Economics Research Associates. January 27, ERA Project No (2)

Transcription

1 Project Report Public Review Draft Downtown Density Bonus and Attainable Housing Policy: Recommended Comprehensive Plan Amendment Submitted to Department of Planning, Florida Submitted by January 27, 2006 ERA 1101 Connecticut Avenue, NW Suite 750 Washington, DC FAX Los Angeles San Francisco San Diego Chicago Washington DC London New York

2 Table of Contents General and Limiting Conditions...iv 1. Executive Summary... 1 Background... 1 Comparable Programs... 2 Density Bonus and Attainable Housing Unit Requirement Alternatives... 2 Recommended Policy and Comprehensive Plan Amendment... 3 Development Capacity Background... 6 Introduction... 6 Scope and Methodology... 6 Defining Attainable Housing and The Problem... 6 Sarasota Housing Market Context... 7 Sarasota Policy Framework Summary Comparable Attainable Housing Programs Introduction Defining Inclusionary Housing Examples and Lessons from Other Communities Summary Density Bonus and Attainable Housing Unit Requirement Alternatives Introduction Methodology Development Community Stakeholder Comments Key Assumptions Density Bonus Without Attainable Housing Requirements Density Bonus With Attainable Housing Requirements Sensitivity Analysis Summary Recommended Policy and Comprehensive Plan Amendment Introduction Summary of Proposed Policy Recommended Changes to Housing Chapter Recommended Changes to Future Land Use Chapter Development Capacity Introduction Existing Dwelling Units and Capacity Potential Dwelling Units and Capacity Potential Attainable Housing Units Summary Public Review Draft 1/27/2006 Page i

3 Appendix A: Participating Stakeholders Residents / Neighborhood / Community Representatives Developers / Brokers / Business Representatives Public Staff Appendix B: Sarasota Policy Framework Comprehensive Plan Downtown Master Plan 2020 and Downtown Code Downtown Residential Overlay District (DROD) Attainable Residential Overlay District (AROD) Consolidated Plan Sarasota County Comprehensive Plan Sarasota County Zoning Ordinance Density Bonus and Affordable Housing Overlay District Community Housing Trust of Sarasota County Appendix C: Proposed Attainable Housing Specialist Position Description and Typical Duties Knowledge and Abilities Minimum Qualifications Public Review Draft 1/27/2006 Page ii

4 Index of Tables Table 1: Population & Household Projections for the, Table 2: HUD Income and Affordability Definitions...9 Table 3: Household Projections by Household Income, Table 4: Average Asking Rents in the Sarasota-Bradenton MSA, Table 5: A Comparison of Recent Trends in Median Home Sale Prices and Household Income in the Sarasota-Bradenton MSA...12 Table 6: Attainable Housing Construction Need for Households, Table 7: Inclusionary Housing Programs in Other Communities...16 Table 8: Affordability Assumptions, Sarasota...28 Table 9: Development Profit of For-Sale Units (Condos) by Zone by Density Without Attainable Housing Requirements, Downtown Sarasota...31 Table 10: Development Profit of For-Sale Units (Condos) in the Downtown Edge (DTE) with Attainable Housing Requirements, Downtown Sarasota...33 Table 11: Development Profit of For-Sale Units (Condos) in the Downtown Core (DTC) with Attainable Housing Requirements, Downtown Sarasota...34 Table 12: Development Profit of For-Sale Units (Condos) in the Downtown Bayfront (DTB) with Attainable Housing Requirements, Downtown Sarasota...35 Table 13: Development Profit of For-Sale Units (Condos) Sensitivities with Selected Density and Attainable Housing Requirement, Downtown Sarasota...37 Table 14: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota...40 Table 15: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota (Continued)...41 Table 15: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota (Continued)...42 Table 16: Existing Dwelling Units in Study Area...47 Table 17: Maximum Development Capacity in Study Area Under Current Zoning Regulations...48 Table 18: Maximum Development Capacity in Study Area with Density Bonus...49 Table 19: Net Capacity in Study District Under Current Zoning and Proposed Density Bonus 50 Table 20: Maximum Density in Study District Under Current Zoning and Proposed Density...52 Table 21: Maximum Potential Attainable Housing Units in the Downtown Mixed-Use Zones 53 Table 22: Downtown Urban Mixed-Use Classification Correspondence Between Policy Documents and Major Development Standards,...64 Table 23: Sarasota County Affordable Housing Policy Income Definitions...80 Table 24: Sarasota County Affordable Housing Policies...81 Index of Figures Figure 1: Population Change by Age Segment, Figure 2: Percent of Home Sales in the by Price Range, Figure 3: Projected Housing Demand by Unit Type, Figure 4: Future Land Use, Zoning, and Potential Edge Zoning Sites Map,...62 Figure 5: Neighborhood Associations,...65 Figure 6: Downtown Master Plan 2020 Study Area,...67 Figure 7: Adopted Downtown Zone Districts (September 2005),...69 Figure 8: Downtown Residential Overlay District,...72 Public Review Draft 1/27/2006 Page iii

5 General and Limiting Conditions Every reasonable effort has been made to ensure that the data contained in this study reflect the most accurate and timely information possible. These data are believed to be reliable. This study is based on estimates, assumptions and other information developed by from its independent research effort, general knowledge of the market and the industry, and consultations with the client and its representatives. No responsibility is assumed for inaccuracies in reporting by the client, its agent and representatives or any other data source used in preparing or presenting this study. No warranty or representation is made by that any of the projected values or results contained in this study will actually be achieved. Possession of this study does not carry with it the right of publication thereof or to use the name of "" in any manner without first obtaining the prior written consent of. No abstracting, excerpting or summarizing of this study may be made without first obtaining the prior written consent of. This report is not to be used in conjunction with any public or private offering of securities or other similar purpose where it may be relied upon to any degree by any person, other than the client, without first obtaining the prior written consent of. This study may not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations. Public Review Draft 1/27/2006 Page iv

6 1. Executive Summary Background The Sarasota City Manager directed Planning Department staff to prepare a comprehensive plan amendment reflecting a density bonus initiative for attainable housing within the Downtown Urban Mixed-Use land use classification. The City retained Economics Research Associates (ERA) to assist with this effort. ERA s primary tasks were the following: identify the maximum number of attainable units that can be developed within the subject area over the life of the plan; ensure that the density incentive is sufficient so as to be attractive to the development community in order that the needed housing will be forthcoming; and develop an administrative mechanism to ensure that attainable units remain attainable. Based upon conversations with city leaders and residents, and a review of housing affordability definitions elsewhere, ERA defined housing as attainable in its report titled Analysis of Selected Attainable Housing Policies, dated August 2005, as follows: targeted to working households earning between 60 percent and 120 percent of Area Median Income (AMI); affordable, wherein housing costs consume less than 30 percent of annual gross income; and proximate to a resident s place of work. Workers in households earning between 60 percent and 120 percent AMI fill the majority of jobs in nearly every sector of the economy, especially in services and retail trade. These households are diverse in character and composition, and may include single persons with or without children, or married persons, one (or occasionally, both) with a workforce job. Moreover, members of these households often serve as essential, frontline servers in the economy, such as police officers, construction workers, teachers, nurses, retail salespersons, and waiters. The region s households are facing relatively little growth in wages and rapid increases in home prices. While median household incomes in the city only increased from $34,077 in 2000 to $35,340 in 2005, median home prices escalated from $151,800 in 2000 to $367,800 in November 2005 in the Sarasota-Bradenton MSA. An estimated 14,569 of households in Sarasota earned below 120 percent AMI in 2005, representing 60 percent of all Sarasota households, according to the Shimberg Center for Affordable Housing at the University of Florida. By 2015 this number is expected to increase to 15,317 households earning below 120 percent AMI. Furthermore, an estimated 2,068 housing units need to be constructed in order to meet the anticipated growth in households earning less than 120 percent of AMI during the period 2002 and 2025, which equals 60.5 percent of the total projected construction demand for the City through As housing becomes increasingly unattainable for these community s residents, they will seek jobs and homes in less expensive locations and Sarasota s economic health and sustainability will be negatively affected. Despite this situation, Sarasota s existing planning policy framework, including the Sarasota City Plan, do not directly address the issue of attainable housing. While a relatively new planning policy, the Downtown Residential Overlay District (DROD), has successfully led to new residential development in the downtown, it has not resulted in any attainable housing. Public Review Draft 1/27/2006 Page 1

7 Comparable Programs In order to establish a policy framework for the creation of attainable housing in Sarasota that is generally consistent with commonly accepted density bonus and attainable housing practices elsewhere, ERA researched selected voluntary and mandatory affordable housing policies in other U.S. communities, particularly those in urban locations. These affordable housing strategies are often referred to as inclusionary housing policies or inclusionary zoning. The purpose of inclusionary housing policies is to create affordable housing by either: (1) requiring developers to designate a portion of development as affordable residential units; or (2) by providing incentives that encourage developers to create affordable housing voluntarily. While inclusionary housing policies can be mandatory or voluntary, most include incentives to maximize the development of affordable units that otherwise would not occur. These incentives may include density bonuses, financial subsidies, development fee waivers, option to produce inclusionary units off-site, relaxed development standards, reduced impact fees, and donations of land or fees in-lieu of providing affordable units. A review of comparable attainable housing programs reveals the following: Inclusionary housing programs are uniquely tailored to meet the policy goals of a community, and strongly reflect the political will of its residents and leaders. Inclusionary policies and programs are highly complex. Efficient and consistent application of these policies is best served by municipal staff with expertise in the affordable housing field. Communities that have expanded and strengthened their inclusionary housing programs in recent years have done so in a time when housing market conditions have been sufficiently strong to avoid or mask any potential constraints to development that regulatory actions can have on a market. It is unclear if or how these inclusionary policies will affect the pace of development in the future. By and large, these programs serve moderate and low-income residents, rather than the very low-income population. As such, these programs serve as one tool among many, that a community may use to address affordable housing needs. Density Bonus and Attainable Housing Unit Requirement Alternatives ERA prepared a development feasibility model in order to analyze alternative density bonus and attainable housing requirements in downtown Sarasota. The model is based primarily on ERA s expertise in the areas of planning and real estate development, with inputs crosschecked with third party data sources as well as developers and real estate brokers active in Sarasota. During this process, ERA also attended meetings with the Sarasota Downtown Partnership, Community Redevelopment Advisory Board, and Sarasota neighborhood representatives to discuss the project and potential policy issues. The development model was used to evaluate the profitability of development in downtown Sarasota under alternative density bonus and attainable housing requirements. Public Review Draft 1/27/2006 Page 2

8 The analysis was done in a step-wise manner, starting with current conditions, then with increased density and no attainable housing requirements, then with increased density with attainable housing requirements, and finally with sensitivities to individual feasibility model variables. This analysis leads to the conclusion that under current and foreseeable market conditions, even a significant density bonus is unlikely to result in new development of attainable units downtown. The primary factors behind this situation are the high land and construction costs in downtown compared to other areas of Sarasota, both of which have increased significantly in the last six months in Sarasota, which has had a strong negative impact on development profit. In addition, the rapid pace of residential sales price increases experienced over the past few years in Sarasota appear unsustainable, with prices beginning to level off at current levels; this is particularly true of the condominium market, a large portion of which has been fueled by investors. ERA notes that this situation is a national phenomenon and also is a recognized part of the housing business cycle. On the upside, together these factors may exert downward pressure on land and construction costs over the mid-term. Despite the above conclusion, if developers have some sort of advantage relative to current market conditions in the downtown, then a density bonus program could be effective in creating attainable housing. Such an advantage could be due to a range of factors, such as reduced development costs (land or construction costs, or even as a function of city financial support or actions), increased sales revenues, or a lower minimum development profit level. In addition, non-profit housing developers may be in a better position to take advantage of a downtown housing density bonus, particularly when combined with other development tools, such as below market interest rates or low-income housing tax credits. It is also useful to take a broader view of the situation, in which a density bonus and attainable housing requirement may be used in the future in the downtown when market conditions have improved. Such a policy could also be considered for application in areas outside the downtown. Recommended Policy and Comprehensive Plan Amendment In developing the recommended policy, ERA sought to find a balance among a range of issues including the following: community interest in providing housing downtown that is available to all residents, not just investors or the affluent; impact of such a policy on the City s housing market; the area economy more broadly; and overall development downtown in the near- and long-term; utility, legality, and financial feasibility of such a policy; overall consistency with and success of similar policies in other communities; compatibility with existing adjacent residential development; and the ability of the City to administer an attainable-housing density bonus program. Based on these factors and on the economic analyses, ERA recommends that the City of Sarasota pursue the downtown density bonus and attainable housing policy outlined below: Program is voluntary, not mandatory. Public Review Draft 1/27/2006 Page 3

9 Increases density to a maximum of 50 DU/acre in the Downtown Edge (DTE) and 200 DU/acre in the Downtown Core (DTC) and Downtown Bayfront (DTB). Requires 10 percent of the units to be attainable units at the time of sale or rental, which are affordable to households earning a maximum average of 100 percent of Median Family Income (MFI) (median household income for a family of four in the Sarasota-Bradenton MSA as determined annually by the U.S. Department of Housing and Urban Development) and available to households earning up to a maximum of 120 percent MFI. Applies to developments that have 10 or more units, whether for-sale or for-rent. Attainable units must be developed on-site (no in-lieu fee), dispersed throughout the building, and with a size (sq.ft.) and finishings functionally equivalent to market rate units. Attainable units are to be attainable in perpetuity. If an attainable unit is sold, a designated public agency (e.g., Community Housing Trust of Sarasota) has the right of first refusal; selling owner of attainable unit receives 25 percent of profit since purchase (with profit based on current owner's purchase price adjusted for inflation, owner equity, owner improvements, closing costs, and commission) to be paid either (i) entirely by designated public agency or (ii) if designated public agency chooses not to purchase unit directly, by attainable income-qualified buyer with support as necessary by designated agency or agencies. In conjunction with the County's program, a third-party affordable housing organization either Housing Trust or the joint Sarasota Office of Housing and Community Development (OHCD) will be critical for determining income qualification of households, providing homeownership tutorials, handling resale units, etc. The City will require at least one full-time experienced housing planner to assist with the following: program implementation and monitoring as it relates to development review; provide consistency in plan review and permitting; income qualification; attainable unit monitoring; and possibly management of attainable housing trust fund. This staff requirement is likely to grow if the program is widely used. Specific policy language is also proposed for the Housing Chapter and the Future Land Use Chapter. Development Capacity The three downtown mixed-used zones in the study area provide a finite amount of land available for development. Under current zoning regulations, the maximum development capacity in the study area totals 9,327 dwelling units (excluding use of the Downtown Residential Overlay District or DROD). Assuming the recommended density bonus policy were enacted (with similar to the current DROD), maximum residential development Public Review Draft 1/27/2006 Page 4

10 capacity would increase to a total of 28,901 dwelling units. This represents a potential maximum net capacity increase of 19,574 dwelling units versus the number of units allowed under the current zoning (excluding the DROD). The maximum average density in the study area would increase from 34.4 DU/acre under current zoning (excluding DROD) to DU/acre under the proposed zoning. It is important to note that such increased density throughout the downtown is not a given for all sites due to a variety of factors, including market conditions, parcel specifics, and other factors. Furthermore, individual proposals would be reviewed on a case-by-case basis to determine if the proposal is appropriate for the specific location. Due to the large number of factors influencing the specifics of each development project, it is not possible to forecast how many of the potential attainable housing units will be built. However, based on experience in other communities with voluntary density bonus and attainable housing policies, the number of attainable units actually built is likely to be significantly lower than the potential maximum, perhaps on the order of 10 to 20 percent of the maximum, which could result in approximately 230 to 470 attainable units in the downtown. Public Review Draft 1/27/2006 Page 5

