AGENDA #5d(1)
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Affordable Housing Report on Current Initiatives
DATE: January 10, 2005
The purpose of this memorandum is to provide the Council with a report on affordable housing initiatives and resources pursued or considered to date.
The attached resolution would schedule a Work Session to discuss affordable housing initiatives.
BACKGROUND
At the Council Planning Session on January 15, 2004, the Council established its goals and priorities for the year. Please see Attachment 1 for an excerpt of the Council’s discussion.
The Goals adopted by the Town Council on March 22, 2004, identify providing the Council with a comprehensive report on affordable housing initiatives and resources pursued or considered to date as its sixth highest priority for 2004. The goal was to complete the work by December 2004, for subsequent consideration at a Council work session.
The Comprehensive Plan
One of the Goals of the Comprehensive Plan adopted by the Council on May 8, 2000, is to increase the availability of well-designed, affordable, safe, and sanitary housing for all citizens of Chapel Hill. The Plan also identifies three objectives for achieving this goal:
The Comprehensive Plan also identifies the following strategies and actions for increasing affordable housing opportunities:
The activities discussed in this memorandum are consistent with these strategies and actions.
DISCUSSION
In general, the Town’s affordable housing programs serve households earning less than 80% of the area median income by household size as determined by the US Department of Housing and Urban Development (HUD). Currently, the maximum eligible household income for a family of four is $57,050. Community Development funded homeownership programs are designed for first time homebuyers that currently live or work in Orange County. The Housing Loan Trust Fund guidelines require recipients to live or work in Chapel Hill when applying for assistance.
Below is (1) a summary of funding sources currently used by the Town for affordable housing initiatives; (2) recent affordable housing initiatives; and (3) results of applying affordable housing policies in the Land Use Management Ordinance.
1. Funding Sources
Community Development Block Grant
Activities eligible for Community Development funding must meet one of three National Objectives:
The Town of Chapel Hill has received Community Development grants since 1975 under the Housing and Community Development Act of 1974. This legislation provides funds to cities and counties to carry out activities that benefit low- and moderate-income families including: housing repair, public improvements, and acquiring land for housing and economic development.
The primary objective of the Community Development program is to develop viable urban communities, by providing decent housing and a suitable living environment, and expanding economic opportunities for low- and moderate-income households.
Since the mid-1980’s, the Council has used a significant amount of Community Development funds for the renovation of public housing communities, affordable housing projects and neighborhood revitalization. Funds have been used to rehabilitate the exterior of public housing apartments, for drainage improvements, and to refurbish the interior of apartments. Over the past several years, the Council has also budgeted funds for affordable housing development such as the Legion Road and Rosemary Place Townhomes in Meadowmont. Both of these developments are in the Land Trust. Funds have been used for two Habitat for Humanity subdivisions on Rogers Road, neighborhood revitalization activities with EmPOWERment, Inc., and community service programs with the YMCA, the Chapel Hill Training and Outreach Program, and the Orange County Literacy Council.
Please see Attachment 2 for a summary of the 2004-2005 Community Development Program.
HOME Program
The HOME Program was established to provide funding for various types of housing programs to benefit low-income families. This funding is in addition to the existing federal Community Development grants, rental assistance through the Section 8 Program and public housing operating and improvement funding. In 1992, Chapel Hill, Carrboro, Hillsborough and Orange County formed the Orange County HOME Consortium with Orange County acting as the lead entity. The Consortium was established as a local partnership to develop affordable housing.
On October 23, 2000, the Council passed a resolution to participate in a HOME Program Review Committee along with Orange County, Carrboro and Hillsborough. The purpose of this Committee is to allow elected officials to have more involvement in the development of the annual HOME Program plan and to review the progress of HOME funded activities on a regular basis. The Review Committee meets quarterly.
Please see Attachment 3 for a summary of the 2004-2005 HOME Program.
Housing Loan Trust Fund
Using local revenue sharing funds, the Town Council established the Housing Loan Trust Fund in 1973 to assist low-income families with the purchase of a new home or to renovate an existing home. Funds are also used for predevelopment costs related to the construction of affordable housing. The Fund is periodically replenished by receiving program income from the sale of Culbreth Park or Tandler homes and other loans issued.
