AGENDA #10
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Development Ordinance Text Amendment regarding Small House, Affordable Housing Options
DATE: February 25, 2002
INTRODUCTION
Adoption of the attached Ordinances would create affordable housing options in the Development Ordinance regulation requiring that a percentage of homes in new residential developments be below a particular size.
BACKGROUND
A Public Hearing was held on February 18 to consider this proposed text amendment. We note that the Larkspur Cluster Subdivision proposal is scheduled later on tonight’s agenda for possible action. The developer has proposed an affordable housing option in anticipation of and in accordance with this proposed text amendment.
PROPOSAL
On January 14, the Council responded to a petition from the Larkspur Cluster Subdivision developer, Ms. Carol Ann Zinn. Ms. Zinn’s proposal would amend Article 13 of the Development Ordinance to allow the following:
“In lieu of restricted floor area, for a major subdivision or a Planned Development Housing proposal with 13 or more residential lots, the applicant may offer and the Council may approve an affordable housing proposal or payment-in-lieu after applicant has demonstrated to the Council how the proposal meets the intent to provide affordable housing.”
Ms. Zinn’s proposal is provided as Ordinance B.
DISCUSSION
We reviewed Ms. Zinn’s proposal and offered alternative language for consideration at the February 18 Public Hearing. We believe that the proposal to allow the Council to accept the substitution of affordable housing for the house size restriction has merit. We noted at the Hearing that we believe further clarification is necessary to describe a suitable affordable housing proposal. Ordinance A provides the language offered at the Public Hearing as the Manager’s recommendation.
As proposed in Ordinance A, both of the proposed options, an affordable housing component or the payment-in-lieu of an affordable housing component, would be Council discretionary decisions once an applicant requests it be considered as an alternative to small houses.
With this text amendment proposal to offer an affordable housing option as part of the development, in lieu of a small house requirement, we recommend that the units be affordable to individuals and families who have incomes at or below 80% of the area median income. This figure changes annually as the area median income changes. This definition of housing affordability is normally used as a threshold for participation in federally funded housing programs.
KEY ISSUES
The following issues were raised at the February 18 Public Hearing:
Partial Payment-in-Lieu: At the Public Hearing, several questions arose regarding the proposed payment-in-lieu option. A Council member asked if a partial payment-in-lieu for the 15% affordable housing units could be provided.
Comment: Ordinance A, the Manager’s recommendation, would allow a developer to make a partial payment in combination with the partial provision of an affordable housing component if the Council were to determine that the combination was appropriate.
Area Median Income: A Council member asked what area the area median income was based upon.
Comment: The area median income we refer to is the Median Family Income for the Raleigh-Durham-Chapel Hill Metropolitan Statistical Area.
We note that the area median income for a family of 4 in the Raleigh-Durham-Chapel Hill area is $66,100. Eighty percent (80%) of that figure is $52,500. A basic rule-of-thumb is that a family can afford to purchase a house valued at 2.5 times the family’s annual income. This means that we consider an affordable homeownership opportunity today to be a house that sells for $130,000 or less.
Second Draft of the Revised Development Ordinance: A Council member asked what provisions the second draft of the revised Development Ordinance includes for inclusionary housing.
Comment: The second draft includes inclusionary housing provisions which would require that, for residential development proposals of 10-50 dwelling units, 10% be affordable; for proposals of 51 or more dwelling units, 20% would be required to be affordable. The target income limits for the affordable units are lower than the Comprehensive Plan definition of “80 % of median.” The draft includes a payment-in-lieu provision, specifying payments of $20,000 per unit for detached housing, $15,000 per unit for attached housing. The draft also includes provisions for off-site satisfaction of up to ½ of the affordable unit requirement.
Non-negotiable Fee: A Council member asked if an option could be provided that would offer a non-negotiable fee for the payment-in-lieu of providing affordable units.
Comment: Regarding the payment-in-lieu option, our experience has shown us that the subsidy necessary per dwelling unit in order to provide an affordable homeownership opportunity is typically $35,000 or more. We have proposed language, in Ordinance A, that we believe would provide the Council with maximum discretion. Ordinance A includes the following language:
“The amount of the payment shall be 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.”
We note that alternatively, the Council could include language that provided a specific dollar amount for the payment option. This amount could be revised and updated periodically by the Council. Ordinance C provides this option. We have inserted the amount at $35,000 per affordable unit in Ordinance C. This amount could be adjusted prior to adoption.
Option with no Affordable Housing Payment-in-Lieu: It was noted by several Council members that acceptance of the payment-in-lieu option should be discouraged. A request was made to provide an Ordinance that would not offer the payment-in-lieu as option.
Comment: The attached Ordinance D would amend the Development Ordinance to allow a developer to offer 15% affordable units on-site instead of providing 25% size restricted houses and would not provide the payment-in-lieu provision.
RECOMMENDATIONS
Planning Board Recommendation: On February 5, 2002, the Planning Board voted 9-0 to recommend that the Council adopt Ordinance A with adjustments to the payment-in-lieu option to better define the payment amount. In addition, the Board believed the payment option should be discouraged and allowed only as a last resort. Please refer to the Summary of Planning Board Action.
