Presentation to Housing Policy and Development Committee August 22, 2018 Stephanie Reyes and Rick Jacobus
Grounded Solutions Network cultivates communities – equitable, inclusive and rich in opportunity – by advancing affordable housing solutions that last for generations.
Agenda Inclusionary Housing – What and Why Policy Analysis Financial Feasibility Analysis Policy Options and Recommendations 3
Inclusionary Housing – What and Why 4
What is Inclusionary Housing? New York Department of City Planning Palmers Dock Apartments, 5 Brooklyn, NY
Why Inclusionary Housing? Balance growth and affordability “We need new investment and energy in this city. We want to grow.” “Our workforce and long-time residents should be able to stay. 6
Why Inclusionary Housing? Goal 1: Reduced disparities: In 2040, Minneapolis will have significantly reduced economic, housing, safety, and health disparities among people of color and indigenous peoples compared with white people. 7
Why Inclusionary Housing? Increase resources available for affordable housing 8
Policy Analysis 9
Voluntary or Required? 10
Voluntary or Required? 11
Voluntary or Required? Average # of Units Produced Annually 120 100 80 60 40 20 0 # of Units 12 Voluntary Mandatory
Minneapolis 2040 Goals 13
Best-Practice Planning Strategies Increased Density Reduced Parking 14
Best-Practice Planning Strategies Increased Density Reduced Parking Reduced cost (up to $25k/space) Increased project revenue 15
Voluntary Inclusionary Housing Allowed under base zoning Allowed with affordable housing Credit: NYC Department of City Planning 16
Voluntary or Required? Recommendation for Minneapolis: Link the provision of affordable housing to a discretionary land use action such as site plan approval. 17
Financial Feasibility Analysis 18
Why Financial Feasibility Analysis? Additional Policy Choices for Inclusionary Housing Percent of units that will be affordable Affordability levels / incomes served Incentives offered Variation (city-wide or geographically varied) 19
Why Financial Feasibility? Example project in hypothetical city REVENUE COST FEASIBLE Without inclusionary housing 20
Why Financial Feasibility? Example project under hypothetical IH program REVENUE REVENUE COST COST NOT FEASIBLE FEASIBLE Without With inclusionary inclusionary housing housing 21
Why Financial Feasibility? Example project under voluntary IH program REVENUE REVENUE COST COST FEASIBLE NOT FEASIBLE Without With inclusionary inclusionary housing housing 22
Why Financial Feasibility Example project under IH program with requirements REVENUE COST NOT FEASIBLE With No project inclusionary housing 23
Why Financial Feasibility? Goal for most projects under IH program with requirements REVENUE COST FEASIBLE With No project inclusionary housing 24
Methodology and Results 25
2016 Analysis 26
2016 Analysis Neighborhood Study Areas Hennepin/Central Activity Center Downtown Stadium Village & Prospect Park Stadium Area West Lake Area 38 th and Hiawatha 46 th and Hiawatha South Lyndale Area 27
Financial Feasibility Analysis + + $$$ $$$ $$$ Feasible with market- Feasible with Feasible with rate only? affordable housing affordable housing? and incentives? 28
2018 Analysis Development Prototypes Woodframe Rental Midrise Rental Highrise Rental 100 units, 5-6 stories, wood construction over concrete 150 units, 12+ stories, concrete 200 units, 20+ stories, steel podium parking construction construction Rent: $2.33/foot Rent: $2.37/foot Rent: $2.42/foot Downtown Land: $27,500/unit Land: $25,000/unit Land: $35,000/unit Downtown Strong market outside of downtown where current Strong zoning allows dense urban development (ex. West Market Rent: $2.27/foot Rent: $2.32/foot Rent: $2.40/foot Lake, Hennepin, Prospect Land: $22,500/unit Land: $25,000/unit Land: $27,500/unit park?) Mixed market areas where Minneapolis 2040 provides Emerging for significant increases in Rent: $2.00/foot Rent: $2.19/foot Rent: $2.08/foot Market density (Ex. Blue line Land: $10,000/unit Land: $10,000/unit Land: $10,000/unit station areas) Softer market locations where multi-family Soft residential is allowed but Rent: $1.91/foot Rent: $1.91/foot Market not currently being built. Land: $8,000/unit Land: $8,000/unit 29 (ex: South Lyndale)
