CREATING AFFORDABLE HOUSING IN YOUR COMMUNITY HOSTED BY LOCAL PROGRESS

Ady Barkan Co-Director Local Progress

Sasha Hauswald Cornerstone Partnership Senior Program Officer for Inclusionary Housing Policy

© Cornerstone Partnership 2013 Inclusionary Housing Presentation for Local Progress

5 Cornerstone Partnership Introduction Sasha Hauswald Senior Program Officer, Inclusionary Housing Policy

6 Agenda About Cornerstone Why Inclusionary Key Choices Recent Trends

7 What We Do We promote housing opportunity by: Advising communities on inclusionary housing policy. Building capacity of nonprofits running homeownership programs that build wealth and preserve affordability over time. Developing innovative technology solutions to increase program efficiency and capture social impact data.

8 What’s the Problem? Lower and middle-income households are increasingly being priced out of growing housing markets. Lack of housing opportunities leaves these families few choices: extreme commute times, overcrowding, substandard housing, or living in housing beyond their means.

9 San Jose Home Sales History (2014 dollars) YearSales PricePotential Buyer 1988 $378,000$87, $301,900 $69, $939,000 $216,032 Loss of Affordability

10 Housing Prices Outpace Wages source: americancenturyblog.com

11 Why Inclusionary?

12 What is Inclusionary Housing? >500 Source: Hickey, Sturtevant and Thaden (2014). Achieving Lasting Affordability through Inclusionary Housing. Local policies that require or encourage lower-priced, income-targeted homes and apartments in new market- rate developments.

13 Development Booming Source:

14 Income Inequality on the Rise Source: San Francisco Human Services Agency

15 Polarization: A Tale of One City Source: J.D. Pooley/Getty Images

16 Why Inclusionary? Affordable Housing Development without Public Subsidy Recapture Value Generated by Public Investment Build Mixed-Income TOD Workforce Attraction and Retention Reduce pollution due to Commuting Economic Integration: Access to Good Neighborhoods Ponce City Flats, Atlanta, GA

17 How Do We Structure Inclusionary Policies?

18 Voluntary or Mandatory? What is the percentage of price-restricted units (typical range is 10% to 30%)? What is the threshold size for projects? What income groups will be targeted? Does it apply to both rental and for-sale development? Is the policy geographically targeted? Does the policy apply to non-residential developers? Will in-lieu fees, off-site or land dedication be allowed? What incentives will be offered? What is the duration of affordability requirements? Will specific design standards apply to the price-restricted units? Key Choices

19 Mandatory Typically produce more affordable units. Voluntary vs Mandatory San Francisco, CA

20 Voluntary Must offer adequate incentives Strong Voluntary/ Triggered Programs Voluntary vs Mandatory Austin, TX

21 Inclusionary Percentage Typical range 10% to 30% Trade Off Lower % for Deeper affordability Palmers Dock Apartments, Brooklyn, NY

22 Income Targeting Typical range 30%AMI to 120%AMI Often lower for rental than ownership Atlanta, GA

23 Geographic Targeting Transit Oriented Development Mixed markets Specific zoning districts, neighborhoods or census tracts.

24 In-Lieu Fees Flexibility Leveraging of outside funds Use expertise of nonprofits Ease of development Monitoring costs and challenges New Condominium Development, Santa Fe

25 Why Not Do In-Lieu Fees Prices often set too low Delay to see units Administrative and development capacity Concentration of poverty Scarcity of leveraging sources Political and public will Evans Station Lofts, Denver

26 Other Compliance Options Offsite Performance Land Dedication Preservation Downtown Tucson, Arizona

27 Density bonus Parking reduction Other zoning variances Fee / tax reductions Financial subsidies Expedited permitting Types of Incentives Atlanta, Georgia

28 Most Effective Policies: Do not miss the window of opportunity Apply where new development is occurring/ will occur Are mandatory Have long terms of affordability Plan for monitoring and stewardship Are simple and predictable Objectively assess financial feasibility Lessons Learned

29 Strengthening Existing Programs Longer terms of affordability Higher fees-in-lieu Voluntary programs becoming mandatory Mixed Markets Denver, New York, Pittsburgh, New Orleans Southern and Rustbelt Cities Atlanta, Nashville, Minneapolis Inclusionary Upzoning Regional Efforts California, Twin Cities Fee-Based Programs Seattle, California 2015 Trends

