been eliminated should expand their vision: that profits may not be possible for a two-story, four unit development, but that profits could be made on a four-story, sixteen unit project on the same property or by combining two properties. And, whether the applicant is in favor of such an approach or not what impacts would the larger project have on the surrounding area? 4 The Assessor does not attempt to predict market value. For example, the Assessor typically undervalues both properties and houses due in part to the very hot housing market throughout Western Washington. But the Assessor does provide relatively objective information over a large sample size. Page 4 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

5 Staff expects that this balance of objectives will be discussed by the Planning Commission and may inform the ultimate zoning regulations. Does the City require higher densities, mindful of the possibility that this is may be only way to achieve redevelopment? Does the City participate in addressing existing infrastructure, without putting the responsibility entirely on one applicant? Does the City identify a type/scale of development that it would prefer, and then work backwards to determine the best way to achieve it? Does the City take the position that the market will determine when redevelopment occurs, and that the City will wait until such time as projects start to pencil out? Does the City take a hard-line approach, understanding that only large-scale developments can pencil out? CONCLUSIONS: Staff wishes to initiate these conversations based not only on the directives of the Comprehensive Plan, but from the perspective that none of these neighborhoods have emerged from a transitional stage that has likely been present for several decades. While this is a subjective perspective, the neighborhoods have clearly not been redeveloped to reflect existing zoning. And while we believe that multifamily zoning and redevelopment achieves a range of desirable goals, we do not believe that by simply modifying the zoning that the existing physical or market obstacles can be ignored. There probably has not been a zoning modification made over the last ten years that, if successful, would have the potential to impact as many people that are currently in place as this proposal. Most of the zoning changes that have occurred have impacted undeveloped properties, or have impacted properties around the edges (such as increasing height limits but not allowing or disallowing the primary type of use that currently existed). Staff wants new zoning in this area to be successful, and therefore we seek to more fully understand the existing dynamics of these areas. The Public Works Department is currently working on significant modifications to the 6-Year Capital Improvement Plan with a goal of ensuring that long-range planning expectations and infrastructure projects are matched. The Planning Commission is not expected to develop a specific plan of attack based on this staff report. Rather, the staff report is intended more to start the conversation that will inform that plan. It is likely that additional information related to the size and location of existing infrastructure and the anticipated size of future infrastructure necessary to serve possible development will be provided as soon as the March Planning Commission meeting. Page 5 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

6 EXHIBIT 1 THORNTON MALLOY PORTAL RS Low-Single Family Dwelling VIS CHURCH TA MAIN LA UG DO S MAIN LA UN BO LABOUNTY TY OpenStreetMap (and) contributors, CC-BY-SA City of Ferndale, WA Residential Multifamily Medium Zone Residential Multifamily Medium City Limits Page 6 of 15 DISCLAIMER: USE OF THIS MAP IMPLIES THE USER'S AGREEMENT WITH THE FOLLOWING STATEMENT: O The City of Ferndale disclaims any warranty of merchantability or warranty of fitness of this map for any particular purpose, either express or implied. No representation or warranty is made concerning the accuracy, currency, completeness or quality of data depicted on this map. Any user of this map assumes all responsibility for use thereof, and further agrees to hold the City of Ferndale harmless from and against any damage, loss, or liability arising from any use of this map CITY OFPrint FERNDALE PLANNING FEBRUARY 14, 2018 Map Date: February, 2018COMMISSION 1 Miles

7 EXHIBIT 2 THORNTON MALLOY PORTAL RS Low-Single Family Dwelling VIS CHURCH TA MAIN LA UG DO S MAIN LA UN BO LABOUNTY TY OpenStreetMap (and) contributors, CC-BY-SA Residential Multifamily 1.5 & Residential Office Zones RM 1.5-Multiple Dwelling Residential Office City Limits Page 7 of 15 City of Ferndale, WA DISCLAIMER: USE OF THIS MAP IMPLIES THE USER'S AGREEMENT WITH THE FOLLOWING STATEMENT: O The City of Ferndale disclaims any warranty of merchantability or warranty of fitness of this map for any particular purpose, either express or implied. No representation or warranty is made concerning the accuracy, currency, completeness or quality of data depicted on this map. Any user of this map assumes all responsibility for use thereof, and further agrees to hold the City of Ferndale harmless from and against any damage, loss, or liability arising from any use of this map CITY OFPrint FERNDALE PLANNING FEBRUARY 14, 2018 Map Date: February, 2018COMMISSION 1 Miles

8 NEW FERNDALE SUBDIVISION (RECORDED ~1900), OVERLAID ON EXISTING PARCEL BOUNDARIES NOTE THE OVERALL DENSITIES ANTICIPATED AT THAT TIME (LOTS 25 X117 = 2,925 SF) Page 8 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

