AGENDA #2
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Public Hearing: Comprehensive Plan Amendment Regarding the Calculation of a Payment-in-Lieu in the Affordable Housing Strategy
DATE: September 26, 2005
PURPOSE
This Public Hearing has been called to consider a proposed amendment to the Comprehensive Plan to determine how the payment-in-lieu option in the affordable housing strategy is calculated.
BACKGROUND
On April 27, 2005, the Town Council conducted a work session on affordable housing. Among the topics discussed was an amendment to the Comprehensive Plan regarding affordable housing strategies that would more clearly define payment-in-lieu as an option to meet the affordable housing goal.
DISCUSSION
Affordable Housing Policy
Section 7A of the Comprehensive Plan states that, “the provision of housing at a cost affordable to all of Chapel Hill’s residents is a major priority for the Town.” The Comprehensive Plan also states that, “Funding limitations hinder the Town’s ability to fully meet local affordable housing needs on its own, particularly in the field of new housing production. As a result, private housing developers are looked at as key partners in addressing this problem.”
Land Use Management Ordinance Language
The Land Use Management Ordinance addresses the Comprehensive Plan affordable housing goal by requiring developers proposing a Major Subdivision or a Planned Development Housing proposal with five or more single-family or two-family residential lots to build at least 25% of the units at less than 1,350 square feet of floor area. This ordinance was created in response to the Council’s desire to create a variety of housing types and sizes in subdivisions. However, because it is not always feasible to build small houses, two alternatives to providing size restricted houses were developed:
1. Substitution of affordable housing for floor area restrictions.
2. Substitution of payment-in-lieu for affordable housing for floor area restrictions.
Section 3.8.6.1 of the Land Use Management Ordinance specifies the requirements if a developer offers to substitute affordable housing for floor area restrictions (alternative 1). The section states, “The affordable housing component shall provide initial and continued affordability of at least 15% of the dwelling units. The dwelling units shall be priced to be affordable to individuals and families who have incomes at or below 80% of the area median family income for a family of four.”
If a developer offers the payment-in-lieu alternative to the floor area restrictions (alternative 2), Section 3.8.6.2 of the Land Use Management Ordinance states “the amount of the payment shall be calculated by multiplying the number of affordable housing units to be provided as calculated in Section 3.8.6.1 (without dropping fractions) by an estimate of funding that would be needed to make a homeownership opportunity in the proposed development available to individuals and families with annual income at or below 80% of the area median income. The estimate shall be developed in consultation with and approved by the Town Manager.” Please see Attachment 1 for the 2005 Median Household Income limits published by the U.S. Department of Housing and Urban Development.
Because the language in Section 3.8.6.2 refers to the calculation of affordable housing in Section 3.8.6.1, the payment-in-lieu cost calculation is clearly defined.
Comprehensive Plan Language
The Comprehensive Plan states “as a general policy, the Town should encourage developers of residential developments of five or more units to 1) provide 15% of their units at prices affordable to low and moderate income households, 2) contribute in-lieu fees, or 3) propose alternative methods so that the equivalent of 15% of the units will be available and affordable to low and moderate income households.” (Section 7A-2) No explanation is provided about how in-lieu contributions are to be calculated.
Proposed Change
As stated in the Land Use Management Ordinance (Section 4.5.2), one of the four findings the Council must make to approve a Special Use Permit is that the use or development conforms with the general plans for the physical development of the Town as embodied in the Comprehensive Plan. During the affordable housing work session, the Council expressed the desire to more clearly define the payment-in-lieu option in the Comprehensive Plan for the residential Special Use Permit process so it can be considered when evaluating a Special Use Permit application.
We recommend the following new language be added to the Comprehensive Plan language (shown by underscoring):
“As a general policy, the Town should encourage developers of residential development of five or more units to 1) provide at least 15 percent of their units at prices affordable to low and moderate income households; or 2) contribute in-lieu fees where the amount of the payment shall be calculated by multiplying the number of affordable housing units to be provided as calculated in option 1 (without dropping fractions) by an estimate of funding that would be needed to make a homeownership opportunity in the proposed development available to individuals and families with annual income at or below 80% of the area median income; or 3) propose alternative methods so that the equivalent of 15 percent of the units will be available and affordable to low and moderate income households. At the same time the Town should continue to seek state enabling legislation for inclusionary zoning (see Strategy 7A-3).”
NEXT STEPS
After tonight’s public hearing, we will review all comments received and develop a report for the Council’s consideration on October 10, 2005.
RECOMMENDATIONS
Planning Board Recommendation: On September 20, 2005, the Planning Board voted 7-0 to recommend that the Council adopt the attached Resolution. Please see Attachment 3 for a summary of the Planning Board’s action. Please see Attachment 4 for the staff responses to questions raised by the Planning Board.
Manager’s Preliminary Recommendation: We recommend that the Council adopt the attached Resolution to amend the Comprehensive Plan to better define the payment-in-lieu option for providing affordable housing.
ATTACHMENTS
1. 2005 Median Family Income Limits (p. 4).
2. Draft Resolution (p. 5).
3. Summary of Planning Board Action (p. 6).
4. Summary of Issues Raised by the Planning Board (p. 7).