City of Lawrence, Kansas
Housing Needs HNTF
February 5, 2009
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MEMBERS PRESENT:
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Rebecca Buford, Mary Grob, Commissioner Dennis “Boog” Highberger, Thomas Howe, Barbara Huppee, Tom Kern, Gwen Klingenberg, Phil Struble |
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MEMBERS ABSENT: |
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Bobbie Flory
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STAFF PRESENT: |
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Danelle Dresslar, Scott McCullough, Margene Swarts
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PUBLIC PRESENT: |
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None |
Highberger called the meeting to order at 3:05 pm.
Introduction of New Members (Commissioner Dennis “Boog” Highberger)
Highberger gave a background and recap of the Housing Needs HNTF (HNTF) and said that he had spoken to Tom Kern when he arrived at the Lawrence Chamber of Commerce, and found that he had extensive experience in different parts of the country regarding community housing needs. After having those conversations, Commissioner Highberger decided to ask the HNTF to meet again. Members and staff introduced themselves.
Summary of Previous HNTF Work (Margene Swarts)
Swarts recapped the information for the HNTF regarding the two recommendations of the incentive-based inclusionary zoning ordinance and identifying a permanent funding source for the Housing Trust Fund that the HNTF determined in January 2007 as key elements to affordable housing in Lawrence. Swarts noted the possible permanent funding streams identified by the Housing Trust Fund Board for operating an ongoing Housing Trust Fund. She stated that the group had identified Real Estate Transfer fees, Building Permits, Property Taxes, Impact Fees, and Foundations. She added that the City Commission received the HNTF report, however there was no action taken and the recommendations have not been reviewed by the City Commission since.
Highberger said he though it had not gone any farther because it was clear that there would not be three votes for it.
Buford added that she remembered that the HNTF gave the City Commission the recommendations, but then nothing was done after that.
Highberger asked Kern to speak about his background in affordable housing. Kern stated that he was a City Manager for 10 years and has also served as the Vice President of HomeStretch in Michigan which was a regional developer of affordable housing. He said the company built affordable housing in the urban areas of Michigan and they were able to provide 50-70 housing units per year.
Kern said that they viewed their projects as “workforce housing” rather than “affordable housing”. The target population that workforce housing includes is teachers, nurses, firefighters, and police among others. He said that because of this view they were able to develop housing successfully in many areas of Michigan. He said in calling it workforce housing instead of affordable housing it removed the stigma of the term “project” from the picture. He said that it also made a difference in Michigan that state funding for housing was available, which is not the case in Kansas, so other funding avenues would need to be explored. He said that he has done research throughout the country, and this is a community issue everywhere he has been. One example was in metropolitan areas in Virginia where a 1200 square foot townhome appropriate for workforce housing has an average sales price of $550,000. That same workforce housing in areas of California starts at around $400,000.
He went on to say that the key to making workforce housing successful is all in the land acquisition. He said that in his experience he has seen cities, counties, and school districts donate land that is unused and is not going to be developed by those entities. If an empty lot in Lawrence would run approximately $40,000, that is a significant savings in the cost of the project when the land does not have to be purchased.
He also noted some areas such as California provide funding breaks by waiving permit fees or other associated fees with new construction, for workforce housing. He said that impact fees such as those can total 10% - 15% of the cost of the house itself. He said that by adding all these land donations and fee breaks, you keep pulling the cost of the actual units down.
He explained in Michigan that HomeStretch created a community based Housing Trust Organization for single family and multi family workforce related housing. He said that the average single family home in the HomeStretch area was $265,000. An example of the workforce housing that HomeStretch created was a 1350 square feet townhome and it was available for $88,000. He explained that the land trust used the money from the workforce home sales and continued to build up the trust. He said again that they received empty lots form the city and fees waived so it drove the price of the housing down, and that the key was always to get the cost of the construction down. Additionally, adding workforce housing in the market in already established areas helped avoid the stigma of “projects”.
Huppee asked if most of the work was done for home ownership or were there any rental projects as well.
Kern said that it was mostly home ownership because it was geared towards that workforce population. He explained that an average teacher’s salary was $30,000/yr and the average single family house was $265,000. This did not add up to a viable option for that population.
Swarts asked Kern if an average single family home was valued at $265,000, how did the neighbors react when the workforce housing was built in their neighborhood?
Kern said that the homes were built on vacant lots that were not typically in the neighborhoods that contained the median-cost homes. He added that the HomeStretch houses were actually an improvement to the neighborhood in most cases.
Grob asked for clarification if the land trust held a mortgage on the properties.
