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HomeMy WebLinkAbout2003-0318 Annexation Documents Submitted CITY OF --ASHLAND Memo DATE: July 2, 2002 TO: Council and Planning Commission FROM: Bill Molnar, Senior Planner RE: Proposed Ordinance Amendments 1. Background The Housing Commission and Planning Staff have been evaluating land use strategies intended to facilitate the production of affordable housing in the community. The proposed ordinance amendments represent one technique that links the construction of low- and moderate-income housing to the construction of market rate housing. The proposed changes would result in developments where the lower-income units are included in an otherwise market-driven development. This strategy provides a voluntary path to a developer or applicant that stipulates a percentage of housing units in a new residential or mixed-use development to be sold or rented to lower-income households at an affordable rate (i.e. below market). The City of Ashland is currently undertaking the second part of a two part Housing Opportunity Study. The first part consisted of the production of a Housing Needs Analysis, completed by the consulting firm ECO Northwest. The Needs Analysis presents a succinct evaluation of housing trends in Ashland, and projects future and current housing needs. The second part of the study includes the development of a Housing Action Plan. The Action Plan is intended to recommend specific land use and non-land use strategies, as well as long term funding strategies for ensuring the implementation of a comprehensive housing plan. The draft Action Plan will be available at the end of summer 2002. From there, the findings and recommendations of the Action Plan will be available for public review and the development of implementing ordinances and policies. 2. Proposal This proposal suggests changes and offers additions to the approval standards relevant to zone change requests. An application for a zone change is a voluntary act by the property owner - in essence the applicant is asking the local government to change the rules to allow the applicant to develop in a manner not allowed under the existing zoning. Specifically, the proposed amendments recommend the adoption of additional zone change criteria that make it easier to obtain a zone change if an applicant can demonstrate that the resulting zone change would have a positive impact on needed affordable housing. Page 1 Community Development Tel: 541488-5305 20 East Main Fax: 541-488-5311 rA'~ Ashland, Oregon 97520 TTY: 800-735-2900 www.ashland.or, us For the InOS! part. the proposec~ _mendment provides an alternate approx _.. criterion that would permit the Planning Commission or Council to approve the zone change if the application guarantees that a specified percentage of project is developed at affordable levels. This criterion is intended to create an incentive to propose including aftbrdable housing as an element of the application to avoid the other more subjective and sometimes problematic zone change criteria. 3. Intended Results A. Amendments to zone change criteria The proposed changes to zone change criteria are intended to accomplish the following: · Differentiate a "public need" for a affordable housing from other legitimate public interests described in Ashland's Comprehensive Plan (i.e. economic development, conservation, protection of natural features, alternate forms of transportation, etc.); · Delete seldom referenced approval standards that are difficult to demonstrate compliance with (i.e. a need to correct mistakes); · Add an additional criterion that makes it easier to obtain a zone change if the application has a positive impact on needed affordable housing; · Set specific housing targets for a applications opting to provide affordable housing; · Require an assessment of the impact on Ashland's commercial and industrial land supply for zone change applications that convert commercial/employment/industrial lands for housing uses or that permit or increase residential density on existing commercial/employment or industrial lands; and · Guarantee that units are maintained at affordable levels for a period of 60 years. B. Amendments to annexation criteria The proposed changes to annexation approval criteria are intended to accomplish the following: · Maintain similar affordable housing targets for annexations, as required for zone changes; and · Provide affordable housing within commercial/employment/industrial-annexed lands that include residential use through a residential overlay (R-Overlay). · Guarantee that units are maintained at affordable levels for a period of 60 years. Page 2 Community Development Tel: 541488-5305 2OEa st Main Fax: 541488-5311 Ashland, Oregon 97520 TrY: 800-735-2900 www.ashlandor, us 4. Kc), Considerations It is difficult to dispute the strength and attractiveness of Ashland's current housing market. Housing costs within the community arguably are the highest within the State of Oregon. Decisions by local government that increase housing density can be seen as imparting additional value upon private property, while placing additional demands on public infrastructure and services. The benefit of higher housing density through the approval of a zone change should be balanced with State and local housing goals that require a local housing inventory capable of meeting the needs of a broad cross-section of individuals. Accordingly, the proposed ordinance amendments seek to balance the additional benefit derived from an increase in housing density with the public interest of ensuring housing opportunities for low-- and moderate-income households. A. Target Households - Lower Income Existing housing ordinances target households with incomes ranging between 80% and 130% (approximately $32,000 to $52,000 - family of four) of the area median for the Ashland- Medford area. The amendments to approval standards for both zone changes and annexations limit the provision of affordable housing, for the purpose of complying with standards, to households with incomes of 80% or less of the area median. These are considered lower-income