11 2. Background Introduction The, Florida retained (ERA) of Washington, D.C. to assist with developing an amendment to the City s Comprehensive Plan. The proposed amendment would address attainable housing through a density bonus program focused on the Downtown Urban Mixed Use (DUMU) land use classification. The amendment is designed to contribute to a larger effort by the city and Sarasota County to create policies to address the housing needs of its residents and workers. ERA s work on the Comprehensive Plan Amendment is a follow up to a previous attainable housing project for the. The result of that work was a report titled Analysis of Selected Attainable Housing Policies, dated August The study examined five potential attainable housing policies, including an attainable housing requirement with a corresponding density bonus, with three areas of the city examined, including the downtown. Scope and Methodology ERA s major tasks for this study were the following: Identify the maximum number of attainable units that can be developed within the Downtown Urban Mixed-Use land use classification and corresponding zoning (Downtown Bayfront, Downtown Core, and Downtown Edge) over the approximately 25-year life of the new comprehensive plan, which is to be adopted in Determine what density incentives would be sufficiently attractive to the development community to ensure that attainable housing would in fact be built. Define an administrative mechanism to ensure that attainable units constructed through a density bonus program will remain attainable. In order to complete these major tasks, ERA undertook the following activities: regular communications with City personnel; face-to-face and telephone interviews with community stakeholders; analysis of relevant attainable housing policies in other communities, particularly best practices; preparing and revising draft documents; and attending public meetings/hearings. Defining Attainable Housing and The Problem The has become increasingly concerned in recent years about rapidly rising housing costs and the ability of its long-time and less affluent residents to find decent, affordable housing (for the purpose of this report, referred to as attainable housing ) in the city. Based upon conversations with city leaders and residents, and a review of housing affordability definitions elsewhere, ERA defined housing as attainable in its August 2005 report as follows: Targeted to working households earning between 60 percent and 120 percent of area median income (AMI); Public Review Draft 1/27/2006 Page 6

12 Affordable, wherein housing costs consume less than 30 percent of annual gross income; and, Proximate to a resident s place of work. According to the U.S. Department of Housing and Urban Development (HUD), a twoperson household earning between 60 percent and 120 percent of AMI would have annual household incomes ranging from $26,820 to $53,600 in the for fiscal year Assuming that 30 percent of gross income is spent on housing, these households would be able to afford monthly housing expenses ranging between $671 and $1,340. Workers in households earning between 60 percent and 120 percent of area median income (AMI) fill the majority of jobs in nearly every sector of the economy, especially in services and retail trade. Workforce households are diverse in character and composition, and may include single persons with or without children, or married persons, one (or occasionally, both) with a workforce job. Moreover, workforce households often serve as essential, frontline servers in the economy. Examples of workforce jobs can include a police officer, construction worker, teacher, nurse, retail salesperson, and waiter. In high-growth areas like Sarasota, commercial development often outpaces affordable housing production. This can create a jobs-housing imbalance, meaning there are not enough places for workers to live in the vicinity of their jobs. A jobs-housing imbalance can drive up prices in the local housing market, displacing workers and leading to long commutes and traffic congestion as workers live farther from jobs. Rising housing prices significantly exacerbate the problem. Sarasota is not alone in facing this issue. In 2004, the National Association of Counties and Center for Housing Policy published a report entitled, Paycheck to Paycheck: Wages and the Cost of Housing in Counties, which revealed that affordable housing for working families is an increasing problem for most large and/or rapidly growing counties. Based upon a survey of 391 counties, the report further stated that in these circumstances many working households are forced to choose between paying exorbitant suburban housing costs or enduring lengthy commutes from areas with more affordable housing. Moreover, the study found that the inability to attract and retain employees affects a company s bottom line, making access to a suitable labor pool one of the top three factors in corporate location decisions. In summary, housing affects the available labor pool, which in turn affects the competitive position and economic health and sustainability of a community. Therefore, attainable housing is an important competitive factor in the sustainable economic growth of a community. Sarasota Housing Market Context The has experienced a tremendous change in housing market conditions in recent years. Since the late 1990s historically low interest rates, demographic and lifestyle shifts, a proliferation of flexible financing options, and the American propensity toward homeownership have combined to create a robust housing market nationwide. In recent months, however, there have been signs that the nation s housing market is cooling as Public Review Draft 1/27/2006 Page 7

13 capital markets withdraw from real estate investments, mortgage interest rates creep up, and the housing supply begins to catch-up with or even exceed demand. To better understand the character of housing affordability in the, ERA reviewed key market indicators to provide a snapshot of the current housing market. Population and Households Population change is an important variable in determining the demand for housing. A review of the demographic characteristics of the shows that steady population growth is projected over the next 20 years, as shown in Table 1. Table 1: Population & Household Projections for the, Year Population Households ,961 22, ,700 23, ,338 24, ,293 24, ,340 25, ,446 26, ,469 26,956 Change, % 2.3% Change, % 15.2% Source: Shimberg Center for Affordable Housing Between 2005 and 2025 the share of residents over age 65 is projected to increase by 35 percent. Other age cohorts are expected to stay relatively flat, as shown in Figure 1. This reflects a larger national trend, as the Baby Boom generation enters into retirement. However, the number of people over age 65 represents only a quarter of the total population. Overall, the increase in population and households is expected to translate into greater housing demand in the over time. Public Review Draft 1/27/2006 Page 8

14 Figure 1: Population Change by Age Segment, Population Under Age 35 Ages Age 65 and Older Year Source: Shimberg Center for Affordable Housing Income Another important variable in assessing housing needs is household income. Each year the U.S. Department of Housing and Urban Development (HUD) establishes income thresholds that determine which households are defined as being low, moderate, or middle income (see Table 2). These income thresholds, referred to interchangeably by affordable housing specialists as median family income (MFI) or area median income (AMI), are adjusted according to geography and household size. Table 2: HUD Income and Affordability Definitions Income Definitions Very Low Income Low Income Moderate Income Middle Income Household Income As a Percentage of Area Median Income 30% AMI and below 31% - 50% AMI 51% - 80% AMI 81% - 120% AMI Source: HUD. According to the Shimberg Center for Affordable Housing at the University of Florida, in 2005 an estimated 14,569 households earned below 120 percent of AMI, representing 60 Public Review Draft 1/27/2006 Page 9

15 percent of all Sarasota households. By 2015 this number is expected to increase by 748 households to a total of 15,317 households earning below 120 percent AMI as shown in Table 3. Table 3: Household Projections by Household Income, Households (2000) Sarasota County # % # % Very Low Income 30% AMI and below 1,966 8% 11,510 8% Low Income 31% - 50% AMI 2,486 11% 14,411 10% Moderate Income 51% - 80% AMI 4,331 19% 26,164 17% Middle Income 81% - 120% AMI 5,381 23% 33,264 22% Upper Income > 120% AMI 9,245 39% 64,563 43% Total 23, % 149, % Households (2005 estimate) Sarasota County # % # % Very Low Income 30% AMI and below 2,033 8% 12,606 8% Low Income 31% - 50% AMI 2,560 11% 15,739 10% Moderate Income 51% - 80% AMI 4,452 18% 28,430 17% Middle Income 81% - 120% AMI 5,524 23% 35,948 22% Upper Income > 120% AMI 9,603 40% 70,531 43% Total 24, % 163, % Households (2015) Sarasota County # % # % Very Low Income 30% AMI and below 2,126 9% 14,657 8% Low Income 31% - 50% AMI 2,692 11% 18,474 10% Moderate Income 51% - 80% AMI 4,686 20% 33,347 17% Middle Income 81% - 120% AMI 5,813 25% 42,017 22% Upper Income > 120% AMI 10,181 43% 82,134 43% Total 25, % 190, % Source: Florida Housing Data Clearinghouse, Shimberg Center. In order to understand whether these households face challenges in finding affordable housing, it is necessary to understand current home prices and rental rates. The following section explores the supply side of Sarasota s housing market. Public Review Draft 1/27/2006 Page 10

16 Housing Prices Over the past six years home prices in the Sarasota-Bradenton MSA have escalated by 142 percent, rising from a median of $151,800 in 2000 to $367,800 in November 2005 according to the Sarasota Association of Realtors. A closer look at home sales in the City of Sarasota demonstrates dramatic upward shift in home sales, as shown in Figure 2. Figure 2: Percent of Home Sales in the by Price Range, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% < $40,000 $40,000-$79,000 $80,000-$119,999 $120,000-$159,999 $160,000-$189,999 $190,000+ Sources: SCOPE Scope Affordable Housing Study, 2002 and the Sarasota Office of Planning. Rental Rates The regional rental market presents a less alarming picture than the for-sale market. According to a survey of rental rates conducted by the Sarasota County Office of Planning, housing units were still relatively affordable at the time of the survey, particularly for smaller units, as shown in Table 4. However, anecdotal information suggests that recent condo conversions may be reducing the rental housing supply and that owners of rental properties are facing escalating property taxes, which will likely be passed on to their tenants, or will create an incentive to convert the units to condos. Public Review Draft 1/27/2006 Page 11

17 Table 4: Average Asking Rents in the Sarasota-Bradenton MSA, 2005 Apartment Size Asking Rent 1 Rent 2 HH Type Affordable Efficiency $722 $783 1 person HH 1-bedroom $755 $783 1 person HH 2-bedroom $907 $895 2 person HH 3-bedroom or more $1,089 $1,006 3 person HH 1 For North Sarasota County, At 30% of gross income based on MFI for HH type. Sources: HUD; Sarasota County Office of Planning. Housing Needs The region s households are facing relatively little growth in wages and rapid increases in home prices. A comparison of median residential sale prices and household incomes demonstrates that home values are far outpacing income growth (Table 5). Table 5: A Comparison of Recent Trends in Median Home Sale Prices and Household Income in the Sarasota-Bradenton MSA Median Single-Family Median Household Income Year Home Sale Price City County 2000 $153,700 $34,077 $41, $156, $158, $174, $224,100 $35,340 $50, $305, Change % 4% 21% Sale price as recorded every year in March. Source: Florida Association of Realtors; ESRI Business Information Solutions;. Between 2005 and 2025 total housing demand in the City is projected to increase from 25,545 units to 28,448 units for permanent (non-seasonal) households. As Figure 3 illustrates, multi-family housing demand is estimated at 11,595 units in 2025, comprising 40.7 percent of total demand. Public Review Draft 1/27/2006 Page 12

18 Figure 3: Projected Housing Demand by Unit Type, ,000 Multi-family Single-family 25,000 20,000 10,397 10,665 10,965 11,280 11,595 Housing Units 15,000 10,000 15,148 15,538 15,975 16,436 16,893 5, Source: Shimberg Center for Affordable Housing Year Between 2002 and 2025 an estimated 2,068 housing units that would need to be constructed in order to meet the anticipated growth in households earning less than 120 percent of AMI, according to the Shimberg Center for Affordable Housing (Table 6). This represents 60.5 percent of the total projected construction demand for the City through Table 6: Attainable Housing Construction Need for Households, Household Income as % of AMI <20% % % % % % % Total Households < 120% AMI ,124 1,593 2,068 All Households 476 1,133 1,871 2,647 3,418 Source: Shimberg Center for Affordable Housing Public Review Draft 1/27/2006 Page 13

19 Implications for Attainable Housing in the While the lowest-income households face the most severe housing burden, and will continue to do so, moderate and middle-income households are faced with a growing attainable housing problem. Current publicly-funded housing assistance programs are tied to HUD definitions, and these programs focus on households earning below 80 percent of AMI, with most assistance going to households at or below 40 percent of AMI. Consequently, there are no public assistance programs in place that can assist workforce households to find attainable housing. Sarasota Policy Framework In addition to understanding the Sarasota housing market and the downtown s housing capacity, it is useful to review the City s planning and housing policy framework. This provides context for the potential development of new attainable housing policies in the downtown. A review of the city and county housing and planning policies is given in Appendix B: Sarasota Policy Framework. Summary The affordability of housing is recognized as a growing problem in Sarasota, particularly in the case of workforce households with moderate incomes, such as police officers, nurses, construction workers, retail salespersons, waiters, etc. As housing becomes increasingly unattainable for these community s residents, they will seek jobs and homes in less expensive locations and Sarasota s economic health and sustainability will be negatively affected. Despite this situation, Sarasota s existing planning policy framework, including the Sarasota City Plan, do not directly address the issue of attainable housing. While a relatively new planning policy, the Downtown Residential Overlay District (DROD), has successfully led to significant new residential development in the downtown, it has not resulted in any attainable housing. However, efforts are now underway both within the city and the county to more directly and effectively address the issue of attainable housing. As a result, the city has requested assistance in developing attainable housing policy specific to downtown Sarasota and the remainder of this report is focused on this effort. Public Review Draft 1/27/2006 Page 14

20 3. Comparable Attainable Housing Programs Introduction ERA researched selected voluntary and mandatory affordable housing policies in other U.S. communities, particularly those in urban locations that offer benefits such as a density bonus. The purpose of this research was to establish the larger policy framework for creating an attainable housing program in the that is generally consistent with commonly accepted density bonus and attainable housing practices elsewhere. These affordable housing strategies are often referred to as inclusionary housing policies or inclusionary zoning. Findings of this research are presented in this section. Defining Inclusionary Housing The purpose of inclusionary housing policies is to create affordable housing by either: (1) requiring developers to designate a portion of development as affordable residential units; or (2) by providing incentives that encourage developers to create affordable housing voluntarily. While inclusionary housing policies can be mandatory or voluntary, most include incentives to maximize the development of affordable units that otherwise would not occur. These incentives may include density bonuses, financial subsidies, development fee waivers, option to produce inclusionary units off-site, relaxed development standards, reduced impact fees, and donations of land or fees in-lieu of providing affordable units. Examples and Lessons from Other Communities Characteristics of selected affordable housing programs in other communities that offer a density bonus are provided in Table 7. As the table demonstrates, inclusionary housing policies address a complex interplay of variables, and parameters can vary widely: Target Income Levels: between 30 percent and 160 percent of AMI, but generally within the range of 60 percent to 100 percent of AMI. Threshold (applicability): three (3) units up to all residential development, typically on the order of 10 to 50 units. Required Set-Aside (the proportion of units that must be affordable): six percent to 70 percent, with most in the 10 percent to 25 percent range. Tenure: ranges from none specified to perpetuity, although most fall within the 10 to 30 year range. Public Review Draft 1/27/2006 Page 15

21 Table 7: Inclusionary Housing Programs in Other Communities Community Area Median Income (AMI) Threshold (Applicability) Set-Aside (Percent Affordable Units) Annapolis, MD $68,600 All development 12% (6% for rental requiring development development) approval Fee In-lieu Equal to 4% of total value of construction costs based upon quoted building permit value per unit not built. Period of Affordability 10 years for owner occupied housing; 20 years for rental Aspen, CO $70,300 All residential subdivisions. 60%-70%, depending Available for projects on a case-by-case basis. Payments range from $117,171 to upon development type. $237,764. Boulder (City), CO $69,500 All residential development 20% Available for projects of 4 or less units. Approximately $18,000 for detached; approximately $17,000 or $50 times 20% of the floor area (attached dwellings) per unit not built. Cambridge, MA $82, dwelling units 15% $3.86 per square foot for projects over 30,000 square feet gross floor area 50 years Resale formula stipulated in Housing Guidelines Section 6 part 4. Rental and ownership units restricted in perpetuity. In perpetuity Chapel Hill, NC $69,800 5 dwelling units 15% Negotiated on a case-by-case basis. Available for projects of 5 to 12 units. Multiply # Negotiated on a case-by-case basis of affordable units by "estimate of funding needed to create a homeownership opportunity in development for 80% AMI or less Davidson, NC $61,800 3 dwelling units 12.5% Available for projects of less than 8 units. Town working on specific fee schedule 30 years (owner occupied housing) Davis, CA $64,100 5 dwelling units for 25% for owneroccupied; 15%-35% for ownership; 20 dwelling units for rental housing rental. Available for projects of 30 or fewer units and 10 acres or less. Fee equals $23,737 per unit not built. No restriction on owner occupied housing; in perpetuity for rental housing. Denver, CO 1 $69, dwelling units 10% Equal to 50% of the sales price of a moderately priced dwelling unit per unit not built 15 years Developer incentive: $5,000 per MPDU, up to $10,000 Fairfax County, VA $85, dwelling units Proportional to the amount of density bonus that can be used, with a minimum of 6.25% (max = 12.5%) No Fee In Lieu provided. 15 years for owner occupied housing; 20 years for rental (50 years if rented prior to 3/3 1/98) Highland Park, IL $69,600 5 dwelling units 20% Available to projects of 20 units or less. $ 1 00,000 per unit. In perpetuity for owner occupied housing; 25 years for rental housing Leon County, FL (City of Tallahassee, FL) $57, dwelling units 10% Graduated up to $10,000 per unit. Available for small & medium-size developments only. Fee based on % of difference b/w avg selling price and max sales price attainable by target population. 10 years for owner occupied housing; 10 years for rental? Public Review Draft 1/27/2006 Page 16