Kern said yes, and that when the homeowner decided to move to another house, HomeStretch had a buyback option. The selling homeowner would get a portion of the appreciation. He said this keeps the property affordable and the homeowners from overly profiting from the sale. He added that in Michigan the appreciation could be fairly substantial, and what was once an $88,000 property could appreciate to $131,000 in approximately four years. He mentioned they also worked with the modular home projects, had great success with them at a low cost, and were still able to put out a very quality product.
Kern said that he also saw the same type of modular single family projects in Cincinnati and the cost of the modular houses there were around $61,000. He said that the key is just finding the dirt first.
Grob asked if they had any experience at HomeStretch with rehabilitation on existing housing.
Kern said that they focused on finding the lots and did not really work with rehabilitation projects.
Buford spoke about Tenants to Homeowners and the similarities in their program to the HomesStretch program. She told the HNTF that they have 33 homes in the Lawrence Community Land Trust, and a pipeline of 15 units in progress, including two rehabilitation projects.
McCullough added that the City Commission has recently approved code provisions that allow reward points in mixed use districts, and the SmartCode also has incentives as well.
Swarts noted the Development Code also allows higher density developments under particular circumstances.
Buford noted they utilized that in a recent development and realized 11 lots for development instead of just eight.
Kern said in his experience some developers would take density discounts. He said the jewels are the pieces of ground that the school (or other public entity) bought but then were never developed.
Kern added the difficult part about the process has been getting the elected officials to understand the importance of workforce housing. He said the private sector cannot afford to build it, and if the return is not there then you cannot expect the private developer to take a chance on it. He said the public sector can contribute without actually putting a dollar investment in it by waiving fees and working with the developers to offer some materials at cost. He said mostly it is a commitment needed from the elected officials for workforce housing to be successful.
Kern asked what the average cost of workforce housing in Lawrence would be.
Buford said that it needs to be around $100,000, but not over $115,000 or $120,000 at the most.
Howe asked if there was a needs analysis for Lawrence and if so, what was the need in Lawrence?
Buford said that the CHAT needs analysis from 2006 showed that there needed to be around 1600 houses under $130,000 by 2015. She added that since the report had come out there had been 20 units produced by Habitat for Humanity and Tenants to Homeowners combined. She noted that the waiting list has gone down and before the housing downturn they had a waiting list of about 15 to 20 people waiting to get in at all times. The economy has shifted that number.
Kern asked Grob about workforce population and the preapproval process at the banking levels and if this population is getting preapproved.
Grob said this has been a problem for a few years because of availability of affordable housing for this population. She said that today there are some units available but a lot of those units need a lot of rehabilitation. She added that with lending, the house still needs to be a certain standard.
Kern asked about the costs for the lowest new construction homes.
Huppee said that recent duplexes LDCHA constructed were around $100,000/unit.
Howe said that the average in Lawrence today would be about $135,000 to $140,000 for 1200 square feet. The median unit would be 3 bedroom with 2 baths on a slab in North or East Lawrence.
Buford said the gap for the workforce housing availability is $130,000 to $150,000.
Kern said that if they can find the dirt that it will lower that distance for the workforce homebuyer.
Howe asked about the fees from the city.
Buford said that the system development fee is close to $3,000 for new construction and that includes sewer and water. She noted the City waives building permit fees for both Tenants to Homeowners and for Habitat for Humanity.
Howe asked if the HNTF would look at recommending that all the projects be run through either TTH or Habitat for Humanity.
Grob suggested that that might be a possibility.
Struble said that recent projects have not been big enough for the developers. The days of seeing large, significant pieces of development are on hold.
Swarts added that mostly what you see with big projects currently are apartments.
Kern said that there are tax advantages to doing apartments and they can be very significant.
Struble asked if program restrictions included detached properties.
Buford said that they have done projects on all levels, including townhomes and others. There are not any restrictions in that regard.
Discussion of possible HNTF recommendations (Tom Kern)
Kern said he would be interested to see what is available as far as lots owned by the City, County, and USD.
Huppee said they can also look at a tax sale for property acquisition, although sometimes the time allowed for redemption by the owner can be long.
Kern agreed it would be somewhere to look.
Howe asked if the early plan of the HNTF was to identify what is available.
Grob asked about the method for finding out what the school district has available, because there is more than likely unused school owned property available.
Highberger asked Kern about other jurisdictions that he had worked with and the cooperation of the school boards in relation for land for workforce housing, which would include opportunities for housing teachers as well.
Kern said that there has been very good support.
