Meeting Affordable Housing Challenges in Resort Communities Florida Finance Housing Corporation 2007 Nancy Muller Introduction Due to the vigorous market for vacation homes in resort areas around the country, real estate prices have been escalating, as have rents. The resulting affordable housing crisis has forced tourist areas in particular to introduce new regulatory and funding mechanisms to help lessen the blow for seasonal workers and middle-low income earners feeling the housing crunch. The involvement of the business community in these areas is critical to the success of such programs. For this report, the affordable housing strategies of a number of resort areas were reviewed, as listed below. Hilton Head, South Carolina Massachusetts Lake Tahoe Jackson Hole, Wyoming Aspen, Colorado Telluride, Colorado Vail, Colorado Other examples of programs in non-resort areas, such as Jacksonville, Florida; Santa Cruz, California; Santa Monica, California; and Santa Fe, New Mexico are also included. This report is categorized by affordable housing strategies, although in many cases these housing initiatives overlap one another. Housing Lottery Funded by a five percent sales tax, real estate taxes, and in-lieu fees (an $85,000 assessment for each new bedroom), the Aspen-Pitkin County Housing Authority acts as a transaction broker representing both buyer and seller by either building housing or having a developer build housing which is then sold to people who have had full-time jobs in the county for at least four years. Due to high demand, such housing is allocated by lottery. (Rental units are allocated on the basis of a waiting list with no restrictions.) An employee who has worked in the County for at least four years automatically receives five chances in the lottery. For each year that he or she continues working in the County, an additional chance is granted. Therefore, the longer a person has worked in Aspen, the better their chances of getting a home through the lottery. The units are priced according to income categories and the difference is subsidized through City funds. For each sale that is made, the Housing Authority earns two percent of cost of the unit. Housing in the lottery remains deed-restricted forever. Eventually a buy-down fund will be created to lower the price of deed-restricted homes that are no longer affordable. Community Land Trusts A Community Land Trust functions as a nonprofit organization that buys land and existing houses or builds new units to be sold or rented to income-eligible people. Homeowners are generally given 99-year leases. They can sell the homes and receive equity, but the land remains owned by the trust in perpetuity. With the price of land taken out of the equation, housing remains affordable. 1
Vermont has the largest community land trust in the country - 1,300 units in a state with half a million people. Trusts are used in Jackson Hole, Wyoming, the San Juan Islands in Washington State and other areas where real estate is out of the reach of local residents. The Jackson Hole Community Housing Trust is active in providing affordable housing for purchase by permanent residents. Units are kept affordable over time because the Trust retains ownership of land. Appreciation is controlled, and the Trust has first right of refusal for resales. Buyers must be qualified by income, employment, and Teton County residency. Employer Assisted Housing In resorts and other areas with rising land and housing prices, housing is limited or unavailable for those in lower paying jobs. Consequently, some communities and businesses are creating a linkage between housing and jobs. Beginning in the 1980s, employers began to offer housing assistance to their workers as an employee benefit. Since then, employer assisted housing has grown in scope and popularity across the nation. Employers motivations to offer housing benefits to non-management workers extend well beyond recruitment, retention, and productivity issues. Employers find that they can make and save money on housing benefits. For example, employers can make money by purchasing housing bonds which make it feasible for their workers to achieve homeownership via below-market loans. Employers offering mortgage guarantees to lower or eliminate down payment requirements for those workers purchasing homes near their work not only enhance productivity, they may achieve appreciation in those property values. Some employers are involved in redevelopment efforts in the surrounding neighborhoods in addition to promoting these areas to their employees. Employer assisted housing (EAH) can take many forms but essentially is an employer-provided benefit that helps employees become homeowners. Each EAH plan is different, customized to meet the needs and circumstances of the employer, but most programs fall into one of two categories. Demand programs enhance the affordability of existing housing, enabling employees to obtain housing already available on the market. Supply programs add affordable units to a regional housing market through development of owner and rental units, and limited equity housing. These programs result in a developer (nonprofit or for profit) being able to build or rehabilitate units at a reduced cost. Examples of Demand Housing Programs Group mortgage origination plans Closing cost assistance programs Mortgage guarantees Group mortgage insurance Examples of Supply Housing Programs Housing site subsidies Construction financing Downpayment loans Mortgage buydown programs Purchase of mortgage backed securities Cash Purchase guarantees Near the resort area of Aspen, Colorado, Gould Construction Company recently spent one million dollars to purchase an old hotel to house construction workers recruited from Montana and Wyoming. For examples of EAH programs around the country, see Appendix 3a. 2
