<html xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40"> <head> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> <meta name="Generator" content="Microsoft Word 15 (filtered medium)"> <style></style> </head> <body lang="EN-US" link="#0563C1" vlink="#954F72" style="word-wrap:break-word"> <div class="WordSection1"> Dear Councilor Wallach,<o:p></o:p> Thank you for the questions. Below are brief responses and we will be happy to go into more detail tonight at the study session.<o:p></o:p> Jay<o:p></o:p> <o:p> </o:p> Jay Sugnet<o:p></o:p> Housing Senior Manager<o:p></o:p> <o:p> </o:p> City of Boulder<o:p></o:p> Housing & Human Services 303.441.4057<o:p></o:p> PO Box 791 | Boulder, CO 80302 <o:p></o:p> <div> <div style="border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in"> From: Wallach, Mark <<a href="mailto:WallachM@bouldercolorado.gov">WallachM@bouldercolorado.gov</a>> Sent: Wednesday, October 26, 2022 5:25 PM To: HOTLINE <<a href="mailto:HOTLINE@bouldercolorado.gov">HOTLINE@bouldercolorado.gov</a>> Subject: Housing <o:p></o:p> </div> </div> <o:p> </o:p> In connection with tomorrow’s conversation concerning middle-income housing, I do have a few comments.<o:p></o:p> <o:p> </o:p> 1) Can we start by understanding what housing  must be priced at in order to be considered middle-income? And what level of AMI is associated with various price levels?<o:p></o:p> There are three tiers for middle income with different pricing and income limits for attached and detached units. The price is scaled according to the home’s square footage and number of bedrooms and baths. For example, an attached unit (1,200 square feet 2 BR, 1B) is $462,366 priced at 120% AMI, $376,781 priced at 100% AMI, and $291,195 priced at 80% AMI. We currently do not have any homes priced at 120% AMI and staff is concerned that this pricing level may compete with the market (i.e., may not be discounted sufficiently for a buyer to accept an appreciation cap as you discuss in question #12 below).<o:p></o:p> <o:p> </o:p> 2) On page 4 of the staff memo: what is the data on the impact of the Construction Defect Law? Are condos not being built anywhere? Are no condos being built in Denver?<o:p></o:p> Construction Defect Law is only one factor for the shift from rental to ownership. Condos are being built in Colorado and across the country, but significantly more rental was built after the housing bubble. Developers that previously built for sale housing have indicated that the defect legislation is a strong factor in not building this product.<o:p></o:p> <o:p> </o:p> 3) On page 5 of the memo, please clarify the distinction between mid-size and larger annexations.<o:p></o:p> Small annexations have development capacity for 1-4 units where we will consider 2x the cash-in-lieu for each newly constructed home. Large annexations would have capacity for over approx. 30 - 40 new homes and up. Medium is between the two. For example, the 90/96 Arap annexation will construct 46 units of which 19 will be permanently affordable. <o:p></o:p> <o:p> </o:p> 4) on page 7 of the staff memo it says the following: “The city cannot influence the tenure (ownership/rental), location or any other characteristics of the IH required affordable housing in a new housing development.” Why not generally, and specifically why not when the developer is asking for relief from one or more requirements, such as height, open space requirements, etc.?<o:p></o:p> Tenure is prescribed in the IH code. In rental projects developers can provide rental or for-sale units, in an ownership project they must provide ownership units. Per location we were referring to the location of the project itself, staff reviews and approves location of the units with-in the development. For-sale projects cannot aggregate the affordable units throughout while rental project are allowed to aggregate the affordable units to facilitate separate ownership. <o:p></o:p> The community benefit ordinance, 9-2-14 (h)(2)(K) allows for a height modification in return for an increase in the IH requirement.<o:p></o:p> <o:p> </o:p> 5) What aspect of the Telluride Decision forbids us from entering into a bargain with a developer who wants relief from city requirements in exchange for other limitations on rents? What if the rent relief were for a fixed period of time, say 20 or 25 years? Why is this not a contractual bargain relating to an individual project instead of the institution of a rent control system?<o:p></o:p> The Telluride decision does not preclude voluntary agreements with developers. We could negotiate as described per project. However, these sorts of negotiations are time consuming because coming to a reasonable agreement with the developer can be difficult. The city is not staffed to have drawn out negotiations on each development's IH compliance.