22 Table 10: Inclusionary Housing Programs in Other Communities (Continued) Community Area Median Income (AMI) Threshold (Applicability) Set-Aside (Percent Affordable Units) Fee In-lieu Period of Affordability Longmont, CO 2 $81,900 All residential development 10% Available for all projects. Equal to the total construction costs of an on-site affordable home per unit not built. 2003: single-family = $111,692; multi-family rental = $61,562 (high density) continued 10 years for owner occupied housing; 20 years for rental $77,604 (med. Density); townhomes & condos = $75,528 Loudon County, VA $85, dwelling units 6.25% Equal to 25% of construction costs of prototypical "affordable dwelling unit" per unit not built. 15 years for owner occupied housing; 20 years for rental Montgomery County, MD $85, dwelling units 12.5%-15% Equal to amount required to build "significantly more" units than would be built on site. 30 years for owner occupied housing; 99 During , averaged about $21,000 per unit not built, with one project years for rental assessed at $133,000 per unit not built.? Palm Beach County, FL $62,100 Voluntary 40% of bonus units 1.2X cost of production of unit 10 years for owner occupied housing; 15 years for rental San Diego (City),CA $63,400 All residential developments 10% Equal to $2.55 per square foot of an affordable dwelling unit per unit not built (for 55 years for owner occupied housing; 55 developments of 1 0 or more units). $ 1.25 per sq. foot for developments of <10 units years for rental San Francisco, CA $95, dwelling units 12% Varies according to unit size; $100,280 for a studio up to $308,501 for a threebedroom 50 years Santa Barbara, CA $64, dwelling units 15% of total units In lieu payment calculated by subtracting cost of affordable unit to those making 100% 45 to 60 years, depending upon the property AMI from the productions cost of a unit. Based on average productions cost data fee type for 2 bedroom units would be $310,000. Payment due 10 days after issuance of building permit. Off site construction permitted if off site unit would be better than on site unit. Santa Fe,NM 2 ' 3 $66,000 All residential development 11% -16% No fee in-lieu provided, except in cases of "extreme hardship." 30 years Notes: AMI reflects HUD definitions for Metropolitan Statistical Areas with the exception of Aspen, CO, which is based on median family income as reported by the U.S. Census. 1) Denver has multiple sets of schedules and requirements for "Special Cases" and "Exceptions." All residential development is subject to providing at least 10% of housing units as moderately priced units, except rental housing, where standards apply when developer chooses to utilize density bonuses. 2) Longmont's and Santa Fe's Period of Affordability restriction restarts after every resale if not occupied by the same owner for the full period. 3) Santa Fe's required set aside is indexed to the price of market-rate homes being developed; the higher the sales price of the housing, the higher the set aside percentage. Source: Sarasota County Planning Department and. Public Review Draft 1/27/2006 Page 17

23 Perhaps what is most clear from the review of inclusionary housing programs in other communities is that the specific characteristics of an inclusionary housing policy can be tailored to the specific needs of a community. This research also revealed the following: 1. Inclusionary housing policies are highly sensitive to market conditions. Communities that maximize the effectiveness of their inclusionary housing programs include all of the following elements: Strong housing markets: The demand for housing units is high and supply is low, providing optimal conditions for profitable development. Incentives: The additional costs of developing affordable units is offset by incentives, available alone or in combination, such as a density bonus, reduced parking requirements, Tax Increment Financing, fee waivers, and expedited permitting. Mandatory participation: Developers must provide the affordable units and conditions are such that required for-profit developer returns on investment can be met or exceeded. 2. Communities refine their affordable housing policies over time. Recent trends have been toward expanding the provisions of inclusionary zoning-related policies, including: Expanding the income eligibility of households to include moderate and middle-income residents (typically those earning between 80 percent and 120 percent of MFI). Reducing the minimum threshold of development (project size) at which affordable housing is required. Converting voluntary to mandatory programs. Expanding the required time span of affordability. 3. Urban communities are struggling to successfully create on-site affordable housing programs within the context of high-rise, luxury condominium development where high condominium fees can significantly impair the affordability of a unit. Among the policies surveyed, it is common for condominium association fee increases to be passed along to low-income households absent any relief. Among the communities addressing this issue: Cambridge, Massachusetts works with the developer to establish an initial condo fee that is proportionally lower than the market-rate units. As condo fees rise over time, the affordable unit share increases at the same rate as market rate units, although the affordable unit condo fee continues to be lower overall. Montgomery County, Maryland offers an in-lieu fee option. According to the manager of the County s Moderately Priced Dwelling Unit Program all of the Public Review Draft 1/27/2006 Page 18

24 Summary high-rise condo developers have opted to pay the in-lieu fee, rather than to create the units on-site. San Francisco, California uses an expanded housing expense assumption of 33 percent of gross income (as opposed to a standard 30 percent), which includes condominium fees. Boulder, Colorado established livability guidelines stipulating that the affordable units be functionally equivalent to market rate units, but allowing developers to reduce costs on affordable units by substituting lower-cost finishes such as laminate rather than granite countertops. However, this creates a significant administrative burden for the city and the developer. A review of comparable attainable housing programs reveals the following: Inclusionary housing programs are uniquely tailored to meet the policy goals of a community, and strongly reflect the political will of its residents and leaders. Inclusionary policies and programs are highly complex. Efficient and consistent application of these policies is best served by municipal staff with expertise in the affordable housing field. Communities that have expanded and strengthened their inclusionary housing programs in recent years have done so in a time when housing market conditions have been sufficiently strong to avoid or mask any potential constraints to development that regulatory actions can have on a market. It is unclear if or how these inclusionary policies will affect the pace of development in the future. By and large, these programs serve moderate and low-income residents, rather than the very low-income population. As such, these programs serve as one tool among many, that a community may use to address affordable housing needs. Public Review Draft 1/27/2006 Page 19

25 4. Density Bonus and Attainable Housing Unit Requirement Alternatives Introduction This report section details the parameters for residential development in the downtown Sarasota. This includes testing of alternative density bonus and attainable housing unit policies using a development feasibility model. Methodology As noted previously, ERA previously completed a study of potential housing policies for the, titled Analysis of Selected Attainable Housing Policies, which was completed in August For this study, a preliminary development economics model was prepared by ERA and based primarily on our expertise in the fields of planning and real estate development. This model was then refined to more accurately reflect the particulars of development in Sarasota by obtaining additional information through discussions with a number of developers active in Sarasota. This model covered three geographic areas of the city, one of which was the entire downtown. The development model from the previous study had the following limitations: some of the development parameters were outdated and in need of updating due to significant changes that occurred in the last six months (e.g., land costs, construction costs, financing terms, and sales prices); a limited number of developers were consulted; and the downtown was treated as a single area, instead of addressing each zoning districts separately in the model. As a result of these limitations, for the new study of a possible downtown density bonus and attainable housing requirement, ERA prepared a more detailed development model. This model is again based primarily on ERA s expertise in the areas of planning and real estate development. In order to ensure that the model accurately reflected recent market conditions and trends in downtown Sarasota, the model inputs were crosschecked with third party data sources (e.g., RS Means, Marshall and Swift). In addition, ERA had faceto-face interviews, telephone interviews, and correspondence with developers and real estate brokers active in Sarasota. During this process, ERA also attended a meetings with the Sarasota Downtown Partnership, Community Redevelopment Advisory Board, and Sarasota neighborhood representatives to discuss the project and potential policy issues (see Appendix A: Participating Stakeholders). The main purpose of directly involving the development community and neighborhood representatives was to gather a wide range of informed input into the development model in order to make it as realistic as possible, thereby ensuring that the results of the density bonus and attainable housing analysis accurately reflect current and near-term conditions in downtown Sarasota. The other purpose of the review was to gather opinions about the potential downtown density bonus and attainable housing effort from development community stakeholders. Note that the development model is exactly that, a model, which is the most accurate representation of development economics that ERA could develop based on the combination of our experience and judgment as well as the resources and information Public Review Draft 1/27/2006 Page 20

26 available. It is intended to provide the leaders, staff, residents, and business community with an indication as to the effectiveness of various potential density bonus and attainable housing alternatives in a specific area (downtown Sarasota) and under certain conditions. As with all models, it is not a guarantee that the conditions will remain constant, nor that the projected values or results contained in this study will actually be achieved. ERA recognizes that the validity of the feasibility model findings below is based on the assumption that the development inputs and calculation methodologies have been correctly specified. We acknowledge that in the case of a specific developer, parcel, and development, the inputs and/or calculation methodologies are likely to vary from those specified below. This will result in development profit levels that are higher or lower than indicated by ERA s feasibility model and may even result in a rational developer choosing to build even when our feasibility model indicates that they won t. Nevertheless, by using the combination of ERA s professional judgment and expertise, plus information from the development community, ERA believes that the feasibility model findings provide useful and reasonably accurate guidance to the community about the effectiveness of a density bonus and attainable housing requirements. Development Community Stakeholder Comments Before reviewing the key inputs to the feasibility model, it may be useful to consider a summary of the opinions expressed by the development community stakeholders (see Appendix A: Participating Stakeholders). Note that the stakeholders were assured in advance that their specific opinions and development economics information would be kept confidential on an individual basis, thereby enabling them to speak more freely and providing a more accurate information in the aggregate. The interviews were divided into two major parts. The first part focused of general Sarasota housing trends and policies, while the second part focused on Sarasota development economics and was particularly concerned with the draft development pro forma. Due to the broad nature of the material as well as the large number of questions and interviewees, it is only possible to provide a brief summary of the comments. Note that ERA is very appreciative that so many members of the development community in Sarasota were willing to share their time, opinions, and information with ERA and the. This input is recognized as vital to the development of an effective attainable housing policy. General Trends and Policies In terms of the general Sarasota housing trends and policies, the following comments received were received: Need For Attainable Housing: While all interviewees agreed that there is a strong need for attainable housing in Sarasota and throughout the county, many were skeptical that this could be accomplished downtown due to high development costs, mainly as a function of land and construction prices. However, a few interviewees expressed strong support for the idea of attainable housing downtown Public Review Draft 1/27/2006 Page 21

27 in order to increase the level of activity and diversity in the downtown, and to reduce distances traveled by moderate-income workers to downtown. Voluntary vs. Mandatory: A strong majority of the interviewees stated that attainable housing and offsetting density bonus should be voluntary. Mixed or Exclusive: Opinions were fairly evenly divided as to whether or not attainable housing units should be required to be mixed into a building or could be provided in alternative designs, such as concentrated within the building (e.g., on lower floors), in an adjacent building on the same site, or even developed elsewhere. Those against a requirement to mix them throughout the building were concerned with the impact on the marketability of market rate units, particularly high-end market rate units. On-Site / Nearby / In-Lieu Fee: Most interviewees stated that the provision of attainable housing units or their equivalent (in the form of an in-lieu payment) should be flexible. As noted above, those against a requirement to provide them on-site were concerned with the impact on the marketability of market rate units, particularly high-end market rate units. Skepticism was also again expressed as to the economic efficiency of developing attainable units in the downtown versus other locations. The payment of an in-lieu fee was favored by most interviewees, although several opposed this idea and noted that it was unlikely to result in the stated policy goal of attainable housing downtown. Minimum Development Size: Nearly all interviewees said that there should be no minimum development size before application of an attainable housing requirement, except as a function of the required percentage. For example, if 10 percent of units were required to be attainable, then a minimum development size of 10 dwelling units was appropriate. Maximum Density Bonus: Opinions varied widely as to the maximum density bonus. Those at the highest range favored the Downtown Partnership Attainable Residential Overlay District (AROD) proposal (i.e., up to 100 DU per acre in the Downtown Edge (DTE) and 200 DU per acre in the Downtown Core (DTC) and Downtown Bayfront (DTB)). However, many noted that this level of density was unlikely to be achieved due to site and development constraints, particularly frequently encountered site size and configuration issues as well as the loss of ground floor and first floors to other uses (e.g., retail, offices, parking), parking requirements, and story limits (instead of height limits). A number of interviewees suggested that the maximum density should be a function of adjacent development and what the community wants in the area. Percentage Attainable Units: The interviewees were fairly evenly split here between those that (i) provided a specific number or range and (ii) those who were unsure what percentage of units should be required to be attainable in return for a density bonus. For those that provided a specific number or range, most said that between five and 20 percent of the total dwelling units should be attainable units, with 10 percent most frequently cited. These interviewees often stated that they Public Review Draft 1/27/2006 Page 22

28 had heard that similar numbers were required in other communities. However, those that declined to give a number or range often stated that the issue would have to be studied here more carefully. A few also said that there should be no requirement. Attainable Income Levels: Most of the interviewees stated that incomes in the range of 100 to 120 percent of the Median Family Income (MFI) were appropriate given the high cost of development in the downtown. However, there were also a number of interviewees that suggested that number be lower in order to target households in need, while others that suggested higher in order to support project economics and to support project marketability. For-Sale vs. For-Rent: Nearly all interviewees said that there should be no restriction as to whether the attainable units are for-sale or for-rent, that this should be left up to the developer to decide. Term: Answers varied widely on the issue of how long attainable units should remain attainable, with some very specific and extreme answers to complete don t know answers. Most interviewees that that in terms of for-sale attainable units, a period of five to ten years was sufficient, with a portion of the increase in value going to the unit owner (say 25 percent) and the remainder (say 75 percent) going to a public agency for additional attainable housing development (i.e., the land trust model). A few interviewees stated that for-sale units should be held in perpetuity, while others said that it should be a one-time restriction for a predefined period, consistent with the Downtown Partnership Attainable Residential Overlay District (AROD) proposal. The issue of how to monitor and administrate restrictions was raised by numerous interviewees. Minimum Unit Specifications: About half of the interviewees said that the minimum unit specifications (e.g., sq. ft., number of bedrooms/bathrooms, finishings) should not be given for the attainable units, but left to the developers to determine. However, the other half provided figures, ranging from a minimum of 600 sq. ft. for a studio/one-bedroom/one-bathroom attainable unit to 1,300 sq. ft. for a two-bedroom/two-bathroom attainable unit to a four-bedroom/two-bathroom 1,800 sq. ft. attainable unit. Several interviewees noted that downtown households were likely to be smaller in size than non-downtown households. Frequency of Review: Most interviewees answered that the review of the attainable housing policies should take place between every year and every five years. Several noted that the program should be reviewed more frequently at the beginning to ensure that the program is functioning as intended. Other Attainable Housing Mechanisms: Almost all interviewees cited one or more of the following other attainable housing mechanisms, many of which they said should be combined with the density bonus program: real estate tax deferral/abatement; in-lieu fees; development on public land (i.e., free land); use of Community Redevelopment Authority (CRA) Tax Increment Financing (TIF) funds; increase building height (change city code from stories to height); city Public Review Draft 1/27/2006 Page 23

