AGENDA #11b
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Report on Proposed Work Plan for Affordable Housing Initiatives
DATE: June 27, 2005
This memorandum reports on a proposed work plan for affordable housing initiatives discussed by the Council at its work session on April 27, 2005. The work elements include consideration of:
Please see Attachment 1 for a proposed schedule for these elements.
Resolution A would establish a process and schedule for developing an inclusionary zoning ordinance for Chapel Hill.
Resolution B would call a public hearing for September 26, 2005 to consider amending the Town’s Comprehensive Plan to include additional language for the payment-in-lieu option.
BACKGROUND
The Town Council’s 2005 goals adopted on February 28, 2005 call for reviewing the Comprehensive Plan’s strategies for affordable housing, including funding, incentives, and whether to pursue inclusionary zoning. (Goal #7, Highest Priority). The Council held a work session on April 27, 2005, and gave direction on future steps it would like to consider to implement the Comprehensive Plan.
The Comprehensive Plan affordable housing strategies (please see Attachment 2) reviewed in the work session are:
a. Affordable Housing Funding Sources
b. Funding of Affordable Housing Development
c. Consideration of an Affordable Housing Incentive Program
d. Inclusionary Zoning
This report reviews the work plan, including process and schedule for development of items requested by the Council.
INCLUSIONARY ZONING
Based on the Council and Council Committee direction, we have prepared the following list of steps that would need to be undertaken to develop an inclusionary zoning ordinance over the next several months, with a target date of holding a public hearing in January, 2006. Please see attachment 1 for a potential schedule for the project.
Document Need for Affordable Housing
An important first step identified in the Institute of Government study, “Locally Initiated Inclusionary Zoning Programs, A Guide for Governments in North Carolina and Beyond” is the identification of the need for affordable housing in the community. This needs assessment provides the data supporting the goals and strategies in the Town’s Comprehensive Plan, and would be an important component in establishing the legal basis for an ordinance.
We have determined that it is possible to add the needed information to a study of the Orange County housing market already planned as part of our participation in the Orange County HOME Consortium. Federal regulations require the Town and County to produce a Consolidated Plan to identify and prioritize the housing and community development needs for Chapel Hill and Orange County. The Consortium hired a consultant, Training and Development Associates (TDA) to complete the Plan that was submitted to the U.S. Department of Housing and Urban Development in May 2005. In addition to the Consolidated Plan, the Consortium has asked TDA to complete a Comprehensive Housing Strategy for Orange County.
Types of data to be included in the study are:
Please see Attachment 3 for a summary of the planned Comprehensive Housing Strategy. We believe that data collected for this study will help the Town document the need for affordable housing.
This study is planned to occur over the summer, and would be available in draft form by September, 2005. The estimated additional cost to the Town to gather the needed information is $7,000. Funds for this purpose are included in the Manager’s Recommended Budget for 2005-2006 on tonight’s agenda.
Draft Ordinance
From comments received to date and from the review of existing models in other communities, the Town Attorney will prepare a draft ordinance as a working document to assist a Task Force referenced in the accompanying item to this memorandum to be appointed by the Town Council (see below). Any guidance the Council wishes to offer would be considered in developing this draft.
Please see Attachment 4 for a summary matrix of ordinances from other communities. Attachment 5 contains the draft ordinance prepared for the Town Council during preparation of the Land Use Management Ordinance in 2001-02.
Conduct Review by Task Force
The Council has discussed the desirability of establishing a Task Force to guide the process of developing this ordinance. Please see the related agenda report from the Council Committee on Inclusionary Zoning which reviews the possible charge and composition of this Task Force.
The intent of the process would be for the Task Force to represent a spectrum of community input in developing and refining an ordinance for the Council’s consideration in a public hearing.
Hold Public Hearing
Upon receipt of a report and recommended draft ordinance from the Task Force, the Council could elect to hold a public hearing, or to conduct further review in Council work sessions. The draft schedule contemplates that the Council would hold a public hearing in January, 2006 on a draft ordinance.
Council Consideration
After Council consideration of public comments, the Council could be in a position to enact an ordinance in February, 2006.
Implementation
Enactment of an inclusionary zoning ordinance would have implications for the amount of staffing resources needed to implement the program.
