City of Lawrence, Kansas

Housing Needs Task Force

November 15, 2006

MEMBERS PRESENT:	Rebecca Buford, Commissioner Dennis “Boog” Highberger,    Barbara Huppee, Gwen Klingenberg, Bob Santee, Phil Struble, Bill Yanek
MEMBERS ABSENT:	Dennis Constance, Jim Dick, Mary Grob, Lavern Squier
STAFF PRESENT:	David Corliss, Lesley Rigney, Margene Swarts, Victor Torres
PUBLIC PRESENT:	Bobbie Flory

Highberger called the meeting to order at 8:45 am.

Approval of October 18, 2006 minutes

Klingenberg moved to approve the October 18, 2006 minutes. Yanek seconded the motion, which passed.

Inclusionary Zoning Discussion

Highberger explained that what was on the table for recommendation to the City Commission is an inclusionary zoning ordinance.

Santee wants to back up – he does not support going down this road in the first place. He has not read it, and maybe there is something in this that builders can actually work with, but this isn’t the answer to the affordable housing problem. We should be focusing on some other way to solve the problem. He is afraid we are dividing the community by proposing this.

Struble said the findings are great. They are absolutely on target. Going through this discussion is good. There is division in the community. He called colleagues in other states about how they deal with this kind of stuff and they’ve all gone away from this, and are moving toward trying to come up with other ways to do this. He is willing to go down the road.

Santee said he ran a report on multi-list for under $150,000 and he found 200 properties available. These people in our community are trying to sell property and pumping all of these new units into the market is a concern for him. He wants to know how many are on the market at under $125,000 and how many have sold in the last few years. If we introduce a new product, can we really get someone to buy it?

Huppee said the people on this committee have different missions and those can be competing and in order for us to come to an agreement, we should dig into this and do a whole analysis about the pros and cons. She went to look at small and affordable houses on the east side recently with someone who was trying to buy. They were going from $109,000 to $139,000 and some were fixer-uppers but some were pretty nice for that price. Recognizing that the market is fluid, we should consider that and figure out what we can do with that as part of a trust fund and/or an inclusionary zoning ordinance. All of this relates to income and many salaries are not sufficient to get people into home ownership. LDCHA has an ownership program that partners with TTH and they can move people through the program but if they have credit issues it takes a lot longer. There are a lot of impeding issues that affect this – it is a bigger chunk than just IZ. There can be a meeting of the minds, and it might look different than everyone else’s approach to the problem.

Highberger said that what Santee was saying was contradictory to the CHAT report and anecdotal evidence he has been hearing.

The group agreed that the market had made a significant downturn since the CHAT report was completed and since the Task Force began.

Torres said it seems like they might want to make a recommendation, based on a report that monitors the market and if at a time when there was not the availability of lower priced homes, it could trigger inclusionary zoning. There could be a formula that was market-responsive. It could also be based on the amount of money available in the HTF.

Santee said that would be great but the development process takes too long to make that work. He thinks incentives are good, imposing requirements are not.

Struble said what the group is talking about is multi-faceted. If we are talking about a single-family subdivision, builders do not need density bonuses because the development is a product in itself and the developer has a product in mind and density bonuses are going to change that vision. It would help in a mixed-use type of development. Currently, builders can go in and ask for R3 or R5 zoning and get it today if it fits with the character of the neighborhood. He’s trying to understand where the “bonus” is.

Buford asked if there was a problem with including a smaller-scale single-family home in a typical development.

Struble said there are fewer developer-builders in Lawrence and the remaining ones are getting away from it. More and more developers are splitting up developments among builders. This calls into question the validity of large-scale development thresholds.

Santee said these affordable homes would have to really fit into the development and be careful to protect the larger investments.

Buford said she was having trouble finding buyers for a high-quality, affordable product on the east side because a rental was next door that had trash accumulated – no matter the cost of the home, people care about their investment.

Struble was trying to understand how he would fit the last several years of developments into this IZ scheme.

Yanek asked if threshold size is relevant to Lawrence.

Staff said that typically, smaller cities use smaller thresholds, such as 5-10 instead of 50.

Struble said even large developer-builders are selling out lots to builders.

Klingenberg said Stephens is buying 50 lots from Alvamar and is farming them out? But if Stephens initially had the project, wouldn’t it be possible to include a few affordable homes.

Santee said yes, the market is that bad. It has slowed down so much.

Klingenberg said if the market was built back up again, IZ could kick in at that time.