29 funding for parking and/or infrastructure; development permit and fee reductions; expedited approval process; and co-development using county housing trust funds/management. New Downtown Housing Developments: Many of the interviewees are involved in developments recently completed, under construction or planned in the downtown. They were very positive about the developments, although a number of the interviewees commented on the high sales prices for the units, leading to a lack of diversity. Attainable Residential Overlay District (AROD): Most of the interviewees were very familiar with and support the AROD. County Housing Trust / Community Land Trust: Most of the interviewees were not aware of the particulars of the County s activities, but those who were thought that it was a good idea. Other Comments: The interviewees provided a wide range of other comments, with the following reoccurring themes: o Increase city staff knowledge regarding development economics and attainable housing policies/programs. o Increase areas in which the density bonus and attainable housing requirements policy apply. o Review attainable housing programs elsewhere for what works and apply it here. o Land and construction costs are so high in the downtown that attainable housing should be done elsewhere. o The downtown development codes need to be changed from the number of stories to building height. o Allow reduced development standards for attainable units: sq. ft., number of bedrooms, parking spaces, and finishes. Development Economics Following the discussion of general attainable housing policy issues, interviewees were asked to discuss development economics specific to downtown Sarasota. Many of these comments were very specific in response to a preliminary draft development model prepared by ERA. While these responses were too specific and numerous to present here, the following broad development economics trends which have a significant effect on attainable housing were noted: Costs: As noted in ERA s previous study, land costs are particularly high in the downtown compared to other areas of Sarasota. Furthermore, land costs and construction costs, both of which strongly affect development economics, have Public Review Draft 1/27/2006 Page 24

30 both increased significantly in the last six months in Sarasota and has had a strong negative impact on development profit. ERA notes that this situation is a national phenomenon and is a recognized part of the housing business cycle, although construction costs have been particularly impacted in the Southeastern U.S. following hurricanes Katrina and Rita. This situation may moderate somewhat in the mid-term (two to five years) due to sales price trends. Sales Prices: The rapid pace of residential sales price increases experienced over the past few years in Sarasota appears unsustainable, with prices beginning to level off at current levels, with even some price depreciation possible. This is particularly true of the condominium market, a large portion of which has been fueled by investors. Again, ERA notes that this situation is a national phenomenon and also is a recognized part of the housing business cycle. This is likely to result in longer periods to sell units and increasing supply for sale as projects under construction are completed. As noted above, this may exert downward pressure on land and construction costs over the mid-term. Return Level: Most of the development stakeholders stated that under current conditions, for-profit developers would require a development profit (measured as sales revenues, less development costs, divided by development costs) of percent in the Sarasota area. This is also known as the minimum hurdle rate and includes both equity and debt financing. ERA notes that in addition to accounting for the cost of developing a specific project, the required development profit also reflects the level of risk assumed by a developer. In ERA s judgment, based on the expected slowdown in development due to the increasing development costs and flattening sales prices noted above, developers will be willing to accept a lower development profit in the near to mid-term of 20.0 percent. Key Assumptions For each of the three zones under consideration, Downtown Edge (DTE), Downtown Core (DTC), and Downtown Bayfront (DTB), a feasibility model was developed based on ERA s general expertise in the area of residential development and Sarasota and zone specific information provided by the stakeholders. While the development characteristics and methodologies may vary significantly from specific examples due to wide variations in site and time specific situations, they are considered by ERA to provide a broadly accurate picture of current base case development economics in the three zones. Note that the base feasibility models assume current market conditions (i.e., no density bonus and no attainable housing requirements). Affordability The starting point for an analysis of attainable housing is what various households can afford to pay for housing, which is a function of household income. The U.S. Housing and Urban Development Department (HUD) annually sets income limits for the Metropolitan Statistical Areas (MSA) and Non Metropolitan Counties level. These income limits are used to determine eligibility for federal housing assistance and other assistance programs. The primary figure determined by HUD is the Median Family Income (MFI), which is the Public Review Draft 1/27/2006 Page 25

31 household income for a family of four. As a function of the MFI for a family of four, HUD also determines other income limits, such as 30.0 percent MFI, Very Low Income (50.0 percent MFI), and Low Income (80.0 percent MFI). For the purposes of this study and recommended for use in the development of the downtown Sarasota density bonus and attainable housing policy, ERA has utilized the Median Family Income (MFI) for a family of four in the Sarasota-Bradenton MSA. In FY2005, the MFI was $55, for (effective February 11, 2005). Use of the MFI for a family of four as the basis of the attainable housing calculations, as opposed to the household income for a smaller household income, maintains parity in the calculations with federal and other housing program. It addition, it simplifies the calculation of qualifying households. Furthermore, it also is probably a more conservative figure due to the likely smaller household size in downtown Sarasota than in the entire Sarasota-Bradenton MSA. This is due to the generally smaller household sizes in downtown areas versus larger urban, suburban, and ex-urban areas. However, note that this is taken into account with regard to the average dwelling unit size used in the calculations (see below). Applying the attainable housing parameters specified by the, which are 60.0 percent to percent of MFI, the qualifying attainable household income range is $33, to $67, in FY2005 (see Table 8). The next step in estimating affordability is to determine the maximum allowable monthly housing payment by maximum attainable household income. The most commonly accepted measure of affordability is that a maximum of 30.0 percent of annual income for monthly housing payments, with utilities and other costs on top of this. In terms of a forrent unit, this would include rental payment, but would exclude additional payments for utilities (e.g., water, sewer, trash, electricity, gas, etc.), non-essential utilities (e.g., telephone, cable/satellite, and internet), and hazard insurance. In the case of a for-sale unit, it would include mortgage payment (principal, interest, taxes, and mortgage insurance, which together is often referred to as PITI), but also would exclude additional payments for utilities, Homeowners Association (HOA) fees (which often include some utilities and hazard insurance) and non-essential utilities. In an effort to allow for some of these additional payments, particularly in the case of HOA fees (which typically include water, sewer, trash, and hazard insurance), ERA proposes the use of maximum allowable monthly housing payment of 33.0 percent (including in the case of for-sale units, a maximum initial HOA fee of $ per month). On this basis, the maximum attainable monthly housing payment range at varying levels of MFI in the Sarasota-Bradenton MSA is $ to $1, (see Table 8). If the housing unit is to be rented, the above calculations are sufficient. If the housing unit is to be sold, then additional calculations are necessary to determine the maximum affordable sales price. This is determined by making various financing assumptions (e.g., down payment, interest rate, term) and related items (e.g., PITI, HOA) fees). The assumptions were developed based on ERA s general expertise in the area of residential development, consultations with Sarasota residential brokers, and current market Public Review Draft 1/27/2006 Page 26

32 conditions. As a result, the maximum attainable housing unit sales price range at varying levels of MFI in the Sarasota-Bradenton MSA is $91,292 to $208,247 (see Table 8). General Development Characteristics The zoning category varies according to the three zones, Downtown Edge (DTE), Downtown Core (DTC), and Downtown Bayfront (DTB). Based on the City s zoning ordinance, the current (or base) maximum density in these three areas is, respectively, 25 dwelling units (DU) per acre, 50 DU per acre, and 50 DU per acre. In order to optimize development economics, unless otherwise noted, development is assumed to be to the maximum density. The maximum number of stories allowed in these three zones, respectively, is five, 10, and 18. Whether or not this limitation is exceeded is tested (see below). In order to facilitate comparison between the three zones, the site size is set at one (1.0) acre for all three zones (i.e., 43,560 sq. ft. of land area, also known as dirt feet ). Building footprint for all three zones is the maximum allowable according to the zoning ordinance, percent site coverage. Note that in order to simplify the analysis and reduce the impact of other factors, the entire development is assumed to be residential. That is, the project is assumed to be entirely residential, not a mixed-use project with non-residential uses. Residential Characteristics Dwelling unit sizes vary widely in residential projects. However, in order to simplify the analysis, an average DU size of 1,200 sq. ft. was used, which would typically be a twobedroom, two-bath (2B/2B) unit. This average size takes into account possibly smaller units and larger units. The average unit size is held constant across the three zones and, unless otherwise noted, also is held constant when attainable units are considered. The residential area is computed by multiplying the number of dwelling units by the average size per dwelling unit, and grossing up for the common area which is estimated at 18.0 percent of the total residential area (dwelling units, plus common area). Parking Characteristics The parking ratio, that is the number of parking spaces per dwelling unit, is set at This figure is above the zoning code requirement of 1.0 parking space per dwelling unit, but is considered reasonable based on market demand and actual resident automobile use. The average gross parking space size is 400 sq. ft., including the parking space, aisles, ramps, building storage areas, etc. The average parking ratio and parking space size is held constant across the three zones and, unless otherwise noted, also is held constant when attainable units are considered. Public Review Draft 1/27/2006 Page 27

33 Table 8: Affordability Assumptions, Sarasota Attainable Household Income (Percent of Median Maximum Qualifying Household Maximum Allowable Monthly Housing Maximum Attainable Unit If Dwelling Unit To Be Sold Affordable Monthly Housing Payment 2 Total Monthly Housing Payment Family Income) 1 Income Payment 2 Sales Price Down Payment 3 Total Initial Mortgage Mortgage Payment 4 Property Tax 5 Mortgage Insurance 6 HOA Dues % $33, $ $91, $4, $86, $ $ $36.14 $ $ % $44, $1, $130, $6, $123, $ $ $51.57 $ $1, % $55, $1, $169, $8, $160, $1, $ $67.00 $ $1, % $67, $1, $208, $10, $197, $1, $ $82.43 $ $1, FY2005 HUD Median Family Income (MFI) for a family of four in Sarasota-Bradenton, FL MSA (effective Feb. 11, 2005). 2 Maximum monthly income available for housing payments. 33.0% 3 Percent of price as down payment: 5.00% 4 Mortgage Terms: Annual interest rate (fixed): 6.50% Term of mortgage (years): 30 5 Initial annual property tax rate: 1.80% 6 Annual mortgage insurance as a percentage of initial mortgage 0.50% 7 Housing Association (HOA) monthly dues (includes water, sewer, trash, insurance): $ Source:, Public Review Draft 1/27/2006 Page 28

34 The type of parking, whether surface or structured, is determined in a stepwise manner. First, if the total parking area exceeds the maximum allowable building footprint, then it must be structured. Second, if according to the first test, the total parking area does not exceed the maximum building footprint, then a test is performed to determine if the nonparking (i.e., residential) area exceeds the remaining built space assuming that the parking is surfaced (i.e., total built area, less parking area, times maximum number of stories, versus maximum allowable built space). This somewhat complicated calculations determines whether or not parking is on the surface or structured, which significantly affects development costs (see below). Project Size, FAR and Stories The project size is a function of the residential area and parking area. Added to this is the gross parking area, resulting in the total built area, which may also be referred to as the total saleable area. The Floor Area Ratio (FAR) is the total built area divided by the building footprint, which on a one-acre site is 43,560 sq. ft. The number of stories is determined by rounding the FAR up to zero decimal places. For example, if the FAR were 4.7, the number of stories would be rounded up to five (5.0). Development Costs The development costs were determined via detailed discussions with Sarasota area developers, brokers, and contractors. Development costs vary widely as a function of numerous factors, particularly the location of the project, site size and configuration, allowable density/height, and the local market for the project. Where the interviewees gave a wide range of figures, an approximate median was used. The current land cost per land sq. ft. (also known as dirt sq. ft.) varied widely across the interviewees, resulting in the necessity to use a median value for each of the three zones: $75.00 in the DTE, $ in the DTC, and $ in the DTB. Construction costs were more easily determined, but had increased significantly during the last six months (which is in-line with the situation nationally and particularly in the Southeastern U.S.). The following values are used per residential and common area sq. ft. (includes substructure, shell, interiors, services, equipment and furnishings, contractor profit, but excludes parking and on/off site infrastructure) in each of the three zones: $ in the DTE, $ in the DTC, and $ in the DTB. The cost per parking space is $5,000 for surface parking and $25,000 for structured parking. The remaining development costs are assumed to be the same across the three zones. This includes on/off-site infrastructure costs per unit ($17,500.00), permits and fees per unit ($10,000.00), other soft costs (e.g., architecture/engineering, legal, insurance, etc.)(20.0 percent of construction, parking, on/off-site infrastructure), and property taxes (1.8 percent of land, construction, parking, on/off-site infrastructure, and soft costs). Public Review Draft 1/27/2006 Page 29

35 Development Financing The development financing terms were determined via detailed discussions with Sarasota area developers and financiers. Financing terms vary widely as a function of numerous factors, particularly the strength of the borrower and the local market for the project. Where the interviewees gave a wide range of figures, an approximate median was used. However, note that the financing terms are held constant across the three zones. Unless otherwise noted, the same financing terms were used for both land and construction costs. These include the following: 75.0 percent Loan-To-Value (LTV) ratio; 60.0 percent average outstanding loan balance; 7.00 percent interest rate; 1.00 percent loan fee (points), and a loan period of 36 months for land (12 months pre-construction period, plus the construction period) and a construction period of 24 months. Sales Prices / Rents The sales prices for market rate dwelling units were determined via detailed discussions with Sarasota area developers and brokers as well as a review of recent listings. The prices used are $500,000 in the DTE, $600,000 in the DTC, and $700,000 in the DTB. Note that this is for the average unit size of 1,200 sq. ft., resulting in market rate sales prices of $ per sq. ft., $ per sq. ft., and $ per sq. ft., respectively. Maximum sales prices for below market (i.e., attainable) units were noted in the paragraphs on affordability above. The cost of marketing and selling the market dwelling units is estimated at 7.0 percent of sales revenues. Note that this cost is applied to both market rate and, when used, attainable units. Rent per DU was determined via a review of recent listings. The rents specified are $1,250 per month in the DTE, $1,500 per month in the DTC, and $1,750 per month in the DTB. However, note that these figures are only used when the option to rent the units, not sell them, is utilized. The remaining inputs under the for-rent option are the same across the three zones as follows: 5.0 percent vacancy rate; 25.0 percent operating expenses; 3.0 percent capitalization rate (assuming stabilized year sale); and 5.0 percent cost of sale. Note that the development of for-rent units in Sarasota was not economically feasible under market conditions at the time of our previous study and this situation has only worsened due to the above market trends. Therefore, our analysis focuses exclusively on the for-sale condominium market, although development of for-rent units is likely to become economically viable again at some point in the future and, therefore, should not be excluded from attainable housing policies. Development Profit (Loss) The development profit (loss) is computed as the gross sales revenues, less the total development cost (the methodology is the same, whether for-sale or for-rent, although the figures would vary). In ERA s judgment, based on the expected slowdown in development due to the increasing development costs and flattening sales prices noted above, developers will be willing to accept a lower development profit (also known as the hurdle rate) in the Public Review Draft 1/27/2006 Page 30

