Affordable Housing
COUNTY OF ALBEMARLE EXECUTIVE SUMMARY
AGENDA TITLE: Affordable Housing Work Session
SUBJECT/PROPOSAL/REQUEST: Affordable Housing Policy and Proffers
STAFF CONTACT(S): Ron White, Wayne Cilimberg, Elaine Echols
AGENDA DATE:
June 26, 2012
ACTION:
INFORMATION: X
CONSENT AGENDA: ACTION:
INFORMATION:
ATTACHMENTS: Yes
BACKGROUND: At the request of Planning staff, a brief presentation was made to the Planning Commission on March 20, 2012 by the County’s Chief of Housing on the status of affordable housing proffers. Due to the time of evening, the Commissioners requested a follow-up work session and agreed to provide some questions for responses.
DISCUSSION: Attached to this Executive Summary, Commissioners will find responses to a number of questions and some additional comments related to the Affordable Housing Policy and potential considerations for future revisions to the Policy. Given the economic downturn that created significant disruption in development and financing of housing units, a limited number of proffers have been satisfied. Most of the units developed to date have been rental units financed in part with federal housing tax credits. Approximately $450,000 in cash has also been received of which $300,000 was used for downpayment assistance as designated in the accepted proffer. Much of the balance was used to rehab owner-occupied houses, complete rehab and energy improvements for the Meadowlands Apartments in Crozet, and address electrical hazards in the Southwood Mobile Home Park. The Board has reserved $30,000 as a local match for a Community Development Block Grant to rehab 20 – 25 houses in the Orchard Acres Subdivision. The grant application is pending.
RECOMMENDATION: Staff is providing the attached information to the Planning Commission for discussion and guidance from the Commission as revisions to the Affordable Housing Policy are considered. Staff also asks that up to two Planning Commissioners agree to participate in the Affordable Housing Policy Working Group which will meet in early July.
Have we quantified the County's affordable housing needs? Is that information broken down in any manner similar to the City? There has been no comprehensive needs analysis conducted in the County. The Housing Committee had suggested it just about the time that the economy was slowing down and funding was not available for this undertaking. The closest thing we have to an analysis is the regional study completed in October 2006 by Virginia Tech’s Center for Housing Research for the TJPDC. This study indicated that fairly low vacancy rates existed in both rental and owner-occupied units. This was consistent with what was happening in the market at the time with for-sale units selling in less than 60 days and sometimes for more than the asking price. The study did highlight that housing demand projections for Albemarle would increase from the current 34,000 (est.) households to 40,000 households in 2020 with owner-occupied demand outpacing rental demand. Projecting future demand based on current conditions may not produce the best results. It was interesting to read one conclusion in the report which stated that “Home sales in the PDC are robust with condominium sales “hot”.” Based on information provided by City staff, they are planning to update their report due to the lack of a consistent database and discrepancies in the number of “supported” units due to the initial report using guesstimates instead of actual numbers. It appears that the City’s approach is to focus on retaining or increasing the number of supported units which are primarily tax credit properties or other properties with some level of restrictions. It does not appear that the City’s work attempts to identify needs by tenure or type of units.
What has been type of units (e.g., 1BR, price) built under proffer in the County? The majority of units built to date under proffers are rental consisting of two- and three-bedroom units. In addition, 14 townhouse units have been built and sold, all three-bedroom. There have also been a number of proffered accessory units built (one-bedroom) although we do not track these units except that they are built per site plans. One type of housing that is desired by many homebuyers is single-family, detached. There have been few of these units proffered most likely due to the cost of land and development. Those desiring detached housing would likely look to rural areas of the County or neighboring jurisdictions for affordable opportunities although they would have higher transportation costs and limited close access to many services. Are we creating the right kind of units? Most, if not all, of the proffered affordable units have been built under Neighborhood Model zoning which calls for a mix of housing types. Most proffers include a variety of types, not necessarily specified by individual types and numbers. Obviously, developers are likely to proffer units that they believe are marketable within the proposed development, whether for-sale or rental. It is difficult to assess what types of units may be needed at any point in time and more difficult to project needs when units may not be built for a number of years after approval. If we disregard market factors (cost to develop/build and mortgage financing), it would be easy to say that a need exists for potential purchasers in price ranges from around $100,000 up to about $250,000 to address lower-income needs and what has been termed “workforce” housing needs. Lower-income would address those between 50% and 80% of the area median income and “workforce” would include those up to 120% of the area median income. Rental housing targeted to those between 20% and 50% of the area median income should have rents ranging from $300 to $900 per month. Unfortunately, the realities of the market do not provide for many such units to be produced.