30 Thank you. For More Information: affordableownership.org

Valerie Ervin Executive Director Participatory Democracy Project

Inclusionary Zoning in Montgomery County BIRTH-STRUGGLE- EVOLUTION

BIRTH A long view: Visionary Leadership (It is the government’s role to expand opportunity) 1964: Montgomery County Council passed a General Plan which included a concept called “Wedges and Corridors” which created wedges of low-density, open space and protected farmland and corridors of growth and development. In 1974 the Montgomery County Council pioneered the nation’s first mandatory inclusionary zoning law. The program allows that a specified density bonus allowance to builders to provide affordable housing. In 1980 the Council created the Agricultural Reserve which was designed to protect 93,000 acres of farmland and agriculture. As Montgomery County grew as a desirable community outside the nation’s capital, community and political leaders grew concerned that the majority of new housing in the county was being built and marketed to high income households. Moderately priced and low-income housing was shrinking. This fact brought visionary leadership both elected and community together to create public policy answers to this growing dilemma. The law requires that between 12.5% and 15% of homes in new developments of 20 units or more be MPDU’s. The law allows a density increase of up to 22% above the normal density permitted under the zone. The density bonus, in effected, creates free lots on which MPDU’s are constructed. When the program was established it required that the affordability of both rental and homeownership MPDU’s be controlled for 5 years. Today, that period is 30 years for homeownership and 99 years for rentals. In 2014, a household must earn between a minimum of $30,000 and a maximum of $81,000 to rent and MPDU (based on unit size and unit type). To buy an MPDU, household income must be between $35,000 and $81,000. These income limits are updated annually.

STRUGGLE Who qualifies? The program requires that 40% of newly developed MPDU’s first be offered for sale to the Housing Opportunities Commission, Montgomery County’s public housing agency, and to non- profit housing providers who provide housing to the county’s poorest residents who do not qualify for the MPDU program. The MPDU program is not for poor people. Moderately priced housing is designed to be housing for teachers and firefighters and other public sector employees who cannot afford to live in the county where they provide their public service. These residents are moving further and further away from the county due to issues of affordability. The next generation is also impacted by higher housing costs. They essentially cannot afford to live in the community where they were born and raised. The Housing Opportunities Commission was established to provide housing for the families who do not qualify for MPDU’s. As the County grows and the availability of land shrinks, the pressure on the county and developers is growing. New development is actually redevelopment of older wedges that were originally designed in the 60’s and much of that development was in the form of strip malls. The pushback from communities is the result of the older residential communities feeling the pressure of this new development which puts them in close proximity to neighbors who are different. In an enclave that was a traditional bedroom community that was very homogeneous to one that is more diverse has been a tension that creates pushback from well- organized single-family residents and residents who live in condos in tony neighborhoods where redevelopment is also occurring. The lack of affordable housing has also caused neighbors to respond negatively to families due to financial constraints sharing housing.

EVOLUTION The MPDU program is not a static program. It works because it is in a constant state of reevaluation and improvement. The County is becoming more urban and is nearing its capacity for development. As a result, the production of MPDU’s has decreased. This decreased production was also a result of the recent recession which slowed down building and development for the past several years. Land is expensive so the developers continue to find ways to ensure certainty to build to make a profit. The MPDU program is still an important source of affordable housing but it can’t be the only tool. There have to be many tools in the tool box to make affordable housing a reality in our communities.

Robin Kniech Councilwoman At Large Denver, CO

High, medium, and low zones based on the overlay of two metrics 1.Fixed-rail Transit Why?: Proximity to transit saves moderate income families money compared to owning and/or always using a car. Data and thresholds: ≥30% or ≥50% of neighborhood within ½ mile of fixed rail transit station. 2.Median Sales Prices Why?: We have a greater need for new affordable housing as a part of development in higher cost neighborhoods than in neighborhoods where the market already creates moderate priced housing. Data and Threshold: median sales distributed into three tiers citywide by neighborhood. 37 Determining “Zones” for Variable Cash in Lieu/Incentives

“Zones” for variable cash-in-lieu or incentives Distribution: LOW = 25% MEDIUM = 60% HIGH = 15% Zones Based on Need/Transit

Tiered Cash-in-Lieu and Incentives by Zone Zone CILCash Incentives High 70% of Sales Price $25,000 per unit Medium 50% of Sales Price (Existing) $6,500 per unit (Existing adjusted by inflation) Low 25% of Sales price $2,500 per unit * Except within ½ mile of transit, which receives the medium incentive Tiered Cash In Lieu (CIL) and Incentives - By Zones

Denver City Councilwoman At-Large Robin Kniech (720)

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THANK YOU! Please contact Tarsi Dunlop with questions