MINUTES OF A WORK SESSION HELD BY THE CHAPEL HILL TOWN COUNCIL WITH

THE ORANGE COMMUNITY HOUSING CORPORATION BOARD OF DIRECTORS,

MONDAY, FEBRUARY 1, 1993 AT 5:45 P.M.

Mayor Broun called the meeting to order. Council Members in attendance were Julie Andresen, Joyce Brown, Joe Capowski, Mark Chilton, Joe Herzenberg, Barbara Powell, Alan Rimer and Arthur Werner (arrived at 7:27 p.m.). Also in attendance were Assistant to the Mayor Lisa Price, Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Planning Director Roger Waldon, Long-range Planning Coordinator Chris Berndt, Housing and Community Development Director Tina Vaughn and Housing and Community Development Planner Judy Russell. Mayor Broun requested that Orange Community Housing Corporation Directors and staff introduce themselves. Board members Donald Boulton, Keith Cook, Diana Wooley, Peggy Pollitzer, Margie Shoffner, Board Chair Keith Aldridge and OCHC Executive Director Donna Dyer introduced themselves.

Mayor Broun acknowledged that several members of the Town's Housing and Community Development Board were in attendance this evening.

Mr. Horton noted that Long-range Planning Coordinator Chris Berndt had performed much of the research on matters under discussion this evening. He said the Town had a number of key planning documents concerning housing policy, including the Comprehensive Plan and the Comprehensive Housing Affordability Strategy. Mr. Horton stated that the Town's Housing Authority had been originally established in 1962. He said that the Town had three hundred and twelve public housing units with twenty-four additional units under construction. Mr. Horton also said that the Housing Loan Trust Fund provided citizens with access to private funding for deferred payments and second mortgages. He stated that the Town's Housing Department was restructured in 1986.

Mr. Horton briefly reviewed Town housing programs between 1987 and 1992, including the Tandler and Culbreth Park subdivisions. He also noted that the Orange Community Housing Corporation was established in 1990 with the broad purpose of producing low-income housing opportunities. Mr. Horton stated that Donna Dyer had provided a lot of staff leadership for the establishment of a home consortium in Orange County. He said the main purpose of this evening's meeting was to provide guidance on housing matters to the staff and the Orange Community Housing Corporation.

OCHC Board Chairperson Keith Aldridge said the board had three main objectives for the evening: to review the Board's goals and objectives, to receive policy direction from the Council, and to discuss communications between the Council and the Orange Community Housing Corporation Board of Directors. Mr. Aldridge said the Corporation sought to help governments in Orange County to implement their housing policies, especially housing opportunities for persons at and below sixty percent of the Town's and County's median incomes. He noted that a number of affordable housing programs had been proposed, ranging from the Dobbins Hill to Erwin Village projects. Mr. Aldridge the OCHC Board was continuing to explore options for addressing gaps in the community's housing needs.

Mayor Broun inquired whether the median income figures cited in affordable housing programs was for single persons or families. Mr. Aldridge said these figures were generally for a family of four. Council Member Capowski asked whether a family of four with an income of $36,000 could afford a home in the Town. Mr. Aldridge said townhomes were available in this price range. He briefly reviewed a table outlining income levels and housing affordability. Mr. Aldridge stated that construction and land costs in the Town were somewhat higher than in surrounding communities. He reviewed subsidies necessary for varying income and housing cost levels. Council Member Andresen inquired about the estimated cost of homes in the proposed Erwin Village subdivision. Mr. Aldridge said the homes would be in the middle to high $90,000 range. Mayor Broun inquired about the amount of non-Town funds which would be available to a person with an income of $25,000 and receiving a housing subsidy of $28,000. Mr. Aldridge estimated that $15,000 would be from Town funds and $13,000 from other sources. Council Member Capowski requested additional information concerning income and subsidy projections for homeownership. Mr. Aldridge said the scenarios were based on general financial assumptions.

Council Member Rimer inquired about the possibility of utilizing a public-private partnership to reduce legal, financial and marketing costs, including closing costs and underwriting fees. Ms. Dyer noted that the costs outlined in the exhibit memorandum were public-private figures, reflecting the fact that local financial institutions had agreed to accept reduced origination and other fees for affordable housing programs. She added that the Town staff had worked with OCHC staff to reduce public improvement costs as much as possible. Mayor Broun noted that he had requested that Mr. Aldridge develop a matrix of the subsidies needed to make a housing project work at different income levels. Council Member Capowski inquired about the factors which most influenced housing costs and why estimated legal, marketing and financing costs were higher for smaller homes. Ms. Dyer said it was likely that it would take longer to sell a smaller home, increasing the cost of carrying construction loans. Mr. Aldridge said a certain degree of risk was involved in constructing and attempting to market homes on smaller lots, such as in zero-lot line developments.