households by HUD (Federal Department of Housing and Urban Development) standards. In StafFs opinion, the current housing crisis spans well beyond the lower-income households. This is documented in the recently produced Ashland Housing Needs Analysis. In a summary of demographic and housing trends the report noted that Ashland has a large deficit of affordable owner-occupied housing units. Specifically, less than 4% of single-family dwellings are valued below $101,000, the maximum a household earning the median income of $40,400 could afford. Additionally, a rough estimate of income and affordability for 2001 identified the second largest unit gap occurring for households with incomes between 75% and 125% of the area median. Consequently, Staff believes additional discussion is needed concerning structuring affordable housing requirements that value the provision of housing for households with incomes at 100% the area median. B. Impacts on mixed-use developments In discussions with the Housing Commission, Staff raised concern about tying affordable housing to smaller zone change applications that request residential use (i.e. residential overlay) in conjunction with an existing commercial or employment zoning designation. For several years, City policies have recognized the value of encouraging mixed-use projects in commercial and employment zoning districts, while land use ordinances have been adopted to implement these policies. Page 3 Community Development Tel: 541-488-5305 20 East Main Fax: 541-488-5311 Ashland, Oregon 97520 TTY: 800-735-2900 www.ashland.or, us 11 l'he amendments may c._o,:ourage owners of smaller commercial _,d employment properties Irom pursuing a zone change for a residential overlay. There may be limited benefit for developers of smaller projects to provide 15% to 25% of the units for households with incomes at g0% or lower of the area median. Generally, such projects include a couple thousand square feet of ground floor commercial space with two to three second floor residential units. Under the proposed amendments, one of the three units would need to be reserved for a low-income household. The property owner may opt to maintain the existing zoning, resulting in a single or multi-story building made up of only commercial uses. As a consequence, the project would lack the neighborhood-wide benefits promulgated through a mix of commercial and residential uses. It may be appropriate to consider limiting affordable housing requirements to zone change requests involving projects of a minimum size or number of residential units. For example, employment or commercial zone change applications involving a residential overlay and having a lot area of one half acre or less, may be exempt from affordable housing requirements. This exemption might also apply to single lot, mixed-use developments (i.e. commercial with residential) with four or fewer residential units. Page 4 Community Development Tel: 541-488-5305 20 East Main Fax: 541488-5311 y~'~ Ashland, Oregon 97520 TTY: 800-735-2900 www.ashland.or, us ]~ F'RCr,1 ' 7~P, EE'4E,C-IE, H!-_lr,lE? ~A::,', hJL-I. ' 1%:.2 4:_--:2 S'_~34 S~_p. ¢9 20~32 02'45Pf"1 P2 ~ I ~'ecognize that Ashland has a problem wi~h providing affordable housing. Yet, [ am speaking in opposition to this proposal. I, tike the staff¢ believe that "the current housing crisis spans well be~vond the lower-income households". The crisis is the affordablility in Ashland and I believe that the proposed changes to the annexation ordnance wilt actually increase the price of most housing in Ashland while providing a limited number of affordable units. ;[ would like to share with you how these ordinance changes will affect my business decisions concerning the approximately 25 acres ! have in the urban grovcth bOundary. ~[ have given you examples of how changing the median income requirement from the current ordnance, that 25% of the housing be available to families at I00% of the median income¢ to 80% of the median income affects the sa~es price. This change will dramatically increase the cost of the market Fate houses on annexed land, which are subsidizing the affordable units. As you can see, the maximum price a family at 80% of the median income can afford is $98,800, compared to the $~_35,450 a family at ;tO0% can afford. This is a difference of $36,650. Herein ties the problem. Hard costs of building coupled with land costs and development costs provides a product that must sell for much more than $98,800.00. Therefore, in order to meet 80% of the median income¢ these affordable units will have to be sold way below cost. The additional cost to the project has to be covered somewhere. Builders are number crunchers, we analyze ail the project costs, we look at. what the market is paying ~or our product, we compare our product and price to the competition and decide if the return is enough to justify the risk. We are business people and just as all businesses do, we pass alt our costs on to the customer. )~n this case, the additional costs can only be passed on to the market rate houses. Since :[ out of every 4 houses in a development that requires annexation will be subsidized by the 3 market rate houses, these market rate houses will have to be increased in price by $12,216. each just to cover the additional cost of subsidizing 25% of the houses to 80% instead of ZOO% of the median income. These same houses will be competing with the price of houses inside the city limits that have no requirements to build even a single house that is affordable. FR'C~"'"! ' 7'':~'~E'iEI'!'':- )1- ~O[!E'E' ~'~),:. h,tCI. ~_ ~,,4.1 'F'"-" 5"~4 ?