Living Wage Ordinances Many communities have adopted some type of living wage ordinance. These fall into several categories: Public contracts to private service providers, requiring these providers to pay a living wage (specified in the ordinance) to their employees; or Tax assistance, economic development funds, or other state aids going only to corporations paying a living wage. Baltimore now requires companies with city service contracts to pay $6.50 per hour as a result of a living wage ordinance passed in 1994. A recent study in Baltimore found that administrative costs to taxpayers were minimal...about 17 cents per taxpayer annually and that no contractor had reduced their number of employees as a result of the ordinance. Since 1994, 51 cities, counties, and school districts have passed similar versions of living wage ordinances. This year, the City Councils of both St. Paul and Minneapolis passed laws demanding that companies that get over $100,000 in subsidies pay their employees at least $8.25 per hour. The Minneapolis ordinance also extends to companies which receive contracts from the City. Santa Clara County, California requires manufacturing firms which get tax abatements from the County to pay at least $10 per hour to all permanent employees, and to provide them with health insurance. Recently, the Santa Cruz City Council tentatively approved the nation s most generous minimum wage--$11 per hour with health benefits or $12 per hour without. The living wage ordinance covers full time workers employed by the City or for profit companies that have contracts with the City. See Appendix 3b for profiles on living wage and minimum wage legislation. Private companies are also beginning to institute living wages for their employees. In Florida, Holland & Knight, one of the nation s largest law firms, recently established a living wage threshold of $12 per hour, which will be adjusted upward in the firm s offices outside Florida. Nearly 20 percent of the firm s employees in all 22 domestic offices will benefit from the increase. With offices located from Boston to Georgia and California, the minimum wage will increase from 6 to 73 percent, depending on location. Real Estate Taxes State lawmakers in Massachusetts recently passed the Community Preservation Act, which allows towns to impose a one to three percent surcharge on local property taxes. The money must be used for affordable housing, open space and historic preservation. The act also creates a state matching fund to aid cities and towns. Inclusionary Housing and In-Lieu Fees Inclusionary housing policies require and/or provide incentives for private developers to set aside a certain percentage of units for lower income households. Inclusionary housing can be implemented through a local land use policy or program, a zoning ordinance, or a local comprehensive plan. Some programs include an in-lieu fee option which allows a developer to pay a sum of money (often equal to the cost of each unit) to a government entity or affordable housing trust fund for each affordable unit it does not produce. This option is usually used only for hardship situations and is subject to strict regulation and enforcement. 3
The so-called anti-snob zoning law in Massachusetts allows developers to circumvent local zoning and permitting fees, with little recourse by municipal officials or local residents, if at least 25 percent of the housing in a project is designated affordable. This is a means of reaching a difficult goal of ten percent permanent affordable housing stock in towns or cities as required by the law. Failure to reach that threshold means the loss of some grant money from the state. More than 20,000 affordable units have been built in 171 towns and cities since Chapter 40B went on the books. However, restrictions on affordability last only 15 years. In Telluride, a developer of affordable housing may make a payment or convey land in-lieu of construction of required affordable housing units. In this town, the average annual personal income is about $24,000, and the average detached single family home sells for well over $550,000. The Town s Impact Mitigation Program attempts to have new employers and developers provide housing to address the need for the new workers generated by their new business or development. This program is similar to making in-lieu payments, except that the emphasis is on the conversion of existing housing to affordable, deed restricted housing or the creation of new affordable housing, rather than a cash buyout of their obligations. This is intended to be a statement by the Town that new development creates