Struble said to consider a local developer does a 50-unit subdivision and we want 10% affordable – so 5 have to be built affordable. There are going to be 45 lots that they are going to get 10 other builders to take to build houses. Now they have five affordable lots that they will have to increase remaining lot prices on to compensate and then they need to come up with someone who is going to build a $125,000 home in a $300,000 neighborhood. If you ask a developer how they are going to do it, they might not know.

Santee said they would have to build the houses nicer, and push costs onto the market-rate house.

Buford said that is the idea – it is to spread some of the cost of affordable housing to those who can afford it.

Klingenberg asked about HTF incentives to offset the costs.

Santee and Struble said that might be workable.

Highberger said that many ordinances leave room for in-lieu of fees when actual units cannot be incorporated.

Buford said that TTH works with folks who have jobs and are professionals and want nice housing – there are a lot of moderate income folks who need some options that would fit in that upscale type of development. She does agree that density bonus will not help with the financial reality of that type of project. She likes the idea of an incentive with land cost. The other issue is “in-lieu of” fees typically do not create another unit of housing. We should use builders’ expertise to build the units and try to make it financially feasible for them.

Huppee asked if it would make sense to consider land acquisition – non-profits could acquire some of a 50-lot development and develop it themselves.

Klingenberg said if there was an ability to mix lot sizes, the smaller house could be on a smaller lot.

Struble said from a planning perspective, that is problematic – to put a small lot in a large-lot subdivision won’t work. It is an issue of scale – in a large development it would be possible to phase from smaller to larger lots.

Swarts said to consider how cost offsets might help along with the use of a HTF to close some of the gap, and one idea is to finish the exterior to fit the neighborhood, but the interior would be less expensive. If they could combine all of these pieces and parts to get affordability, would that be workable?

Santee said it is scary how important a house is to a family. If there are huge differences there is going to be some conflict somewhere. It may hurt the sale of the bigger house – it is going to be a tough combination to pull off. In huge developments, we have to do that. Here, we have such a neat market that people come to see how we figured it out.

Klingenberg asked if Old West Lawrence, where there are smaller homes and larger homes – does that not work?

Struble said that is the character of Old West Lawrence, but out west that will not work.

Buford said it would have to be well-planned, but is having character a possible goal?

Struble said “character” does not make it through the Planning Commission. Lawrence is such that you can choose to live in the traditional downtown neighborhoods, can go a bit farther out and get a 60’s style home, or you can go out by the traffic-way and get a more suburban style. There is not the flexibility.

Klingenberg asked if builders would want the flexibility.

Struble said he did not know – for the first time in twenty years, alleys are allowed but so far no one is building them. He will wait to see if anyone uses any of the flexibility. He doesn’t see how it fits into the IZ discussion. There are a whole lot of different discussions the group is having right now. Is it realistic to think that we could plop an $85,000 home in Fox Chase?

Torres said there are options to channel money to the HTF or to do something else to still meet requirements without actually providing it in the development.

Highberger said he can see it working in developments with the higher income levels.

Huppee asked who could administer the ordinance? TTH does up to 80% of MFI and Habitat does up to 60% - who can do the higher end?

Swarts said that TTH could administer a program to any income level. Use of federal funds will dictate particular income levels.

Huppee asked how many units we would want to acquire per year.

Klingenberg said the CHAT report recommended adding 160 homes per year at $130,000 or less.

Huppee asked how many people Buford has in one year who are ready to move into home ownership.

Buford said 15-20 if they had housing stock and adequate funding. The demand continues to increase.

Klingenberg said you also have to include people who could go into homeownership who are not necessarily involved in subsidized programs.

Struble said there are 200 homes available under $150,000. There are houses out there for the workforce.

Swarts said there is a huge range of quality of homes on the market – many in the affordable range are not up to code.

Buford noted some moderate income families cannot afford to move into a home that needs lots of repairs.

Struble is trying to focus on what group of people they are trying to help. Is there a way to address the problem – such as, if you are doing a large subdivision, you have to spend money to bring another house in another area of town up to code.

Buford said that is a great idea – lets save housing stock.

Struble said then we could be putting families into these neighborhoods that are struggling.

Swarts said the rehab component of the first-time homebuyer program has been successful but now the program has to focus on houses that only need a little bit of rehab because such a large part of the subsidy is spent on down payment and closing costs. There are many viable homes that just need a bit more rehab than can be provided with current dollars.