<o:p></o:p> <o:p> </o:p> 6) On page 11, the calculation of what is necessary to achieve 15% affordability is a bit misleading. The text implies that if we could simply double our existing affordable units we would achieve our goal. Where the calculation falls short is that as Boulder continues to grow, so will the required number of affordable units in order to hit the 15% threshold. If we continue building at a rate of 75/25 market rate to affordable units, we would need to build more than 10,000 units of housing to get to that 15% affordability level. <o:p></o:p> Correct, new construction is not going to get us to the 15% goal. The other part of that graphic shows the importance of preservation or acquisition of existing housing and converting it to permanently affordable housing. Over the last few years, we have created 35 units of affordable housing for every 100 new housing units built in the city.  We are obtaining affordable housing well above the 25% indicated in IH.<o:p></o:p> <o:p> </o:p> 7) On page 12, proposed changes to IH requirements: CIL is a major source of funding for the creation of affordable housing in Boulder. What will be the revenue impact on the ability of BHP to provide affordable housing by moving towards middle-income housing. And, as affordable housing is highly leveraged through private equity, LIHTC credits, and federal funding, what is the true comparison of the number of units in each category that we will produce? Affordable housing has a leverage of 9 or 10 to 1. What will be the expected leverage for middle-income housing? Is this not a zero sum situation where we produce fewer affordable units through the diversion of resources to middle-income units? Have we fully analyzed the costs and benefits of doing so?<o:p></o:p> We will discuss in more detail tonight, but previous council’s have clearly stated that funding should not be diverted to middle-income at the expense of low- and moderate-income households. And you are correct, middle-income ownership does not currently have the same ability to leverage outside funding and requires a much higher city subsidy using local funding. <o:p></o:p> <o:p> </o:p> 8) On page 12 it is stated that at 60% AMI families are fully able to access market rate housing. This may be the case in older market rate projects, but strikes me as unlikely in newer construction. Looking at the last 20 large projects completed in Boulder, in how many of those could a 3 BR unit be rented for $1,956/month? My instinct is that the market is not providing a great deal of housing at that price.<o:p></o:p> Yes, new rental construction is rarely affordable to low and moderate households. And to clarify, a 60% AMI household may not like the choices currently available in Boulder and choose to find lower rents outside of Boulder. But some will accept an older, smaller unit with fewer amenities to live in Boulder. <o:p></o:p> <o:p> </o:p> 9) I am confused about the comment on page 13 that increases in IH can make some housing developments less attractive. At least with respect to large projects, isn’t this the goal, in order to incentivize the production of actual units, either on site or off site?<o:p></o:p> Increases in CIL have not resulted in more on-site units. Developers still pay the CIL and increase rents or sales prices to cover the ever-increasing cost. The point staff is trying to make is that the annual increase in CIL is significant may have a chilling effect on new development in the coming years. <o:p></o:p> <o:p> </o:p> 10) I think staff’s goals with respect to utilization of a consultant (page  13) are on point and appropriate.<o:p></o:p> <o:p> </o:p> 11) What does the comment that BHP, Thistle and Habitat for Humanity are buffered from bankruptcy mean, and what is its relevance to this discussion? (page 14) <o:p></o:p> Our point is that affordable housing that is owned and operated by non-profits such as the housing authority (a quasi-governmental entity) has better access to local, state, and federal financial resources to maintain the units and a mission to ensure the affordable housing will not be lost. Market-rate owners do not have access to the same array of funds.<o:p></o:p> <o:p> </o:p> 12) While this is not the moment to get into detail concerning the mechanics of deed-restricted housing, have we at least done any analysis as to the extent of the market for this type of housing? While there are undoubtedly individuals or families whose desire to live in Boulder is so great that they would forego market appreciation for the opportunity to do so, have we at least studied how deep that market would be? If not, should we not do so? <o:p></o:p> HHS commissioned a study in the spring of 2022 to better understand middle-income pricing. The study found that there is clearly a market for affordable homes between 80 and 100% AMI. This is reflected in the significant demand for the Affordable Homeownership Program that has homes prices for moderate and middle-income households. There are currently 198 households income and asset qualified waiting for an affordable home. 45 have incomes over 80% AMI. In recent city acquisitions of market rate homes (4 in 2022) staff has learned that a discount of at least $100,000 is needed for a household to accept the appreciation cap of an attached home. That amount grows as the unit size increases for both attached and single-family homes.<o:p></o:p> <o:p> </o:p> </div> </body> </html>