Presentation to Housing Policy and Development Committee August 22, - - PowerPoint PPT Presentation

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Presentation to Housing Policy and Development Committee August 22, - - PowerPoint PPT Presentation

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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

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Presentation to Housing Policy and Development Committee August 22, 2018 Stephanie Reyes and Rick Jacobus

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Grounded Solutions Network cultivates communities – equitable, inclusive and rich in opportunity – by advancing affordable housing solutions that last for generations.

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Agenda

Inclusionary Housing – What and Why Policy Analysis Financial Feasibility Analysis Policy Options and Recommendations

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Inclusionary Housing – What and Why

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What is Inclusionary Housing?

Palmers Dock Apartments, Brooklyn, NY New York Department of City Planning

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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.

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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.

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Why Inclusionary Housing?

Increase resources available for affordable housing

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Policy Analysis

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Voluntary or Required?

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Voluntary or Required?

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Voluntary or Required?

20 40 60 80 100 120

# of Units

Average # of Units Produced Annually

Voluntary Mandatory

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Minneapolis 2040 Goals

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Best-Practice Planning Strategies

Reduced Parking Increased Density

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Best-Practice Planning Strategies

Reduced cost (up to $25k/space) Reduced Parking Increased Density Increased project revenue

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Voluntary Inclusionary Housing

Allowed under base zoning Allowed with affordable housing

Credit: NYC Department of City Planning

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Voluntary or Required?

Recommendation for Minneapolis: Link the provision of affordable housing to a discretionary land use action such as site plan approval.

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Financial Feasibility Analysis

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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)

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Why Financial Feasibility?

Without inclusionary housing

REVENUE COST

Example project in hypothetical city FEASIBLE

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Why Financial Feasibility?

Without inclusionary housing

REVENUE COST REVENUE COST

With inclusionary housing

Example project under hypothetical IH program FEASIBLE NOT FEASIBLE

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Why Financial Feasibility?

Without inclusionary housing

REVENUE COST REVENUE COST

Example project under voluntary IH program

With inclusionary housing

FEASIBLE NOT FEASIBLE

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Why Financial Feasibility

REVENUE COST

No project Example project under IH program with requirements

With inclusionary housing

NOT FEASIBLE

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Why Financial Feasibility?

No project Goal for most projects under IH program with requirements

REVENUE COST

With inclusionary housing

FEASIBLE

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Methodology and Results

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2016 Analysis

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2016 Analysis

Neighborhood Study Areas Hennepin/Central Activity Center Downtown Stadium Village & Prospect Park Stadium Area West Lake Area 38th and Hiawatha 46th and Hiawatha South Lyndale Area

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Financial Feasibility Analysis

Feasible with market- rate only?

$$$

Feasible with affordable housing?

$$$

+ +

$$$

Feasible with affordable housing and incentives?

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2018 Analysis

Development Prototypes

Woodframe Rental Midrise Rental Highrise Rental

100 units, 5-6 stories, wood construction over concrete podium parking 150 units, 12+ stories, concrete construction 200 units, 20+ stories, steel construction

Downtown

Downtown

Rent: $2.33/foot Land: $27,500/unit Rent: $2.37/foot Land: $25,000/unit Rent: $2.42/foot Land: $35,000/unit Strong Market

Strong market outside of downtown where current zoning allows dense urban development (ex. West Lake, Hennepin, Prospect park?)

Rent: $2.27/foot Land: $22,500/unit Rent: $2.32/foot Land: $25,000/unit Rent: $2.40/foot Land: $27,500/unit Emerging Market

Mixed market areas where Minneapolis 2040 provides for significant increases in density (Ex. Blue line station areas)

Rent: $2.00/foot Land: $10,000/unit Rent: $2.19/foot Land: $10,000/unit Rent: $2.08/foot Land: $10,000/unit Soft Market

Softer market locations where multi-family residential is allowed but not currently being built. (ex: South Lyndale)

Rent: $1.91/foot Land: $8,000/unit Rent: $1.91/foot Land: $8,000/unit

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No affordability requirement

Downtown Strong market Emerging market Soft market Woodframe Rental 6.29% 6.26% 5.84% 5.08% Midrise Rental 5.74% 5.61% 5.54% 4.80% Highrise Rental 6.28% 6.20% 5.79%N/A Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible

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15% affordable at 60% AMI

Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 5.96% 5.95% 5.62% 4.99% Midrise Rental 5.34% 5.22% 5.20% 4.57% Highrise Rental 5.94% 5.86% 5.54%N/A

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10% affordable at 60% AMI

Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 6.07% 6.06% 5.70% 5.02% Midrise Rental 5.48% 5.36% 5.32% 4.65% Highrise Rental 6.06% 5.97% 5.63%N/A

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5% affordable at 60% AMI

Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 6.17% 6.15% 5.76% 5.05% Midrise Rental 5.61% 5.48% 5.43% 4.73% Highrise Rental 6.16% 6.08% 5.71%N/A

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20% at 50% AMI, with TIF

Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 6.82% 6.81% 6.39% 5.58% Midrise Rental 5.94% 5.80% 5.77% 4.99% Highrise Rental 6.82% 6.70% 6.30%N/A

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20% at 50% AMI, TIF+requirements

Example assuming 10% increase in construction cost, actual impact could be more or less Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 6.26% 6.24% 5.84% 5.11% Midrise Rental 5.44% 5.31% 5.26% 4.55% Highrise Rental 6.22% 6.11% 5.72%N/A

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Policy Options and Recommendations

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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)

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Variation

Development feasibility, no affordability requirement

Downtown Strong market Emerging market Soft market Woodframe Rental 6.29% 6.26% 5.84% 5.08% Midrise Rental 5.74% 5.61% 5.54% 4.80% Highrise Rental 6.28% 6.20% 5.79%N/A Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible

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Variation: Geographic

Seattle’s Mandatory Housing Affordability map

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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
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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)

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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
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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
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Policy Options 2 and 3

Key decision: percent set-aside in stronger markets

Results, 15% affordable at 60% AMI: Key Threshold Feasible 5.9 Marginal 5.7 Not Feasible Downtown Strong market Emerging market Soft market Woodframe Rental 5.96% 5.95% 5.62% 4.99% Midrise Rental 5.34% 5.22% 5.20% 4.57% Highrise Rental 5.94% 5.86% 5.54%N/A

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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
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Policy Option 3

Geographically targeted hybrid program

  • Up to 15% affordable at 60% AMI in downtown and strong market areas,

no subsidy

  • 20% affordable at 50% AMI elsewhere in the city, with subsidy

Pros

  • Good balance of subsidy provided to affordable units produced
  • Less need to determine ‘needed’ subsidy amount
  • Fewer TIF-related delays

Cons

  • Difficult and politically-fraught process to draw geographic boundaries
  • In areas without subsidy, affordability term limited to 20 years
  • Less flexibility than Policy Option 1
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Policy Options

Recommendation for Minneapolis: Policy Option 1 City-wide program Developers have two options to comply:

  • 10% affordable at 60% AMI, no subsidy
  • 20% affordable at 50% AMI, subsidy available on an as-needed basis
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What’s Next?

Release of Grounded Solutions Network’s report Policy framework to be considered by the City Council concurrent with the Minneapolis 2040 Comprehensive Plan Additional policy and program development in 2019