Berkeley Denver Los Angeles Sacramento Housing Resolution & Policy Review Blue Ribbon Commission Meeting February 1, 2016 Prepared by: Daniel R. Guimond, Principal David Schwartz, Vice President Economic & Planning Systems, Inc.

1 Park City Housing Resolution and Policy Review Agenda Summary of Findings Recommendations Discussion Next Steps

2 Park City Housing Resolution and Policy Review SUMMARY OF FINDINGS

3 Park City Housing Resolution and Policy Review Summary of Findings The housing affordability gap continues to widen Rapid housing appreciation  Single family 6.7% per year  Condos at 5.5% per year – Wage and income growth has lagged  Median income at 1.7% per year since 2000 – Affordability gap has more than doubled  Increased from $375,000 to $949,000  Median HH income =$89,886  Median household can afford a $365,000 home  Average house price = $1.3 million

4 Park City Housing Resolution and Policy Review Housing Prices

5 Park City Housing Resolution and Policy Review Summary of Findings There is a dwindling inventory of affordable housing % of for-sale inventory below $300, it dropped to 12% Resolution applies to < 50% of Residential Development – 1,100 units permitted 78 affordable housing units built At 15% IZ this equals 520 units subject to the ordinance Nearly twice as many units would have been built if the IZ applied to all development

6 Park City Housing Resolution and Policy Review Building Permits by Type, 2015

7 Park City Housing Resolution and Policy Review Summary of Findings Future development will be mostly infill Few new annexations and MPDs expected Most new development will be infill and re-builds Revisions to the Housing Resolution have broadened the definition the community workforce 1999 – police, teachers, firemen, service workers 2006 – “essential” public and private sector service workers Also full time workers in Park City businesses “Essential” was later dropped from the resolution

8 Park City Housing Resolution and Policy Review Summary of Findings There are conflicting public objectives regarding height, view-shed, historic preservation, and open space All these factors increase housing costs and exacerbate affordability conditions Also impact the potential supply of housing EPS employee generation survey data are generally in-line with current factors in the housing resolution Current rate is 20% of 4.4 per 1,000 ft Overall rate estimated at 3.9 per 1,000 ft Sufficient detail to differentiate by land use category

9 Park City Housing Resolution and Policy Review Employment Generation Rates

10 Park City Housing Resolution and Policy Review RECOMMENDATIONS

11 Park City Housing Resolution and Policy Review Provide additional financial incentives Consider deferring or abating a portion of property taxes on rental units in exchange for keeping them affordable – Could be applied to new development or rehab – Long term affordability is the critical factor, e.g., yrs. Consider revising or removing the per unit fee waiver – $5,000 is not a sufficient incentive – Not being used – Set in 1991 and would need = $8,600 today

12 Park City Housing Resolution and Policy Review Modify the commercial component of the housing resolution Could be converted to a commercial linkage program – Requires a nexus study – Estimates the job mix by land use category – Calculates jobs by wage level – Units/sq. ft. of housing needed to for lower wage jobs Current mitigation policy accomplishes the same end – Based on a land use regulation – Less burdensome – Incorporate employee generation rates from EPS survey data Modify or confirm the 20% mitigation factor – Policy goal = to the % of workforce to be housed locally – Not consistent with the 34% location substitution factor

13 Park City Housing Resolution and Policy Review Consider Modifying the In-Lieu Fee Structure Current Structure – Median value of 600-1,600 sf unit sold prior year – Multiply by 900 sf – Minus the affordable house price for a household at the Park City workforce wage Is the City receiving adequate revenues? – To build the same number of units as the 15% residential or 20% commercial mitigation rate? Other approaches can be evaluated as shown on the next slide

14 Park City Housing Resolution and Policy Review Fee in-lieu Alternatives (…for a 40-unit project (4,000 sqft/unit); 6-unit IZ req’t) Approaches 1.Difference btw. market median and affordable price (150% AMI) 2.% of construction cost (varies) 3.% of maximum affordable sales price 4.Land value-based (varies) 5.Nexus-based (residential) Total Fee Examples 1.$400,000 - $260,000 = $140,000 / unit = $840K 2.$240,000 x 75% = $180,000 / unit = $1.1M 3.$260,000 x 75% = $195,000 / unit = $1.2M 4.$50 x 1 acre (43,560 sqft) X 80% = $1.7M 5.$10.00** / sqft x 160,000 sqft = $1.6M ** This is a made-up number.

15 Park City Housing Resolution and Policy Review Modify the housing resolution to apply to all new residential development Consider applying the IZ to all new development – Includes infill and second homes – Exempt housing built at affordable levels – 100% AMI is $89,886 = $359,600 home – Workforce wage at 150% is = $282,700 home Residential linkage program is an alternative – Data intensive – Calculates the employees generated by luxury homes – Quantifies the units or sq. ft. of housing needed for a determined % of the directly generated workers Modify or confirm the mitigation factor – Policy goal = to the % of workforce to be housed locally – Not consistent with the 34% location substitution factor

16 Park City Housing Resolution and Policy Review City should balance shared equity with price appreciation limits Establish a program to provide soft second mortgages to lower the entry cost for affordable units – Limited appreciation cap plays with the market too much, arbitrary rates – Shared equity and ownership programs useful in tandem  Shared equity for markets with new development  Shared ownership where existing inventory is only option for increasing supply – Shared ownership is basically the model of a community land trust  May be a bit cumbersome, may have resistance from buyers

