City of Lawrence, Kansas

Housing Needs HNTF

March 10, 2009

MEMBERS PRESENT:	Rebecca Buford,  Bobbie Flory, Mary Grob, Commissioner Dennis “Boog” Highberger,  Thomas Howe, Barbara Huppee, Tom Kern, Phil Struble
MEMBERS ABSENT:	Gwen Klingenberg
STAFF PRESENT:	Danelle Dresslar, Scott McCullough, Margene Swarts
PUBLIC PRESENT:	None

Highberger called the meeting to order at 3:30 pm.

Introductions (Boog Highberger)

There were no introductions.

Approval of the February 5, 2009 Minutes

Moved by Howe, seconded by Grob, to approve the February 5, 2009 Housing Needs Task Force Minutes.

Motion passed unanimously

Update on System Development Fees for Non-Profits (Margene Swarts)

Swarts told the Task Force that Toni Wheeler, Legal Services Director, has been looking into this matter, and the basic premise is that the City would recommend that rather than have the system development fees waived for this type of housing that there be a fund set aside to pay for development fees for non-profits and other qualified projects.  This money can come from a program such as CDBG, or it can come from the General Fund or a Housing Trust Fund.  Obviously, there are issues with the budget climate at this time and the Legal Department does not agree with waiving the fees.  The thought is that they will still need to be paid, but there are options as to how they are paid.

Highberger asked Swarts what the difference would be in the fee waivers that are occurring currently.

Swarts said that there have been no waived system development fees.  What few fees have seemingly been waived as in the case of Habitat for Humanity, were paid with CDBG funds. 

McCullough added that the wording may not allow for fees to be waived entirely, but what is being told to them is that there is an alternative to paying the fees if another CDBG-type route is taken.

Kern asked if the City was worried about setting a precedent.

Swarts said that a better method to answer the recommendation legally would be to set aside some funding that would actually pay that fee as opposed to waiving the fee.

McCullough said that there was no authority in adopting resolutions to waive fees.

Kern asked if it was possible to amend the ordinance.

Struble asked Staff if the City would have a problem with the Task Force going to the City Commission to request a waiver of fees for workforce housing projects.

Swarts said that the Task Force is able to base their recommendation on what the Task Force agrees.

McCullough added that Staff would not have a problem with that recommendation coming from the Task Force.

Kern clarified to the committee that the recommendation given to the Task Force by the Legal Department reflects the recommendation of direction for the ordinance as it reads in its current language.

Flory expressed concern regarding the Lawrence Home Builders Association (LHBA) view of the waiving of the development fees when it is not an option for them.  There is a calculation between the infrastructure and legal fees to determine the development fee totals.  She asked Buford how many houses a year that Tenants to Homeowners builds.

Buford said that they build 10 to 15 homes a year, and Habitat for Humanity builds another seven or so.

Highberger asked Buford for the price range of the TTH homes.

Buford said that they are at $100,000 or less.  The developers in town cannot come close to that price.

Flory added that other housing is around $160,000 for a three bedroom, two bath, on a slab.

Highberger pointed out that this is not a competition between the two sectors of homebuilders.

Flory said that there were recent permits pulled for similar housing units that were very comparable to the Tenants to Homeowners housing.

Buford said that those homes were still in the $125,000 range.

Highberger said that he was dissatisfied with the answer from Legal.

Swarts indicated Legal was also working on something for City Manager David Corliss on this question, but she was not sure where they were with the report.

Highberger asked if Struble would like to discuss his question about approaching the City Commission to recommend amending the ordinance. 

Struble said it depended on what the Task Force wanted to do as far as a time frame.  Maybe they can leave it until they have a project, maybe they can approach it, and maybe they wait from clarification from Legal and leave it as it is.

Buford suggested that they approach the City Commission.  It would reduce the price of their projects by several thousand dollars.

Highberger said the low cost unit would stay low cost.  It would not appreciate with the housing market.  Waiving of system development fees can be limited to things that participate in the Land Trust to ensure permanent affordability.

Howe asked if it is limited to those participating in the Land Trust, would that exclude someone such as Habitat.

Swarts said that currently Habitat is not participating in a land trust type of situation.  The owner can sell the property at a profit and it goes into the regular housing market after that.

Highberger said his hope was that the subsidies can be utilized for permanently affordable housing.

Buford said that with Habitat for Humanity, perhaps they could look at changing their program to lock that subsidy in for affordable housing.

Kern said that in Michigan with Homestretch, they had the ability to waive the fee, but the housing had to remain in the Land Trust system.

Highberger asked if the entire workforce housing Kern worked with in Michigan was in the Land Trust.

Kern said both in the Land Trust and not.  Charity and grant money was used to pay fees on others.  Within large workforce units, hookup fees and building permit fees were paid, but they were paid through a grant.  Ones that were totally locked into the Land Trust were waived.  The same was true for Habitat houses.

Highberger said that Habitat could have their system development fees paid by the City and then paid back through the sale.