36 near to mid-term of 20.0 percent on the total development cost (note that this includes both equity and debt financing). Density Bonus Without Attainable Housing Requirements Assuming no density bonus and no attainable housing requirements as well as current market conditions for all of the feasibility model inputs reviewed above, new development in the three downtown zones is not expected to result in a profit level that exceeds the minimum level of 20 percent required by for-profit developers (see Table 9). Stated another way, unless developers are already vested in some way in the zones (e.g., land or construction costs at below current market rates or has some other advantage versus market rate conditions), rational for-profit developers would not be expected to build. Table 9: Development Profit of For-Sale Units (Condos) by Zone by Density Without Attainable Housing Requirements, Downtown Sarasota Density Downtown Edge (DTE) Downtown Core (DTC) Downtown Bayfront (DTB) (% of Current Development Development Development Density) DU/acre Profit DU/acre Profit DU/acre Profit 100% 25 DU/acre -3.3% 50 DU/acre 15.6% 50 DU/acre 12.4% 200% 50 DU/acre 4.4% 100 DU/acre 17.8% 100 DU/acre 18.9% 300% 75 DU/acre 9.7% 150 DU/acre 21.3% 150 DU/acre 23.6% 400% 100 DU/acre 13.1% 200 DU/acre 23.4% 200 DU/acre 26.4% This table displays the development profit [(sales revenues - development costs) / development costs] in each of the three zones (DTE, DTC, DTB) depending upon the density (100% current density, 200% current density, 300% current density, 400% curent density) assuming current market conditions and no attainable housing requirements. Shaded cells indicates that the minimum development profit level (also known as the hurdle rate) of 20% was met or exceeded. Note that the 400% density level in the DTC and DTB zones is roughly equivalent to the current Downtown Residential Overlay District (DROD). Source:, However, note that if density is increased substantially, development should become more profitable. In fact, this is the case, with development becoming profitable in the Downtown Core (DTC) and the Downtown Edge (DTE) at a density that is 300 percent (150 DU/acre) or greater of the base density (see Table 9). (This still assumes though that no attainable housing units are required in return for the increased density.) Note that in the Downtown Edge (DTE), even an increase in density up to 400 percent (100 DU/acre) of the base density does not come close to the minimum development profit level required by for-profit developers. Zone Density Bonus With Attainable Housing Requirements While the preceding analysis showed that development under market rate conditions is only expected to occur with a significant increase in density, it is also necessary to test the impact of attainable housing requirements. An attainable housing requirement reduces the developer s profit. A density bonus increases the profit. In an ideal situation, one precisely offsets the other. Public Review Draft 1/27/2006 Page 31

37 The attainable housing requirements take two forms: first the percentage of the total dwelling units that are required to be affordable (i.e., five percent, 10 percent, 15 percent, or 20 percent) and second, the income level of the attainable households as measured versus the Median Family Income (MFI) (e.g., 60 percent, 80 percent, 100 percent, or 120 percent). Again note that Median Family Income (MFI) is defined by the U.S. Housing and Urban Development Department (HUD) as the median family income for a family of four in the Sarasota-Bradenton Metropolitan Statistical Area (MSA). This analysis is relatively complex since it considers the impacts of density, attainable housing unit requirements, and attainable household income levels. As such, it is presented in tables (see Table 10 to Table 12), one for each of the three downtown zones. Note that as expected, the development profit decreases as the attainable housing requirements are increased. As noted above, in the Downtown Edge (DTE), even an increase in density up to 400 percent (100 DU/acre) of the base density does not come close to the minimum development profit level at current market rate conditions. Attainable housing requirements further reduce the development profit level. For example, assuming 400 percent density (100 DU/acre), with no attainable housing requirements the development profit level is 13.1 percent, which decreases to 10.0 percent assuming a relatively light attainable housing requirement of five percent attainable units and attainable household income at 120 percent of MFI (see Table 10). The development profit level only gets worse as density is decreased or the attainable housing requirements are increased. In the Downtown Core (DTC), as noted previously, an increase in density to 300 percent (150 DU/acre) or more is necessary to reach the required minimum development profit level. However, despite assuming an increase in density in the Downtown Core of 400 percent (200 DU/acre), even minimal attainable housing requirements (5 percent attainable units and attainable household income at 120 percent of MFI) reduces the development profit level below the minimum required (see Table 11). That said, under this option, development profit is within one percentage point of the 20 percent hurdle rate required by for-profit developers. Also, in the Downtown Bayfront (DTB), as noted previously, an increase in density to 300 percent (150 DU/acre) or more is necessary to reach the required minimum development profit level. Finally, assuming an increase in density to 400 percent (200 DU/acre), the development profit is above the minimum required level only with relatively minimal attainable housing requirements (five percent attainable units and attainable household income at 120 percent of MFI)(see Table 12). Assuming a somewhat reduced density of to 300 percent (150 DU/acre) and the same relatively minimal attainable housing requirements, the development profit is again within one percentage point of the 20 percent hurdle rate required by for-profit developers. Public Review Draft 1/27/2006 Page 32

38 Table 10: Development Profit of For-Sale Units (Condos) in the Downtown Edge (DTE) with Attainable Housing Requirements, Downtown Sarasota Density (% of Current Density) DU/Acre 100% 25 DU/acre Attainable Household Income Level (% of MFI) 0% Attainable DU 5% Attainable DU 10% Attainable DU 15% Attainable DU 60% -6.2% -9.2% -12.1% -18.1% 80% -6.0% -8.6% -11.3% -16.7% -3.3% 100% -5.7% -8.1% -10.5% -15.3% 120% -5.4% -7.5% -9.6% -13.9% 60% 1.3% -3.6% -6.8% -11.5% 80% 1.6% -2.9% -5.7% -10.0% 20% Attainable DU 200% 50 DU/acre 100% 4.4% 1.9% -2.1% -4.7% -8.4% 120% 2.2% -1.3% -3.6% -6.9% 60% 6.4% 1.9% -2.5% -7.0% 300% 75 DU/acre 80% 6.7% 2.7% -1.3% -5.4% 9.7% 100% 7.0% 3.4% 0.2% -3.8% 120% 7.3% 4.2% 1.0% -2.2% 60% 8.8% 4.6% 0.2% -4.1% 400% 100 DU/acre 80% 9.2% 5.4% 1.4% -2.4% 13.1% 100% 9.6% 6.2% 2.7% 0.8% 120% 10.0% 7.0% 3.9% -0.9% This table displays the development profit [(sales revenues - development costs) / development costs] in the Downtown Edge (DTE) assuming current market conditions, depending upon the density (100% current density, 200% current density, 300% current, density 400% curent density), plus the following attainable housing conditions: the percentage of attainable units required (as a percentage of the total dwelling units in the development) and as a percentage of the attainable household income levels. Shaded cells indicates that the minimum development profit level (also known as the hurdle rate) of 20% was met or exceeded. Source:, Public Review Draft 1/27/2006 Page 33

39 Table 11: Development Profit of For-Sale Units (Condos) in the Downtown Core (DTC) with Attainable Housing Requirements, Downtown Sarasota Attainable Density (% of Current Density) DU/Acre Household Income Level (% of MFI) 0% Attainable DU 5% Attainable DU 10% Attainable DU 15% Attainable DU 20% Attainable DU 60% 12.0% 6.5% 2.9% -2.6% 100% 50 DU/acre 80% 12.3% 7.2% 3.9% -1.2% 15.6% 100% 12.5% 7.9% 4.8% 0.2% 120% 12.8% 8.6% 5.8% 1.6% 60% 13.1% 8.6% 3.9% -0.7% 200% 100 DU/acre 80% 13.5% 9.3% 5.0% 0.7% 17.8% 100% 13.8% 10.0% 6.0% 2.2% 120% 14.2% 10.7% 7.1% 3.6% 60% 16.9% 11.8% 7.4% 2.3% 300% 150 DU/acre 80% 17.2% 12.6% 8.5% 3.8% 21.3% 100% 17.5% 13.3% 9.6% 5.2% 120% 17.9% 14.0% 10.6% 6.7% 60% 18.7% 13.8% 9.0% 4.1% 400% 200 DU/acre 80% 19.0% 14.6% 10.1% 5.6% 23.4% 100% 19.4% 15.3% 11.2% 7.1% 120% 19.8% 16.1% 12.3% 8.6% This table displays the development profit [(sales revenues - development costs) / development costs] in the Downtown Core (DTC) assuming current market conditions, depending upon the density (100% current density, 200% current density, 300% current density, 400% curent density), plus the following attainable housing conditions: the percentage of attainable units required (as a percentage of the total dwelling units in the development) and as a percentage of the attainable household income levels. Shaded cells indicates that the minimum development profit level (also known as the hurdle rate) of 20% was met or exceeded. Note that the 400% density level with 0% attainable units is roughly equivalent to the current Downtown Residential Overlay District (DROD). Source:, Public Review Draft 1/27/2006 Page 34

40 Table 12: Development Profit of For-Sale Units (Condos) in the Downtown Bayfront (DTB) with Attainable Housing Requirements, Downtown Sarasota Attainable Density (% of Current Density) DU/Acre Household Income Level (% of MFI) 0% Attainable DU 5% Attainable DU 10% Attainable DU 15% Attainable DU 20% Attainable DU 60% 8.8% 3.3% -0.3% -5.8% 100% 25 DU/acre 80% 9.0% 3.9% 0.5% -4.6% 12.4% 100% 9.2% 4.5% 1.3% -3.5% 120% 9.5% 5.1% 2.1% -2.3% 60% 14.1% 9.4% 4.5% -0.3% 200% 50 DU/acre 80% 14.4% 10.0% 5.4% 1.0% 18.9% 100% 14.7% 10.6% 6.4% 2.2% 120% 15.0% 11.2% 7.3% 3.5% 60% 19.0% 13.7% 9.1% 3.8% 300% 75 DU/acre 80% 19.3% 14.4% 10.1% 5.1% 23.6% 100% 19.6% 15.0% 11.0% 6.4% 120% 19.9% 15.6% 12.0% 7.7% 60% 21.5% 16.4% 11.3% 6.2% 400% 100 DU/acre 80% 21.8% 17.1% 12.3% 7.5% 26.4% 100% 22.1% 17.7% 13.3% 8.8% 120% 22.4% 18.4% 14.3% 10.1% This table displays the development profit [(sales revenues - development costs) / development costs] in the Downtown Bayfront (DTB) assuming current market conditions, depending upon the density (100% current density, 200% current density, 300% current density, 400% curent density), plus the following attainable housing conditions: the percentage of attainable units required (as a percentage of the total dwelling units in the development) and as a percentage of the attainable household income levels. Shaded cells indicates that the minimum development profit level (also known as the hurdle rate) of 20% was met or exceeded. Note that the 400% density level with 0% attainable units is roughly equivalent to the current Downtown Residential Overlay District (DROD). Source:, Public Review Draft 1/27/2006 Page 35

41 Sensitivity Analysis In the preceding section, as expected, as the attainable housing requirements were increased, the development profit decreased and in most cases dropped below the minimum required development profit level. This is due to the marginal development economics under conditions, as discussed in the previous section. While this would appear to indicate that a density bonus and attainable housing requirement is not worth the effort to consider further, it is important to note that the preceding analysis was made considering current market conditions. Essentially, this would require that a developer attempt to enter the market today, under current market conditions. However, currently there may be numerous developers that are already in the Sarasota market with one or more inputs that are below current market rates. For example, a developer may own land or have an option to purchase land at a price below that assumed in the model. In addition, the city may have the ability to reduce some of the cost of other development costs in a variety of ways. Therefore, it is important to evaluate the relative importance to development profit of a range of factors affecting development economics. This can be done by specifying an example density and attainable housing requirement, and then varying the development inputs. As an example, the following case was selected for this analysis: a 400 percent density (above base density), 10 percent attainable housing requirement, and attainable household income at 120 percent of MFI. A number of variables were then changed from their base input level, ranging from 50 percent to 150 percent, to test the impact on the development profit. This was done for each of the three zones. The minimum development profit was met only under the following conditions (see Table 13): In the Downtown Edge (DTE), with a significant decrease in construction costs (75 percent or less of the base construction costs), a significant decrease in parking cost (50 percent or less of the base parking cost), or a significant increase in the market rate unit sales price (25 percent or more of the base market rates unit sales price). In the Downtown Core (DTC) as in the Downtown Edge (DTE), plus also with a significant decrease in soft costs (50 percent below the base soft cost input). In the Downtown Bayfront (DTB), as in the Downtown Core (DTC), plus also with a significant decrease in land costs, on/off site infrastructure costs, construction loan period, interest rate, and attainable dwelling unit size. Public Review Draft 1/27/2006 Page 36

42 Table 13: Development Profit of For-Sale Units (Condos) Sensitivities with Selected Density and Attainable Housing Requirement, Downtown Sarasota Zone Sensitivity (% of Variable Versus Current Market Rate) Variable 50% 75% 100% (Base) 125% 150% A Land Costs Per Dirt Sq. Ft. 10.8% 8.5% 4.0% 2.0% B Construction Costs Per Sq. Ft. 57.3% 26.8% -8.6% -19.8% C Cost Per Parking Space 125.0% 9.2% 3.3% 0.6% D On/Off-Site Infrastructure 9.0% 7.6% 4.8% 3.5% E Permits and Fees Per Unit 7.5% 6.9% 5.6% 4.9% F Other Soft Costs 13.8% 9.9% 2.8% -0.4% Downtown Edge G Property Taxes 6.9% 6.6% 6.2% 5.8% 5.5% (DTE) H Pre-Construction Loan Period 6.3% 6.3% 6.1% 6.1% I Construction Loan Period 9.2% 7.7% 4.8% 3.4% J Interest Rate 9.3% 7.7% 4.7% 3.3% K Attainable DU Size (Sq.Ft.) 9.6% 7.6% 4.3% 2.6% L Parking Spaces Per Attainable DU 6.8% 6.5% 5.9% 5.6% M Market Rate Unit Price -42.8% -17.8% 29.3% 51.6% A Land Costs Per Dirt Sq. Ft. 18.3% 16.8% 13.9% 12.5% B Construction Costs Per Sq. Ft. 76.4% 39.5% -1.7% -14.3% C Cost Per Parking Space 21.5% 18.3% 12.5% 9.8% D On/Off-Site Infrastructure 18.1% 16.7% 14.0% 12.7% E Permits and Fees Per Unit 16.6% 16.0% 14.7% 14.1% F Other Soft Costs 23.9% 19.5% 11.5% 7.9% Downtown Core G Property Taxes 16.1% 15.7% 15.3% 14.9% 14.6% (DTC) H Pre-Construction Loan Period 15.4% 15.4% 15.3% 15.2% I Construction Loan Period 18.5% 16.9% 13.8% 12.3% J Interest Rate 18.6% 16.9% 13.8% 12.2% K Attainable DU Size (Sq.Ft.) 19.6% 17.5% 13.4% 11.6% L Parking Spaces Per Attainable DU 15.9% 15.6% 15.0% 14.7% M Market Rate Unit Price -38.0% -10.8% 40.3% 64.3% A Land Costs Per Dirt Sq. Ft. 21.8% 19.7% 15.8% 13.9% B Construction Costs Per Sq. Ft. 80.4% 42.5% 0.3% -12.7% C Cost Per Parking Space 23.2% 20.4% 15.1% 12.7% D On/Off-Site Infrastructure 20.2% 18.9% 16.5% 15.3% E Permits and Fees Per Unit 18.9% 18.3% 17.1% 16.6% Downtown F Other Soft Costs 26.3% 21.8% 13.8% 10.2% Bayfront G Property Taxes 18.5% 18.1% 17.7% 17.3% 16.9% (DTB) H Pre-Construction Loan Period 17.8% 17.8% 17.6% 17.6% I Construction Loan Period 20.9% 19.3% 16.1% 14.6% J Interest Rate 21.1% 19.4% 16.1% 14.5% K Attainable DU Size (Sq.Ft.) 22.0% 20.1% 15.8% 13.9% L Parking Spaces Per Attainable DU 18.2% 17.9% 17.4% 17.2% M Market Rate Unit Price -36.9% -9.0% 43.3% 67.8% This table displays the development profit [(sales revenues - development costs) / development costs] in each of the three zones (DTE, DTC, DTB), assuming variation versus the current condition for the specified variable (50%, 75%, 100%, 125% 150%) assuming the following density and attainable housing conditions: the density is 400% of the current density; 10% of the total units are for attainable households; and the attainable households are at 100% of the Median Family Income (MFI). For example, in the Downtown Edge (DTE), if Variable A - Land Cost Per Dirt Sq. Ft. is reduced to 50% of the current market rate, the development profit will increase to 10.8 percent (versus a development profit of 6.2 percent assuming that Variable A - Land Cost Per Dirt Sq. Ft. equals the current market rate). Shaded cells indicates that the minimum development profit level (also known as the hurdle rate) of 20% was met or exceeded. Source:, Public Review Draft 1/27/2006 Page 37