In the current voluntary approach, the Council relies heavily on the staff of the Orange Community Housing and Land Trust to negotiate with developers during development review and to work with Town staff on the terms and conditions of development proposals. Once the Council approves a development, the Land Trust then advises Town staff on legal documents, works with the developer and Town staff to implement the chosen approach, markets the units, and qualifies families for the units.
If an inclusionary program were to be adopted, Council policy would then be codifed into an ordinance. It is likely an ordinance approach would require similar or greater levels of Land Trust staff time for work related to negotiations, development permit terms and conditions, and project implementation.
Over time, the program also will need additional Land Trust and Town staff time devoted to monitoring that the ordinance and conditions of the development permit continue to be met, and managing the resale of homes and the turnover of rental units.
SIZE RESTRICTED HOUSE ORDINANCE
At the Work Session, several Council Members commented that the current small house ordinance in the Land Use Management Ordinance was ineffective in advancing the Council’s affordable housing goals.
The 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. This ordinance was created in response to the Council’s desire to create a variety of housing types and sizes in subdivisions. Developers have stated that it is not always feasible to build small houses; therefore two alternatives to providing size restricted houses were developed:
We recommend that the Council keep the language currently included in the Land Use Management Ordinance requiring provision of size restricted units. The ordinance serves as leverage for the Town to have affordable housing constructed or a payment-in-lieu of providing size restricted units. Under the ordinance, if a developer proposes not to provide small houses in a subdivision, he or she may volunteer to substitute the small houses with providing affordable housing or a payment-in-lieu of providing the small house. If the ordinance language were eliminated, the alternatives would also be eliminated.
We recommend that the Council consider retaining the size restricted house ordinance until the Council determines whether to adopt an inclusionary zoning ordinance.
AMENDMENT TO THE PAYMENT-IN-LIEU PROVISION
The Council also discussed the current ordinance provisions for developers to offer a payment-in-lieu of providing affordable housing in the case of a Major Subdivision or a Planned Development.
Current Provisions
Instead of providing floor area restricted units in a Major Subdivision or Planned Development, the Land Use Management Ordinance provides two alternatives for developers to consider: 1) substitution of affordable housing for floor area restrictions; and 2) substitution of payment-in-lieu of affordable housing for floor area restrictions.
The payment-in-lieu of affordable housing for floor area restrictions regulation states that “the amount of the payment shall be calculated by multiplying the number of affordable housing units to be provided as calculated…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.”
Results to Date
As a result of the Council’s payment-in-lieu policies, developers are committed to contribute a total of $430,000 in lieu of providing affordable housing. Of this amount, $356,500 was allocated to the Town’s Revolving Acquisition Fund and $73,500 to Orange Community Housing and Land Trust. The payment-in-lieu provisions are written so that payments are due to the Town as Certificates of Occupancy are issued for the affordable housing units or issuance of a Zoning Compliance Permit. To date, $141,500 of this approved amount has been received by the Town.
The current balance of the Revolving Fund is approximately $232,600. This amount includes $150,000 from the Housing Loan Trust Fund used to capitalize the fund and payments received to date. Currently one loan for $60,000 is outstanding from Orange Community Housing and Land Trust and due and payable to the Town in November. The organization borrowed funds in May to purchase a property in Northside.
Proposal
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 as 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.”
We understand that the Council is interested in using similar language in the Comprehensive Plan as that used for payment-in-lieu of floor area restrictions for a Major Subdivision or Planned Unit Development. As stated in the Land Use Management Ordinance, one of the four findings the Council must make to approve a Special Use Permit is that the use or development conforms to the general plans for the physical development of the Town as embodied in the Comprehensive Plan.
We understand that the Council may wish to define the payment-in-lieu requirements for the residential Special Use Permit process so it can be considered when determining if the finding listed above is met. Therefore, we recommend that the Council consider amending the Comprehensive Plan to include the same language that is currently included in the Land Use Management Ordinance regarding payment-in-lieu of providing a size restricted house. We believe that amending the Comprehensive Plan would require a public hearing to receive citizen comments on the proposed change. The attached Resolution B would schedule a public hearing to amend the Comprehensive Plan for September 26, 2005.
OPERATING FUNDS FOR HOUSING AGENCIES
At the Council’s Work Session, Council Members discussed the problem non-profit organizations have obtaining operating funds and suggested that the Council consider using local funds to assist agencies.
