City of Asheville COMPREHENSIVE AFFORDABLE HOUSING STRATEGY Affordable Housing Financial Incentives

Contents Housing Strategy Framework Tools Example General Obligation Bond Land Banking Permanently Affordable Homeownership Housing Trust Fund Land Use Incentive Grant Permit Fee Rebates Federal HOME and CDBG Program Income Capital Improvement Program City-Owned Property Density Bonus Example

Housing Needs Assessment BOWEN NATIONAL RESEARCH Primary Work Elements Analyzed more than 100 demographic & economic metrics Conducted ~40 community stakeholder interviews/surveys Surveyed nearly 170 multifamily rental properties (14,000+ units) Surveyed over 100 non-conventional rentals Evaluated 171 mobile home parks Analyzed for-sale data on 25,999 units (3,669 listed/22,330 sold) Surveyed 58 Senior Care Facilities (Adult Care, Nursing Home, & Multi-Unit Assisted) Completed a housing needs/gap analysis by tenure & affordability (up to 120% AMHI) Made more than 200 contacts with individuals & organizations Over 200 housing properties were visited and rated

Median Market-rate Rents by Bedroom Type Surveyed/Inventoried Housing Supply What’s Affordable?   Median Market-rate Rents by Bedroom Type Studio One-Bedroom Two-Bedroom Three-Bedroom + Buncombe County $875 $930 $1061 $1,127 HUD Fair Market Rents $709 $713 $917 $1,073 City Affordable Rents $685 $773 $870 $949 Note: Rents without utilities

Income/Rent Affordable Housing Standards Maximum Rent-80% AMI   Family Size* Utility Allowance** 80% Max affordable rent at 80% AMI*** Rent + Utilities**** 0 BR 1 126 32,450 685 811 1 BR 2 133 37,050 793 926 2 BR 3 173 41,700 870 1,043 3 BR 4 209 46,300 949 1,158 4 BR 6 228 53,750 1,116 1,344 Low Income Housing Standards Maximum Rent-60% AMI 60% Max affordable rent at 60% AMI*** 24,338 482 608 27,788 562 695 31,275 609 782 34,740 660 869 40,313 780 1,008

Rental Housing Gap 3,580 affordable rental units needed by 2020 64% are needed by households earning 80% or less of median income 45% of all renter households pay >30% of their gross income for rent 21% pay >50% of their gross income for rent 75% <60% AMI pay >30% for housing costs

Red shading = Unable to afford Fair Market Rent   Mean Hourly Wage Employment % of Total Efficiency Bedrooms 1 2 3 Total all occupations $17.14 116,920 Retail Salespersons $10.71 4,690 4.0% Food Preparation & Serving Workers $8.08 3,780 3.2% Registered Nurses $28.96 3,630 3.1% Cashiers $8.45 3,350 2.9% Waiters & Waitresses $8.90 3,250 2.8% Home Health Aides $10.57 2,310 2.0% Stock Clerks & Order Fillers $10.74 1,970 1.7% Laborers, Freight, Material Movers $11.08 1,930 Secretaries $13.74 1,900 1.6% Janitors & Cleaners $9.84 1,740 1.5% Office Clerks, General $11.73 1,720 Customer Service Representatives $13.14 1,700 General & Operations Managers $49.62 1,600 1.4% Cooks, Restaurant $10.42 1,500 1.3% Supervisor/Mgr of Retail Sales Work $17.62 1,450 1.2% Bookkeeping & Accounting Clerks $15.20 1,390 Maids & Housekeeping Cleaners $8.77 1,310 1.1% Executive Secretaries & Admin Assts $16.55 1,270 Truck Drivers, Heavy/Tractor-Trailer $18.11 1,200 1.0% Receptionists & Information Clerks $11.39 1,180

What’s Affordable? To a family of 4, annual income of $46,300 $1,158 month Mortgage: $187,295.74 To a family of 2, annual income of $37,000 $926/month Mortgage: $156,507.40 These are households at 80% of the median income

Owner Housing Gap 3,879 affordable new ownership units needed by 2020 73% of that total needed by senior households 70% of households are looking for homes priced under $200,000 13% of current homes listed are listed $200,000 Current median sales price: $270,000