Comment: The basic Ordinance requirement is to provide 25 percent of size restricted homes. Under the proposed revision, the developer may offer to provide, and the Council may accept, 15 percent of the homes as affordable houses on site, or may offer to make a payment-in-lieu of providing those homes. If the Council is not satisfied with the affordable housing proposal or the payment-in-lieu proposal, the Council does not have to approve either option. The developer would be required to satisfy the small house requirement. Because of the Council’s discretionary authority in the proposed language, we do not believe it is necessary to further define the payment amount.
MANAGER’S RECOMMENDATION
We recommend making an Ordinance adjustment as provided in Ordinance A, in order to expand the options available to the Town Council. Ordinance A would create an affordable housing option to the small house provisions, as well as an option for a payment-on-lieu.
Ordinance B would amend the Development Ordinance as proposed by Ms. Zinn.
Ordinance C would amend the Development Ordinance as include language that provided a specific dollar amount for the payment option. This amount could be revised and updated periodically by the Council. Ordinance C provides this option at $35,000 per affordable unit.
Ordinance D would amend the Development Ordinance to allow a developer to offer 15% affordable units on-site instead of providing 25% size restricted houses and would not provide the payment-in-lieu provision.
ATTACHMENTS
ORDINANCE A
(Manager’s recommendation)
AN ORDINANCE AMENDING THE CHAPEL HILL DEVELOPMENT ORDINANCE to provide affordable housing options to the current regulation requiring that a percentage of homes in new residential developments be below a particular size (2002-02-25/O-3a)
WHEREAS, the Council of the Town of Chapel Hill adopted an amendment to the Chapel Hill Development Ordinance in 2000 to impose restrictions on the size of new dwelling units in new residential subdivisions and Planned Developments; and
WHEREAS the Town Council has considered amendments to provide affordable housing options to that maximum house size requirement, and finds that the amendments are appropriate due to changed or changing conditions in a particular area or in the jurisdiction generally and achieve the purposes of the Comprehensive Plan;
NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Chapel Hill as follows:
“13.11.1 Substitution of Affordable Housing for Floor Area Restrictions
With the approval of the Council, for a major subdivision or a Planned Development-Housing proposal with 13 or more single-family or two-family lots, an affordable housing component, as defined below, or an affordable housing payment, as defined in Section 13.11.2, may be substituted for the floor area restrictions described in Section 13.11.
The affordable housing component shall provide initial and continued affordability of at least 15% of the dwelling units. The dwelling units shall be affordable to individuals and families who have incomes at or below 80% of the area median income. Restrictive covenants shall be recorded with the dwelling unit(s) to ensure the continued and ongoing affordability of the dwelling unit(s).
The minimum number of affordable units shall be determined as described in Section 13.11 with the number of units based on the permissible units on each lot and with resulting fractions dropped.
The subdivision preliminary and final plats and the Planned Development-Housing proposals minor subdivision plats shall indicate clearly each lot on which an affordable unit must be constructed, and the builder, developer and purchaser shall be bound by the restriction. The recorded plat shall cross-reference the restrictive covenants.
13.11.2 Payment-in-Lieu of Provision of Affordable Housing
As an alternative to providing the affordable housing component option in Section 13.11.1, a developer of a major subdivision or a Planned Development-Housing may, with the approval of the Council, make a payment to the Town whereby the Town may fund affordable housing initiatives.
The Town shall use such payment only for the funding of affordable housing initiatives.
The amount of the payment shall be 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. The estimate shall be developed in consultation with and approved by the Town Manager. The developer shall make the payment before approval of a final plat for the subdivision or approval of a minor subdivision for the Planned Development-Housing, provided, however, that the Town Manager may allow phasing of payments consistent with the approved phasing of the subdivision.
A developer may make a partial payment in combination with the partial provision of an affordable housing component if the Council determines that the combination is appropriate.”
Section 2. That all ordinances and portions of ordinances in conflict herewith are hereby repealed.
Section 3. That these amendments shall become effective upon adoption.
This the 25th day of February, 2002.
ORDINANCE B
(Petitioner’s Proposal)
AN ORDINANCE AMENDING THE CHAPEL HILL DEVELOPMENT ORDINANCE to provide affordable housing options to the current regulation requiring that a percentage of homes in new residential developments be below a particular size (2002-02-25/O-3b)
WHEREAS, the Council of the Town of Chapel Hill adopted an amendment to the Chapel Hill Development Ordinance in 2000 to impose restrictions on the size of new dwelling units in new residential subdivisions and Planned Developments; and
WHEREAS the Town Council has considered amendments to provide affordable housing options to that maximum house size requirement, and finds that the amendments are appropriate due to changed or changing conditions in a particular area or in the jurisdiction generally and achieve the purposes of the Comprehensive Plan;
NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Chapel Hill as follows:
“13.11.1 Substitution of Affordable Housing for Floor Area Restrictions
In lieu of restricted floor area, for a major subdivision or a Planned Development Housing proposal with 13 or more residential lots, the applicant may offer and the Council may approve an affordable housing proposal or payment-in-lieu after applicant has demonstrated to the Council how the proposal meets the intent to provide affordable housing.”