43 These findings suggest that developers may take advantage of a density bonus program with attainable housing requirements if they have some sort of advantage versus current market conditions. This advantage may come as a function of their situation (e.g., prior purchase or optioning of land at below current market rates) and/or as a function of city actions (e.g., provision of infrastructure, low cost financing, or other incentive). Whether alone or in combination, this situation is likely to entice developers to take advantage of a density bonus program despite associated attainable housing requirements. Summary Information provided by residential developers and stakeholders in downtown Sarasota was used to prepare a development feasibility model, which ERA used to analyze the profitability of development in downtown Sarasota. The analysis was done in a step-wise manner, starting with current conditions, then with increased density and no attainable housing requirements, then with increased density with attainable housing requirements, and finally with sensitivities to individual feasibility model variables. This analysis leads to the conclusion that under current and foreseeable market conditions, even a significant density bonus is unlikely to result in new development of attainable units downtown. Furthermore, as attainable housing requirements are imposed and increased, the development profit decreases and new development becomes less and less probable. However, if developers have some sort of advantage versus current market conditions in the downtown, then a density bonus program could be effective in creating attainable housing. Such an advantage could be due to a range of factors, such as reduced development costs (such as reduced land or construction costs, or even as a function of city financial support or actions), increased sales revenues, or a lower minimum development profit level. In addition, non-profit housing developers may be in a better position to take advantage of a downtown housing density bonus, particularly when combined with other development tools, such as below market interest rates or low-income housing tax credits. It is also useful to take a broader view of the situation, in which a density bonus and attainable housing requirement may be used in the future in the downtown when market conditions have improved. Such a policy could also be considered for application in areas outside the downtown. Public Review Draft 1/27/2006 Page 38

44 5. Recommended Policy and Comprehensive Plan Amendment Introduction In this report section, ERA proposed changes to the Sarasota City Plan based on the preceding analyses. These proposed changes are expected to form the basis of a comprehensive plan amendment. Following adoption of the proposed changes, ERA will work with the City to develop proposed modifications to the Zoning Code. Summary of Proposed Policy Based on the preceding policy and economic analyses, ERA recommends that the City of Sarasota pursue the downtown density bonus and attainable housing policy outlined in Table 14. In developing the recommended policy, ERA sought to find a balance among a range of issues including the following: Community interest in providing housing downtown that is available to all residents, not just investors or the affluent. Impact of such a policy on the City s housing market, the area economy more broadly, and overall development downtown in the near- and long-term. Utility, legality, and financial feasibility of such a policy. Overall consistency with and success of similar policies in other communities. Compatibility with existing adjacent residential development. Ability of the City to administer an attainable-housing density bonus program. Recommended Changes to Housing Chapter ERA recommends the policy changes below to the Housing Chapter of the Sarasota City Plan. Note that changes are shaded grey, with deletions marked with strikethrough text and additions marked with underline text. Objective 1 New Construction The City shall continue to enhance a City government/private sector association that encourages the private sector to provide new housing that: meets the needs of City residents; is innovative; and, is compatible with the City s neighborhoods.; and offers diverse housing types and affordability levels to meet the present and future needs of Sarasota City residents. Public Review Draft 1/27/2006 Page 39

45 Table 14: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota Downtown Zone Policy Characteristic Policy Issue/Question Downtown Edge (DTE) Downtown Core (DTC) Downtown Bayfront (DTB) Reasoning Program Type Voluntary versus mandatory policy approach Voluntary Voluntary Voluntary Policy is new to Sarasota; housing market demand currently waning and development economics marginal; mandatory program could stop new development; more acceptable to development community. Current Base Density Density under current zoning 25 DU/acre 50 DU/acre 50 DU/acre Density Bonus Recommended density with bonus density and attainable housing requirment 200 percent of base 400% of base 400% of base In DTE: density sensitive to scale and character of adjacent DTN zones. In DTC and DTB: keeps development economics near current margin of profitability (maximizing probability of use); consistent with density currently allowed under DROD; increases probability of density bonus use by developers. Maximum Allowable Density Attainable Housing Requirement (% of total DU) Number of units allowed (including bonus units) Percentage of bonus units that must be attainable 50 DU/acre 200 DU/acre 200 DU/acre 10 percent Same as DTE Same as DTE Keeps development economics near current margin of profitability (maximizing probability of use, particularly by for-profit developers already vested in the market and by non-profit housing developers who can leverage other funding sources). Threshold Size of development to which policy applies Projects with 10 or more housing units Same as DTE Same as DTE 10% of 10 DUs is 1 attainable DU; in-line with inclusionary housing policies in other communities. Continued on next page. Source:, Public Review Draft 1/27/2006 Page 40

46 Table 15: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota (Continued) Downtown Zone Policy Characteristic Policy Issue/Question Downtown Edge (DTE) Downtown Core (DTC) Downtown Bayfront (DTB) Reasoning Income Target Persons to be served Attainable units are affordable at the time of sale or rental to households earning a maximum avearge of 100 percent of Median Family Income (MFI) (median household income for a family of four in the Sarasota-Bradenton MSA as determined annually by the U.S. Department of Housing and Urban Development) and available to households earning up to a maximum of 120 percent MFI Same as DTE Same as DTE Serves residents most affected by area's rapid home prices and keeps development economics near current margin of profitability (maximizing probability of use). Project Type Off-site Construction or In-lieu of Fee Type of development to which policy applies Location of bonus units; consideration in-lieu payment option For-sale and for-rent projects Same as DTE Same as DTE There is a need for both rental and for-sale housing; maintains program flexibility and clarity; more acceptable to development community. No Same as DTE Same as DTE Supports community diversity over income-segregated development; maximizes development of attainable units in the downtown; reduces administrative burden on city; keeps city from direct development activity. Construction Type New Same as DTE Same as DTE Unit Type Size and type of attainable units to be constructed Continued on next page. Source:, Size (sq. ft.) and appearance (fixtures & finishes) functionally equivalent to market rate units Same as DTE Same as DTE Ensures minimum standards for attainable units; avoids negative impact on market rate units due to low quality development. Public Review Draft 1/27/2006 Page 41

47 Table 16: Recommended Downtown Density Bonus and Attainable Housing Policies, Downtown Sarasota (Continued) Downtown Zone Policy Characteristic Policy Issue/Question Downtown Edge (DTE) Downtown Core (DTC) Downtown Bayfront (DTB) Reasoning Dispersal of Attainable Units Location of attainable units in development Units dispersed throughout the development, not concentrated on a single floor or part of the building Same as DTE Same as DTE Avoids stigmatizing attainable unit residents; avoids adverse impact on market rate units due to concentration of attainable units. Tenure (Timeframe Unit is Attainable) Maintaining attainability In perpetuity; if the unit is sold, designated public agency (e.g., Community Housing Trust of Sarasota) has right of first refusal based on resale terms below. Resale Terms Maintaining attainability Selling owner of attainable unit receives 25 percent of profit since purchase (with profit based on current owner's purchase price adjusted for inflation, owner equity, owner improvements, closing costs, and commission) to be paid either (i) entirely by designated public agency or (ii) if designated public agency chooses not to purchase unit directly, by attainable income-qualified buyer with support as necessary by designated agency or agencies. Same as DTE Same as DTE Maintains attainability of unit; provides partial profit to attainable homeowner. Same as DTE Same as DTE Maintains attainability of unit; provides partial profit to attainable homeowner. Administration & Enforcement Implementation, administration, and enforcement of program In conjunction with the County's program; a third-party affordable housing organization--either Housing Trust or the joint Sarasota Office of Housing and Community Development (OHCD)--will be critical for determining income qualification of households, pr Same as DTE Same as DTE Working with other attainable housing entities maximizes administrative efficiencies; attainable housing program administration and enforcement requires specialized and exclusive staff. Deed Restrictions For-sale units must be owneroccupied. Same as DTE Same as DTE Avoids potential program abuse. Source:, Public Review Draft 1/27/2006 Page 42

48 Action Strategy 1.7 Non-Profit Developers Collaboration: The City will continue to encourage and work cooperatively with other municipalities, State and federal agencies, for-profit and non-profit developers, and other interested parties in the housing delivery process to create attainable housing in the City. Objective 3 - Maintaining and Attracting Moderate and Middle Income Families Recognizing that in approximately two thirds sixty percent of households within the City had annual household incomes below 120 percent of AMI of less than $35,000, the City will pursue actions that maintain and attract moderate and middle income families. Action Strategies: 3.7 Definition of Attainable Housing Units: The City shall define attainable housing units as meeting the following conditions: affordable to households earning from sixty (60.0) percent to one-hundred-twenty (120.0) percent of the Median Family Income (MFI) (family of four) in the Sarasota-Bradenton MSA and spending no more than thirty-three (33.0) percent of their gross household income on housing (including rent or mortgage costs (mortgage payment, property taxes, mortgage insurance) and, if applicable, homeowners association fees); and size (sq. ft.) and appearance (fixtures and finishes) of attainable housing units shall be functionally equivalent to market rate units. The attainable housing income range shall be updated annually by the City based on U.S. Housing and Urban Development Department (HUD) data and existing mortgage financing conditions. This definition shall be used in conjunction with the Downtown Density Bonus and Attainable Housing Overlay District specified in the Future Land Use Chapter and other City attainable housing policies. 3.8 Attainable Housing Staff and Knowledge: In order to assist with the implementation and monitoring of attainable housing policies, the City shall make resources available for the hiring of attainable housing staff. The City shall initiate this policy with the hiring of one (1) full-time attainable specialists and revisit the need for additional staff annually. The City shall also consider the need for training in order to increase City staff knowledge regarding attainable housing and development economics. 3.9 Other Attainable Housing Mechanisms: In addition to the Downtown Density Bonus and Attainable Housing Overlay District specified in the Future Land Use Chapter (see Action Strategy 2.14), the City shall consider other attainable housing mechanisms, including but not limited to the following: use of linkage fees; real estate tax deferral/abatement; in-lieu fees; development on public land (i.e., free land); use of Community Redevelopment Authority (CRA) Tax Increment Financing (TIF) funds; City Public Review Draft 1/27/2006 Page 43

49 funding for parking and/or infrastructure; development permit and fee reductions; expedited approval process; and co-development using county housing trust funds/management Support Community Housing Trust of Sarasota County: The City shall provide funding and/or other resources to support the Community Housing Trust of Sarasota County. The Trust is expected to assist the City with attainable household income qualification, monitoring attainable housing units, and related activities Comprehensive Attainable Housing Strategy: The City shall prepare a comprehensive, city-wide attainable housing strategy, which includes the following elements: existing and future attainable housing supply and demand by neighborhood; regulatory review; public outreach; and recommended policies and funding. Objective 5 - Coordinate with other Local Governments and Private Sector Action Strategies 5.3 Attainable Housing: The City will coordinate with Sarasota County s Community Housing efforts and identify opportunities to leverage expertise and program administration. This may occur in partnership with the Community Housing Trust of Sarasota. Recommended Changes to Future Land Use Chapter ERA recommends the policy changes noted below to the Future Land Use Chapter of the Sarasota City Plan Note that changes are shaded grey, with deletions marked with strikethrough text and additions marked with underline text. Objective 2 Land Development Regulations The City shall make appropriate changes to the City s existing Land Development Regulations (LDRs), including zoning code, in order to ensure continued consistency between those regulations and this Sarasota City Plan. In addition, the City may consider other regulatory factors for possible incorporation into the Land Development Regulations that are not issues of consistency, but which warrant consideration due, in part, to the developed character of the City. Action Strategies: 2.14 Reserved.Downtown Density Bonus and Attainable Housing Overlay District: A Downtown Density Bonus and Attainable Housing Overlay District shall be added to the Zoning Code and shall replace the Downtown Residential Overlay District (DROD). The Downtown Density Bonus and Attainable Housing Overlay District shall apply to the Public Review Draft 1/27/2006 Page 44

50 following three zones of the Downtown Urban Mixed-Use land use classification: Downtown Edge (DTE); Downtown Core (DTC); and Downtown Bayfront (DTB). The following maximum density shall apply for specific sites in each of the three zones: fifty (50) dwelling units per acre in the Downtown Edge (DTE) zone; two-hundred (200) dwelling units per acre in the Downtown Core (DTC) zone; and two-hundred (200) dwelling units per acre in the Downtown Bayfront (DTB) zone. Developments seeking increased density in accordance with this provision shall be required to make at least ten (10.0) percent of the total dwelling units available as attainable housing units (as defined in Action Strategy 3.7), with the income qualified households for a single project averaging no higher than onehundred (100.0) percent of Median Family Income. Developments allowing increased dwelling unit density in accordance with this provision may be approved only after public hearings held by the Planning Board and City Commission. Criteria for approval shall be incorporated into the City s land development regulations, including consideration of Objective 3 Development Review and Approval Process of the Future Land Use Chapter Downtown Residential Overlay District: A maximum residential density up to two-hundred (200) dwelling units per acre may be developed on sites within the area depicted on Illustration LU-12, Downtown Residential Overlay District, but the average density shall not exceed fifty (50) dwelling units per acre within the overlay district. Developments allowing increased dwelling unit density in accordance with this provision may be approved only after public hearings held by the Planning Board and City Commission. Criteria for approval shall be incorporated into the City s land development regulations. (Adopted by Ordinance No , August 4, 2003). Public Review Draft 1/27/2006 Page 45

51 6. Development Capacity Introduction The three downtown mixed-used zones in the study area provide a finite amount of land available for development. Based upon information provided by the City Planning Department, ERA evaluated the increased residential development that could occur as a result of an attainable housing-related density bonus program, and the number of attainable housing units that could be built in a best-case scenario. Existing Dwelling Units and Capacity According to the City s Planning Department, there are 4,697 existing dwelling units in the current DTE, DTC, and DTB zones combined, as shown in Table 17. Factoring in City s proposed expansion area for the DTE zone adds an additional 914 existing dwelling units. Together, this results in 5,611 existing dwelling units within the study area. As Table 18 demonstrates, under current zoning regulations, the maximum development capacity in the study area totals 9,327 dwelling units (excluding use of the Downtown Residential Overlay District or DROD). Potential Dwelling Units and Capacity Incorporating this information, ERA estimated the change in maximum development capacity that could occur if an attainable housing-focused density bonus program was enacted. In this case, the maximum number of dwelling units per acre would increase from 25 DU/acre to 50 DU/acre in the DTE zone, and from 50 DU/acre to 200 DU/acre in the DTC and DTB zones similar to the current program in the DROD. Assuming a maximum utilization scenario, whereby all new developments would utilize the density bonus program, the maximum residential development capacity would total 28,901 dwelling units as shown in Table. This represents a potential maximum net capacity increase of 19,574 dwelling units versus the number of units allowed under the current zoning (see Table 20). However, this level of utilization of the proposed density bonus program is considered unrealistically high, primarily due to the voluntary nature of the program (meaning that many developers probably will not use it) and its discretionary nature (meaning that the City Commission may not approve developer applications). Public Review Draft 1/27/2006 Page 46

52 Table 17: Existing Dwelling Units in Study Area Area Units Current Downtown Zone Districts DTE 1,709 DTC 593 DTB 2,395 Sub-total 4,697 Areas Under Evaluation for DTE Zoning Area 1, Central Coconut 555 Area 2, Rosemary 119 Area 3, 4th Street Lots 35 Area 4, Park East, west of Lime Ave 32 Area 5, Park East, east of Lime Ave 165 Area 6, School Ave/Ron Burks Site 0 Area 7, Wood Street Site 8 Sub-total 914 Total 5,611 Notes: Includes units currently under construction. Source:, Department of Planning, January 2006 Public Review Draft 1/27/2006 Page 47

