Incentivizing & Building Affordable Housing

Transcription

1 Incentivizing & Building Affordable Housing Kim Travis, Housing Integrator League of Oregon Cities September 29, 2017 Oregon Housing and Community Services

2 Housing Across a Continuum Homeless Chronic Situational Emergency rent assistance Rapid Rehousing Shelters Transitional Housing Rental Housing Permanent Supportive Housing Public Housing Section 8 vouchers Publicly funded apartment buildings Privately owned apartments Homeownership Asset Building & Wealth Creation Foreclosure Avoidance Oregon Housing and Community Services 2 2

3 OHCS Programs Homelessness Prevention Energy Assistance Weatherization Multifamily Housing Homeownership Individual Development Accounts Oregon Housing and Community Services 3 3

4 Defining Affordability Affordable housing: 30% or less of gross income spent on housing. $1,619 average rent for a apartment in Oregon 0% - 30% Area Median Income Affordable Housing Costs $0 - $500/month 30% - 60% area median income Affordable Housing Costs $500 - $1,000/month 60% - 80% Area Median Income Affordable Housing Costs $1,000 - $1,300/month Social Security $16,000/year Full-time minimum wage $19,000/year Preschool Teacher $30,590/year Two full-time minimum wage workers $38,000/year Auto Mechanic $41,040/year Carpenter $46,000/year Source: Oregon Bureau of Labor and Statistics and Zillow Rent Estimates Oregon Housing and Community Services 4

5 Key Multifamily Housing Development Resource Low Income Housing Tax Credit 9% and 4% The 1986 Tax Reform Act created the Low Income Housing Tax Credit Program (LIHTC) as an incentive to encourage the construction and rehabilitation of rental housing for lower-income households. The program offers credits on federal tax liabilities for 10 years. Individuals, corporations, partnerships and other legal entities may benefit from tax credits, subject to applicable restrictions. Oregon Housing and Community Services 5

6 2016 allocation amounts & regions Metro Region $4,002,000 of which $1,400,700 is set aside for Preservation & Public Housing undergoing preservation transaction Non Metro Participating Jurisdiction $1,479,000 of which $517,650 is set aside for Preservation & Public Housing undergoing preservation transaction Balance of State $3,219,000 of which $1,126,650 is set aside for Preservation & Public Housing undergoing preservation transaction Oregon Housing and Community Services 6

7 Competitive Process 1. Need (20 points) 2. Impact (40 points) 3. Preference (10 points) 4. Financial Viability (15 points) 5. Capacity (15 points) Typically funding projects in Oregon a year Oregon Housing and Community Services 7

8 Bend LIHTC Project Examples 1. Azimuth units Pacific Crest Development (private) City of Bend contribution: $600, Daggett & Moonlight Townhomes 53 units Housing Works (Public Housing Authority) City of Bend contribution: $1.1M loan and $300K SDC Waiver Oregon Housing and Community Services 8

9 Moonlight & Daggett Oregon Housing and Community Services 9

10 Regional Solutions Workforce Housing Initiative Regional Solutions and OHCS convened roundtable conversations with housing developers and business leaders Regional Solutions Cabinet Agency Directors compiled a list of State tools that could be deployed in pilot projects, and issued a Request for Information (RFI) Workforce Housing Initiative web version.pdf Oregon Housing and Community Services 10

11 State Agency Tools Agencies have identified two separate sources of flexible funds to support a limited number of pilot projects: 1) Up to $1 million in funding for predevelopment, site readiness, gap funding on mixed income multifamily rentals. Funding will also support community readiness and innovative partnerships and programs, such as employer assisted housing initiatives, land trusts, and homebuyer education. 2) Funding for public/private partnerships with tradedsector companies that demonstrate a concrete link between a housing project (unit production) and permanent job creation or retention. Oregon Housing and Community Services 11

