Background:
See previous Council Communication (attached) and previous meeting minutes
(attached).
Below Staff has provided responses to a number of questions raised by Council
at the August 17th discussion of the RFP. Based upon the Council deliberations
regarding the development above downtown parking lots, the proposed RFP would
be modified to exclude all but the Lithia way parking lot as a demonstration
project site. The comments provided below are primarily related to the Lithia
Way lot for this reason.
Issue: Downtown Housing
Second story residential uses were identified as desirable in the 1988 Downtown
Plan. The Plan cites that people who live downtown offer security and a sense
of community (pg15). Within the section on Housing in the Downtown Plan it
is stated that
"Housing should be introduced downtown on upper stories. Allowing it outright
and removing off-street parking requirements encourages owners to rent to
travelers and enhances the area's diversity. This will allow a flexible downtown
housing pattern and encourages appropriate downtown multi-story developments"
(pg. 44).
Specifically referencing the development of Lithia Way and Will Dodge Way
(alley), the Downtown Plan recommends creating an intimate atmosphere on
Will Dodge Way through the construction of buildings at least 2 stories in
height (pg37). Further the downtown concept plan on page 28 of the document
shows that a new building was planned for the area currently occupied by
the parking lot. Although this site was not originally identified as a location
for parking, its use is clearly beneficial to the downtown businesses, tourists,
and residents. Within the "Parking" section of this memo the issues involved
in parking are described in more detail.
Throughout the Transportation Element of the Comprehensive Plan mixed-use
development is encouraged especially when in easy walking distance of transit
(pg. 11). Being located on an existing bus route, the Lithia Way lot is well
suited to take advantage of existing transit. Further the Transportation
Element cites that "mixing land uses, housing and jobs, reduces traffic by
locating residences close to shopping, entertainment, and job centers."
Issue: Long-Term Lease/Purchase of Airspace or Reversion back to
City?
In Paul Nolte's Memo to the Housing Commission dated November 17, 2003, five
ownership/lease scenarios are outlined (attached). In evaluating these
alternatives the Housing Commission has indicated support for any mechanism
that establishes the ability for the City to recapture, or retain ownership,
of the property at the conclusion of the affordability period.
Should the Council agree, the RFP will specifically state after the term
of affordability that the project will revert in ownership to the City for
$1 if the original project involves purchase of the air-rights.
The other option would be to attempt to maximize the economic return on the
property by leasing or selling the airspace at market or near-market rates.
However, this approach would likely preclude the option of utilizing the
site for affordable housing.
Given the effort to minimize project costs to use the available land to subsidize
the affordable housing project, any lease or purchase amount would have to
be minimal ($1) to benefit the low-moderate income households.
Issue: Rental vs. ownership
Council members raised concerns over whether the RFP would solicit for-purchase
affordable housing projects in addition to rental projects. Given the reversion
of asset requirement at the conclusion of affordability period, a for-purchase
project would not be feasible. Although the initial purchasers of the units
could benefit from the ownership opportunity and recapture some equity upon
resale, the household in the unit(s) at the conclusion of affordability period
would be in a position to sell their investment back to the City for $1,
taking a considerable loss. Essentially a rental development is preferable
development for this reason. Additionally City of Ashland Housing Needs Analysis
(adopted 2002) found that the greatest disparity between the type of housing
units needed and the type built since 1998 is for the attached multifamily
residential (apartments) housing type (Table 4-1). The development of City
owned property provides an opportunity to ensure the needed housing type
of apartments is provided.
Issue: Level of affordability
The draft RFP indicates that affordable units would have to target households
at or below 80% area median income (AMI). Members of the Council have raised
the question as to why not require proposals benefit only households at or
below 60% AMI. To provide actual income levels for consideration, the current
income levels as established by the Department of Housing and Urban Development
(HUD) for the Medford-Ashland metropolitan area are shown below:
Income Limits by Family Size: $/year
*For the Medford-Ashland Statistical Area as determined by the Department
of Housing and Urban Development 2004. |
Income Level
Category |
Number of Persons in Family |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8+ |
| Extremely Low Income (30%) |
10,950 |
12,500 |
14,050 |
15,650 |
16,900 |
18,150 |
19,400 |
20,650 |
| 60% Income |
21,900 |
25,020 |
28,140 |
31,260 |
33,780 |
36,240 |
38,760 |
41,280 |
| Moderate Income (80% Median) |
29,200 |
33,350 |
37,500 |
41,700 |
45,000 |
48,350 |
51,700 |
55,000 |
The City of Ashland Housing Needs Analysis (HNA) found that 3660 of Ashland's
8645 households (42%) qualify as low income (80% area median income-AMI).
These households will not have the ability to purchase housing within Ashland
on the open market without substantial private contributions or government
subsidy. Therefore this large segment of Ashland's population is primarily
in the rental market. Depending on the household income level, the housing
costs including utilities should account for no more than 30% of the household's
total income.