The Housing Loan Trust Fund has been used to support a variety of Community Development projects, including deferred second mortgage loans for Tandler and Culbreth Park programs and construction loans to EmPOWERment Inc. and Habitat for Humanity. The Council authorized these funds to be converted into deferred second mortgages for the homebuyers. Funds have also been provided to the First Baptist Church for assistance with developing a Section 202 Elderly Housing application for submittal to the U.S. Department of Housing and Urban Development.
The 2004-2005 budget for the Housing Loan Trust Fund is $98,777.
Please see Attachment 4 for a summary of projects funded by the Housing Loan Trust Fund.
Revolving Acquisition Fund
The Town of Chapel Hill’s Comprehensive Plan adopted by the Council on May 8, 2000, recommends that the Town establish a “First Option Fund” as a strategy to address the effects on neighborhoods of the conversion of owner-occupied residences to rental properties. After discussions with non-profit affordable housing providers, we recommended that the Council establish a fund focusing on the acquisition of properties for the purpose of creating affordable homeownership opportunities in the Northside and Pine Knolls neighborhoods. The “First Option Fund” was renamed the “Revolving Acquisition Fund. On January 28, 2002, the Chapel Hill Town Council established the Fund using $150,000 from the local Housing Loan Trust Fund. The current balance of the Revolving Fund is $202,500.
The purpose of the fund is to provide non-profit affordable housing providers with a source of funds that could be accessed quickly to purchase properties that might otherwise be sold to non-lower income households or be used for relatively high cost rental housing. This fund could assist with maintaining or creating additional affordable homeownership opportunities in Chapel Hill.
The main goal for the Revolving Acquisition Fund is to preserve owner occupied housing for affordable housing purposes. Some homes purchased with these funds may require renovation and/or second mortgage assistance so that the property is more affordable to a household earning less than 80% of the area median income by household size. We continue to use funds from the Town’s Housing Loan Trust Fund and/or the Community Development Neighborhood Revitalization program to provide this subsidy.
Buyers of properties purchased with these funds agree to use the home as their primary residence and to provide a right of first refusal to the Town or a designated non-profit agency.
We also note that developers required to provide affordable housing may instead, upon approval by the Council, make a payment to this fund. To date, developers of two subdivisions have each agreed to donate $52,500 to this fund. To date, one payment has been received (Morgan Estates).
The Land Trust has used the Revolving Acquisition Fund to purchase three homes in the Culbreth Park subdivision. The Land Trust was able to purchase the homes from the original buyers and sell them to households earning less than 80% of the area median income. These properties will remain more permanently affordable.
2. Affordable Housing Initiatives
Below is a description of affordable housing initiatives pursued over the past five years.
I. Orange Community Housing and Land Trust
Rosemary Place Townhomes (Meadowmont)
Ø Thirty-two townhomes for first time homebuyers
Ø Funds provided for infrastructure development and site improvements
Ø Town Funding Sources: Community Development, Housing Loan Trust Fund
Ø Project complete
Legion Road Townhomes
Ø Fourteen townhomes for first time homebuyers
Ø Funds provided for infrastructure development and site improvements
Ø Town Funding Sources: Community Development, Housing Loan Trust Fund
Ø Project complete
Culbreth Park
Ø Purchased and performed minor repairs to three homes
Ø Houses resold to first time homebuyers earning less than 80% of the area median income and placed in the Land Trust
Ø Town Funding Sources: Revolving Acquisition Fund, Housing Loan Trust Fund
II. Habitat for Humanity
Rusch Hollow Subdivision (Rogers Road)
Ø Twelve single family homes for first time homebuyers earning less than 50% of the area median income
Ø Five rental units for households earning less than 50% of the area median income
Ø Funds provided for property acquisition, site improvements and infrastructure development
Ø Town Funding Sources: Community Development, Housing Loan Trust Fund
Ø Project is underway
New Homeplace Subdivision (Rogers Road)