a demand for more housing, and that this housing should be near the place of work. At this time, new development only provides housing for 40 percent of the employment demand in Telluride, but the town is working to increase this factor. In light of a recent Colorado Supreme Court ruling on rent control, Telluride has had to adjust parts of its housing policy. The law has outlawed rent control on deed-restricted housing with the exception of units on which the Town holds deed restrictions. These units are allowed to remain restricted while managed by the housing authority. In Jackson Hole, Wyoming, a developer may have the option of paying an in-lieu fee to the County if extenuating circumstances prevent the developer from providing housing for seasonal workers through the use of either accessory units or campgrounds. The County uses this money to provide seasonal housing. This money is returned to the employer if the County has not used it to implement affordable housing programs within seven years. These fees are based on established standards for housing seasonal workers, which currently is $16,864 per employee. In 1974, an environmental movement in Aspen led to a cap on the number of homes built each year. As a component of that growth management law, the County Commission also required a percentage of new developments to be sold at an affordable rate. Now 60 percent of any new development must be affordable or the developer must pay a mitigation fee. In the 1990s, Aspen voters passed a one percent tax on real estate transfers. The revenues are used to buy more land or homes. For example, when a five million dollar home sells in Aspen, $50,000 goes toward the provision of affordable housing. The affordable housing program is tailored to keep people of different income levels in town. By using four price brackets, housing stock is maintained for households of all income levels. Today Aspen has about 1,800 affordable units side by side with about 3,000 market rate homes. Its goal is to provide in-town housing for 60 percent of the workforce by the year 2015. The current unmet need is 650 units. 4
Accessory Apartments Many cities allow rental accessory apartments to be built on lots zoned for single family homes. Santa Cruz, California has a Second Unit Program that allows anyone with an adequate lot to build a second dwelling as long as it is rented at an affordable rate. The maximum size is 1,200 square feet. That doubles the density normally allowed in the city. About 30 units are created a year through the program. Both Telluride and Aspen include provisions for accessory units. In Aspen, the development of accessory uses in a mixed use development is exempt from the growth management competition and scoring procedures, as long as the impacts of the accessory use on public facilities are met. Building Permit Caps with Affordable Housing Exemptions To limit growth, towns may restrict the number of units constructed each year, but many communities provide exemptions for projects that include affordable housing. Some towns give priority to affordable projects by allowing these developments to go to the front of the line for building permits. In Aspen, there is an annual maximum building cap of 5,750 square feet for each development. If a development exceeds this amount, then special exemptions must be granted through a growth management competition process or Transfer of Development Rights. Projects that are 70 percent or more affordable are exempt from the cap. For more information about any of these programs, contact Nancy Muller, Florida Department of Community Affairs, (850) 922-1606, nancy.muller@dca.state.fl.us 5
Appendix 3a Examples of Employer Assisted Housing 1 1. New Haven, CT. Yale University/New Haven Hospital Yale University and New Haven Hospital offer down payment and closing cost assistance for their employees to purchase in the Hill neighborhood, which is contiguous to both institutions. 2. St. Louis, MO. BJC Health Systems and Washington University Both the hospital and the university provide down payment and closing cost assistance for their employees. These programs promote homeownership in targeted geographic areas. 3. Philadelphia. University of Pennsylvania The University of Pennsylvania has developed a three-part program with down payment assistance, mortgage guarantees, and home improvement components for employees who are purchasing or already own homes in West Philadelphia. This type of program generally requires some type of financial incentive to offset the risk associated with living in a less desirable neighborhood and often seeks to encourage moderate-income families to relocate to these neighborhoods. 4. Kalamazoo, MI The City of Kalamazoo includes a home improvement loan component in its EAH program. 5. Washington, D.C. Howard University Howard University s sizable EAH program encourages employees to purchase homes in neighboring LeDroit Park. In addition to providing financial assistance for home buyers, Howard University partners with Fannie Mae, the Fannie Mae Foundation, and others to rehabilitate older homes and build new ones in the neighborhood. 