Given that rents charged in an affordable housing project are correlated
to income level, staff sees an advantage in providing flexibility in the
income levels targeted assuming all households qualify as low-moderate income
or extremely low income. In general the rental proceeds from those households
approaching 80% AMI can offset the lesser rents generated from units targeted
to extremely low-income households. For this reason the Housing Commission
recommended that proposals for developments above downtown parking lots serve
households at or below 80% AMI. The largest unit gap exists for households
earning less than $10,000 a year (page 4-3 HNA), however as the total amount
of rent and utilities that can be charged without over burdening these households
is $250. These rents do not provide enough revenue to pay for the development
and maintenance of the unit without additional subsidy. Should the Council
require the proposals only target households earning less than 60%AMI it
is staff's concern that again the maximum rent per unit obtained by the developer
(approximately $400-550 not including utilities) may not be sufficient to
account for development costs and ongoing management and long term maintenance.
For these reasons staff sees value in establishing a ceiling of 80%AMI to
encourage multiple proposals. At today's income levels, 80% AMI rents approach
$550 for a studio, $640 for a one bedroom, and $794 for a two-bedroom unit.
Such affordable rents will increase over time commensurate with the wage
increases (typically 2-3% annually) as compared to market rate increases
in housing costs.
If a developer intends to utilize federal funding, tax credits, or other
subsidies to contribute to the project, a percentage of the units (or all)
could be required to be at or below the 60%AMI due to the additional subsidy.
It is clear given the number of service sector jobs available in Ashland
and the vicinity, many resident employees will be eligible for the units
at 80%AMI.
Potential households and wages
A single person earning $14.03 per hour would qualify at 80%AMI and could
earn no more than $10.52 per hour to qualify at 60%AMI.
A two wage earner household could earn cumulative wage of $16.03 per hour
($8.02 each) and qualify at the 80%AMI mark, but could earn no more than
a combined $12.03 per hour to qualify at 60% AMI.
A household with two wage earners and a dependant could earn a cumulative
wage of $18.02 ($9.01 each) per hour and qualify at the 80%AMI mark, but
could earn no more than $13.52 per hour combined to qualify at 60%.
Given minimum wage is $7.05 per hour, establishing a strict requirement that
all units be restricted to 60%AMI households it could be that the proposed
apartments would not likely accommodate households with more than one full
time wage earner. Again the flexibility in a housing product that benefits
households up to 80%AMI would allow for a mix of households and income levels
not otherwise possible under the 60% cap.
Issue: Term of affordability
Provided the City regains ownership of the affordable housing project at
the conclusion of the period of affordability, it would be the responsibility
of future elected officials to determine the continued use of the project.
The Council and Housing Commission have both deliberated on what the initial
period of affordability should be, and have discussed a range between 30
and perpetual affordability. Perpetual affordability, although a admiral
goal poses a number of logistical problems in establishing a realistic management
and maintenance plan for the project, given at some point the structure's
natural life will expire and need to be replaced. For this reason the period
of affordability for affordable housing projects typically ranges between
30 and 60 years.
The intention to provide affordable housing for the longest feasible term
possible points to a 60- year period of affordability. The obvious advantage
being the additional 20 years of needed housing for low-moderate income
households. Financing of a project would likely require a minimum period
of the developer's interest in the property to be 30 years for conventional
funding. The advantage of initially establishing a shorter period, such as
the 40-year period recommended by the Housing Commission, rests in the fact
that after the time period expires, the City could re-evaluate the community
needs and restructure the project accordingly.
For instance, were the original project established to benefit households
at 80%AMI or 60%AMI, at the conclusion of the period of affordability, the
ongoing project could be restructured to benefit only 30% AMI or special
needs populations depending on the most urgent need the community at that
time is facing. A shorter period of affordability both increases the viability
of the initial project, by reducing long term maintenance/replacement costs
attributable to that project, while allowing more flexibility in the potential
re-use of the site. The important aspect in this distinction involves the
fact that the lease or buy-back provision maintains City control of the ongoing
use.
Were the property to be sold outright or donated to a non-City entity, it
would be most advantageous to maximize the period of affordability (60+ years)
as a condition of the sale. However, with the ability to revisit the use
at an interval to be responsive to both the condition of the project and
the needs of the community, a shorter yet renewable period of affordability
has some advantage.
Issue: Parking
The selected property is located within the Downtown (C-1-D) zone. In all
areas within the "D" Downtown Overlay District, all uses are not required
to provide off-street parking or loading areas, except for hotel, motel,
or hostel uses (ALUO 18.35.050). In keeping with the adopted downtown plan,
parking requirements for full time residential uses are not required to provide
on site parking. Within the Draft Downtown Plan developed in 2001 the purpose
of, and priority for, parking in the Core of downtown is stated as to support
and enhance the vitality of the retail/theater core. With this recommendation
it is evident that the existing surface level parking should remain available
for business use and should not be reserved exclusively for residential use.
