[BoulderCouncilHotline] FW: Information packet on modifications to the Inclusionary Housing program

[Sugnet, Jay]

Dear Councilor Folkerts,
Thank you for the questions regarding the Affordable Housing Program. Below are short responses and we will be happy to go into more detail at the study session tonight.
Jay

Jay Sugnet
Housing Senior Manager

City of Boulder
Housing & Human Services
303.441.4057
PO Box 791 | Boulder, CO 80302
www.bouldercolorado.gov/hhs<https://gcc02.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.bouldercolorado.gov%2Fhhs&data=05%7C01%7CSugnetJ%40bouldercolorado.gov%7C8ea59860668c42c2fc3408dab7c34a74%7C0a7f94bb40af4edcafad2c1af27bc0f3%7C0%7C0%7C638024346656005350%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=bXFIYEqjfmmpbUsUhgmPhe71v6FMVGqzutM4H200gM0%3D&reserved=0>

From: Folkerts, Lauren <FolkertsL at bouldercolorado.gov<mailto:FolkertsL at bouldercolorado.gov>>
Sent: Wednesday, October 26, 2022 2:04 PM
To: HOTLINE <HOTLINE at bouldercolorado.gov<mailto:HOTLINE at bouldercolorado.gov>>
Subject: Information packet on modifications to the Inclusionary Housing program


Good evening colleagues staff and Hotline followers,

I have some questions and proposals related to the upcoming discussion on modifications to the Inclusionary Housing (IH) program.  The packet provides a great summary of the existing program and its history, however, there are several Items I’d like to know more about.



  1.  Are the for sale middle income housing units permanently deed restricted?  If so, is the appreciation capped on a yearly basis, what is that cap, and are there factors that keep the maximum yearly appreciation from being realized?

Yes, all moderate- and middle-income ownership homes in the program are affordable in perpetuity. Each year, the appreciation rate is either the percentage change in the most recent Consumer Price Index or Area Median Income (whichever is less). The maximum increase for any given year is 3.5 percent, while the minimum increase is 1.0 percent. The resale formula that sets the maximum price strikes a balance between keeping the home affordable for future buyers and allowing owners to receive a return on their investment in the property. We are not aware of factors that keep the yearly appreciation from being realized. But there are voluntary programs such as downpayment assistance and special assessment assistance that could reduce the future resale price of a home.



  1.  In the existing Inclusionary Housing program are there minimum unit size requirements or bedroom requirements based on the size or bedroom count of market rate units in the building?

Yes, the policy intent is for the affordable units to be comparable in size to the market rate units. Below is the table in the Inclusionary Housing regulations.

[Table  Description automatically generated]



  1.  Do we have protections in place that ensure neighborhood and association fees are restricted and remain proportional to property values so that deed restricted units do not end up being required to pay for modifications that don’t end up having a positive impact on their appreciation

HOA fees are included in the total housing cost when a buyer purchases a home to ensure affordability. And staff reviews HOA declarations prior to accepting a home in the program. Staff also go to great lengths to explain to program applicants the risks of homeownership and the potential for escalating HOA dues and one-time special assessments. But challenges remain, as with all HOAs, because it is a contract between the HOA and the homeowner. The city does not have a role and the state has regulates HOAs. Staff continues to explore options to address the challenges with HOAs and has developed a program to assist with special assessments and reviews the affordability of each unit at the time of resale if the HOA fees increase substantially.



  1.  Of the 25-28 onsite affordable units mentioned as part of recent annexation agreements, how many of those has the city received building permits for?  Not all annexations result in the proposed development because markets change and as projects progress sometimes developers decided that the cost or risk are too great.  How confident are we that these new annexations will result in the construction of units.

We are not sure where the reference to 25-28 onsite affordable units comes from, but in general, development of annexed properties is on the timeline of the property owner. Therefore, the confidence level would be property specific.



I also would like to propose some additional Inclusionary Housing updates, and wanted to make sure everyone has a chance to review them before the meeting



  1.  In attachment C the Desired Outcome of the project is listed as “Align housing programs, especially the Inclusionary Housing Program, with the city’s goal to increase middle income homeownership opportunities in Boulder.”  I would like to propose a change to “Align the Inclusionary Housing Program and the city’s zoning standards, with the goal of creating higher numbers of both for rent and for sale affordable and middle-income housing units, while also ensuring that the IH Program doesn't create an incentive for larger market rate units.”
  2.  In looking at adjusting IH Cash-in-Lieu, staff has proposed a sliding scale based on home size, and charging for demolition and rebuilding of new homes.  I would like to propose that we take that to as nuanced a level as we are allowed by state law.  Ideally, I’d like to see the IH fee set up similarly to many other fees in the city which are accessed per square foot.  This would allow the city to collect a small amount of IH fee not just for new homes, but also for the expansion of existing single family homes, and account for the impact that has on housing affordability. 
  3.  I would also like to propose an additional section of IH updates that focus on new incentives or paths for creating middle income and affordable housing such as:

     *   Allowing an additional for sale permanently deed restricted middle income or affordable housing unit on any single-family residential property by right as long as it meets all other zoning requirements.
     *   For mixed use and multi-family residential properties, for sale permanently deed restricted middle income or affordable housing units should not count against dwelling unit maximums.
     *   In RMX-2 and RH-2 where a 2x density bonus (with no increase in building size) is allowed with site review, we should also allow the additional density without site review if the project meets Inclusionary Housing requirements with onsite units.
     *   Projects under a certain size (perhaps 50Ksf) that meet their inclusionary housing requirements with ownership units onsite, should be allowed by right and not required to go through site review
     *   Projects under (perhaps 50Ksf) where 80% or more of the units are deed restricted permanently affordable or middle-income ownership or rental units, should be allowed by right and not required to go through site review
     *   We should also look at reduce parking and open space requirements for projects that meet or exceed their inclusionary housing requirements onsite

  1.  I would also like to propose another additional section of IH updates that focus on ensuring middle income homeownership units set up owners for long term success.  For this I would like to see a review of the following:

     *   Adjust appreciation to ensure that it is keeping up with cost of maintenance and lending costs
     *   Adjust standards to ensure neighborhood and association fees are restricted and remain proportional to property values so that deed restricted units do not end up being required to pay for modifications that won’t impact their appreciation.



I understand that some of these suggestions may impact or be impacted by other planning efforts, but I strongly believe that after speaking with several affordable housing developers that minor modifications to the inclusionary housing program are not likely to provide more middle-income ownership units.  These suggestions are not intended to replace other planning efforts, but instead they are intended to supplement them.  Each one of these changes is specifically targeted to address issues I’ve heard about or dealt with when looking at the development of middle income and affordable housing in our community.  Our municipal code is a living document and it’s more important to make sure that updates to it are prompt and reflective of community needs rather than all-encompassing and completely comprehensive.  Unless we address zoning issues that significantly impact the number and type of residential units that can be built in our community, we are not doing justice to the topic of middle-income housing.   Infill and missing middle housing must be part of both this conversation and other zoning and development conversations, because even if these market rate units are not affordable for middle income households on they day of completion, in 10-20 years they could be the units that help address market rate affordability. 

Thank you for your consideration,
-Lauren Folkerts
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