Ø Fourteen single family homes for first time homebuyers
Ø Funds used for site improvements and infrastructure development
Ø Town Funding Sources: Community Development, Housing Loan Trust Fund
Ø Project complete
Sunrise Road
Ø Funds provided for property acquisition and predevelopment costs
Ø Project planning is underway
Ø Funding Source: Housing Loan Trust Fund
III. EmPOWERment, Inc.
Rental Projects
Ø Funds used to purchase four units in Northside and Pine Knolls for rental to households earning less than 80% of the area median income
Ø All units are occupied
Ø Town Funding Source: Community Development
Homeownership Projects
Ø Funds used to purchase and renovate six homes in the Northside Neighborhood for sale to first time homebuyers earning less than 80% of the area median income
Ø Three of the six houses will be placed in the Land Trust
Ø Four units sold to date
Ø Town Funding Sources: Community Development, Housing Loan Trust Fund
IV. First Baptist Church / Manley Estates
Ø Funds used for site improvements and infrastructure development
Ø Project is complete
Ø Town Funding Source: Housing Loan Trust Fund
V. Town Initiatives
Ø Single Family Rehabilitation Program
· Funds will be provided as a deferred loan to renovate owner occupied homes in the Northside neighborhood
· Eligible applicants must earn less than 80% of the area median income
· Property must need repairs to meet the Town’s Minimum Housing Code
· Project is underway
· Town Funding Source: Community Development
Ø Renovation / Refurbishing of Public Housing
· Funds used for comprehensive renovation of public housing
· Funds used for refurbishing units (minor repairs)
· Town Funding Sources: Community Development, Comprehensive Grant Funds
3. Affordable Housing Policies in Land Use Management Ordinance
Since Comprehensive Plan policies that require the development of affordable housing have been adopted in Chapel Hill, 123 units for households earning less than 80% of the area median income, 38 units for households earning less than 100% of the area median income, and 22 units between 1,100 and 1,350 square feet have been built or are under development. Of the 161 affordable units, 149 (92%) will be developed by the private sector. In addition, developers have contributed $104,500 to the Town and $73,500 to the Orange Community Housing and Land Trust as payments-in-lieu of affordable housing.
Below is a summary of affordable housing policies adopted by the Council that are incorporated in the Land Use Management Ordinance. Please see Attachment 5 for a summary of affordable housing contributions from the private sector as a result of the policies adopted by the Council pursuant to the Comprehensive Plan.
Residential Special Standards – Conditional
On April 12, 1999, the Chapel Hill Town Council amended the Town’s Development Ordinance (now Land Use Management Ordinance) and created a new zoning district – Residential Special Standards–Conditional (RSS-C). The main features of this conditional use-zoning district are that it allows higher density for housing developments (twelve units per acre), a ten-foot minimum street setback and no buffer requirement. Projects using this zoning district must have a long-term affordability component.
Rezoning Requests
On March 6, 2000, the Chapel Hill Town Council passed a resolution to increase the availability of affordable housing for low- and moderate-income households in Town. The new policy states the Council’s expectation that any rezoning requests with a residential component incorporate a 15% affordable housing feature into their plans with a mechanism to ensure ongoing affordability. Developers with rezoning requests work with Orange Community Housing and Land Trust to market these homes to persons earning less than 80% of the median income.
Size Restricted Units
The Town’s recently amended Land Use Management Ordinance requires developers with a Major Subdivision or a Planned Development Housing proposal with 5 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.
Affordable Housing Substitution
The Ordinance also allows for a substitution of affordable housing for floor area restrictions. The Town Council may allow a developer of a Major Subdivision or Planned Development Housing to provide initial and continued affordability of at least 15% of the dwelling units. The dwelling units must be priced to be affordable to individuals and families who have incomes at or below 80% of the area median income for a family of four. Restrictive covenants must be recorded with the dwelling unit(s) to ensure the continued and ongoing compliance with these restrictions and shall be sold to individuals and families who have incomes at or below 100% of the area median income by family size as published periodically by the Department of Housing and Urban Development.
Payment-in-Lieu of Affordable Housing
As an alternative to providing affordable housing, a developer may also make a payment-in-lieu of affordable housing to the Town. The amount of the payment is calculated by multiplying the number of affordable housing units to be provided 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.
Other Features
Within the designated urban services areas of Chapel Hill where access to employment, transit, day care, schools, and public utilities is located, the supply of vacant land is small and the price is high. In addition to the high cost of plan preparation, processing fees, utility installation, street improvements, and lengthy review schedules all add to development costs. The Council has responded by making special accommodations for affordable housing development including: waiving processing fees, expediting review schedules, and modifying street improvement requirements.