12 State Agency Tools (cont.) Agencies have identified two pools of loan funds. These loan funds can be deployed independently or as part of a pilot project: 1) Up to $3 million in loan funding targeted to workforce housing projects and infrastructure that supports workforce housing projects. These loans currently bear an interest rate of 3.89 percent with initial loan terms starting at 25 years or the useful life of a project. Terms can be extended. 2) Loan funds targeted at a variety of other specific infrastructure needs, like water or waste water, and mostly used for municipal systems, not developments. Oregon Housing and Community Services 12

13 State Agency Tools (cont.) Agencies have prepared lists of properties they own that are in the queue for sale or under consideration for sale. Agencies have identified three separate opportunities for grant funds/program participation related to workforce housing: Grants to local governments to complete studies of housing stocks and needs and develop strategies and codes to meet needs. Grants that focus on the nexus between land use and transportation. These grants can help update code to promote efficient land use and transportation systems and help communities identify ways to meet these goals on site-specific projects. Urban growth boundary expansion pilot project for affordable housing. Only two communities will be selected for this opportunity, one under 25,000 and one over 25,000. Oregon Main Street Program Oregon Housing and Community Services 13

14 Request for Information RFI will further define the specific issues, offer feedback on the tools and determine practical next steps to: 1) increase the availability of workforce housing in target communities within the next two years; 2) identify successful approaches for expansion to other communities; 3) inform longer range housing strategies and discussions with the Oregon legislature. Oregon Housing and Community Services 14

15 Next Steps Market the RFI to ensure diverse responses by October 2 Review responses with Regional Solutions Cabinet and determine if a RFP is appropriate Engage the Governor s Institute on Community Design to provide support for collaboration and implementation of Workforce Housing Initiative Oregon Housing and Community Services 15

16 League of Oregon Cities Incentivizing Affordable Housing Todd Chase, AICP, LEED September 29, 2017

17 Demographics: Oregon is Growing! Established Families and Boomers Young and Diverse Families Millennials Baby Boomers (53-71) will constitute a senior pop. unprecedented in size. They will look for homes where they can age-in-place. Urban areas will continue to grow and increase in diversity. These households seek rental housing and entry-level homeownership. Millennials now rent far longer than previous generations. They prefer walkable neighborhoods with transit access. FCS GROUP Page 17

18 Incomes are Not Keeping Up with Prices FCS GROUP Page 18

19 Local Housing Market Trends Multiple housing types are needed Much demand for SFD, townhomes & apartments Senior housing & congregate care facilities Short-term Rentals are Disrupting the Marketplace FCS GROUP Page 19

20 Developer s Financial Analysis Rural Resort Estate Lot Urban Standard Single Family Small Lot Single Family Townhome Flats (Condos): 3 Levels Flats w/commercial: 4 Levels Apartments: 3-4 Levels Apartments w/commercial: 4-5 Levels Feasible? It Depends Yes Yes Yes Yes Risky Risky Usually It Depends FCS GROUP Page 20

21 The Developer s Perspective Single Family Detached Single Family Manufactured Townhomes Apartments by For-Profit Developer Apartments by Non- Profit Developer Critical Metrics 1. NOI before debt service (at expected rents/prices & absorption) 2. Return on Equity (Breakeven in 4 Years or less) 3. Supportable Equity (based on targeted IRR: 5% to 16%) 4. Supportable Debt (at current market rates & terms) 5. Residual Land Value (Supportable Debt + Equity Construction Cost) Mixed Use (Apts over Retail) Residential Sales Price or Monthly Rent (avg.) $385,000 $245,000 $225,000 $1,000 $800 $1,200 Commercial Lease Rate (Per SF per year) $15 Developer Type For Profit For Profit For Profit For Profit Non-Profit For Profit Targeted Annual Rate of Return 16% 16% 16% 16% 5% 16% Dwellings Per Net Acre Residual Land Value Per Gross Acre, current $235,200 $375,467 $438,000 ($227,300) $411,500 ($530,300) Residual Land Value Per Dwelling Unit $49,000 $46,933 $43,800 ($15,150) $27,433 ($25,411) Feasible in near term? YES YES YES NO YES NO Residual Value Sensitivity Analysis per Dwelling 0. Current Conditions, Status Quo $49,000 $46,933 $43,800 ($15,150) $27,433 ($33,744) 1. Value of $5,000/DU reduction in SDCs or Cost $5,000 $5,000 $5,000 $5,667 $4,067 $8, Value of adding 1 additional unit per acre $2,505 $894 $400 $5,563 $4,138 $ Value of combining 2 and 3 $7,505 $5,894 $5,400 $11,229 $8,205 $9,268 Potential change in monthly cost to occupant -$45 -$36 -$33 -$68 -$50 -$56 Notes: analysis assumes "shovel ready" development sites with no extra-ordinary facility cost to developers. FCS GROUP. * Assumes other costs and return on investment assumptions to developers remain consistent with base case scenario. FCS GROUP Page 21