Section 2. That all ordinances and portions of ordinances in conflict herewith are hereby repealed.
Section 3. That these amendments shall become effective upon adoption.
This the 25th day of February, 2002.
ORDINANCE C
(Specified Amount for Payment Option)
AN ORDINANCE AMENDING THE CHAPEL HILL DEVELOPMENT ORDINANCE to provide affordable housing options to the current regulation requiring that a percentage of homes in new residential developments be below a particular size (2002-02-25/O-3c)
WHEREAS, the Council of the Town of Chapel Hill adopted an amendment to the Chapel Hill Development Ordinance in 2000 to impose restrictions on the size of new dwelling units in new residential subdivisions and Planned Developments; and
WHEREAS the Town Council has considered amendments to provide affordable housing options to that maximum house size requirement, and finds that the amendments are appropriate due to changed or changing conditions in a particular area or in the jurisdiction generally and achieve the purposes of the Comprehensive Plan;
NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Chapel Hill as follows:
“13.11.1 Substitution of Affordable Housing for Floor Area Restrictions
With the approval of the Council, for a major subdivision or a Planned Development-Housing proposal with 13 or more single-family or two-family lots, an affordable housing component, as defined below, or an affordable housing payment, as defined in Section 13.11.2, may be substituted for the floor area restrictions described in Section 13.11.
The affordable housing component shall provide initial and continued affordability of at least 15% of the dwelling units. The dwelling units shall be affordable to individuals and families who have incomes at or below 80% of the area median income. Restrictive covenants shall be recorded with the dwelling unit(s) to ensure the continued and ongoing affordability of the dwelling unit(s).
The minimum number of affordable units shall be determined as described in Section 13.11 with the number of units based on the permissible units on each lot and with resulting fractions dropped.
The subdivision preliminary and final plats and the Planned Development-Housing proposals minor subdivision plats shall indicate clearly each lot on which an affordable unit must be constructed, and the builder, developer and purchaser shall be bound by the restriction. The recorded plat shall cross-reference the restrictive covenants.
13.11.2 Payment-in-Lieu of Provision of Affordable Housing
As an alternative to providing the affordable housing component option in Section 13.11.1, a developer of a major subdivision or a Planned Development-Housing may, with the approval of the Council, make a payment to the Town whereby the Town may fund affordable housing initiatives.
The Town shall use such payment only for the funding of affordable housing initiatives.
The amount of the payment shall be calculated by multiplying the number of affordable housing units to be provided by $35,000. The developer shall make the payment before approval of a final plat for the subdivision or approval of a minor subdivision for the Planned Development-Housing, provided, however, that the Town Manager may allow phasing of payments consistent with the approved phasing of the subdivision.
A developer may make a partial payment in combination with the partial provision of an affordable housing component if the Council determines that the combination is appropriate.”
Section 2. That all ordinances and portions of ordinances in conflict herewith are hereby repealed.
Section 3. That these amendments shall become effective upon adoption.
This the 25th day of February, 2002.
ORDINANCE D
(No Payment Provision)
AN ORDINANCE AMENDING THE CHAPEL HILL DEVELOPMENT ORDINANCE to provide AN affordable housing option to the regulation requiring that a percentage of homes in new residential developments be below a particular size (2002-02-25-O/3d)
WHEREAS, the Council of the Town of Chapel Hill adopted an amendment to the Chapel Hill Development Ordinance in 2000 to impose restrictions on the size of new dwelling units in new residential subdivisions and Planned Developments; and
WHEREAS the Town Council has considered amendments to provide affordable housing options to that maximum house size requirement, and finds that the amendments are appropriate due to changed or changing conditions in a particular area or in the jurisdiction generally and achieve the purposes of the Comprehensive Plan;
NOW, THEREFORE, BE IT ORDAINED by the Council of the Town of Chapel Hill as follows:
“13.11.1 Substitution of Affordable Housing for Floor Area Restrictions
With the approval of the Council, for a major subdivision or a Planned Development-Housing proposal with 13 or more single-family or two-family lots, an affordable housing component, as defined below, or an affordable housing payment, as defined in Section 13.11.2, may be substituted for the floor area restrictions described in Section 13.11.
The affordable housing component shall provide initial and continued affordability of at least 15% of the dwelling units. The dwelling units shall be affordable to individuals and families who have incomes at or below 80% of the area median income. Restrictive covenants shall be recorded with the dwelling unit(s) to ensure the continued and ongoing affordability of the dwelling unit(s).
The minimum number of affordable units shall be determined as described in Section 13.11 with the number of units based on the permissible units on each lot and with resulting fractions dropped.
The subdivision preliminary and final plats and the Planned Development-Housing proposals minor subdivision plats shall indicate clearly each lot on which an affordable unit must be constructed, and the builder, developer and purchaser shall be bound by the restriction. The recorded plat shall cross-reference the restrictive covenants.”
Section 2. That all ordinances and portions of ordinances in conflict herewith are hereby repealed.
Section 3. That these amendments shall become effective upon adoption.
This the 25th day of February, 2002.