Historically the Town has provided operating funds to affordable housing agencies:
· Since the organization’s inception in 1990, the Town has provided operating funds to Orange Community Housing and Land Trust. In 2004-2005, the Council provided $110,000 from the General Fund to the organization for general operations. The Manager’s recommended budget includes $110,000 for 2005-2006.
· For the past several years, the Town has provided administrative funds to EmPOWERment through the Police Department budget to fund its community organizing activities (currently carried out by the Executive Director);
· In 2004 the Town provided $10,000 to Affordable Rentals from the General Fund for operating funds;
· In addition to providing a building, utilities, and maintenance, the Town has provided funds to InterFaith Council (IFC) for expenses related to providing services to operate the shelter through the Human Services Program. In FY2003-04 and FY2004-05, the Council provided $5,500 each year. The Council has also provided one-time allocations for specific requests such as $30,000 for expenses related to Project Homestart in 2003 and $30,000 for operating expenses for the shelter and Project Homestart in 2004. The Council also provided $11,000 for the shelter to move temporarily out of the shelter building prior to the initiation of renovations of the 100 West Rosemary Street building.
We believe that the General Fund would be the best sources of funds to use to provide operating grants to non-profit organizations that provide affordable housing. If funds were made available, we could establish a reporting and monitoring system similar to what is used for the Human Services programs.
PROPERTY TAX ASSISTANCE FOR LOW INCOME HOMEOWNERS
Council Members expressed interest in finding a way to assist lower income homeowners with payment of their property taxes.
We have determined that federal regulations do not allow federal funds to be used for payment of property taxes therefore Community Development or HOME Program funds could not be used.
Options we have reviewed are:
1. The Homestead Exemption (already in place with Orange County)
For the past several years, the Council’s legislative agenda has included requests to the General Assembly to enact a bill to raise the Homestead Exemption. The current Homestead Exemption in Orange County excludes the greater of $20,000 or 50% of the appraised value of the permanent residence when both of the following requirements are met:
As previously explained to the Council, any change to the Homestead Property Tax Exemption would need to be State-wide. The Council could continue to forward this recommendation to the General Assembly for consideration.
2. Reverse Mortgage
Reverse Mortgages are currently available to eligible property owners through financial institutions. This type of mortgage allows older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up the title, or take on a new monthly mortgage payment. Instead of making monthly payments to a lender, the lender makes payments to the homeowner. The Town could provide information on Reverse Mortgages to neighborhood organizations to inform them about the program.
3. Tax Limit Caps or Freezes (i.e. Property Tax Circuit Breakers)
4. Property Tax Deferral Program
Some states offer tax circuit breaker and deferral programs for lower income homeowners. We believe that implementing similar programs would require a change in legislation. The Council could add this item to a future legislative agenda.
5. Land Trust
Originally, Orange Community Housing and Land Trust divided ownership of properties so that the homeowner retained ownership of the house and the Land Trust owned the land. The Land Trust has now moved away from this model, based upon legal advice from its attorney.
Under the current system, homeowners purchase a leasehold interest in both the land and the home. The Land Trust has the deed and then the Land Trust leases both land and improvements back to them. The owners are still responsible for paying the property taxes. There is now just one tax bill - in the Land Trust’s name, but the lessee (homeowner) agrees to pay the tax. The tax is reduced from what would be the assessed value of the home if it were outside the Land Trust, but they still pay taxes based upon the purchase price. It is unlikely that the Land Trust would change its current system to revert to the prior model.
Please advise if the Council wishes to further pursue any of these options.
RECOMMENDATION
We recommend that the Council adopt Resolution A to establish a process and schedule for conducting the inclusionary zoning work. We also recommend the Council adopt Resolution B scheduling a public hearing for September 26, 2005 to amend the Town’s Comprehensive Plan to modify the payment-in-lieu policy provisions.