Since there are a number of non-profits in this area that focus on affordable housing, should we be focused on creating opportunities for these groups through partnership opportunities or by providing funding or lots? Nonprofits have always been seen as potential partners in creating affordable housing although they have not been a major player so far. The limited availability of funding may be one factor. Nonprofits often survive off of grants and restricted funds which may address specific initiatives. They also often use public funding to maintain staffing and operational costs. Although not generally reflected in the sales price or rental costs, this public funding should be viewed as a cost to developing housing. It has not been proven that nonprofits can produce “affordable” housing any better than a for-profit builder although the perception is that they do when one only views the cost to the purchaser or renter. Even Habitat “sells” units for their appraised value taking back junior liens to secure the total value. The purchaser may get an affordable mortgage for $130,000 but the unit may be worth almost twice that much. How important do we feel it is to spread the affordable units throughout our community? One of the principles in the Neighborhood Model is that the majority of units be provided in the Development Areas and another principle is for a mixture of housing types and the desire to have affordable units dispersed throughout a development. The Development Areas are the preferred location because of the ability to walk and ride the bus, which is not present in the Rural Areas. Low-to-moderate income residents would not have to spend as much money on transportation if they work close to home or can ride mass transit. Also it is likely much easier to disperse affordable, for-sale units within a development of townhomes than it is to
get scattered affordable rental units. As previously mentioned there has been some success with accessory or carriage-house units which are more dispersed than multifamily housing. However, there are funding mechanisms (primarily federal tax credits) that make multifamily affordability work while creating a significant number of units on one site. A recent example is Treesdale Park on Rio Road. When was the Affordable Housing proffer program developed and was there a projection developed at that time (as in a proforma of planned performance)? What are the goals and how is success measured? Describe the past history. The proffer system was developed from the Affordable Housing Policy which was adopted as a section of the Comprehensive Plan on February 4, 2005. The key thing to point out is that we do not have an Affordable Housing Ordinance but a policy that sets a target for 15% of any new development created through rezoning or special-use permit to be affordable or the developer provides “comparable contributions” for affordable housing. This target has been used to measure the success of the policy. What are the major barriers in the implementation of the For-Sale Units? There are a number of barriers with changes in the financial market being the most recent. The initial barrier is identifying a purchaser with enough income to qualify for a mortgage but whose income does not exceed our maximum income limits. An example from the sale of units in Avon Park was that purchasers had to have approximately $48,000 in income to qualify but could not exceed approximately $52,000. This creates a very small window for someone to fit in. These purchasers also needed down payment assistance for which the County has discontinued funding. There are some limited amounts of down payment assistance available through other sources. Another barrier created by the downturn in the real estate market is that builders are now mostly building units under contract which means that an eligible purchaser has to be found and qualified prior to the unit being built. Back to the financial market – although interest rates are at historical lows, qualifying for a mortgage now requires significantly higher credit scores and funds available for down payment. We also have a staffing issue in that the County’s housing counselor who was the contact for lenders and prospective purchasers is no longer funded as of June 30, 2012. Are there other comparable communities with more ‘successful’ programs we could do some benchmarking analysis with, in order to understand what changes would yield results for either the building of additional units and/or better mechanisms for the selling process? Albemarle County has been a leader in Virginia, particularly in relation to other rural counties, in working with developers to include affordable housing in their developments. James City County has utilized Community Development Block Grant funds to provide infrastructure for new developments in exchange for a set-aside of affordable units. Fairfax County has used an ordinance for a number of years to get affordable units through private development but have done so using a formula which takes into consideration the increase in density requested. I believe this formula was adopted after Fairfax was taken to court over a previous ordinance that was considered confiscatory. The formula works for Fairfax since most of the property is zoned R-1. Most of the County’s property identified for development has a higher zoning which does not allow a similar formula to work. For example, I used the formula for Biscuit Run. Based on the available density under then-current zoning and the density requested, Biscuit Run would not have been required to provide affordable units. I think we know there are people in our community that need this housing, and what I remember from previous PC discussions is that access and timing are complex and