Swarts asked Kern about the Habitat program in Michigan and how it related to the rest of the workforce housing.

Kern said that non-profit organization constructed houses could exist in mixed income areas of the market with subsidized housing in the same development project.  Fees were not waived by the city and county.  The Housing Authority and non-profits went to charities to get money to pay the fees.  On other projects that were not mixed income the fees were paid by a grant.  An example of land that was utilized in these projects was a case of the City purchasing land to build a bypass.  The bypass did not happen so the City had lots available for development.  They sold these lots to Habitat for $1 as they could not legally be donated.

Swarts asked about waived fees for homes in the Land Trust, if Habitat homes were placed in the Land Trust, and if the City recaptured the inflationary increase of appreciation.

Kern said that yes, the fees were waived for those in the Land Trust.  Habitat homes were not in the Land Trust, and the City did recapture inflationary increase of appreciation.  At Homestretch, everything was in the Land Trust therefore the only buyer of the property could be Homestretch.  It could not be sold by anyone else.  Homestretch had a wait list and there was always a pool of buyers.  At one time they sold workforce housing for $88,000 and within a year the value had already increased 4%.  The homebuyer got 1.2% of the increase and the rest went to the Homestretch pool.  They then resold the property at the new price including inflation calculations.  Michigan had the same problem that Lawrence has in that Habitat was not keeping their homes affordable.  Once they were sold they went into the regular housing market and there was no recapture.  He indicated that he did not know if that was still the case as there had been some media coverage about the process and questions about the issue arose from the community.

Grob said that Habitat did file a second mortgage on the property.

Swarts noted that it could still be resold for more money.

Howe said that the house then leaves the label of affordable in that case.

Buford said that although Habitat does recapture some, it can still be sold for more money and full benefits to the homeowner.

Highberger asked if there should be a recommendation to the City Commission to look at amending the ordinance.

Flory said she felt that it was important to find out what the legal issues are related to the system development charges.  It is not a good idea to move forward with a recommendation to the City Commission without finding out the background on why an opinion was brought forth by the Legal Department.

Struble said that is exactly the time to ask the City Commission.

Huppee said that the answer from Legal is that waiving system development fees is not the preferred way to look at the issue, which says to her that while not preferred, it is allowable. 

Highberger asked what stipulations they wanted the recommendation to include.  One thing to look at would be permanent affordability requirements.

Huppee said that it should not be necessarily restricted to non-profits.  Conditions may present themselves in the future where developers may want to look at affordable housing developments as well.

Buford said that 80% area median income (AMI) would protect the city and the grant activity under CDBG.  TTH works with 80% AMI for homes and 60% AMI for rentals.

Huppee said that 80% is considered low income.  That is set by the federal government.

Legal Director Toni Wheeler joined the meeting.

Highberger asked Wheeler to summarize the legal opinion on waiving system development fees for workforce housing.

Wheeler explained that their position was that it was not the first recommendation that they would make to the City Commission.  The ordinance that established the system development charge says the City Commission can make exceptions to that.  There is no policy in place right now.  Charges are based on established rates.  They are not arbitrary or discriminatory.  If the Task Force wants to exempt one sector of builders of new housing and not another it may be a problem.  Being sensitive to that, the Legal Department suggests a better way to process requests is to see if the City can utilize a grant to those agencies to pay the fees.

Highberger asked about the difference in permit fees as the City waives permit fees now on occasion.

Wheeler said that system development fees are three to four times higher in cost than permit fees. 

McCullough asked Swarts if waiving permit fees can be considered a funds match for the city in terms of specific grants.

Swarts said yes.

Huppee asked what the collected system development fees pay for.

Wheeler said that they went to large capital improvement expansions.  New homes place additional demands on the system, and they need to be able to plan for that down the road. 

Huppee clarified that the system development fees pay for hard costs, while permit fees were more of a staffing fee.

Swarts said yes.

Buford asked if there was a policy defining this that could solve some questions.

Wheeler said that the ordinance does allow an adopted policy.  It is something that can be investigated.

Highberger asked about other jurisdictions and waiving system development fees.

Wheeler said that she only did a legal analysis.  It is hard to compare what other cities do and how the cities utilize the fees.  It is not always equitable to look at other cities.

Huppee said that the policy can look at the nature of the project and not the developer.

Flory asked Wheeler about the capital costs of waiving fees.

Wheeler said that a complete waiver of those fees means that other entities would have to cover the loss of that revenue.

McCullough asked Wheeler if there are other options for waiving fees besides grants.

Wheeler said she had not spent time on other options, so there might be some.  The main thing is finding a funding source.

Huppee asked Swarts if CDBG restricted such development.

Swarts said that any CDBG funded project needed to meet a national objective, so it does restrict the population of people the grant can serve, such as mixed income development.  When someone wants to do a large development with mixed income and CDBG funds are used, all properties over 80% AMI would not be eligible. 