Kern asked why not look outside of the City in the County as well.
Buford said that her experience with the county has been limited because their projects are normally federally backed and that going outside of the City may hinder that HUD funding.
Kern said that he would like to explore opportunities in the county as well, especially close to the City limits.
Howe asked how the City of Lawrence HNTF would operate based on the inclusion of county projects.
Kern said that it might eventually become a City/County entity.
Huppee noted that the housing authority is the Lawrence/Douglas County Housing Authority.
Kern asked Highberger if the HNTF could request information from the City Manager’s office to determine the City owned lots available.
Highberger excused himself to speak briefly with Corliss about this request.
Howe asked about the next step if the City, County and USD came back with a “yes” answer and a donation of land to the Land Trust.
Kern said that it would transfer the land to the agencies and go from there.
City Manager Dave Corliss responded to the HNTF in person and said that the City would gather the information for their request and he would contact the County and USD as well.
Grob noted that affordable housing in Lawrence does also include the LDCHA.
Huppee said that LDCHA has approximately 1200 units through all their programs.
Grob asked Huppee if they would be able to build developments on land that they own as well.
Huppee said that their developments are federally regulated so they are all below market rent units. The issue for the LDCHA is funding.
Buford added that when you are doing rentals, you do not get some of the same kickbacks that you do from homes.
Kern asked the agencies about CDBG or HOME funding received from the City.
Huppee said that LDCHA gets Tenant Based Rental Assistance from the HOME program.
Buford said that in addition to HOME funding they also are working with tax credits on 20 rental units.
Struble suggested that possibly we did not really need to go through the Land Trust after all.
Huppee said that for the rental housing there really is not a real waiting list.
Buford asked about their general housing wait list.
Huppee said that the general housing wait list average is about six months, and Section 8 is two years. She said that if LDCHA had more available that was not federally regulated that it might be a different story.
Kern said perhaps the land can be distributed situationally.
Buford said that as a group the HNTF needed to decide on regulations for the project.
Grob said that the current rent in Lawrence is so high that some of this workforce population cannot rent a home in Lawrence either. She said there needs to be a balance.
Kern asked about rentals in Lawrence.
Huppee said that Fair Market Rent in Lawrence for a two bedroom unit is $703.
Grob said that if you are a family of four and you are a workforce population you are looking at $1,100 in rent.
Kern said that in this marketplace, you are practically equaling rent and a house payment. He said if we can find the dirt, we can create a product in which the monthly payment is basically the same as a rental payment.
There was a group discussion regarding average median income for those who would qualify for the workforce housing.
Buford said that they have had to turn those away that have been between 80% AMI and 120% AMI because they cannot go over 80%.
Klingenberg said that this was the group above the 80% or lower AMI population that are the folks that need help getting into housing.
Kern said if you are not using federal money, you can house anyone.
Swarts noted the importance of the Land Trust because it keeps properties affordable. She mentioned that some Habitat for Humanity homeowners have sold property in the past on the open housing market, and although the City was a silent second lien holder and some funds were recouped, generally the property moves out of the umbrella of affordable housing and joins the regular housing market
City Development/Utility Fees and Affordable Housing.
Buford noted that a request had been made to the City Commission by both Habitat and TTH regarding waiving system development fees and she did not remember them voting against it but she was unsure what happened. Possibly it was not advanced because the way it was presented was not how the City Commission viewed the path should be; that maybe it should have routed to the general fund instead.
Kern said that it should be on the fee side and not the general fund/revenue side. He added in the end it is the general contractors that are building it for you and you do not want to create an uncompetitive environment for them.
Grob said that she had always had a concern for the 80-120% MFI population. She said that things have changed so much that it is very hard for them to acquire housing as well as meet current credit standards. She said that over the last several years it has gone from one end of the spectrum to the other.
Buford said that if there is a subsidy that shows the development is locked into the community then it is a lot easier to make a case for helping those in the 80-120% MFI population. She said that they will move into the housing, then eventually move on and take their equity and move into regular housing.
Kern said that is the great thing about the Land Trust. The housing always stays affordable. It helps to move the workforce population up the housing chain.
Swarts retrieved the information on the status of the TTH/Habitat request to the City Commission. It was determined that the City Commission asked for additional information from staff and it appears that the information was never returned to the City Commission.
Swarts noted she would visit with the City Manager regarding the issue and report back to the HNTF.
Other
There was no additional information. After discussion, the group agreed to meet again on Tuesday, March 10, 2009 at 3:30 pm.
Adjourn
The meeting adjourned at 4:50 pm.