22 Newport: New SDCs and CET Lower SDCs for smaller homes New CET for Affordable Housing Small Home (market rate) Standard Home (market rate) Large Home (market rate) Apartment Unit (market rate) Affordable Apartment Unit (with incentives) SDCs, Prior $10,994 $10,994 $10,994 $4,406 $4,406 SDCs: New $5,189 $9,800 $15,100 $3,313 $0 CET: New $1,875 $3,750 $6,300 $950 ($950) Total: New SDCs and CET $7,064 $13,550 $21,400 $4,263 ($950) Change Per Unit ($3,930) $2,556 $10,406 ($143) ($5,356) Example (floor area SF) 1,250 2,500 4, City Objectives 1. Enhance Equity for Homeowners and Renters 2. Create Incentives for Desired Investment 3. Generate New Affordable Housing Funding Source FCS GROUP Page 22

23 Employment/Mixed-Use Design Options FCS GROUP Page 23

24 Community Partnerships Can Build Trust Boardman Hillsboro FCS GROUP Page 24

25 Summary: Roles for Local Government Specific Case Studies Demonstrate How To for Developers Ways to Lower Development Cost City-sponsored Design Assistance Streamline Permitting Process Increase Site Utilization Set SDCs by dwelling size and/or location CET offers new local funding tool Public/Non-Profit land acquisition Various Incentives: down payment assist, off-site Infrastructure, etc. Leveraging Private Investment with Public $ Limit Short-Term Rentals: make way for workforce housing Public/Private Partnerships: Patience is a Virtue Family Wage Job Growth is Also Key FCS GROUP Page 25

26 Todd Chase, AICP, LEED Principal/Economist Contact FCS GROUP: (503)

27 AFFORDABLE HOUSING Discovery Park Lodge 53 senior housing units at 60% AMI CITY OF BEND

28 BEND HOME MEDIAN HOME PRICE AND MEDIAN INCOME $450, Home Price and Income $400, $350, $300, $250, $200, $150, $100, $50, $ CITY OF BEND

29 BEND RENTAL MARKET 0.62% VACANCY RATE Median Rent $ $ $ $ $ $1, $1, $1, $1, $1, $1, $1, $1,850 $2, $1, $1, $1, $1, $1, $ $ $ $ $0.00 Median Rent Average Rent CITY OF BEND

30 SYSTEMS DEVELOPMENT CHARGES EXEMPTIONS SDC Exemptions Systems Development Charges may not be waived for projects. However, several cities in Oregon, including Portland, Salem and Eugene do allow for certain classes of housing to be exempted from having to pay Systems Development Charges. Affordable Housing is one such class. Exemptions are for City of Bend SDC s. Bend awards $1 million per biennium through an RFP process. Water and Sewer being exempted 100% and Streets 75% for qualified projects that receive local, state, or federal funds for affordable housing. These projects would be Rental housing that is affordable for households with an income at or below 60% AMI and Owner-occupied or lease-to-purchase housing for households with an income at or below 80% of the AMI. CITY OF BEND