Also, on tonight’s agenda is a memorandum regarding a proposed amendment to the Land Use Management Ordinance to adjust the rounding provisions for the size restricted/affordable housing provisions of the Ordinance so that fractions for all numbers are rounded up.
NEXT STEPS
We recommend that the Council schedule a Work Session to further discuss the Town’s affordable housing initiatives.
MANAGER’S RECOMMENDATION
That the Council adopt the attached resolution scheduling a Work Session to discuss affordable housing initiatives at a time to be determined, in the Spring of 2005.
ATTACHMENTS
1. Excerpt from the January 15, 2004 Council Planning Session (p. 10).
2. Summary of 2004-2005 Community Development Program (p. 12).
3. Summary of the 2004-2005 HOME Program (p. 13).
4. Summary of Projects Funded by the Housing Loan Trust Fund (p. 14).
5. Affordable Housing Contributions (p. 16).
A RESOLUTION SCHEDULING AN AFFORDABLE HOUSING WORK SESSION (2005-01-10/R-8.1)
WHEREAS, it would be beneficial to schedule a work session to discuss affordable housing initiatives;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council schedules an affordable housing work session at a time to be determined, in the Spring of 2005.
This the 10th day of January, 2005.
Excerpt from Minutes of the January 15, 2004 Council Planning Session
Mayor Foy turned the Council’s attention back to the Comprehensive Plan goals. He suggested prioritizing the new issues, and looking at the existing ones to see if some need rearranging. Mayor Foy said he believes most of the new items would be of a low priority. For instance, Mayor Foy said, will we look at the Tree Ordinance this year, or in a future year?
Mayor Foy reviewed the current highest priorities, then moved to the second priorities. He asked if any could be dropped, or if any needed to be moved into another category. Mr. Horton said #11 (Joint Planning with Durham) is now a process, and probably does not need to be listed here any longer.
By consensus of the Council, #10 (Development of Parking Lots 2 and 5) was moved to the last item under First Priority.
By consensus of the Council, #12 (Downtown Small Area Plan Implementation) was moved to the first item under Second Priority.
Mr. Waldon noted that there is an obvious need to tie together what we are doing regarding affordable housing on a broad range of fronts. He said this might be a good time to pull all of those together and produced a report for the Council.
Council Member Greene agreed, noting that such a report on Inclusionary Zoning would be most helpful. She said she understood the legal caution in enacting an Inclusionary Zoning ordinance, but said if we were careful in drafting it we could include affordable housing as a component.
Council Member Strom asked what was the quantitative difference between our current approach and an inclusionary zoning approach? He said his understanding of the meaning is that Chapel Hill was doing well as compared to Davidson and other communities. Council Member Strom stated he prefers the inclusionary approach, but deferred to the Attorney’s opinion that the Council continue its current approach. Council Member Greene responded that under inclusionary zoning you would also get the housing, and there would be no buyout or payment-in-lieu that would keep the affordable housing from being included. She said such an ordinance also gives you more flexibility in how such an ordinance would work. Council Member Strom stated that our existing system gives us more flexibility to negotiate percentages.
Mayor Foy said that we have so much leverage at such a low level that we are using our process to get the kind of flexibility and housing stock that we want without resulting in an Inclusionary Zoning ordinance. He said that there was a chance that such an ordinance would be challenged in the courts, and the Council did not want to jeopardize the current system.
Council Member Ward noted that in Maryland the affordable housing component was in effect for twenty years, and since that twenty-year time frame is about up they are now losing that housing stock.
Council Member Greene said she believed what would benefit Chapel Hill is a model similar to that used in Davidson. Council Member Strom asked what such an ordinance would do to the Land Trust. In order words, he asked, could we still support a Land Trust with such an ordinance? Council Member Greene answered yes.
Mayor pro tem Wiggins said the concept of Inclusionary Zoning has been discussed her entire term on the Council. She said the Council had worked hard to find an alternative to such zoning that would achieve the same results. She asked how Inclusionary Zoning would give us more that what we have? Mr. Horton said the staff could review the Davidson report, talk with their staff, and possibly arrange a site visit if there was interest.
