[bouldercouncilhotline] Hotline: Inclusionary Housing Item

[cmosupport at bouldercolorado.gov]

Sender: KC Becker

As Council members know, we are scheduled to discuss on Tuesday night next steps for revisions of Inclusionary Housing and other housing policies. I'm writing this hotline item because I think my comments could take a lot of time during the Council meeting, and because of the many issues I raise, could be hard to follow.
 
I asked that this item be scheduled after reading the November 1, 2012 Information Item titled, "Inclusionary Housing Rental Policy Update." That memo concerned me because I had been hearing about policy changes that our Housing Department has recently made, but these are not the ones that appear will be coming to us.  I was also concerned that the Nov 1 update mentioned several changes that neither Council or the Affordable Housing Task Force have asked for, although we have asked for other affordable housing items to be addressed. Additionally, at least some of the changes aren't supported by affordable housing providers (non-profit providers and for-profit developers who have opted to build affordable housing rather than pay cash-in-lieu). So I thought that some more work to understand their concerns needed to occur before this item came to Planning Board and Council. I think there are important developments in the affordable housing world that we need to understand in context and I'm concerned that addressing a couple things in a piecemeal fashion will just mean that we end up re-visiting them again. On a substantive level, I personally have many questions about the requested changes that I thought the Housing Division's proposal to have a "less robust public process than is normal" wouldn't work.  For all these reasons, as further addressed below, I think it's premature to bring these items up now. If Council does want to move forward with this item, then to the extent they are not addressed in the memo accompanying the first reading,  my questions and concerns should be considered first reading questions.
 
I want to acknowledge that staff is proposing changes that they think are in the best interest of the program and that these changes are ones that they believe are necessary because we are about to see a large number of affordable rental units being built. I'm not clear whether affordable housing rental units that are currently in the development pipeline will be affected by these changes or not, but I believe that number is about 170 units. I don't know how many we can realistically expected after that.  
 
I also want to preface my comments by saying I  don't have concerns with all of staff's proposals. Some I think are quite good. But I am concerned, as I state below, that many of the changes need to be considered after other work is done (hiring a director, creating an affordable housing plan, getting input from the city attorney's office, doing more market research, incorporating more input from the affordable housing community, etc). They also need to be considered along with other policy changes that staff is making. There are many more changes that have been made or are being made to the affordable housing program, and we need to hear about all of these. 
 
Ok, my broader concerns are listed first; my more substantive concerns are listed second.  
 
1) My overarching concern is that we do in fact need some IH Rental Policy Reform, but that it really needs the involvement of a Housing Director before it can proceed. Affordable housing is complex, costly, and contentious. It is important to have leadership in place.  Out city manager has begun the process of hiring a new Housing Director and it may make sense to wait for his/her expertise and input. 
 
2)  We need, in my opinion, an Affordable Housing Master Plan.The Housing Division is  trying to get ahead of an estimated influx of affordable housing,  but i'm not sure that we can know where to head without a Housing Plan. In every other department, we create master plans and then implement that. We have learned that with affordable housing, we have difficulty reacting to the market because the market will keep changing and then we need to react to that. Instead of chasing what the current trend is, shouldn't we have a larger, long-range plan that guides all of this? Case in Point: About 3 or 4 years ago, we significantly increased the cash-in-lieu (CIL) that developers who were building had to pay. That has led to developers building units instead of paying CIL, and staff is now reacting to that in this proposal to lower CIL. If we adopt staff's proposal, that will have consequences and then we'll react to that. I'd like to have a Master Plan that guides us to particular outcomes so we know how best to react.  
 
3) Earlier this year Council laid out 2 specific work items about IH Rentals: that they be well-distributed in the city (i.e. not all located in North Boulder) and that, if possible, we try to create mixed-income projects. The first has been dealt with by staff through an internal policy change. However, this policy change is not one listed in our memo as one to be addressed, and yet it still needs an ordinance fix or Council feedback. Solutions to meet Council goal of having mixed-income projects may or may not be included in the proposed changes.  I'd still like to see these addressed first rather than distract  staff with other work plan items. 
 