31 COTTAGE CODE Development Code now allows for Cottage Housing A Cottage Code will provide a housing type that responds to changing household sizes and ages (e.g., retirees, small families, single-person households); provide opportunities for ownership of small, single family detached units within residential zoning districts; encourage creation of more usable space for residents of the development through flexibility in density and lot standards; and support growth management through efficient use of urban residential land. CITY OF BEND

32 DEVELOPMENT CODE CHANGES Density Bonus Development Code now allows for a Density Bonus Provide a Density Bonus for projects that provide affordable housing. Projects that are providing up to 50% of the units as affordable (targeting 80% of Area Median Income for ownership projects, 60% of AMI for rental projects) are allowed to go to 1.5 of the base density for that zone. It has a decreasing scale of 1.4 for 40% affordable, 1.3 for 30%, etc. Southern Pines 22 homes for families at 80% AMI Habitat for Humanity Home CITY OF BEND

33 AFFORDABLE HOUSING ADVISORY COMMITTEE Brings the best people for a solution A representative from the Central Oregon Builders Association A representative from the Chamber of Commerce A representative from a local lending institution A representative from an affordable housing provider A representative from a tenant organization A representative from the Central Oregon Realtors Association Three at-large representatives CITY OF BEND

34 BEND AFFORDABLE HOUSING FUND Adopted by Council in 2006, a fee 1/3 of 1% of the total Building Permit Valuation Fee to address lack of workforce housing, low vacancy rates and increase in home prices The Parks at East Lake 40 units at 60% AMI CITY OF BEND

35 AFFORDABLE HOUSING FUND RESULTS Capitalized to date at approximately $7 million Have loaned out over $14 million since inception 770 units funded 631 multi family units 139 single family homes Per direct testimony from developers, the majority of these units would not have been funded without the City of Bend s housing fund s assistance. Putnam Pointe 44 units at or below 60% AMI CITY OF BEND

36 AFFORDABLE HOUSING FUND RESULTS This year, another 121 multi-family units and 16 single-family units are coming online, with the 16 single-family units targeted to families at 40% AMI. In the next year another 7 acres of land dedicated to homeowners at or below 80% of AMI will start development Bend s Affordable Housing Fund is utilized by both non-profit and for-profit developers. Revere Avenue Renaissance Mixed income project utilizing Affordable Housing Fund, Density Bonus and SDC Exemptions developed by private contractor CITY OF BEND

37 LEVERAGING IMPACT Federal and State Housing Financing Programs, along with most private financing sources typically have a requirement for match funding. A source of local match, in most funding programs, scores significantly higher than all other funding sources. A local funding source also shows a local commitment to a project. To date, the Affordable Housing Fee has leveraged over $77.6 million in State and Federal funding and over $40.8 million in private equity. Southern Pines 10 homeowner units at 100% AMI CITY OF BEND

38 Uses of Funds Permanent Financing Construction Financing Land Acquisition Soft and Hard Costs Property Acquisition CITY OF BEND

39 IT S UP TO YOU Affordable Housing is a choice for any community. If you want to have a vibrant community for all citizens then you need to make that choice. Or you can choose not to, but you need to have that discussion. CITY OF BEND

40 IDEAS? SOLUTIONS? It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something. Franklin D. Roosevelt CITY OF BEND

41 Building a Housing Vision for Oregon Summary of recent and upcoming legislative sessions Rep. Alissa Keny-Guyer Chair, House Committee on Human Services and Housing

42 Paradigm Shift Like transportation, education, health care, human services, public safety & economic development, housing should be a core responsibility of the state. With only two (small) dedicated state funding streams and a minor amount from GF, Oregon cannot solve the housing crisis. Our vision and investment must be much bigger.

43 Housing Bills that passed in 2015 $20 million in lottery bonds for mental health housing and services $40 million in GO bonds for LIFT (Local Innovation Fast Track) Affordable Family Housing Development for families with incomes below 60 percent of the area median income.

