I received feedback from many state & national experts on the affordable housing proposal. They were not positive. Neither were mine. We deserve a solution that respects the seriousness of the situation. This did not. For obvious reasons the names have been removed. These are mostly unedited, however a few were changed to protect the identity of the author.
I especially concur with the statement that some of the data presented was intellectually dishonest.
My next post will be presenting a more complete housing policy.
There’s a huge need for affordable housing in Olmsted County and Rochester. According to work done by Maxfield Research and Greater Minnesota Housing Fund, keeping pace with the need for affordable housing would require producing over 4,500 affordable homes in Olmsted County by the end of 2020.
All financing and policy tools should be used to further the shared goal of creating as much affordable housing as possible.
According to the report by Grounded Solutions, a mixed-income housing policy in Rochester that requires 10% affordability in new rental and for-sale housing – both with some offsetting financial incentives including TIF, fee reductions, density bonuses, and other tools – would create approximately 70 affordable homes in Rochester every year (a total of 280 affordable homes from 2017 through 2020). This needs to be the minimum starting point for the discussion.
The staff proposal for leveraging TIF to create affordable housing is one approach, but it doesn’t go far enough.
The affordability requirements should be triggered any developer request for City assistance: TIF, zoning change, conditional use permit, non-conforming use approval, incentive or restricted development process, or other requests. As proposed, they would only be triggered by a developer seeking TIF or an incentive or restricted development process.
The affordability requirements should apply to both multifamily and single-family development. As proposed, they would only apply to multifamily development. Participating in efforts like First Homes is valuable and worthwhile, but the City of Rochester should be willing to programmatically require affordability in single-family development.
The staff report suggests that the cost of requiring affordability will be passed along by the developer to the market rate renter or homebuyer, or to the City of Rochester in the form of reduced fees, or to landowners in the form of lower prices.
Grounded Solutions demonstrated that incentives including TIF and density bonuses can offset the cost of affordability requirements to the developer.
The market rate renter or homebuyer is making a market-based decision to rent or purchase their housing.
The City of Rochester could revise its fee structure to be revenue neutral, if affordable housing has reduced fees.
The staff report suggests there are limited examples of mixed-income policies in Minnesota. Grounded Solutions identifies 8 cities that have mixed-income policies, and provides a full case study for several of them, including the City of Edina.
In Edina, multifamily development requires 10% at 50% AMI or 20% at 60% AMI affordability. That’s consistent with the staff proposal but is also triggered by other developer requests for assistance, not just the use of TIF.
In Edina, single-family development requires 10% at 110% affordability. That’s a greater requirement than the staff proposal, although at higher incomes.
The City of Edina has flexibility to help developers meet their affordability requirement with tools such as density bonuses, parking reductions, building the affordable units off-site, or a fee-in-lieu of producing the affordable units.
The City of Rochester should implement the recommendations of Grounded Solutions, adding the potential option of a fee-in-lieu if developers would prefer to pay a fee rather than producing the affordable units.
The City of Rochester could capitalize an affordable housing trust fund using the fee-in-lieu and the affordable housing portion of non-housing TIF that staff proposed. This local, dedicated resource could leverage the creation of a lot of affordable housing.
- The staff report suggests that more than half of the single-family homes in Rochester are already affordable at 80% AMI, based on “the best available tax information”, and that these homes will be a resource for lower-income households in the future.
- For the community to grow, more housing is needed at all price points.
Many homeowners are aging in place and unlikely to move up in the market because there are limited options at more moderate price points.
- In a hot real estate market, assessed values lag market values, so it’s likely that many of those homes won’t be quite as affordable if they turnover.
- It’s critical to use CDBG and other tools to encourage rehabilitation, to preserve the stock of older homes.
- It’s critical to use financing and policy tools to create new affordable single-family homes, to serve households with lower incomes and few options.
I must say, it struck me as strangely defensive, excuses heavy, and at times intellectually dishonest, especially in comparing St. Louis Park’s new TIF policy results with the entirety of what Rochester does for affordable housing.
Terry recommend a TIF standard of 20% affordability, and that incentive developments getting extra units would be required to make 10% of the bonus units affordable. But NHC’s national scan of policies in 2014 did not turn up a single place in the U.S. with such low affordability expectations when providing bonus units. Rochester, was cautious in recommending 10% overall affordability. A 100-unit development receiving a 20% density bonus would provide 1.7% affordability. If the building were allowed to double in size to 200 units, it would provide at most 5% affordability.
A comparable program structure to what Terry is proposing is Arlington County, VA. There they require 20-35% of bonus units to be affordable in designated (under-invested) corridors. Given Rochester’s comparable land costs, and given that density bonuses offset the cost of land for the market and affordable units, you should be able to support at least 20% of the bonus units made affordable.
Based on the land costs reported in the prototypes section of the report (which were minimally $43k per unit in peripheral areas of the city), I’d calculate that you could completely cover at least 1 unit’s affordability gap for every 4 units that get free land via the density bonus. 25% affordability. I would ask staff at the very least to show their financial numbers for concluding that 10% of bonus units is the most one could ask.
Lastly, regarding 5% of TIF reimbursements from commercial developments going to affordable housing: not a bad start. But most, if not all, jurisdictions set aside a bigger share if they’re going to both. 20% is common. Portland just recently increased their overall share to 45% (previously 30%).