difficult for all to navigate once we do get a unit developed. Also, there has been discussion on issues around resale and related restrictions. If this kind of background could be provided to us in a summary before our session, I think the discussion will be more productive. Timing is a critical issue both from the standpoint of the builder and those working with the prospective purchaser. Current proffers require some period of notification when the builder has to notify the Housing Office X days prior to expected completion. It was anticipated that this notification period would allow the Office of Housing to identify potential purchasers and/or work with housing partners to do so. As noted above, due to staff reductions, we believe going forward we will likely rely of the developments’ sales staff to assist in identifying eligible purchasers. The issue of resale restrictions has been discussed by the Housing Committee with little or no workable solutions available. I believe the changes in the financial market make any restrictions more problematic now than a few years ago. A deed restriction would have to be executed by the seller of the property and would likely be considered by the seller as making the property more difficult to sell or requiring a sales price lower than similar market units. Then the question would be who would monitor the restrictions. Obviously, there could be restrictions in financing instruments such as junior deeds of trust although enforcing these restrictions would likely require paying off the first mortgage. Most down payment assistance loans for affordable housing have some level of restriction but the nonprofit or governmental lender has to get those loans approved and generally sign a certification that the first mortgage overrides everything else. Some additional thoughts that may be helpful
There may be opportunities to use nonprofit partners to assist in marketing and financing affordable units for sale. In particular, if developers would proffer donation of lots or sale of lots at a reduced price to the Land Trust, then the Land Trust could ensure long-term affordability. The current proffer system, particularly related to for-sale units, only benefits those at or near 80% of the area median income. One Housing Committee discussion a few years ago was to develop a chart on how developers could meet the 15%. The proposal would have allowed a developer to build houses affordable to higher income families (up to 120% of the area median income) although they would only get partial credit per unit. If they built a product affordable to households below 50% area median income, they would get more that 1:1 credit. The proposal was structured so that a maximum number of 80 – 120% units would be allowed ensuring that units for lower-income households would also be developed. Another idea was floated that we should not be concerned about who purchases a house, other than the purchaser would have to reside there, as long as the appraised value of the house met the County’s affordable definition. This approach would require developers and builders to build an affordable product rather than discounting the price of a unit that has a higher market value. As for the current Affordable Housing Policy and potential revisions
1. The Policy should remain a general policy and not get into detail of how proffers are structured with the exception of setting forth targets.
2. We should retain the option of providing units or comparable contributions. 3. Flexibility should be maintained for the use of cash proffers. If any restrictions were considered, we should, at a minimum, allow for cash proffers to be used to assist in developing affordable housing and preserve existing affordable housing through rehabilitation and possibly acquisition.
AGENDA TITLE: Affordable Housing Work Session
SUBJECT/PROPOSAL/REQUEST: Affordable Housing Policy and Proffers
STAFF CONTACT(S): Ron White, Wayne Cilimberg, Elaine Echols
AGENDA DATE:
June 26, 2012
ACTION:
INFORMATION: X
CONSENT AGENDA: ACTION:
INFORMATION:
ATTACHMENTS: Yes
BACKGROUND: At the request of Planning staff, a brief presentation was made to the Planning Commission on March 20, 2012 by the County’s Chief of Housing on the status of affordable housing proffers. Due to the time of evening, the Commissioners requested a follow-up work session and agreed to provide some questions for responses.
DISCUSSION: Attached to this Executive Summary, Commissioners will find responses to a number of questions and some additional comments related to the Affordable Housing Policy and potential considerations for future revisions to the Policy. Given the economic downturn that created significant disruption in development and financing of housing units, a limited number of proffers have been satisfied. Most of the units developed to date have been rental units financed in part with federal housing tax credits. Approximately $450,000 in cash has also been received of which $300,000 was used for downpayment assistance as designated in the accepted proffer. Much of the balance was used to rehab owner-occupied houses, complete rehab and energy improvements for the Meadowlands Apartments in Crozet, and address electrical hazards in the Southwood Mobile Home Park. The Board has reserved $30,000 as a local match for a Community Development Block Grant to rehab 20 – 25 houses in the Orchard Acres Subdivision. The grant application is pending.
RECOMMENDATION: Staff is providing the attached information to the Planning Commission for discussion and guidance from the Commission as revisions to the Affordable Housing Policy are considered. Staff also asks that up to two Planning Commissioners agree to participate in the Affordable Housing Policy Working Group which will meet in early July.