Council Member Powell said she thought there was a fairly significant need for affordable smaller housing units. Mr. Aldridge said although it was his personal opinion was that there was such a need, many people were afraid that these units could not be resold as quickly as larger units. Ms. Margie Shoffner said that smaller homes with one bathroom generally required greater marketing efforts. Council Member Brown inquired about the nature of the market for single persons and couples without children. Ms. Dyer noted that more than half of the residents of the Culbreth Park subdivision were single parents with children. She noted that the majority of two-income families could not meet income requirements for projects such as Culbreth Park.

Council Member Capowski said he was having trouble understanding the problem of marketing smaller housing units. He inquired whether it was correct that the University was not planning any additional dormitories. Mr. Boulton said this was correct, adding that there were vacancies in a number of the University's residence halls. Ms. Dyer noted that classes for first-time homebuyers offered by OCHC were extremely popular. She added that townhomes costing between $75,000 and $85,000 did not appear to be desirable for first-time homebuyers. Council Member Chilton noted that many persons preferred to buy larger $75,000 to $85,000 homes in Durham or northern Chatham counties. Mr. Aldridge noted that many University, Town and Chapel Hill-Carrboro school district employees could not afford to live in the Town. Council Member Herzenberg noted that many persons, including a Council Member, found it desirable to live in cottages or bungalows located in various parts of the Town. Council Member Brown said she lived in a small cottage which was both convenient and desirable.

Council Member Andresen expressed interest in having the possibility of inclusionary zoning examined carefully. Mr. Horton stated that attempts to secure such legislation had been previously rebuffed by the General Assembly. Council Member Andresen expressed interest in exploring the possibility of density bonuses. Ms. Berndt said such bonuses had mainly applied to HUD projects. She noted that at a public hearing on density bonuses in 1986, concern had been expressed about proposed increases in densities. Mayor Broun said he favored targeting affordable housing programs for persons making sixty percent or less of the median income. He added that creative public/private efforts to provide affordable housing should be encouraged. Council Member Andresen said the sixty percent or less income level was the appropriate place for the Town to focus its housing programs. Council Member Andresen stated that the Culbreth Park subdivision might have been handled somewhat differently with regard to the provision of amenities.

Council Member Capowski said he could not imagine that any homes which were reasonably priced and constructed innovatively would remain idle for very long. He added that although some homes in Chatham or Durham County might be less expensive than those in the Town, commuting costs added up quickly. Council Member Brown inquired whether the current economic climate was more favorable for possible passage of enabling legislation for inclusionary zoning. Mr. Horton said this was difficult to determine, but such legislation could be requested. Council Member Andresen emphasized the need to work with the building community on common goals. Ms. Dyer said this was a good idea since private developers sometimes feared non-profit housing corporations. She added that many private developers had shown a willingness to work with OCHC on joint venture housing programs. Council Member Brown noted that a recent local affordable housing workshop was well-attended by various sectors of the community. Ms. Dyer said the Orange Community Housing Corporation was exploring the possibility of providing subsidies for attached housing, although the market might still be a little stagnant. Mayor Broun said he thought the possibility was well worth investigating.

Council Member Rimer inquired about the types of gaps in existing affordable housing markets. Ms. Dyer said that area homebuilders had stated that new development was unserved for homes costing less than $115,000. Council Member Rimer inquired about the housing market segmentation and demand. Ms. Dyer said this was difficult to identify, adding that couples making up to $40,000 per year were having difficulty identifying affordable housing opportunities. Council Member Capowski said the Council needed to decide whether it was in the business of building houses or helping people get housing. Noting that some existing homes in the area cost less than $100,000, Ms. Dyer emphasized the need to take into account the maintenance costs of new and existing homes. Council Member Capowski asked whether OCHC was in the business of reconstructing older homes. Mr. Aldridge said yes. Ms. Dyer noted that maintenance reserves were especially important for older homes. Council Member Capowski inquired about the reasonable amount of subsidy per housing unit. Ms. Dyer said the average subsidy was $15,000, with some HOME grants extending to $50,000, including competitive grants.

Mayor Broun suggested that the Council might wish to discuss rental versus purchase housing opportunities. Noting that it might be advisable to proceed with both, Mayor Broun said although rental units were more economical, there was societal value in developing homeownership opportunities. Council Member Andresen said that property taxes for homes were high meaning that some people might never be able to afford a home. She said this matter should be examined closely. Peggy Pollitzer said there was a great need for very-low income rental opportunities. Council Member Chilton concurred, noting the need for programs for persons who were able to afford $150 or less per month for rent. Ms. Dyer noted that the average annual maintenance cost per apartment unit was $2,400 to $2,800. Mr. Aldridge noted that very few affordable three or four bedroom apartments were available in the area.