Huppee clarified that 60% AMI was considered low, and 80% AMI was considered moderate.

Swarts said yes.

Legal Director Wheeler left the meeting.

McCullough said there are different ways to consider the issue.  It could be different depending on the type of structure and if we are discriminating one group and spreading costs over another.

Buford said if the profit builders wanted to build truly affordable housing they should be able to qualify for waived system development fees.

Huppee said that the policy should include affordability requirements.

Highberger said that there was a proposal on the table.  He asked Swarts if, consistent with the discussion, she could draft a policy on system development fee waivers to present to the City Commission in reference to the ordinance.

Huppee added that it should be written in the way predicting the type of housing we need now.  Maybe it can spur the type of affordable housing developments Lawrence needs.

Swarts asked specifically what price or income level should be included.

Huppee said 80% AMI or below, probably between 60% AMI and 80% AMI.

Highberger asked Flory about average costs.

Flory said that the cost for an average slab house is around $160,000.  She added that some were at the same price as the Tenants to Homeowners houses and some were lower.  Generally speaking, $160,000 is the average of everything.

Highberger asked Grob what income level would work with this type of housing.

Grob said that we are missing the boat on the 80-100% AMI borrower.  She asked Buford how many workforce buyers they have helped.

Buford said they have helped some, but they were all single buyers.

Grob said that it is the single borrower and not so much families that can get approved.  For a family to buy a house if they do not have capacity to save a down payment or have very little debt is not very feasible.  They can not buy a $160,000 house and they can not qualify for a TTH house.  Where do we get the money to help this segment of the Lawrence population?  A house payment on a 3 bedroom slab rancher that is new construction, saying that the sale price is $140,000, will take a payment of $1,200 a month.  Rentals can be from $900 to $1,100 a month.  The taxes and fees such as PMI add up on a mortgage payment.  She would like to see a way for those borrowers to participate.  She is not sure where we would get the money.  She asked Buford about once TTH has gotten a property through the system does it still have to go to someone at 80% AMI or below.

Buford said it depended on if there are HOME funds involved or if TTH sell it and be on the chain of title.

Grob said it would have to be a stated mission.

Struble left the meeting at 4:15 pm.

Flory said she appreciated hearing those comments.  She is hopeful to increase the ability for people to get into workforce housing. 

Grob said that there are affordable houses available, but some of them are not in good shape.  Recently, loans have become much harder to get.

Highberger said that the two issues were getting people into existing housing and getting them into workforce housing.  Based on income levels, people who are working cannot buy the lowest level market product, but they make too much to qualify for other services.

Grob added if they have two children in daycare that is $1,000 a month.

Kern said that there are assistant professors having to live in subsidized housing also.

Buford agreed and said that that is correct.  However, if there are not children, they often cannot qualify to buy a new home because they exceed the income guidelines. 

Swarts asked the Task Force if they would want to consider going beyond 80% AMI for qualifications.  With the Neighborhood Stabilization Program HUD has opened up income guidelines to 120%.  Is that something that they want to consider?

The Task Force agreed that 120% AMI would be acceptable. 

Flory stated for the record that she preferred Wheeler’s recommendation to not waive system development fees.

Discussion of vacant public land for affordable housing (Margene Swarts)

City Manager David Corliss joined the meeting for the discussion on vacant public land for affordable housing.

Swarts presented the Task Force with large scale maps that illustrated land owned by the City, the County, and USD 497.  There are a lot of parks and city buildings on some of this land in the original map.  Swarts talked to GIS staff and they redid the map to mark to exclude parks and city building locations.

Corliss added that the school district had not specifically noted if something was on their land.

The Task Force split into several groups and each discussion followed about the land that was shown on the maps.

Corliss pointed out several properties on the map that the City of Lawrence had purchased and the reasons that they had purchased it, such as placement of a storm water tube or a flood prone home.  He noted that the property owned by the school district beyond Langston Hughes Elementary School was purchased by the school district but was not all ultimately needed for the total project. 

Huppee suggested that the Task Force look into KU Endowment properties.

Corliss said that was a good point and the University may have property that is not being used.

Flory asked if this project would work like the HAND project.

Highberger said that it would be similar to HAND but not exactly like it.  The school district should be a willing partner in this project because of the workforce housing need for teachers.  Highberger suggested Swarts draft a letter to the appropriate school district representative to talk about the possibilities regarding school district land.  He also asked that a letter be drafted to the KU Endowment Association with the same intention.

Corliss said that Staff can run the inquiry on the Endowment properties, and then speak to them about their properties. 

Huppee said that some of the Endowment properties may have estate stipulations tied to them about the fact that they are required to stay in the Endowment.

Next steps/task assignments.

Highberger suggested that the Task Force schedule the next meeting for April 7 at 3:30pm in the City Managers conference room.  He asked that the school district representative attend, and staff have the system development fee waiver draft policy available for review as well.

Adjourn.

The meeting adjourned at 4:45 pm.