_;e__p. OL::B 20~ 02 /4.6,Phl Currently, 25% of the housing on annexed land fs being subsided but this subsidy is helped, in part, by density bonuses. However, this new ordinance also reduces the maximum density bonus for affordable housing under performance standards by 10-2B% . ! have included an analysis of five acres comparing both ordinances. As you can see, the proposed ordinance reduces the number of affordable units by two¢ decreases overall density by four, leaving fewer market rate homes to help o{fset this loss in income and, bottom line, reduces the number of affordable homes. Do ! have this right or is this fuzzy math? So, ! have given you a lot of facts and these facts will affect my decision regarding the property ]: own in the U BG. Building is a very competitive business. ! can not price my homes $~_2~000. to $:[5,000. higher tha~ my competition. ! will have to wait until the price of housing inside the cfty catches up to what my price, which includes the subsidizin9 of the affordable units, has to be. This, of course, means that my land will not be available. This will reduce the supply. Since ! do not believe that the demand is likely to go down~ the result wi(t be even higher prices for housing in town and no affordable units being built as they are not required inside the city limits. ]~n conclusion, we need a comprehensive plan for c~eating affordable housing. One that spreads the cost over a large base of people instead of requiring the few people buying homes on annexed land to carry all the cost. These people wilt not just be outsiders moving into town, but will be our chiidrer~, who grew ~lP in Ashland and current residents whose ii~e style and housing needs have changed. Subsidizing housing to 80% of the median income cannot be left to the private sector only. It needs local, state and ~ederal funding. 482 $'-3~34 '~Jep. F4'~ 2L']ID2 E12:46Phl P4 LOAN QUALIFICATIONS BASED ON MEDIAN INCOME Analysis of the maximum sales price that a family of 4 at 80% of the medium income based on Klamath First Federat's criteria for a 95% roan at 7% in~ere~t. annual income $32~000. monthly income $2,666. 33% available for housing $879. 7*/. for all other debt $187. 40% total debt allowed $2066. maximum sales price $98,800. down payment $5,000. Analysis of the maximum sales price that a fatuity of 4 at 100% of the medium income based on Klamath First Federal's criteria for a 9.5% loan at 7% interest. annual income $40,400. monthly income $3,.366. 33°/, available for housing $1,119. 7% for all othe~ debt $236. 40% total debt allowed $1356. maximum sales price $135,450. down payment $6¢900 The difference in revenue generated by the sale which must be absorbed by ~he market rate homes is $36,650. ~ ~ DENSITY BONUS CURRENT ORDINANCE Based on five acres zoned at R13.5 with a 25% density bonus for providin~j 25% of the houses at 100% of the median income. Base density 7.2 x 5 acres -- .36 units 25% bonus for affordable housfng is 25% x 36 units = 9 Total number of units including density bonus is 45 units Number of affordable units is 4_~ x 25% -= :t:t affordable units PROPOSED ORDINANCE Based on five acres zoned at R13,.5 with a 15% density bonus for providing 25 % of the houses at 80% of the median income. Base density 7.2 x 5 acres = 36 units 15 % maximum bonus for affordable housing is 15 % x 36 units Total number of units including density bonus is 4~_ units Number of affordable units required is 25% of base density which is 1.5% x 36 = 9 affordable units Affordable Housing in Ashland September 20, 2002 To my knowledge there have not been any annexations completed since the Chautauqua Trace annexation and Chapter 18.106 Ar~r~exations was revised in January of 1997 that implemented the approval criteria under G. "For all residential annexations of four units or greater the applicant must allocate (1) 25% of the project to affordable buyers or renters with incomes at or below 100% of median income or (2) 15% of the project affordable to buyers or renters with incomes at or below 80% of median income." It would seem that the ordinance has worked conversely with its intent because it in effect creates a financial penalty or disincentive for developers to provide the entry level or below median sales priced housing desired. If the intent of the ordnance was to promote infill on existing lots inside the city limits, it was very successful. However, because of the cost of those smaller in-fill lots, builders have had to provide the consumers with larger more expensive homes to recover the additional cost of land and hillside foundations. There are numerous factors that have contributed to the disproportionate expense of Ashland's housing, to include among others a) geographically we are located along the I-5 corridor which enhances our transportation and attractiveness to business, b) climate is dryer than our northern neighbors and it is cooler than most of California, c) Economy and culture is enhanced by the OSFestival and College, d) Enhanced livability and attractiveness has been fostered by community pride as a result of collaborative local governmental participation, manifesting itself in design and site review standards e) Finite buildable land due to the hillside slopes to the West, expanding our Eastern urban growth boundary across the freeway would be a very bad planning action and the freeway closes us in on the north and south, all of which limits supply and makes Ashland homes in high demand. In order for developers to significantly increase the supply of lower priced entry level housing there are a FIVE critical components that must be available, 1) Level land, hillside foundations and infrastructure adds to much to the costs. 2) Larger parcel, ideally five or more acres that will enable the pre-construction soft-costs to be spread over more units, volume material purchases and the ability to provide subcontractors enough steady work to give them the incentive to keep their bids competitive, 3) underutilized or un-occupied land, where the land acquisition does not require the purchase (and demolition) of existing income. 4) Experienced developers who have a track record of successfully completing progressively more difficult projects and have earned the ability to obtain lower priced financing. 5) Profitability, in order to obtain the financing for the infrastructure and hard costs of construction, institutional lenders require that the pro-forma show a reasonable profit margin that can absorb cost over-runs or slow sales, and still repay the loan. The current annexation ordnance is a major contributing factor that limits increase in the supply of affordable housing.