Housing and Community Development board member Adele Thomas said that the proposed subsidies discussed this evening were welfare. Ms. Thomas said it was not fair to provide complete housing subsidies for persons making eighty percent of the median income, supported by the taxes paid by those making less than forty percent of the area's median income.

Noting that he lived next door to a rooming house, Council Member Herzenberg said he was not sure that OCHC was the group to assist persons in moving from the homeless shelter to very-low end housing opportunities. Ms. Pollitzer emphasized the importance of private donor participation in transitional housing programs. Council Member Rimer said he was attempting to develop a sense of the types of programs which would produce the greatest impact using limited funding resources. Noting that very-low end housing opportunities had declined markedly in the Town in the past twenty years, Council Member Herzenberg said he believed that major impacts could result from the creation of additional rooming houses. Council Member Rimer expressed concern about the possibility of absentee landlords not properly maintaining such properties.

Council Member Powell noted that since 1960, the majority of African-Americans had purchased homes outside the Town due to economic obstacles. She emphasized the need for a very diversified community, with efforts focused beyond public housing and rooming houses. Council Member Powell added that single persons not in upper income brackets had difficulty attaining housing. She stressed the importance of maintaining African-Americans in the community.

Council Member Andresen said she favored an examination of the Comprehensive Plan goal relative to the provision of lower-end housing opportunities. She added that some citizens had expressed concern that qualifying income limits were sometimes too high.

Mayor Broun noted that the Council and OCHC had earlier expressed interest in discussing communications between the two groups and the Erwin Village proposal. Noting that Ms. Thomas and Ms. Pollitzer had both made good points, Council Member Brown requested an assessment of everything heard this evening. Mayor Broun said although no definitive answers had been reached, he sensed agreement among the Council about the need to address housing opportunities at lower income levels (60% of the median income or less). He added that there appeared to be some support for inclusionary zoning and variations on this theme. Mayor Broun also noted that unique housing challenges in the African-American community also needed to be addressed. Council Member Andresen said further conversations were needed, possibly emphasizing the need for transitional housing.

Mayor Broun requested an update on the Erwin Village proposal. Mr. Aldridge noted that the project did not receive anticipated funding from the State. He added that the project should have been presented to the Council earlier in the conceptual and design process. Mr. Aldridge stated that the failure of the project had left a $45,000 gap in the Orange Community Housing Corporation's budget. Noting that Orange County and the Town of Carrboro had also participated in the Erwin Village proposal, Council Member Rimer said he felt it was appropriate that these bodies assist with making up the shortfall experienced from the project's failure.

Mr. Boulton said the entire OCHC Board of Directors was concerned about the potential for communication problems with local governments and other agencies. He emphasized the importance of good communication relative to successful project development.

Council Member Brown asked about the possibility of recovery of any of the funds spent for Erwin Village. Mr. Aldridge said a number of options, including sale of the subdivision, were being explored. Mr. Boulton said similar shortfalls might jeopardize the corporation's very existence. He noted that successful projects could result in significant affordable housing projects for the community. Mr. Boulton stated that the Erwin Village proposal was intended to address the community's current definition of affordable housing needs. Mayor Broun inquired about possible impacts of the Erwin Village related shortfall. Mr. Aldridge said the most likely impact would be laying off staff. Mayor Broun emphasized the importance of leveraging in affordable housing programs.

Council Member Andresen emphasized the importance of giving people home-buying opportunities through sweat equity programs such as Habitat for Humanity. She stated that the Town might consider giving gifts of land for such programs. Council Member Herzenberg inquired about the number of below market rate lots in Culbreth Park subdivision. Mr. Horton said eight. Council Member Capowski asked whether there were appreciable land and related cost savings for developments outside the Town limits. Ms. Dyer said such savings were appreciable outside the Chapel Hill-Carrboro school district. She added that lots in the hillier part of the Town were more difficult and expensive to develop, since additional grading was needed. Council Member Capowski asked whether some costs were higher due to the perceived value of the Chapel Hill-Carrboro school system. Mr. Aldridge said yes. Ms. Dyer introduced OCHC Board Member Keith Cook, who had arrived following the initial introduction of OCHC board members. Mr. Aldridge thanked the Council for the evening's work session. Mayor Broun thanked the members of the Orange Community Housing Corporation Board of Directors, and the Town's Human Services and Housing and Community Development Boards for their attendance and participation in the evening's proceedings.

The work session concluded at 7:38 p.m.