44 Housing Bills that passed in 2016 SB 1582 LIFT: Further parameters for the LIFT program for low income individuals or families. SB 1533 Inclusionary Zoning: Allows local government to require a certain percentage of new housing development to be affordable and to charge a Construction Excise Tax (up to 1%) to support affordable housing. SB 1573 Annexation: Allows annexation of land contiguous to city limits (within UGB) when all owners want in. HB 4079 UGB Pilot: Sets up 2 pilots to allow smaller cities to extend UGB by 50 acres to allow for needed housing if certain conditions are met. HB 4042 General Assistance: Restores a DHS program to offer housing assistance and personal incidental funds to homeless, disabled individuals while they wait for their federal Social Security disability benefits to be approved. HB 4143B Tenant Protections: No rent increases in the first year and 90-day notice for rent increases thereafter for month-to-month tenancies.

45 Housing bills that passed in 2017 SUPPLY $80 million in GO bonds for LIFT, with up to 20% allocated for home ownership HB 2852/2066 extends Affordable Housing Tax Credit for 6 years; raises cap from $17 mil to $25 mil HB 2912 Land Acquisition: Establishes Revolving Loan Fund Program for eligible organizations to purchase land for affordable housing development. HB 1051 Expediting new construction: streamlines permitting for affordable housing; expands definition of needed housing; clear and objective standards; requires cities over a certain size to allow ADUs; allows religious organizations to develop housing on their property, consistent with local zoning codes. (Dropped the historic preservation part of HB 2007) HB 2737 Tiny Homes: establishes construction standards for homes up to 250 sq ft SB 310 Vertical Housing: transfers administration of tax break for vertical housing; requires study of displacement HB 3063 Establishes Mental Health Housing Fund, requires matching funds to pay for construction and start-up costs of housing for individuals with mental illness. (Formalizes a program we funded in the last two sessions.)

46 Housing bills that passed in 2017 PRESERVATION HB 2002 Promotes preservation of publicly supported housing by creating a database of expiring properties, and allowing local jurisdictions to purchase a property (for new properties: a first right of refusal to purchase). $25 million in lottery bonds HOMEOWNERSHIP 20% of new LIFT funds allocated to home ownership (Mentioned in Supply) HOMELESSNESS HB 3063 (Mentioned in Supply) Housing for Individuals with Mental Illness: Establishes Mental Health Housing Fund, requires matching funds to pay for construction and start-up costs of housing for individuals with mental illness. $40 million in funding for EHA/SHAP doubling it from $20 million in 2016 TENANT PROTECTION HB 2724 Rent Guarantee Program: Provides mitigation fund for landlords who rent to low income tenants with history of debt, incarceration, or other barriers, after completion of tenancy training course. HB 2008, SB 277 Manufactured Homes

47 Mortgage Interest Deduction (MID) Oregon is 47 th in the nation for home ownership (only 61%) 1 Mortgage interest deduction subsidizes top earners (60% go to top 20%) The deduction costs the state an estimated $1 billion/biennium in forgone income tax revenue for the budget 2 In 2017, the House Human Services and Housing Committee proposed HB 2006, which would cap mortgage interest deduction at $15,000; eliminate it for single filers with adjusted gross income of $100,000+ and joint filers with adjusted gross income of $200,000+.

48 Document Recording Fee In 2017, HB 3357 would have doubled the document recording fee from $20 to $40 per document, generating $30 million a biennium. Funds go to: Emergency Housing Account (EHA) and State Homeless Assistance Program (SHAP) Home ownership Supply: preservation and construction of affordable housing 25% is devoted to veterans. HB 3357 failed to get the super majority (3/5) required, in part because of opposition to HB 2004 Tenant Protections and HB 2006 MID Reform. Raising the doc recording fee in 2018 (as CA just did) to $75 would generate $82.5 mil.

49 Other Housing Bills in 2018 Referral to the ballot to amend the State Constitution to provide more flexibility for state and municipal General Obligation bonds Possible bill to facilitate conversion of single family home into duplex, triplex, quadruplex. FOOTNOTES/RESOURCES: OHSC presentation to the House Committee on Human Services and Housing: September 19, 2017 OHCS Presentation to House Committee on Human Service sand Housing

50 Oregon s Statewide Housing Plan