Key Regional and National Trends Rising Labor and Material Costs Continued Growth in Asheville and region, Urbanization Lower Income HH pushed further from job centers Uncertain Economic Environment Likely Reduction in Federal Housing $ Greater Reliance on Local Resources

Challenges Housing that is affordable Housing that will stay affordable Housing for families with children Housing for smaller households Housing that creates opportunities Housing that is close to where people work, shop, go to school, worship

Affordable Housing Strategy The Comprehensive Affordable Housing Strategy A “living strategy” that will guide ongoing work related to affordable housing policies and programs. Inform annual work program priorities Continual action, monitoring and evaluation to expand housing opportunities through a variety of tools and coordinated initiatives.

Strategy Goals Strengthen Our Current Commitments Maintain the Middle Create Diverse Housing Choices in Every Neighborhood Create Vibrant Neighborhoods Strengthen Partnerships and Leverage Resources

Actions Goal: 2,800 units in next 7 years New Public-Private Partnerships Continue to remove regulatory barriers, increase density Increase Transportation- Housing Connection Prioritize Incentives for maximum impact

Asheville Tools and Strategies General Obligation Bond Housing Trust Fund Land Use Incentive Grant Permit Fee Rebates Federal HOME and CDBG repayments Capital Improvement Program City-Owned Property Density Bonus

General Obligation Bond $10 Million for “Housing Trust Fund” $5 Million, Direct Project Investments $3 Million, Land Banking $1 Million, Community Land Trust $1 Million, Down Payment Assistance $15 Million for “Repurposing City Owned Land” Evaluation of 3 Highly Visible Properties

General Obligation Bonds Issues Spend in 7 years from Voter Approval Loan, Grant, Land Investments Must be Capital Uses Size to Have an Impact Impact on Tax Rate Importance to Voters Support of Governing Board Prioritized Activities

General Obligation Bonds Affordable Housing Uses Allowed Infrastructure Loans to Developers Loans to Consumers Grants to Developers Grants to Consumers Land Purchasing, Land Banking

Asheville “Allocation Principles” Fund the creation of diverse unit types: New affordable homeownership creation with affordability restrictions Rental units affordable to those with a range of incomes, but emphasizing lowest income households Diversify and expand partnerships Continue to support highly leveraged developments e.g. LIHTC Support private-sector partnerships creating mixed-income communities

Asheville “Allocation Principles” Recognize that greater benefit may require larger investments, such as Developments serving those with lowest incomes Developments that are walking or bicycling convenient to jobs, schools and services Developments that have extended and permanent affordability Support investments that leverage other resources to the maximum extent feasible Make investments that can repay bond capital, with the ROI put back into funding for future affordable housing creation Provide operational support to enhance the City’s partnership with affordable housing developers (i.e. adequate staff)

Land Banking Purchase and Hold Land for Future Development Slow or stop the speculative increase in value Lay out the terms for development Partner with neighborhood in development planning Partner with developers to create pipeline

Permanently Affordable Homeownership Community Land Trusts Capital Investment in Land or Existing Housing Limited profit-taking from appreciation Community holds that equity, making the house affordable for new generations Limited Equity Co-op Housing Corporation formed to own housing Financing not based on individual credit Resident control of rules, investment decisions

Permanently Affordable Homeownership Issues American Dream of wealth creation vs creation of place-based affordability Often not considered when housing stock is “affordable” Small pool of financial institutions lending Need for operating supports Not common practice in NC

Housing Trust Fund General Fund Allocation ($.01/$100) Rental and Ownership Housing Finance Ownership: Construction Loans only Rental: Permanent financing, minimum 15 years, 2% Interest Special terms (for units at 60% AMI): 2% interest only, deferred principal; or, 0% interest

Housing Trust Fund Rolling applications accepted Analyzing the “subsidy” Minimum of 20% affordable Creating flexible terms that can yield return Underwriting Challenges: When is enough enough? When is it not enough? When HTF funds are not likely to be repaid Highly leveraged deals

Housing Trust Funds Management Challenges Getting to scale in smaller towns and cities Managing as an enterprise fund Initial loans rolled into “silent second” mortgages City as consumer lender, collections When deals go bad: on the courthouse steps