Struble said he doesn’t know how it would work between developers and builders but there is a real selling point to this idea – not that we are putting $150,000 homes into $300,000 neighborhoods but we can go back to the community and say we are going to reinvest families into older neighborhoods, keep renters out, bring families back into the core of city. That might be a better focus than IZ.

Yanek said regarding the findings, he would hope the TF could recognize the real estate market – it is really soft or really bad. Any jolt to the market could be significant and that ought to be taken into account.

Swarts asked for clarification.

Yanek said he would like a formal recognition that there are some challenges in the market and that any recommendations we make should take that into account. That would breed good will and the practitioners would want to hear that.

Highberger asked if there was some sort of standard indicator that ranks the state of the market.

Yanek said he would look into it further but mortgage rates are higher, LHBA has an index they release, realtors have an inventory index, NAR has number of days an average house is on the market and other indicators.

Buford said she liked Torres’ idea to adjust IZ requirements with the market.

Huppee asked if Habitat and TTH clients ever requested different parts of town.

Buford has a ton of people who want to live on the west side due to schools, family, transportation issues. A lot have tended to not ever have lived on the East side and so that is a real deterrent to buying through TTH. There would be no shortage of people who could fit into homes on that side of town, acknowledging they would have to be of a certain size and scale.

Highberger said what he is hearing is that IZ may not be the best tool – there are many different tools such as a sort of platting fee and applying it to an affordable housing program.

Santee said if it is a good enough idea, lets all get behind it. Don’t put it just on new developments.

Buford said that others are currently dong something. It should be a community solution and developers have to be a part of it.

Santee said developers are willing to pony up their share. However, the majority of people who are buying these larger homes are local people and raising the prices of these homes is picking on people whose families are growing and who are moving up and into larger homes.

Huppee said we are talking about buying and flipping houses, in a good way, and considering rehab that has to go into this. If someone bought some property or a house and was willing to flip it at as low a price as possible – could we not look at waived fees, etc – a whole scale of things that could be done?

Struble said giving builders a percentage break on sewer fees in exchange for doing this might be one possibility…

Huppee said it would all have to be part of a very specified program.

Torres said there are a lot of options available for supporting the development of more affordable housing in the community. The HTF is back on the table again and we have talked about the Neighborhood Revitalization Act (NRA) and never done anything with that. There needs to be some combination of tools working together. Looking at the HTF and a funding mechanism that is supported by all in the community is important. One mechanism is to include a checkbox on gas and water bills – the fund could receive ongoing donations if someone wants to donate.  That fund could channel some money to the comprehensive rehab program and to TTH. Looking at some existing revenue sources is also a possibility – sales tax goes to a lot of areas –a very small portion of that could be channeled into a fund so that the community at-large addresses the issue. We can use the NRA and channel housing into the Land Trust so that it stays affordable. Inclusionary Zoning should also be considered as one piece of the solution.

Klingenberg said the HNTF could send forth a tool box to be looked at so that in the future when the market changes, this group does not need to come back to the table.

Santee said maybe this is more of a financing issue and maybe as a community if we can offer a note from the city to help qualify for a loan as well as to fund the rehab gap to make it possible to buy.

Housing Trust Fund Discussion

Identify Action Items and Next Steps

Miscellaneous/Calendar

Highberger wants to still discuss the HTF and does not want to write off IZ. There will be further discussion at the next meeting.

Huppee clarified that this notion of preservation and restoration of the center city has some traction in this group.

Consensus of the group was yes.

Swarts asked if there is any information staff can provide.

Yanek said the state has a HTF – are there any resources available through that?

Swarts said the HTF at the state level is practically non-existent and when it does get some funding it generally goes into rural areas. The City is an entitlement community and receives funds directly from the federal government and therefore, according to state guidelines, is not eligible for any such state funding.

Klingenberg said there is a banking institution in Topeka – FHLB – she doesn’t know how it is useable.

Buford said she uses it all of the time and she can provide information about it.

Klingenberg asked if the City could tap into it.

Buford explained how it works – it has to include a lender partner but it could be used for rehab projects.

Public Comment

Flory said it is important to consider that this has to be supported on a community-wide basis. Why would affordable housing be any less important than the arts, which are supported community-wide? The idea of going to IZ – she is opposed because they are going to rely on one segment of the community to pay the costs. She is excited with the conversation today.

Adjourn

The meeting adjourned at 10:10 am.