Council Member Strom said there was a former staff member of the Triangle J Council of Governments (TJCOG) with expertise in this area, and might be willing to read the Davidson report and offer an opinion to the Council.
Council Member Kleinschmidt said he believed it would be a good idea to conduct some public education so that the public would understand the Town’s commitment to affordable housing. Mr. Horton said he believed this would be a separate issue from the evaluation of the report.
Mayor Foy asked how the Council wanted to proceed. The Council agreed by consensus to proceed as suggested by the Manager.
Mayor Foy noted he was interested in finding out if there was a way to get some of the County’s bond money to purchase land before it is not longer available.
2004-2005 Community Development Program
On April 26, 2004 the Council approved activities for the 2004-2005 Community Development grant. The Program was amended by the Council on December 6, 2004 as follows:
Public Housing $206,000
Renovation of Airport Gardens $150,000
Refurbishing Program $ 50,000
Playground Equipment $ 6,000
Neighborhood Revitalization $213,018
Orange Community Housing and Land Trust $100,000
Comprehensive Rehabilitation Program $100,000
Community Services $ 81,700
Chapel Hill Police Dept. Youth Programs $40,000
Family Resource Center $15,000
Cooperative Extension $13,700
YMCA $13,000
Administration $101,600
Total $802,318
Summary of the 2004-2005 HOME Program
The following activities were approved by the Orange County HOME Consortium for the 2004-2005 HOME Program:
Rental Assistance HOME Consortium $236,431
Property Acquisition Town of Chapel Hill
Transitional Housing Program $125,000
Habitat for Humanity (Winmore) $125,000
Second Mortgage Assistance EmPOWERment, Inc. $100,000
Habitat for Humanity $ 80,000
Down Payment Assistance Orange Community Housing and
Land Trust (Pacifica and Winmore) $140,000
Infrastructure Development Habitat for Humanity $ 25,000
Administration Orange County Housing $ 73,905
TOTAL $905,336
As in previous years, the Town will use funds available in the Housing Loan Trust Fund for the Town’s match contribution of $68,177.
Summary of Projects Funded by the Housing Loan Trust Fund
The following activities have been funded through the Housing Loan Trust Fund over the past several years:
Each member of the Orange County HOME Consortium (Carrboro, Chapel Hill, Hillsborough and Orange County) contributes non-federal funds to the HOME Program as part of the local match requirement. Each year the Town uses the Housing Loan Trust Fund for our portion of the local match, approximately $47,000 per year.
2. Grants to Orange Community Housing and Land Trust
Funds have been used to provide grants to the Land Trust to purchase three houses in Culbreth Park where the Town held a right of first refusal. Funds were used for minor repair costs and to reduce the sales price to lower income homebuyers. These funds could be used in conjunction with the Revolving Acquisition Fund. In 2004-2005, the Council budgeted $26,000 for this purpose.
3. Habitat for Humanity
The Council authorized use of $50,000 from the Housing Loan Trust Fund to assist with the acquisition of a sixteen-acre site on Sunrise Road. Orange County provided $250,000 to purchase this property. The property was purchased on February 27 , 2003. Habitat is in the process of preparing its application for development of this site.
On May 10, 2004 the Council authorized $30,000 from the Housing Loan Trust Fund to Habitat for pre-development costs for this site.
In 1999, the Council budgeted $30,000 to Orange Community Housing and Land Trust for pre-development costs for the Meadowmont Affordable Townhomes. The funds were repaid upon completion of the project.
In 1998, the Council authorized Orange Community Housing and Land Trust to use $20,000 from the Housing Loan Trust Fund for pre-development costs for the Legion Road Townhomes. The funds were repaid upon completion of the project.
In 2001, the Council authorized use of $50,000 from the Housing Loan Trust Fund to Habitat for Humanity for development costs at the Rusch Road site. Habitat intends to build 12 – 14 single family houses for first time homebuyers earning less than 50% of the area median income. Funds will be used for site improvements, architectural and engineering costs and infrastructure development.
The Council granted a total of $145,000 from the Housing Loan Trust Fund to the First Baptist Church for the construction of a Section 202 Elderly Housing project on Park Road in the Pine Knolls neighborhood. This project provides rental housing for the elderly earning less than 50% of the area median income.