Capital Improvement Program Debt and “Pay-Go” funds Debt Funds for Capital Uses Only, such as Subsidies Land banking Construction Financing Pay-Go: wide variety of uses, such as Market studies Engineering and architectural studies and plans Traffic analysis Infrastructure improvement

Capital Improvement Program Issues and Challenges Debt limits Amount of “pay as you go” funds available Prioritization Return on Investment

Local Government-Owned Property What land does your City/Town/County own? What are you doing with it? If It can be repurposed, is affordable housing a priority? If so, you can make it available for a direct sale or lease for affordable housing- no upset bid process required

Local Government-Owned Property Due diligence activities Phase 1 and 2 environmental Zoning review Title review Geotechnical testing if any question Neighborhood feedback Appraisal Survey

Local Government-Owned Property Issues and Challenges Is Affordable Housing the right use? Sale vs. Lease Is the value of the property going to be the subsidy? Credibility of developer Period of affordability Deed or other restrictions

Development Team Minimum Experience Qualifications Minimum Developer Experience: : New Construction of at least one 24-unit or larger residential development in the past 5 years; Past experience with at least one of the following: New affordable housing for low income families and for low income seniors; Development of housing in Asheville Low Income Housing Tax Credit financing. Minimum Ownership Experience: Owned at least one residential development for at least 5 years prior to the Submittal Deadline of this RFP. Minimum Architectural Experience: Design and construction of at least one multifamily housing development. Design and completed construction of at least one 24-unit or larger residential development within the past 5 years. Minimum Property Manager Experience: Managed at least one family rental project for at least 24 months. For any Developer team member, the experience of key staff members may be substituted for the experience of the organization as a whole

Land Use Incentive Grant Focused on affordable housing and location First passed in 2010, first real agreement in 2014 Designed like “Tax Increment Financing” (TIF), but deferred revenues are not set-aside for the project Annual grant equal to City (only) property tax Additional grant of a percentage of permits fees

Land Use Incentive Grant 10 points = 1 year grant equal to the City of Asheville property tax that results from the increase in value due to the development. 10 points = 10% reduction in City of Asheville building permit fees. At least 10% of the units must be affordable for households earning 80% or less of the Area Median Income. The affordable units must be affordable to and leased to income-eligible households for at least 15 years. Must be located to provide convenient access to jobs, schools and services. The applicant may make the case for convenient access.

Points 5 10 15 20 30 40 50 60 70 80 90 100 10%+ Affordable   x 20%+ Affordable 30%+ Affordable 40%+ Affordable 50%+ Affordable 60%+ Affordable 70%+ Affordable 80%+ Affordable 90%+ Affordable 25%+ Workforce 50%+ Workforce 75%+ Workforce Location: .25 mile ½ hour transit stop Location: 1 mile from job center Location:.5 mile from transp. Amenity Tenant Affordability: 20 years Tenant Affordability: 30 years

Example 8 Unit New Development , all 2 BR All-in Cost/per unit: $120,000 Land $20,000 Site/Utilities $20,000 Bldg. Constr. $80,000 (800 sq ft @ $100/sq ft) Total cost: $960,000 Equity 30% $288,000 Debt 70% $672,000

Rent Structure Scenarios 100% AMI Rents: $1,194/month Scenario 2: 100% at 50% AMI (Vouchers): $992.00/month Scenario 3: 50% at 100% AMI, 50% at Voucher Rate

Other Assumptions Annual Rent increase: 2% Annual Vacancy rate: 3% Annual Cost Increase: 3% Other Income: 3% of gross rent Annual Operating Cost: $38,792 (yr 1) 33% of year 1 net market rent income Conventional Debt: 5%, 15 Years Cash-on-Cash analysis

Bottom Line Cash-on Cash Analysis 100% AMI Rents: Year 5= $18,403 All Voucher Rents: Year 5= $13,558 Affordable also brings savings on - Permit Fees

More information Jeff Staudinger Heather Dillashaw http://www.ashevillenc.gov/departments/community/community_development/unding_programs/default.htm Jeff Staudinger 828-259-5723 jstaudinger@ashevillenc.gov Heather Dillashaw 828-259-5851 hdillashaw@ashevillenc.gov