Have we quantified the County's affordable housing needs? Is that information broken down in any manner similar to the City? There has been no comprehensive needs analysis conducted in the County. The Housing Committee had suggested it just about the time that the economy was slowing down and funding was not available for this undertaking. The closest thing we have to an analysis is the regional study completed in October 2006 by Virginia Tech’s Center for Housing Research for the TJPDC. This study indicated that fairly low vacancy rates existed in both rental and owner-occupied units. This was consistent with what was happening in the market at the time with for-sale units selling in less than 60 days and sometimes for more than the asking price. The study did highlight that housing demand projections for Albemarle would increase from the current 34,000 (est.) households to 40,000 households in 2020 with owner-occupied demand outpacing rental demand. Projecting future demand based on current conditions may not produce the best results. It was interesting to read one conclusion in the report which stated that “Home sales in the PDC are robust with condominium sales “hot”.” Based on information provided by City staff, they are planning to update their report due to the lack of a consistent database and discrepancies in the number of “supported” units due to the initial report using guesstimates instead of actual numbers. It appears that the City’s approach is to focus on retaining or increasing the number of supported units which are primarily tax credit properties or other properties with some level of restrictions. It does not appear that the City’s work attempts to identify needs by tenure or type of units.
What has been type of units (e.g., 1BR, price) built under proffer in the County? The majority of units built to date under proffers are rental consisting of two- and three-bedroom units. In addition, 14 townhouse units have been built and sold, all three-bedroom. There have also been a number of proffered accessory units built (one-bedroom) although we do not track these units except that they are built per site plans. One type of housing that is desired by many homebuyers is single-family, detached. There have been few of these units proffered most likely due to the cost of land and development. Those desiring detached housing would likely look to rural areas of the County or neighboring jurisdictions for affordable opportunities although they would have higher transportation costs and limited close access to many services. Are we creating the right kind of units? Most, if not all, of the proffered affordable units have been built under Neighborhood Model zoning which calls for a mix of housing types. Most proffers include a variety of types, not necessarily specified by individual types and numbers. Obviously, developers are likely to proffer units that they believe are marketable within the proposed development, whether for-sale or rental. It is difficult to assess what types of units may be needed at any point in time and more difficult to project needs when units may not be built for a number of years after approval. If we disregard market factors (cost to develop/build and mortgage financing), it would be easy to say that a need exists for potential purchasers in price ranges from around $100,000 up to about $250,000 to address lower-income needs and what has been termed “workforce” housing needs. Lower-income would address those between 50% and 80% of the area median income and “workforce” would include those up to 120% of the area median income. Rental housing targeted to those between 20% and 50% of the area median income should have rents ranging from $300 to $900 per month. Unfortunately, the realities of the market do not provide for many such units to be produced.
Since there are a number of non-profits in this area that focus on affordable housing, should we be focused on creating opportunities for these groups through partnership opportunities or by providing funding or lots? Nonprofits have always been seen as potential partners in creating affordable housing although they have not been a major player so far. The limited availability of funding may be one factor. Nonprofits often survive off of grants and restricted funds which may address specific initiatives. They also often use public funding to maintain staffing and operational costs. Although not generally reflected in the sales price or rental costs, this public funding should be viewed as a cost to developing housing. It has not been proven that nonprofits can produce “affordable” housing any better than a for-profit builder although the perception is that they do when one only views the cost to the purchaser or renter. Even Habitat “sells” units for their appraised value taking back junior liens to secure the total value. The purchaser may get an affordable mortgage for $130,000 but the unit may be worth almost twice that much. How important do we feel it is to spread the affordable units throughout our community? One of the principles in the Neighborhood Model is that the majority of units be provided in the Development Areas and another principle is for a mixture of housing types and the desire to have affordable units dispersed throughout a development. The Development Areas are the preferred location because of the ability to walk and ride the bus, which is not present in the Rural Areas. Low-to-moderate income residents would not have to spend as much money on transportation if they work close to home or can ride mass transit. Also it is likely much easier to disperse affordable, for-sale units within a development of townhomes than it is to
get scattered affordable rental units. As previously mentioned there has been some success with accessory or carriage-house units which are more dispersed than multifamily housing. However, there are funding mechanisms (primarily federal tax credits) that make multifamily affordability work while creating a significant number of units on one site. A recent example is Treesdale Park on Rio Road. When was the Affordable Housing proffer program developed and was there a projection developed at that time (as in a proforma of planned performance)? What are the goals and how is success measured? Describe the past history. The proffer system was developed from the Affordable Housing Policy which was adopted as a section of the Comprehensive Plan on February 4, 2005. The key thing to point out is that we do not have an Affordable Housing Ordinance but a policy that sets a target for 15% of any new development created through rezoning or special-use permit to be affordable or the developer provides “comparable