The draft RFP language has been amended to clearly state that the goal is
to retain the existing number of parking spaces or increase the number to
off-set the impacts of the housing. Working under the principle that the
available parking downtown can be jointly used by both businesses and residents
at different times during the day and night, the current ordinance aims to
encourage residential uses downtown. Were a for-profit private housing project
to be proposed within the C-1-D zone by a private developer, no parking
requirements would apply. For an affordable housing project of the same type,
additional parking requirements would place more restrictions upon affordable
housing than the existing code places on non-affordable housing.
Issue: Potential Project Funding
Affordable Housing developments involve a variety of funding sources and
often some form of local, state, or federal subsidy to effectively off set
the reduction in rental or sale proceeds from an affordable unit. Given the
proposed housing development would target low-moderate households it would
be eligible for competitive HOME funds (HUD Funds allocated through the State)
as part of a competitive award cycle. Projects in the Rogue Valley have been
successful in competing for these State allocated funds over the last eight
years bringing between $500,000 to $900,000 in affordable housing assistance
to the region annually. The Ashland Community Land Trust (ACLT) was successful
in 2002 in being awarded over $570,000 in HOME funds for the development
of the Garfield Street Parkview apartments. The benefit of these HOME funds
is that unlike Community Development Block Grant (CDBG) funds, HOME dollars
can be applied to construction of the dwellings.
Community Development Block Grant Funds could potentially assist in the project
development by paying all or part of public facility improvements within
the right of way necessary to serve the development. This use is currently
being anticipated to assist in the Rogue Valley Community Development
Corporations development of the corner of Siskiyou and Faith by contributing
$13,800 to contribute to public sidewalks, storm drains, curb and gutter
and other public street improvements.
Tax Credits have also been identified as a potential funding source for the
development of affordable housing above downtown parking lots. The City of
Ashland Affordable Housing Action Plan specifically identifies this funding
source for use in developing housing above downtown parking lots. Tax credits
offer direct federal income tax savings to owners of rental housing developments
who are willing to set-aside a 40% of the development's units for households
earning 60 percent or less of gross area median income. Developers of tax
credit developments typically sell the credits to investors, or are retained
by the developer, who is willing to provide equity capital in return for
the economic benefits (including tax credits) generated by the development.
The amount of tax credit an owner receives is determined at the time the
tax credit is allocated by the State. The tax credit amount is based on several
factors including depreciable development costs, type of development (new
construction, rehabilitation or acquisition), percentage of housing units
designated for low-income use, the state's evaluation of the project including
need, and development financing.
The local support provided to the project in the form of donation of air-rights
or a no-cost ($1) lease would demonstrate a local commitment to the project
that is often a key competitive advantage for state or federal funding.
Additionally, the proposed site is within one of only four qualified low-moderate
income census tracts within Ashland which would also be favorable components
in an application for HOME funds or Tax Credits. Tax credits are also available
on a non-competitive basis and the development of new affordable housing
would be eligible for these credits. With non-competitive projects the Credits
are reduced from 9% to 4% but can still be a valuable funding component of
a proposal.
It is likely a variety of funding sources will be brought to bear in order
to complete the affordable housing project. Evaluation of the proposals received
will include an assessment of the funds secured, and/or sought by the development
team.
Issue: Land Costs
Staff has done a cursory analysis of the cost to develop second story housing
over parking spaces versus purchasing multi-family zoned land for a housing
project. While the estimates are rough, it appears clear that the costs
associated with development over a downtown parking lot (with no land purchase)
are far less than those associated with purchased multi-family zoned land.
Additionally, affordable housing providers have continually cited that the
greatest difficulty in doing affordable housing projects in Ashland is in
finding available land. For these reasons staff believes the development
of housing above downtown parking lots is economically feasible even when
considering the added cost of deck construction provided the air-rights are
sold or leased for little or no cost.
Issue: Opportunity Costs
Questions have been raised as to what the potential uses, other than affordable
housing that could be possible as a revenue-generating use. The zone allows
for a wide variety of uses including retail, offices, restaurants, housing,
and public parking. The thought is that there may be opportunities to sell
or lease the property for these alternative uses as a means of generating
income that can be applied to affordable housing projects elsewhere. An accurate
determination of the value for these uses, and the underlying value of the
property would require an appraisal to clearly outline the potential revenue
generation.
Additional public parking (parking structure) would be difficult given the
small size of the parcel and the land area needed for ramps. Additionally
the revenue generation from a public parking lot would be minimal thus this
opportunity is not particularly viable.
The use as retail poses some difficulty in that the retention of the existing
parking lot points to second story commercial. Second story retail is problematic
in that street level visibility is typically a prerequisite for retail. Offices
or restaurant use above the parking lot is more feasible, however with the
project costs of airspace lease, parking deck construction, and building
development, the feasibility of such a project decreases. However, only through
an appraisal and offering the airspace for lease would the Council truly
find the value of the property. |