6. Chicago Metropolitan Planning Council The Metropolitan Planning Council promotes EAH programs to companies located in counties surrounding Chicago as a strategy to address that region s jobs-housing imbalance. EAH is used to supplement employees income so they can afford to purchase a home closer to their place of work outside the central city. Some companies in high-cost suburban areas see EAH as one way to distinguish themselves from other employers that are competing for new hires. 7. Santa Barbara, CA. Coastal Housing Partnership of Santa Barbara The Coastal Housing Partnership of Santa Barbara collaborates with local financial institutions to provide special mortgage financing for participating employers. Homebuyers can receive generous discounts on home inspections, escrow and lender fees, as well as credits from the real estate broker when utilizing the services of the companies that participate in the Homebuyer's Assistance Program. 2 8. Minnesota. Greater Minnesota Housing Fund 1 Summarized from Reinventing the Company Town: Employer-Assisted Housing in the 21 st Century by Stephanie Jennings, from Housing Facts & Findings, Summer 2000. Two exceptions noted. 2 From the Coastal Housing Partnership of Santa Barbara website: http://www.coastalhousing.org. 6
A statewide housing intermediary called the Greater Minnesota Housing Fund encourages employers to assist their employees in overcoming downpayment and closing cost barriers to homeownership by matching the employee s contribution to a "homeownership payroll savings plan. For example, an employee who saves $2,000 from their earnings will receive matching grants of $2,000 each from the employer and GMHF, providing the family with $6,000 toward the downpayment and closing costs of a home. Through this program, employers have supported the conversion of more than 150 units to affordable housing. 3 9. State of Maryland. Live Near Your Work Program In 1997, the State of Maryland launched the Live Near Your Work statewide program as one of a series of smart growth policy initiatives. The state, municipality and employer provide a total of $3,000 for an employee who purchases a home in a designated geographic area close to their place of work. The program simultaneously seeks to redirect growth to areas with existing infrastructure, revitalize disinvested neighborhoods, and reduce employee commutes. In Baltimore, the state s largest metropolitan area, 20 employers have joined the program and more than 200 households have purchased homes thus far. 10. Milwaukee, WI. Walk-to-Work Program The CDBG/HOME programs are used to fund Milwaukee s Walk-to-Work Home Buying Program. With this initiative, employers subsidize the home buying costs of employees who purchase homes in the same neighborhood as their place of work. 11. National programs for police officers and teachers HUD s Officer Next Door program offers a 50 percent discount on the purchase price of HUD-owned homes. HUD launched the Officer Next Door program in 1997, and through it police officers have purchased more than 3,300 homes. The Officer Next Door program was expanded to include teachers in 2000. 12. State of Maryland. Five Percent Interest Rate Mortgages for Teachers The State of Maryland has a statewide EAH program for teachers that offers home mortgages at a five percent interest rate for home purchases within designated smart growth communities. 13. Nashville, TN. Opryland Hotel Workers Employee recruiters at Opryland realized that many people were turning down employment offers because they could not afford housing in Nashville. So Opryland purchased a 150-room hotel for $1.7 million to provide short-term housing for employees recruited from Jamaica and Puerto Rico. 14. San Francisco/Santa Clara, CA. Rental Housing for Teachers In overheated housing markets such as San Francisco and San Jose, school districts are planning to build affordable rental housing for teachers. 15. Rogers, AR. First National Bank and Tyson Foods In the early 1990s, poultry processing firms faced a severe shortage of workers. One plant, North Arkansas Poultry and Tyson Foods, stabilized its workforce by providing a financial literacy program to put poultry workers on the path to homeownership. In partnership with First National Bank and 3 From the Greater Minnesota Housing Fund website: http://www.gmhf.com. 7
Trust Company, the program helped the largely immigrant workers build money management skills and familiarized them with the U.S. credit system. Between 1994 and 1999, over 500 families purchased homes, and the plant s employee turnover rate stabilized at about 15 percent from a high of 200 percent. 16. Jacksonville, FL. Alliance Community Program Jacksonville has been chosen by Freddie Mac to be one of eight cities nationally participating in its Alliance Community program. The program includes an EAH program. The City is working with the Chamber of Commerce and major employers to design programs that encourage increased homeownership among employees through counseling and downpayment assistance. Assistance will be available in priority planning districts close to employers' offices. The Alliance's first EAH program is through Shands Jacksonville Hospital, which provides $5,000 down payment assistance, matched by the City, to locate in the Springfield area. 8