53 Table 18: Maximum Development Capacity in Study Area Under Current Zoning Regulations Zoning District within Downtown Urban Mixed-Use Classification Acreage Maximum Dwelling Units Per Acre Percent Residential Mix Maximum Dwelling Units Allowable The following areas are currently zoned with Downtown Districts Downtown Edge (DTE) % 1,963 Downtown Core (DTC) % 2,144 Downtown Bayfront (DTB) % 2,975 Sub-total ,082 The following areas may be rezoned to Downtown Edge (DTE) 1 - Central Coconut % Rosemary Neighborhood % th Street Lots % Park East (west of Lime Ave) % Park East (east of Lime Ave) % School Ave/Ron Burks Site % Wood Street Site % 111 Sub-total ,245 Maximum Dwelling Units Allowed by Current Zoning Current DTE, DTC, and DTB Districts within Downtown Urban Mixed Use 7,082 Areas that may be rezoned to DTE 2,245 Total 9,327 Notes: Maximum density allowed excludes right-of-way Reflects current allowable densities and percent mix of development. Source:, Department of Planning, January 2006 Public Review Draft 1/27/2006 Page 48

54 Table 19: Maximum Development Capacity in Study Area with Density Bonus Zoning District within Downtown Urban Mixed-Use Classification Acreage Maximum Dwelling Units Per Acre Percent Residential Mix Maximum Dwelling Units Allowable The following areas are currently zoned with Downtown Districts Downtown Edge (DTE) % 3,927 Downtown Core (DTC) % 8,579 Downtown Bayfront (DTB) % 11,901 Sub-total ,407 The following areas may be rezoned to Downtown Edge (DTE) Area 1, Central Coconut % 1, Rosemary Neighborhood % th Street Lots % Park East (west of Lime Ave) % Park East (east of Lime Ave) % School Ave/Ron Burks Site % Wood Street Site % 222 Sub-total ,494 Maximum Dwelling Units allowed within Study Area Current DTE, DTC, and DTB Districts within Downtown Urban Mixed Use 24,407 Areas that may be rezoned to DTE 4,494 Total 28,901 Notes: Maximum density allowed excludes right-of-way Density bonus assumes 50 DU/acre for DTE and 200 DU/acre for DTC and DTB Reflects existing terms for percent mix of development. Source:, Department of Planning, January 2006 Public Review Draft 1/27/2006 Page 49

55 Table 20: Net Capacity in Study District Under Current Zoning and Proposed Density Bonus DTE DTC DTB DTE Add-On Total Current Zoning Maximum Dwelling Units 1,963 2,144 2,975 2,245 9,327 Existing Dwelling Units 1, , ,611 Net Capacity Under Existing Zoning 254 1, ,331 3,716 Proposed Zoning Maximum Dwelling Units 3,927 8,579 11,901 4,494 28,901 Existing Dwelling Units 1, , ,611 Net Capacity Under Proposed Zoning 2,218 7,986 9,506 3,580 23,290 Difference in Net Capacity (Proposed vs. Current Zoning) 1,964 6,435 8,926 2,249 19,574 Notes: Density bonus assumes 50 DU/acre for DTE and 200 DU/acre for DTC and DTB Existing dwelling units includes units currently under construction Calculation assumes best case scenario under which there are no constraints to development (physical or otherwise) and all developments utilize the density bonus at the maximum number of units. Sources: Planning Department;. Public Review Draft 1/27/2006 Page 50

56 The maximum average density in the study area would increase from 34.4 DU/acre under current zoning to DU/acre under the proposed zoning (see Table 21). Again, neither of these densities are expected to be achieved, but they provide a relative benchmark of the potential density increase. Potential Attainable Housing Units Presuming 10 percent of net new housing units would be designated as attainable units, under the best case scenario a maximum of 2,329 new attainable dwelling units would be possible under the proposed policy (Table 22). It is highly unlikely, however, that under a voluntary program all of these units would be constructed. Due to the large number of factors influencing the specifics of each development project, it is not possible to forecast how many of the potential attainable housing units will in fact be built. However, based on experience in other communities with voluntary density bonus and attainable housing policies, the number of attainable units actually built is likely to be significantly lower than the potential maximum, perhaps on the order of 10 to 20 percent of the maximum. As shown in Example 1 in Table 22, if a total of ten percent additional housing units were built in the study area due to the density bonus, above the maximum number allowed under current zoning (excluding application of the Downtown Residential Overlay District), a total of 2,329 new dwelling units would be built. If 10 percent of these were required to be attainable units, then 233 new attainable housing units would be built. As shown in Example 2 in Table 22, if a total of twenty percent additional housing units were built in the study area due to the density bonus, above the maximum number allowed under current zoning (excluding application of the Downtown Residential Overlay District), a total of 2,329 new dwelling units would be built. If 10 percent of these were required to be attainable units, then 466 new attainable housing units would be built. ERA considers that these two examples are a reasonably accurate estimate of the probable number of total and attainable housing units that may be under the recommended density bonus and attainable housing policy. Public Review Draft 1/27/2006 Page 51

57 Table 21: Maximum Density in Study District Under Current Zoning and Proposed Density DTE DTC DTB DTE Add-On Total Acres Total Acres Percent Residential Mix 50.0% 25.0% 75.0% 50.0% Residential Acres Maximum Density With Current Zoning DU/total acres DU/residential acres Maximum Density With Proposed Zoning DU/total acres DU/residential acres Notes: Density bonus assumes 50 DU/acre for DTE and 200 DU/acre for DTC and DTB Existing dwelling units includes units currently under construction Maximum density calculation assumes best case scenario under which there are no constraints to development (physical or otherwise) and all developments utilize the density bonus at the maximum number of units. Sources: Planning Department;. Public Review Draft 1/27/2006 Page 52

58 Table 22: Maximum Potential Attainable Housing Units in the Downtown Mixed-Use Zones DTE DTC DTB DTE Add-On Total Maximum Potential Attainable Housing Units Proposed Zoning Maximum Dwelling Units 3,927 8,579 11,901 4,494 28,901 Existing Dwelling Units 1, , ,611 Net DU Capacity Under Proposed Zoning (New) 2,218 7,986 9,506 3,580 23,290 Maximum Potential Attainable Dwelling Units Percent Attainable 10% 10% 10% 10% 10% Maximum Potential Attainable DU (New) ,329 Example 1: 10% of Max. Net Capacity Utilized Percent Use of Density Bonus 10% 10% 10% 10% Total New DUs ,329 Required Attainable Dwelling Units Percent Attainable 10% 10% 10% 10% Potential Attainable DU (New) Example 2: 20% of Max. Net Capacity Utilized Percent Use of Density Bonus 20% 20% 20% 20% Total New DUs 444 1,597 1, ,658 Required Attainable Dwelling Units Percent Attainable 10% 10% 10% 10% Potential Attainable DU (New) Notes: Density bonus assumes 50 DU/acre for DTE and 200 DU/acre for DTC and DTB. Maximum Potential Attainable Housing Units calculation assumes best case scenario under which there are no constraints to development (physical or otherwise) and all developments utilize the density bonus at the maximum number of units. Sources: Planning Department;. Public Review Draft 1/27/2006 Page 53

59 Summary The three downtown mixed-used zones in the study area provide a finite amount of land available for development. Under current zoning regulations, the maximum development capacity in the study area totals 9,327 dwelling units (excluding use of the Downtown Residential Overlay District or DROD). Assuming the recommended density bonus policy were enacted (with similar to the current DROD), maximum residential development capacity would increase to a total of 28,901 dwelling units. This represents a potential maximum net capacity increase of 19,574 dwelling units versus the number of units allowed under the current zoning (excluding the DROD). The maximum average density in the study area would increase from 34.4 DU/acre under current zoning (excluding DROD) to DU/acre under the proposed zoning. It is important to note that such increased density throughout the downtown is not a given for all sites due to a variety of factors, including market conditions, parcel specifics, and other factors. Furthermore, individual proposals would be reviewed on a case-by-case basis to determine if the proposal is appropriate for the specific location. Due to the large number of factors influencing the specifics of each development project, it is not possible to forecast how many of the potential attainable housing units will be built. However, based on experience in other communities with voluntary density bonus and attainable housing policies, the number of attainable units actually built is likely to be significantly lower than the potential maximum, perhaps on the order of 10 to 20 percent of the maximum, which could result in approximately 230 to 470 attainable units in the downtown. Public Review Draft 1/27/2006 Page 54

60 Appendix A: Participating Stakeholders The persons below participated in the development of this report by attending meetings/interviews with ERA and City staff, contributing information, identifying issues, and suggesting solutions. Their participation and knowledge significantly improved the quality and comprehensiveness of the report and is greatly appreciated. Residents / Neighborhood / Community Representatives Kathleen Baylis, Chairman, Community Redevelopment Agency Advisory Board Don Chaney, Gillispie Park Neighborhood Association Susan Chapman, Hudson Bayou Neighborhood Association Dick Clapp, Indian Beach Sapphire Shores Association and Save Our Sarasota Marcia Gelinas, Central Coconut Neighborhood Association Charles Githler, Vice Chairman, Community Redevelopment Agency Advisory Board Janice Green, Save Our Sarasota Kittie Kelly, Central Coconut Neighborhood Association Kelly Kirschner, Alta Vista Neighborhood Association Jude Levy, Laurel Pak Neighborhood Association Kate Lowman, Laurel Park Neighborhood Association Carol Reynolds, Save Our Sarasota Gretchen Serrie, Indian Beach Sapphire Shores Association Dick Sheldon, Lincoln Park Neighborhood Association and Save Our Sarasota Jon Sugar, Park East Neighborhood Association Stan Zimmerman, Alta Vista Neighborhood Association Developers / Brokers / Business Representatives Shaun Benderson, Leasing Representative, Benderson Development Company John A. "Jay" Brady, AICP, Executive Director, Gulf Coast Builders Exchange Joseph Cohen, Principal, J. Cohen Group Ian Black, CCIM, Ian Black Real Estate Christopher J. Brown, President, Sarasota Main Street Realty Ronald H. Burks, Quincy Investments, L.L.C. Public Review Draft 1/27/2006 Page 55

61 Craig P. Colburn, Jr., Attorney at Law, Norton, Hammersley, Lopez & Skokso, P.A. Andy Dorr, 5 Points Plaza Kathy Ervin, Residential Sales Associate, Hembree & Associates, Inc. Bruce Franklin, President, ADP Group Larry Fineberg, Vice President Leasing, Benderson Development Company Joel Freedman, President, Freedman Consulting & Development LLC Brad Gaubatz, Studio 7 Architecture John Glickman John B. Harshman, Broker/President, Harshman & Company, Inc. Joe R. Hembree, President, Hembree & Associates, Inc. David Horvarth, AIA, Architectural Director, Benderson Development Company Brett Hutchins, President, Casto Southeast Linda Jones, Century 21 Real Estate David L. King, JD, Compliance Officer, Vengroff Williams & Associates Alex Lancaster, Attorney at Law, Lancaster & Eure Don Lawson, AIA, President, Lawson Group Uri Man, Vice President Residential Development, RAM Real Estate Jim Moynihan, President, JM Communities Wayne S. Morehead, President and CEO, Khason Development Rachel Neves, Hembree & Associates, Inc. Felix Power, President Elect, Sarasota Association of Realtors Steve Queior, CCE, President, The Greater Sarasota Chamber of Commerce Lynn Robbins, CRB, GRI, IMS, Director of Business Development, Coldwell Banker Residential Real Estate, Inc., Community Redevelopment Agency Advisory Board Rick Rudloff, Gillespie Park Villas, LLC Ed Sankey, Benderson Development Company Drayton Saunders, President, Michael Saunders & Co. Michael Saunders, CEO, President, Michael Saunders & Co. Public Review Draft 1/27/2006 Page 56

62 Tony Souza, Executive Director, The Downtown Partnership of Sarasota Tony J. Squitieri, Division President, Lennar Communities Marty Strype, Director of Construction, W.G. Mills, Inc. Robert K. Tolsma, PE, PPM, Vice President, CH2M HILL Harvey Vengroff, President, Vengroff Williams & Associates Gerard Violette, Executive Director, Hospitality Services, Sarasota Memorial Hospital Thomas Williams, Executive Vice President, Kraft Construction Dan Zarkovacki, Fairfield Florida Companies Public Staff Chris Anderson, Housing Division Supervisor, Montgomery County John Burg, Chief Planner, Ryan Chapdelain, Planner, Doug James, AICP, Chief Planner, Susan Montgomery, Senior Planning Technician, Jane N. Robinson, Director, David L. Smith, AICP, Senior Planner, Mike Taylor, AICP, Deputy Director, Wendy Thomas, AICP, Manager Community Housing, Sarasota County Public Review Draft 1/27/2006 Page 57

63 Appendix B: Sarasota Policy Framework In addition to understanding the Sarasota housing market and the downtown s housing capacity, it is useful to review the City s planning and housing policy framework. This provides context for the potential development of new attainable housing policies in the downtown. Comprehensive Plan The has a long history of planning, with the city s first comprehensive plan adopted in 1925 and subsequent updates in 1960, 1972, 1979, 1986, 1989, and The plan, known as the Sarasota City Plan, is prepared in draft form by city staff and involved community stakeholders (e.g., residents, employers, developers), recommended for approval by the city planning board, and ultimately adopted by the city commission. In addition to a periodic updating process, the comprehensive plan may also be amended annually. The city is currently in the process of updating the 1998 comprehensive plan, including the preparation of an Evaluation and Appraisal Report (EAR), with a new plan expected to be adopted in In compliance with the Florida Local Government Comprehensive Planning and Land Development Regulation Act (1975) and the Florida Growth Management Act (1986), the Sarasota City Plan includes the following ten chapters: Neighborhood; Housing; Environmental Protection; Recreation and Open Space; Utilities; Transportation; Future Land Use; Governmental Coordination; Capital Improvements; and Historic Preservation. The plan is approved and monitored by the Florida Department of Community Affairs (DCA). The overarching policies of the plan are the following vision and goal statements: Our Vision: Our Goals: A city of urban amenities with small town living and feeling. To be a safe place for people. To have viable neighborhoods working together as a community. To be an attractive and clean city that is aesthetically pleasing. To be a financially responsible government providing high quality services and infrastructure. To achieve economic viability through healthy business and quality job opportunities. Each chapter includes two parts, the plan and support documents. The former (the plan) includes the following: intent and purpose; goals, objectives and action strategies; and attachments. The latter (support documents) includes the following: inventory and analysis; and appendices. While all of the plan s chapters are relevant to the provision of attainable housing in Sarasota, the Housing chapter is the most relevant and is briefly reviewed here. The following is the goal of the Housing chapter: Public Review Draft 1/27/2006 Page 58

64 It shall be the goal of the to provide opportunities for safe, sanitary, and affordable housing to meet the need of all City residents while recognizing the private sector as the primary provider of housing. Supporting this goal are the following objectives (note that it is beyond the scope of this report to include all of the corresponding action strategies): Objective 1 New Construction: The City shall continue to enhance a City government/ private sector association that encourages the private sector to provide new housing that: meets the needs of city residents; is innovative; and is compatible with the City s neighborhoods. Objective 2 Maintain Existing Housing Stock: The City will continue to encourage the private sector to conserve, maintain and enhance the existing housing stock, including historic structures and sites. Objective 3 Maintaining and Attracting Moderate and Middle Income Families: Recognizing that in 1990 approximately two thirds of households within the City had annual household incomes of less than $35,000, the City will pursue actions that maintain and attract moderate and middle income families. Objective 4 Housing for Populations of Special Needs: The City will continue to take maximum advantage of Federal and State incentive and funding programs in order to create maximum housing opportunities for the City s very low and lower income households and other households of special needs. Objective 5 Coordinate with Other Local Governments and Private Sector: The City shall continue to coordinate housing programs with other local governments and the private sector. Objective 6 Neighborhood Quality: The City shall increase the desirability of residing in the City by improving the quality of City Neighborhoods. The Future Land Use Plan chapter of the Sarasota City Plan also is relevant the provision of attainable housing in Sarasota. The following is the goal of the Future Land Use Plan chapter: It shall be the goal of the to achieve a high quality living environment through: encouraging compatible land uses, restoring and protecting the natural environment, and providing facilities and services which meet the social economic needs of the community. Supporting this goal are the following objectives (again note that it is beyond the scope of this report to include all of the corresponding action strategies): Public Review Draft 1/27/2006 Page 59