17 Park City Housing Resolution and Policy Review Expand the density bonus for affordable housing Current density bonus doesn’t work well – 10% bonus if building 30% affordable – Either build 15% affordable, or – Build an additional 15% affordable with a 10% density bonus Recommend increasing the density bonus to 20 to 40 percent – Should be based on construction type – Should directly offset the additional affordable housing requirement

18 Park City Housing Resolution and Policy Review City should establish priorities for the $40M affordable housing allocation Potential options – Developer solicitation (NOFA) – Acquire a strategic land parcel – Purchase existing units to maintain as affordable – Create a mortgage and/or shared equity pool Also consider establishing a permanent funding allocation or source – Community-based solution – Broadens the housing burden beyond new development

19 Park City Housing Resolution and Policy Review ADDITIONAL SLIDES

20 Park City Housing Resolution and Policy Review In-Lieu Fee Considerations Is the amount of the fee sufficient to… – Build or buy-down units elsewhere? How much does the City want to rely on outside information for the calculation? E.g. (follows the #s on previous slide) 1.Market rate price per square-foot from Assessor 2.No outside information is needed 3.Construction cost per square foot and Producer Price Index 4.Land sales data 5.Numerous data sources

21 Park City Housing Resolution and Policy Review Commercial linkage fee An “impact fee” on new non-residential development – E.g. retail, office, industrial, lodging, or sub-classifications, etc. Fee paid by developers… – per square-foot basis – at time of other permitting and impact fees – into a fund – and sometimes the requirement is to “build” (more common in resorts) How are revenues used… – new affordable housing production – acquisition, rehab, or preservation – down payment assistance programs to income-qualified buyers – etc.

22 Park City Housing Resolution and Policy Review Motivation for establishing a program Common rationale… – by generating demand for new employees and (low/moderate income) households, a city is justified in requiring new non- residential development to mitigate/ameliorate/address some of that need Common “whereas” clauses: – Private market is not supplying adequate affordable housing for low- or moderate-income workers – Housing costs are increasing faster than incomes – Businesses increasingly facing shortage of low- and moderate- income wage workers – Workers enduring longer and longer commutes – Community “exporting” its housing problems to outlying areas

23 Park City Housing Resolution and Policy Review Authority and legal basis Developed as an alternative to exactions Established under a municipality’s zoning ordinance Must still be grounded in precedents est’d by SCOTUS in exactions cases Nollan and Dolan – Essential nexus between the impact of the development and the “exaction” (Nollan, 1987) – Rough proportionality between the burden placed on the community and burden placed on the development (Dolan, 1994) Must also be consistent with any state court decisions – E.g. Zelinger v. City and County of Denver (1986), where the Supreme Court of Colorado ruled in deference to the stormwater drainage facilities ordinance “special fee” because its calculations were based on a study by experts

24 Park City Housing Resolution and Policy Review Documentation: the nexus study Nexus ≈ connection Determining how (a) much affordable housing need is generated by (b) a specific development is challenging – And requires a rigorous quantitative study ≈ a nexus study Components – General: analyze fluctuations in housing prices and demographics to new market-rate housing and non-residential development – Specific: document the magnitude of the impacts on affordable housing need stemming from non-residential development

25 Park City Housing Resolution and Policy Review Required nexus study findings… Purpose of fee How the fee is used Quantify a reasonable relationship between the fee and the type of development Quantify a reasonable relationship between demand for affordable housing and the type of development Demonstrate a reasonable relationship between the fee and the cost of the “public benefit” attributable to the development

26 Park City Housing Resolution and Policy Review What the nexus study involves… Specifically, establishing the nexus between (a) and (b) – Employee generation by land use type  Deciding which and how many categories – Employee generation by income level – Conversion to households – Distinguishing between full-time and part-time (or use FTEs) – Commuting factor (optional) – Estimating the gap between maximum affordable price and market-rate – Determination of per square-foot factors by land use type

27 Park City Housing Resolution and Policy Review Land use category options High Level Lodging Retail Office / Light Industrial / R&D Middle of the Road Lodging Retail Office Medical Industrial / R&D / Storage Education Government Detailed Lodging Bar Full Service Restaurant Fast Food / Quick Casual Grocery / Liquor / Convenience Clothing General Retail Education Finance / Insurance Health Care Real Estate Other Professional Services Non-Profit / Cultural Construction Distribution Warehousing Manufacturing Auto Repair / Maintenance Government

28 Park City Housing Resolution and Policy Review How it works… Example office linkage fee = $4.00 / square foot – New office development of 300,000 sqft – Fee ≈ $4.00 x 300,000 = $1.2 million Backing in to the assumptions – Employment generation rate = 400 sqft per job = 250 jobs per 100,000 sqft – # VLI / LI jobs = 35 per 100K sqft – Households 1.5 jobs per household) = 20 – Affordability gaps ≈ $20,000 per unit – Total affordability gap = $400,000 per 100,000 sqft – Fee = $4.00 / sqft

29 Park City Housing Resolution and Policy Review Who uses them?