9 EXISTING LOT BOUNDARIES NOTE REMNANT LOTS FROM NEW FERNDALE, AS WELL AS EXISTING ALLEYS. NOTE ALSO THE DEGREE TO WHICH THE MAJORITY OF LOTS HAVE CONSOLIDATED OLD LOT LINES OVER TIME Page 9 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

10 AERIAL PHOTO OF GRIFFINTOWN NOTE HOW THE AREA HAS EVOLVED FROM THE DENSE DEVELOPMENT ANTICIPATED OVER A CENTURY AGO, TO THE SINGLE FAMILY NEIGHBORHOOD THAT EXISTS NOW, GENERALLY CONSISTING OF SMALL, EARLY TO MID-CENTURY HOMES Page 10 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

11 Griffintown Average Price $250,000 $200,000 $150,000 $100,000 $50,000 $ South of Cherry Street Price $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Page 11 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

12 All of Ferndale Average Price $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Page 12 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

13 Griffintown area 5838 Cedar St Date Sold Price 1964 Somerset St Date Sold Price 5784 Portal Way 3/29/2004 $ 139,000 3/23/2009 $ 165,900 7/15/2011 $ 172,780 4/18/2016 $ 229, Second Ave 4/25/2003 Foreclosed 3/31/2004 $ 141, Second Ave 8/5/2014 Foreclosed 1/6/2015 $ 172, Second Ave 10/26/2007 $ 159, Second Ave 4/24/2009 $ 105, Second Ave 9/24/2004 $ 97, Portal Way 10/17/2017 $ 130,000 10/5/2007 $ 153,000 1/8/2008 $ 150, Portal Way 1973 Somerset St 9/12/2005 $ 152,280 1/26/2015 $ 140,000 10/9/2007 $ 159, Somerset St 11/22/2016 $ 166, Willard St 8/14/2017 $ 251, Cedar St 1971 Somerset St 9/12/2001 $ 76, Somerset St 12/14/2001 $ 120,555 10/30/2014 $ 129,200 5/28/2015 $ 145, Somerset St 2/25/2016 $ 190,000 3/31/2017 $ 215, Willard St 6/18/2001 $ 112, Eaton Ave 10/27/2006 $ 100,280 5/26/2011 $ 83, Willard St 6/7/2016 $ 169,000 9/15/2017 $ 224, Willard St 10/15/2001 $ 85, Eaton Ave 9/15/2003 Foreclose 6/28/2002 $ 105,000 5/21/2004 $ 130,000 4/26/2005 $ 157,500 7/28/2006 $ 180,280 9/28/2010 $ 118, Portal Way 8/30/2004 $ 280,000 3/16/2011 $ 114,280 6/26/2015 $ 159, Washington St 1/29/2009 Foreclosed 1/15/2010 $ 51,280 Page 13 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

14 1975 Eaton Ave 4/24/2002 $ 115,000 12/27/2012 $ 91, Eaton Ave 12/12/2002 $ 117, Beckler Ave 11/21/2005 $ 140,280 4/29/2009 $ 181,780 7/15/2016 $ 109,500 2/21/2014 $ 187, Washington St 9/5/2014 $ 375, Eaton Ave 3/20/2003 $ 114, Portal Way 11/8/2012 $ 195, Willard St 12/13/2013 $ 129, Second Ave 3/26/2003 $ 61,200 1/4/2010 $ 108, Somerset St 8/8/2011 $ 120, Somerset St 5/9/2005 $ 210,000 10/30/2008 $ 176,800 Page 14 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018

15 Date Sold Price Not sold within last two decades Multi-family Homes 5/7/2002 Foreclosed 7/18/2003 $ 137, Somerset St 1974 Somerset St 4/8/2005 $ 170, Somerset St 5825 Portal Way 12/9/2005 $ 209, Somerset St 1955 Eaton Ave 12/7/2012 Foreclosed 5798 Second Ave 5828 Second Ave 4/16/2013 $ 192, Second Ave 1980 Somerset St 1977 Somerset St 1963 Somerset St 3/9/2001 $ 85, Willard St 1960 Willard St 1976 Washington St 1954 Willard St 12/17/2003 $ 137, Washington St 1959 Willard Ave 1928 Mosier Ln 1955 Willard 3/18/2015 $ 149, Mosier Ln 5786 Portal Way 5796 Cedar St 1921 Mosier Ln 3/10/2003 $ 143, Cedar St 5844 Cedar St 11/29/2004 $ 178, Somerset St 4/2/2012 Foreclosed 5820 Portal Way 6/12/2013 $ 114, Portal Way Page 15 of 15 CITY OF FERNDALE PLANNING COMMISSION FEBRUARY 14, 2018