ATTACHMENTS
1. Schedule for Implementing Affordable Housing Work Plan (p. 11).
2. Excerpt from the 2000 Comprehensive Plan, Housing Goals (p. 13).
3. Comprehensive Housing Strategy Outline, Prepared for the Orange County HOME Consortium (p. 24).
4. Matrix Comparing Inclusionary Housing Programs (p. 26).
5. Draft Inclusionary Zoning Ordinance prepared by Mark White for Town of Chapel Hill (p. 27).
RESOLUTION A
RESOLUTION ESTABLISHING A PROCESS AND SCHEDULE FOR PREPARING AN INCLUSIONARY ZONING ORDINANCE (2005-6-27/R-24.1a)
WHEREAS, the Town’s Comprehensive Plan has as a goal to increase the availability of well-designed, affordable, safe, and sanitary housing for all citizens of Chapel Hill; and
WHEREAS, the Comprehensive Plan includes a policy of encouraging developers of residential developments of five or more units to provide 15% of their units at prices affordable to low an moderate income households;
WHEREAS, the Comprehensive Plan includes a strategy to continue to seek inclusionary zoning;
NOW THEREFORE BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council adopts the following process and schedule for consideration of an inclusionary zoning ordinance:
Date Action
Summer, 2005 -Council Committee develops charge to Task Force
-Town Attorney prepares draft ordinance
-Advertise for Task Force membership
September 12, 2005 -Council reviews charge/composition of Task Force
-Council nominates citizens to serve on Task Force
September 26, 2005 -Council appoints citizens to Task Force
October, 2005 -Initiate work of Task Force
November 21, 2005 -Task Force report to the Council
-Council calls public hearing for January, 2006
December 6, 2005/January 3, 2006 -Planning Board review and recommendation
January 18, 2006 -Council holds Public Hearing
February 13 or 27, 2006 -Council considers enactment of inclusionary zoning Ordinance
BE IT FURTHER RESOLVED that the Council authorizes the Town Clerk to advertise
for citizens to serve on the Task Force.
This the 27th day of June, 2005
RESOLUTION B
A RESOLUTION TO CALLING A PUBLIC HEARING TO AMEND THE COMPREHENSIVE PLAN (2005-06-27/R-24.1b)
WHEREAS, on May 8, 2000, the Chapel Hill Town Council adopted a Comprehensive Plan with a policy to provide 15% affordable housing in each development of five or more residential units; and
WHEREAS, the Comprehensive Plan provides the option to developers of five or more residential units to contribute in-lieu fees; and
WHEREAS, the Council desires to modify the language of the Comprehensive Plan to more clearly define the policy for making payments-in-lieu of providing affordable housing based on the cost of providing housing in the proposed development;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council schedules a public hearing to consider amending the payment-in-lieu policy of the Comprehensive Plan on Monday, September 26, 2005 at 7:00 p.m. in the Council Chamber of Town Hall, 405 Martin Luther King Jr. Boulevard.
This the 27th day of June, 2005.
POTENTIAL SCHEDULE FOR IMPLEMENTING AN
AFFORDABLE HOUSING WORK PLAN
June 27, 2005
1. Inclusionary Zoning Ordinance for Chapel Hill
Date Action
Summer, 2005 -Council Committee develops charge to Task Force
-Town Attorney prepares draft ordinance
-Advertise for Task Force membership
September 12, 2005 -Council reviews charge/composition of Task Force
-Council nominates citizens to serve on Task Force
September 26, 2005 -Council appoints citizens to Task Force
October, 2005 -Initiate work of Task Force
November 21, 2005 -Task Force report to the Council
-Council calls public hearing for January, 2006
December 6, 2005/January 3, 2006 -Planning Board review and recommendation
January 18, 2006 -Council holds Public Hearing
February 13 or 27, 2006 -Council considers enactment of inclusionary zoning Ordinance
2. Deletion of the Size Restricted House Ordinance Provisions of the Land Use Management Ordinance
Date Action
February 13 or 27, 2005 -Council calls public hearing to consider deleting
size restricted Ordinance provisions for April, 2006
March 7/April 4, 2006 -Planning Board review and recommendation
April 17, 2006 -Council holds Public Hearing
May 8, 2006 -Council considers deletion of size restricted Ordinance Provisions
3. An amendment to the Comprehensive Plan Policy about Payments-in-lieu
Date Action
June 27, 2005 -Council calls Public Hearing for September, 2005
September 6, 2005 -Planning Board review and recommendation
September 26, 2005 -Council holds Public Hearing
October 24, 2005 -Council considers revision to Comprehensive Plan
4. Town Funds for Operating Assistance for Housing Agencies
Date Action
June 27, 2005 -Council to consider as part of Town Budget for 2005-06 or alternative time to be determined
5. Options for Property Tax Payment Assistance for Low-Income Homeowners
Date Action
June 27, 2005 -Council to consider options and direct staff to
pursue options (if any)