contributions” for affordable housing. This target has been used to measure the success of the policy. What are the major barriers in the implementation of the For-Sale Units? There are a number of barriers with changes in the financial market being the most recent. The initial barrier is identifying a purchaser with enough income to qualify for a mortgage but whose income does not exceed our maximum income limits. An example from the sale of units in Avon Park was that purchasers had to have approximately $48,000 in income to qualify but could not exceed approximately $52,000. This creates a very small window for someone to fit in. These purchasers also needed down payment assistance for which the County has discontinued funding. There are some limited amounts of down payment assistance available through other sources. Another barrier created by the downturn in the real estate market is that builders are now mostly building units under contract which means that an eligible purchaser has to be found and qualified prior to the unit being built. Back to the financial market – although interest rates are at historical lows, qualifying for a mortgage now requires significantly higher credit scores and funds available for down payment. We also have a staffing issue in that the County’s housing counselor who was the contact for lenders and prospective purchasers is no longer funded as of June 30, 2012. Are there other comparable communities with more ‘successful’ programs we could do some benchmarking analysis with, in order to understand what changes would yield results for either the building of additional units and/or better mechanisms for the selling process? Albemarle County has been a leader in Virginia, particularly in relation to other rural counties, in working with developers to include affordable housing in their developments. James City County has utilized Community Development Block Grant funds to provide infrastructure for new developments in exchange for a set-aside of affordable units. Fairfax County has used an ordinance for a number of years to get affordable units through private development but have done so using a formula which takes into consideration the increase in density requested. I believe this formula was adopted after Fairfax was taken to court over a previous ordinance that was considered confiscatory. The formula works for Fairfax since most of the property is zoned R-1. Most of the County’s property identified for development has a higher zoning which does not allow a similar formula to work. For example, I used the formula for Biscuit Run. Based on the available density under then-current zoning and the density requested, Biscuit Run would not have been required to provide affordable units. I think we know there are people in our community that need this housing, and what I remember from previous PC discussions is that access and timing are complex and difficult for all to navigate once we do get a unit developed. Also, there has been discussion on issues around resale and related restrictions. If this kind of background could be provided to us in a summary before our session, I think the discussion will be more productive. Timing is a critical issue both from the standpoint of the builder and those working with the prospective purchaser. Current proffers require some period of notification when the builder has to notify the Housing Office X days prior to expected completion. It was anticipated that this notification period would allow the Office of Housing to identify potential purchasers and/or work with housing partners to do so. As noted above, due to staff reductions, we believe going forward we will likely rely of the developments’ sales staff to assist in identifying eligible purchasers. The issue of resale restrictions has been discussed by the Housing Committee with little or no workable solutions available. I believe the changes in the financial market make any restrictions more problematic now than a few years ago. A deed restriction would have to be executed by the seller of the property and would likely be considered by the seller as making the property more difficult to sell or requiring a sales price lower than similar market units. Then the question would be who would monitor the restrictions. Obviously, there could be restrictions in financing instruments such as junior deeds of trust although enforcing these restrictions would likely require paying off the first mortgage. Most down payment assistance loans for affordable housing have some level of restriction but the nonprofit or governmental lender has to get those loans approved and generally sign a certification that the first mortgage overrides everything else. Some additional thoughts that may be helpful
There may be opportunities to use nonprofit partners to assist in marketing and financing affordable units for sale. In particular, if developers would proffer donation of lots or sale of lots at a reduced price to the Land Trust, then the Land Trust could ensure long-term affordability. The current proffer system, particularly related to for-sale units, only benefits those at or near 80% of the area median income. One Housing Committee discussion a few years ago was to develop a chart on how developers could meet the 15%. The proposal would have allowed a developer to build houses affordable to higher income families (up to 120% of the area median income) although they would only get partial credit per unit. If they built a product affordable to households below 50% area median income, they would get more that 1:1 credit. The proposal was structured so that a maximum number of 80 – 120% units would be allowed ensuring that units for lower-income households would also be developed. Another idea was floated that we should not be concerned about who purchases a house, other than the purchaser would have to reside there, as long as the appraised value of the house met the County’s affordable definition. This approach would require developers and builders to build an affordable product rather than discounting the price of a unit that has a higher market value. As for the current Affordable Housing Policy and potential revisions
1. The Policy should remain a general policy and not get into detail of how proffers are structured with the exception of setting forth targets.
2. We should retain the option of providing units or comparable contributions. 3. Flexibility should be maintained for the use of cash proffers. If any restrictions were considered, we should, at a minimum, allow for cash proffers to be used to assist in developing affordable housing and preserve existing affordable housing through rehabilitation and possibly acquisition.