No affordability requirement Emerging Downtown Strong market market Soft market 6.29% 6.26% 5.84% 5.08% Woodframe Rental 5.74% 5.61% 5.54% 4.80% Midrise Rental 6.28% 6.20% 5.79%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 30
15% affordable at 60% AMI Emerging Downtown Strong market market Soft market 5.96% 5.95% 5.62% 4.99% Woodframe Rental 5.34% 5.22% 5.20% 4.57% Midrise Rental 5.94% 5.86% 5.54%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 31
10% affordable at 60% AMI Emerging Downtown Strong market market Soft market 6.07% 6.06% 5.70% 5.02% Woodframe Rental 5.48% 5.36% 5.32% 4.65% Midrise Rental 6.06% 5.97% 5.63%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 32
5% affordable at 60% AMI Emerging Downtown Strong market market Soft market 6.17% 6.15% 5.76% 5.05% Woodframe Rental 5.61% 5.48% 5.43% 4.73% Midrise Rental 6.16% 6.08% 5.71%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 33
20% at 50% AMI, with TIF Emerging Downtown Strong market market Soft market 6.82% 6.81% 6.39% 5.58% Woodframe Rental 5.94% 5.80% 5.77% 4.99% Midrise Rental 6.82% 6.70% 6.30%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 34
20% at 50% AMI, TIF+requirements Emerging Downtown Strong market market Soft market 6.26% 6.24% 5.84% 5.11% Woodframe Rental 5.44% 5.31% 5.26% 4.55% Midrise Rental 6.22% 6.11% 5.72%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Example assuming 10% increase in construction cost, actual impact could be more or less 35
Policy Options and Recommendations 36
Policy Options Additional Policy Choices for Inclusionary Housing Percent of units that will be affordable Affordability levels / incomes served Incentives offered Variation (city-wide or geographically varied) 37
Variation Development feasibility, no affordability requirement Emerging Downtown Strong market market Soft market 6.29% 6.26% 5.84% 5.08% Woodframe Rental 5.74% 5.61% 5.54% 4.80% Midrise Rental 6.28% 6.20% 5.79%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 38
Variation: Geographic Seattle’s Mandatory Housing Affordability map 39
Variation: Multiple Alternatives Chicago’s Affordable Requirements Ordinance Alternative 1: • 10% of units affordable • at 60% AMI • no public subsidy Alternative 2: • 20% of units affordable • half at 60% AMI, half at 50% AMI • with public subsidy 40
Policy Options Additional Policy Choices for Inclusionary Housing Percent of units that will be affordable Affordability levels / incomes served Incentives offered Variation (city-wide or geographically varied) 41
Policy Options Option 1: City-wide, two alternatives: 10% affordable @ 60% AMI no subsidy or • 20% affordable @ 50% AMI with subsidy • Option 2: Geographically targeted, no subsidy Up to 15% affordable @ 60% AMI in strong market areas • 5% affordable @ 60% AMI elsewhere • Option 3: Geographically targeted hybrid Up to 15% affordable @ 60% AMI in strong market areas, no subsidy • 20% affordable @ 50% AMI elsewhere, with subsidy • 42
Policy Option 1 City-wide program, two alternatives: • 10% affordable at 60% AMI, no subsidy • 20% affordable at 50% AMI, subsidy available on an as-needed basis Pros • No need to draw geographic boundaries • Provides flexibility; will “work” for more projects • Responds to changing market conditions • Use of subsidy allows for longer affordability period Cons • Administrative burden of determining ‘needed’ subsidy amount • TIF process can be time-consuming and delay projects 43
Policy Options 2 and 3 Key decision: percent set-aside in stronger markets Results, 15% affordable at 60% AMI: Emerging Downtown Strong market market Soft market 5.96% 5.95% 5.62% 4.99% Woodframe Rental 5.34% 5.22% 5.20% 4.57% Midrise Rental 5.94% 5.86% 5.54%N/A Highrise Rental Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible 44
Policy Option 2 Geographically targeted program • Up to 15% affordable at 60% AMI in downtown and strong market areas • 5% affordable at 60% AMI elsewhere in the city No subsidy Pros • Does not require City subsidy • No need to determine ‘needed’ subsidy amount • No potential TIF-related delays Cons • Difficult and politically-fraught process to draw geographic boundaries • Less affordable housing produced in emerging markets • Without subsidy, affordability term limited to 20 years 45
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