4) On that last point, some of the staff work that needs to occur before we can really get a handle on the outcomes of proposed affordable housing projects rests with the city attorney's office. Ultimately many of the opinions or solutions they offer may significantly affect what staff's proposed changes. For instance, as I briefly mentioned, we are seeing private developers starting to build affordable rental projects. This is a new development in the city and the City Attorney's Office has some questions about how these deals are structured. These legal issues need to be resolved before we even know if we are going to see more projects like this.  As I mentioned, if the city attorney's office can satisfactorily address Council's goal to see more mixed-income projects,  some of the Housing Division's current proposals may be unnecessary or may need to be reconsidered as a new type of project then comes into the market. 
 
On a substantive level, I have many comments on a few of the proposed changes.  One would significantly decrease the amount of CIL that developers of rental housing must pay. The other would require that IH rents be affordable to households earning no more than 50% AMI.  Another would change the size of affordable housing units that must be built. 
 
1) I am concerned that the solutions Staff provides will lead to less affordable housing both because a lower AMI would be required and because CIL instead of units will be provided. We have 1 defined goal when it comes to affordable housing: 10% of our stocking stock. Are we, in effect, making our goal harder to achieve, rather than easier to achieve, with these changes? If our policies don't prioritize the creation of affordable housing, should we change the 10% goal? I'm concerned about how Cash in Lieu dollars are spent, what the overhead is, how decisions regarding CIL are made, especially if we end up seeing a huge influx of CIL dollars (170 units in current CIL dollars is about $22million). Therefore,  I'd like to staff to provide a table of CIL dollars spent since its inception: annual cash-in, annual cash-out, current balance, overhead, etc. I'd also like to see a list criteria for considering awards. Right now we get an annual prose-style report, but I'd rather see a more detailed spreadsheet that includes all of the information above. 
 
2) I think underlying these changes is a more policy-level discussion: is it ok for for-profit developers to be developing and partly owning affordable housing? It is clear to me that HHS staff is uncomfortable with this development. And it's a fair issue to raise. I believe that some of the changes the Housing Division is proposing will likely end the opportunity for for-profit developers to do this housing. I think we need a Council discussion about the pros and cons of for-profit owned affordable housing. How common is this? Where else does it happen and why? I don't want to skirt the real discussion. 
 
3) Staff proposes to lower the IH rent level from 60% AMI to 50% AMI because they say 60% AMI rents are "equal to or higher than current average rent in the community." I have seen a very recent market study that disagrees with that find. Staff said they did a market study, but I'm told it's based on 2006 housing data. That's a problem.  Staff needs to reconcile the data before it comes to Council. As important, if our affordable housing units at 60% AMI are higher than market, then is there really an affordability gap?  Also, while it's very commendable to make sure that housing for all income levels are met, there are lots of affordable housing tools to do this, like section 8 vouchers, rental assistance, down payment assistance, etc. Why are they not adequate? Third, Council has a goal of meeting middle income housing. What happens to that goal with this change. 
 
4) I'm confused by 2 problem statements, one which says that off-site affordable housing rental units should not be required to be proportional to the market rate units which generated the requirement for IH, and another statement saying that requiring affordable unit floor area to be no smaller than 80% of market rate units is producing units that are too small.  If/when this comes forward, I'd like to staff to clarify how these 2 solutions don't conflict. My own opinion is that market rate units in one location for one type of renter should not dictate the size of a completely different project, geared to a different renter in a different location.   Senior housing, family housing, work force housing, housing first housing require very different unit configurations and sizes and locations.  While we need to insure that our affordable housing program isn't short changed, we shouldn't force the affordable housing to one product-type because it's tied to the size and configuration of the market rate units that generated the need for the affordable housing. 
 
Thanks for reading this very long email. One thing they could address is why these changes are immediately necessary and what are the longer-term implications of not making them (and why those are bad implications and should be avoided). 
 
KC