65 Objective 1 Land Use Classification: To create and map land use classifications that: reflect the grouping of compatible types of land uses; provide sufficient acreage to meet projected growth; consider the suitability of land for development and redevelopment; recognize existing land uses; reflect the availability of public utility and facility capacities at adopted levels-of-service; and provide guidance in preparing and reviewing future requests for rezoning. Objective 2 Land Development Rights (LDRs): The City shall make appropriate changes to the City s existing Land Development Regulations (LDRs), including the zoning code, in order to ensure continued consistency between those regulations and the Sarasota City Plan. In addition, the City may consider other regulatory factors for possible incorporation into the Land Development Regulations that are not issues of consistency, but which warrant consideration due, in part, to the developed character of the City. Objective 3 Development Review and Approval Process: To continue ensuring that future requests for development approval are consistent with the Sarasota City Plan. Objective 4 Downtown Master Plan: To implement components of the Downtown Master Plan consistent with the Downtown Urban General and Downtown Urban Mixed-Use Land Use Classifications. (Amended by Ordinance No , December 17, 2001 and Ordinance No , January 6, 2003). Objective 5 Preserving and Enhancing the Built Environment: To continue to preserve and enhance the physical environment by reducing blight, discouraging urban sprawl, encouraging aesthetic amenities and developing design standards that enhance compatibility. Objective 6 Historic, Archeological, Natural and Cultural Resources: To continue identifying, documenting, and protecting historic, archaeological, natural, and cultural resources. Objective 7 Establishing a Computerized Data Base: To establish and maintain a computerized land use data base for use by the public and private sectors in making land use decisions and to prepare studies pursuant to the Sarasota City Plan. Objective 8 Studies and Research: Prepare studies and conduct research to implement objectives and action strategies of the existing Sarasota City Plan and to serve as a foundation for updates to the Plan. Studies may be prepared by the City or by the private sector under the supervision of the City. Objective 9 Other Jurisdictions and Special Authorities: To continue to promote the development of compatible land use patterns between those governed by the City Commission and those governed by other jurisdictions or special authorities. Public Review Draft 1/27/2006 Page 60

66 Objective 10 Annexation: Prior to the initiation of any annexation within the City s Urban Service Boundary, the City will prepare an appropriate report that will include, but not be limited to: the suitability of the subject area for annexation, a list of the costs and benefits to the City and to the affected property owners, a schedule for annexation if more than one parcel is involved, and effect, if any, on urban sprawl. Two land use classifications were developed for the downtown area, Downtown Urban General and Downtown Urban Mixed-Use, the locations of which are shown on the Future Land Use Map (see Figure 4). The Downtown Urban General land use classification is outside the study area for this downtown attainable housing study and, therefore, is not detailed further in this study. However, the Downtown Urban Mixed-Use land use classification is within the downtown attainable housing study area and, as such, is addressed in some detail below. According to the Sarasota City Plan (2001), the purpose and intent of the Downtown Urban Mixed-Use land use classification is to identify: neighborhoods within the City s Downtown Master Plan 2020 Study Area applicable to this classification; associated uses within which the planning concepts of New Urbanism will be applied to create functional, mixed-use urbanized neighborhoods comprised of a variety of land; and uses that are not compatible with the concepts of New Urbanism as applied to these areas. Public Review Draft 1/27/2006 Page 61

67 Figure 4: Future Land Use, Zoning, and Potential Edge Zoning Sites Map, Public Review Draft 1/27/2006 Page 62

68 The major development parameters of the Downtown Urban Mixed Use land use classification are shown in Table 23. In addition to the major development parameters, the table also notes the correspondence between the Future Land Use classifications (November 10, 1998), Downtown Master Plan 2020 zones (adopted January 22, 2001), the Downtown Code (adopted 2004), and the new Downtown Code zones (adopted September 7, 2005). According to the Evaluation and Appraisal Report (EAR) dated October 11, 2005, which is being prepared as a part of the update of the Sarasota City Plan (1998): In 2004, the City adopted a new Downtown Code [see next section] to implement both of these land use classifications [i.e., Downtown Urban General and Downtown Urban Mixed-Use]. The Downtown Code includes four new zoning districts, which are Downtown Neighborhood, Downtown Edge, Downtown Core, and Downtown Bayfront. The districts correspond to five zones from the Downtown Master Plan 2020 and which are identified in the text of the land use classifications, however, the names used in the Downtown Code were changed from the terminology used in the Downtown Master Plan 2020 and comprehensive plan. The revised land use classifications should refer to those new zone district names as described below to reduce confusion between the revised comprehensive plan and the implementing zoning districts. Figure 4 shows the Downtown Urban Mixed Use classification, shown in brown, with the underlying zoning districts Downtown Edge (DTE), Downtown Core (DTC), and Downtown Bayfront (DTB). Also shown are other land use classifications and underlying zoning districts, such as the Downtown Urban General classification and the underlying Downtown Neighborhood (DTN) zoning district. Note that the Downtown Neighborhood (DTN) zoning district is not under consideration for the downtown density bonus. Outlined in red on Figure 4 are the following nine additional areas downtown edge areas that are under consideration by the for addition to the Downtown Urban Mixed Use classification and, if included, like all properties in the Downtown Urban Mixed Use classification, could be subject to a downtown attainable housing density bonus: Area 1 Central Coconut: acres; Area 2 Rosemary Neighborhood: acres; Area 3 4 th Street Lots: 3.8 acres; Area 4 Park East (west of Lime Ave.): acres; Area 5 Park East (east of Lime Ave.): acres; Area 6 School Ave./Ron Burks Site: 9.43 acres; and Area 7 Wood Street Site: 8.89 acres. For reference purposes, the City s neighborhoods are show in Figure 5. Public Review Draft 1/27/2006 Page 63

69 Table 23: Downtown Urban Mixed-Use Classification Correspondence Between Policy Documents and Major Development Standards, City of Sarasota Future Land Use Map Classification New Downtown Code Zones to be Used in the Revised Land Use Classifications Downtown Master Plan 2020 Zones Residential Percentage Mix of the Distribution of Land Non- Residential Max. Residential Density Max. Non- Residential Floor Area Ratio Max. Building Height Building Coverage Parking Requirem ents (Spaces per DU) Downtown Urban Mixed Use Downtown Edge (DTE) Downtown Core (DTC) Neighborhood Center Downtown General 50% 50% 25 DU / acre stories 75% 75% 25% 50 DU / acre stories 100% Downtown Bayfront (DTB) Downtown Bayfront 25% 75% 50 DU / acre stories 100% 1.0 Source: Sarasota City Plan Future Land Use Plan (November 10, 1998); Zoning Code, Article VI: Zone Districts, Division 10. Downtown Zone Districts (Adopted June 7, 2004, Ord. No. 01-ZTA-04,); Zoning Code, Article VII: Regulations of General Applicability, Division 2. Off-Street Parking and Loading (Ord. No , 3, ); and Evaluation and Appraisal Report (October 11, 2005). Public Review Draft 1/27/2006 Page 64

70 Figure 5: Neighborhood Associations, Source:, Public Review Draft 1/27/2006 Page 65

71 Downtown Master Plan 2020 and Downtown Code The Downtown Master Plan 2020 (DMP) was prepared by the planning firm Duany Plater- Zyberk (DPZ) in 2000 and adopted by the City Commission in 2001 (Resolution No. 01R- 1336). The DMP originated with the need to update the City s Community Redevelopment Area (CRA) Plan, also known as the Downtown Sarasota Master Plan for Tomorrow, with additional areas added in order to coordinate planning with adjacent areas. The DMP applies to the approximately 1.5 square mile area shown in Figure 6. While building on previous planning efforts, the DMP s stated contribution is as follows: The main contribution of this Master Plan is an increase in precision, the assignment of priorities, and the provision of tools for implementation. Toward that end, the DMP identifies five major themes: Connecting the Downtown to the Bayfront; A System of Walkable Streets; A Balanced Transportation System; Walk-to-Town Neighborhoods; Civic Improvements; and Strategic, Pragmatic Implementation. DPZ also prepared a Downtown Code, which is intended to implement the land use components of the DMP. The Downtown Code is based on the SmartCode, a model code developed by the Duany Plater-Zyberk & Company (DPZ). The SmartCode has been tailored to fit the and reformatted to work within the City's Zoning Code (2002 Ed.). The Downtown Code identifies a series of Downtown Zone Districts that include Downtown Neighborhood (DTN), Downtown Edge (DTE), Downtown Core (DTC) and Downtown Bayfront (DTB). As noted in an August 2002 Preliminary Staff Draft of the proposed Downtown Code, the intent and purpose of these districts is to: Produce an urban area that implements the Downtown Master Plan 2020 and fulfills the goals, objectives and policies of the Downtown Urban General and Downtown Urban Mixed-Use land use classifications of the Sarasota City Plan. Subsequent to adoption of the DMP in January 2001, proposed amendments to the City s Comprehensive Plan (Sarasota City Plan) were prepared to provide consistency between the DMP and the two plans. The Comprehensive Plan amendment was adopted by the City Commission in December 2001 and subsequently submitted to the Florida Department of Community Affairs (DCA). In February 2002, DCA issued a Notice of Intent to find the plan to be in compliance with Chapter 163 of the Florida Statutes, the Local Government Comprehensive Planning and Land Development Act. Public Review Draft 1/27/2006 Page 66

72 Figure 6: Downtown Master Plan 2020 Study Area, Source: Downtown Master Plan 2020 (2001) Public Review Draft 1/27/2006 Page 67

73 In March 2002, a group of petitioners filed a challenge to the plan s determination of compliance against the and the Department of Community Affairs. These petitioners include: The Association of Downtown Commercial Property Owners, Inc.; The Argus Foundation; Gulf Coast Builders Exchange, Inc.; Remark Sarasota Quay, Inc.; and Wynnton Sarasota II Limited Partnership. Although the challenge was settled, ERA was retained by the City to evaluate the petitioners principle challenge, the contention that the Downtown Code s proposed reduction in building heights and design requirements such as building recesses would result in such a diminution of value to their properties so as to constitute a taking. The height restriction applies to properties located in the Downtown Core and portions of the proposed Downtown Edge zone districts. ERA analyzed the potential impact of the code by analyzing prototype sites for office and housing and on A streets, as well as other case study cities. On January 6, 2003, the petitioners and the City Commission agreed to settle the challenge. As a result, the DMP and the Comprehensive Plan Amendment adopted on December 16, 2001 became effective in April The Downtown Code was adopted June 7, 2004 (Ordinance No ). On September 7, 2005, four ordinances relating to the Downtown Rezone were adopted by the Sarasota City Commission. The rezoning of the Downtown area will allow the Downtown Code to be applied to more than 1,800 parcels in the Downtown area. The following summarizes the four adopted rezonings (see Figure 7): Ordinance No : To rezone various properties located in the Gillespie Park and Park East Neighborhoods and more particularly described herein to the Downtown Neighborhood (DTN) Zone District, an Urban Zone District, generally appropriate for residential neighborhoods located in close proximity to Downtown; allowing a maximum of twelve (12) dwelling units per acre and a maximum building height of three (3) stories; allowing for certain development rights under existing zoning to temporarily continue and providing for vesting of certain development rights as more fully specified herein; providing for the severability of the parts hereof; etc. Public Review Draft 1/27/2006 Page 68

74 Figure 7: Adopted Downtown Zone Districts (September 2005), Source: (September 2005) Public Review Draft 1/27/2006 Page 69

75 Ordinance No : To rezone various properties located in Downtown Sarasota and more particularly described herein to the Downtown Edge (DTE) Zone District, an urban mixed use Zone District generally appropriate for properties located adjacent to residential neighborhoods; allowing a maximum of 25 dwelling units per acre and a maximum building height of five (5) stories; except for the portion of a site within 100 feet of property zoned DTN or RSM-9 where a lower height limit shall apply as more fully specified in Table VI-1003 of the Downtown Code; allowing for certain development rights under existing zoning to temporarily continue and providing for vesting of certain development rights as more fully specified herein; etc. Ordinance No : To rezone various properties located in Downtown Sarasota and more particularly described herein to the Downtown Core (DTC) Zone District, an urban mixed use zone district generally appropriate for the heart of downtown, along the Main Street corridor from Five Points to School Avenue; allowing a maximum of 50 dwelling units per acre and a maximum building height of ten (10) stories; (except that two buildings up to a maximum of 180 feet in height may be approved within the area bounded by Fruitville Road, Washington Blvd., Ringling Blvd. and Pineapple Ave. as provided in Sec. VI-1005G of the Downtown Code; and except that an existing building over 10 stories in height may be voluntarily or involuntarily removed, demolished or destroyed and replaced with a new building of the same height or 10 stories, whichever is greater); allowing for certain development rights under existing zoning to temporarily continue and providing for vesting of certain development rights as more fully specified herein; etc. Ordinance No : To rezone various properties located in Downtown Sarasota and more particularly described herein to the Downtown Bayfront (DTB) Zone District, an Urban mixed use Zone District generally appropriate for the Downtown Sarasota Bay Front areas between Mound Street and 10 th Street which are not devoted to recreational uses; allowing a maximum of 50 dwelling units per acre and a maximum building height of eighteen (18) stories; allowing for certain development rights under existing zoning to temporarily continue and providing for vesting of certain development rights as more fully specified herein; etc. Downtown Residential Overlay District (DROD) In August 2003, the City Commission adopted the Downtown Residential Overlay District (DROD), which is Article VI: Zone Districts, Division 9. Special Public Interest Overlay Districts, Section VI-906, of the Zoning Code. The DROD is intended to encourage residential development in the downtown area and to implement Objective 2 Land Development Regulations (LDRs), Action Strategy 2.15 of the Sarasota City Plan, Future Land Use chapter: A maximum residential density up to two-hundred (200) dwelling units per acre may be developed on sites within the area depicted on Illustration LU-12, Downtown Residential Overlay District [see Figure 8], but the average density Public Review Draft 1/27/2006 Page 70

76 shall not exceed fifty (50) dwelling units per acre within the overlay district. Developments allowing increased dwelling unit density in accordance with this provision may be approved only after public hearings held by the Planning Board and City Commission. Criteria for approval shall be incorporated into the City s land development regulations. According to the City s Zoning Code, the following is the intent and purpose of the DROD: The Downtown Residential Overlay District (DROD) and the increased residential unit density allowable within the overlay district are intended to: 1. Implement the Sarasota City Plan as amended by Ordinances and (downtown master plan based amendments) and by Ordinance (downtown residential overlay district amendment). 2. Further the goals and policies of the state comprehensive plan, F.S. ch Increase the number of persons permanently residing within the boundaries of the overlay district in order to enhance the economic vitality of downtown. 4. Create an incentive to make it more economically feasible for private developers to include moderately priced dwelling units in new residential developments constructed downtown. 5. To assist in the provision of affordable housing for low and moderate income families in the city by requiring a contribution to an affordable housing trust fund from developers who receive approval to build up to the increased level of dwelling unit density allowed within the overlay district in exchange for the increase in density. 6. To assist in the development of transit facilities within the city by requiring a contribution to a transit development trust fund from developers who receive approval to build up to the increased level of dwelling unit density allowed within the overlay district in exchange for the increase in density. The DROD allows for increased development standards on a case-by-case basis, with consideration at a public hearing by the Planning Board and at a public hearing by the City Commission. Within the DROD, up to 200 dwelling units (DU) per acre may be developed, although the average density within the DROD shall not exceed 50 DU per acre (excluding public rights of way in both cases) and the total number of DUs within the DROD may not exceed 2,302 units. Public Review Draft 1/27/2006 Page 71

77 Figure 8: Downtown Residential Overlay District, Public Review Draft 1/27/2006 Page 72