Downtown Density Bonus Program Fees Presentation — original pdf

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Downtown Density Bonus Program October 25 Design Commission Content Program History and Requirements Program Outcomes Fee In-Lieu Recalibration Discussion and Next Steps Program History and Requirements 3 Downtown Density Bonus Program History 2013: Downtown Density Bonus Ordinance 20130627-105 passes replacing CURE (Central Urban Redevelopment). 2014: Downtown Density Bonus program is updated with a new ordinance 2014022-054 that provides additional definitions and sets up current Rainey Street subdistrict requirements Affordability Requirements  Affordability requirements only apply to projects with a residential component  50% of bonus area must be achieved thru affordable housing benefits which can be done through a fee-in-lieu or on-site affordable units  Rainey Street Subdistrict is only subdistrict that requires on-site affordable units calculated as 5% of the square footage of dwelling units developed within the FAR ratio of 8:1 and made affordable at 80% MFI or below On-site Affordability Terms Ownership: 120% MFI or below ($118,700 for a household of 4) for 99 years *Rainey Street Subdistrict is an exception with an 80% MFI limit Rental: 80% MFI or below ($79,100 for a household of 4) for 40 years Program Outcomes To Date 6 Project Status *As of 10/18/2021 Overall DDB Program Rainey Street Subdistrict Certified Projects by year Overall DDB Program Rainey Street Subdistrict Program Outcomes Certified Site Plan Under Review Building Permit Issued Project Completed Project Cancelled 4 1 8 4 3 2 0 3 2 2 2014 2015 2016 2017 2018 2019 2020 2021 Total 2 2 2 2 2 3 2 5 20 1 0 2 0 1 1 0 4 9 Completed Projects with On-Site Affordable Housing Camden Rainey Street Project includes 16 income- restricted affordable rental units that will be affordable until 2056. The Quincy Project includes 14 rental units that will be income-restricted affordable until 2061. *Both projects are within the Rainey Street Subdistrict. Development Pipeline Overall Downtown Density Bonus Program 3,276 Rainey Street Subdistrict 1,252 1,252 832 41 46 87 45 46 91 Certified/Site Plan Under Review/Building Permit Issued Projects Estimated Total Rental Units Estimated Affordable Rental Units Estimated Total Ownership Units Estimated Affordable Ownership Units Estimated Total Affordable Units Estimated Total Fee-in- lieu Pending $23,043,870 $6,271,102 Total Fee-in-lieu Paid $131,937 Estimated Total Units 4,528 2,084 Alexan Waterloo Apartments at 700 E 11th Street is set to be the next completed Downtown Density Bonus Project. Located in the Waller Creek subdistrict it will be the first project outside of the Rainey Street district to include on-site affordable units. In total the project will provide 4 rental units (1 – 1 bedroom and 3 – 2 bedroom) at 80% MFI. The first Downtown Density Bonus fee-in-lieu payment was received in 2017. Available $1,619,170 Downtown Density Bonus Fund Overview Part 5. from 2013 Downtown Density Bonus Ordinance states: "Monies generated by the fee in Section 25-2- 586(E)(l)(a)(ii) shall be prioritized for permanent supportive housing for low barrier approaches for the chronic homeless.” Downtown Density Bonus Fund Revenue Received Expenses Contract- Permanent Supportive Housing Pilot Program Low Barrier Housing Voucher Program $234,822 $222,874 $2,076,866 Appropriated FY21 Low Barrier Housing Voucher Program Unappropriated FY20: 5TH AND WEST RESIDENCES Unappropriated FY21: 91 Red River St. Unappropriated FY21: 700 E 11th St. Total $12,543 $727,126 $158,010 $589,554 $131,937 $1,619,170 Permanent Supportive Housing Pilot Program In total $457,696 from the Downtown Density Bonus fund was spent on two contracts with ECHO for a pilot permanent supportive housing program that offered a housing subsidy to individuals experiencing homelessness. The two contracts ran from 6/1/2018-1/29/2020 and 1/1/2020-9/30/2021.  Pilot program goal was to serve 96 individual per year.  In total 27 individuals were served by the program during the second contract. All individuals who were receiving a subsidy under the pilot were transitioned to a more permanent housing subsidy before the pilot was ended. Pilot program was ended due to difficulties in scaling program and reaching goals. This was largely tied to the limited capacity by organizations to provide supportive services even prior to the pandemic and made worse during the pandemic. Downtown Density Bonus Fund Future The remaining appropriated funding from the PSH voucher pilot program of $727,126 will be utilized for the conversion of an existing motel into Terrace at Century Park, a 60-unit permanent supportive housing development. If Terrace at Century Park is a success then the current expectation is that DDB funds will continue to be used for the renovation and eventually the maintenance of permanent supportive housing properties. 2021 Fee In-Lieu Calibration 13 Resolution No 20210422-039 FAR Policy •Amend City Code section 25-2-586 (Downtown Density Bonus Program) to amend subsection (B)(6). •The amendments shall maximize participation in the Program and maximize community benefits, especially the funding of permanent supportive housing and housing vouchers. •Before deliberation on the code changes by the Planning Commission or City Council, the City Manager is directed to present a report on Floor to Area Ratio best practices. Interim Fees •Implement interim revisions to the in-lieu affordable housing fees for residential development for the Downtown Density Bonus Program; •Implements interim revisions to the in-lieu affordable housing fees for non-residential development for the Downtown Density Bonus Program and Rainey Density Bonus Programs; and •Moves revised fees described above to the City Fee Schedule so they can be updated more effectively. Fee Calibration •Update the fee-in-lieu analysis provided by EcoNorthwest to reflect current market conditions and existing zones of the Downtown Density Bonus Program area and return to Council with, if necessary, an item for action no later than August 26, 2021, or prior to budget approval if possible. 14 Resolution No 20210422-039  The City Council directs the City Manager to post an item for action on May 20, 2021 that accomplishes the following: – Implements interim revisions to the in-lieu affordable housing fees for residential development for the Downtown Density Bonus Program; – Implements interim revisions to the in-lieu affordable housing fees for non-residential development for the Downtown Density Bonus Program and Rainey Density Bonus Programs; and – Moves revised fees described above to the City Fee Schedule so they can be updated more effectively. 15 Ordinance No. 20130627-105 LDC Revision Calibrated DDBP fees Interim Fees Based on LDC Revision calibrated fees for the Downtown Density Bonus Program: 2013 Calibrated Fees - Calibrated using late 2019 market - Based on proposed zones of the LDC dynamics Revision - Calibrated to a site’s base zoning not the - downtown sub-district Included artificial reductions in market sales prices to compensate for proposed parking maximums 2021 Interim Fees from January 28, 2020 memo from economic consultants, EcoNorthwest 16 Resolution No 20210422-039  Update the fee-in-lieu analysis provided by EcoNorthwest to reflect current market conditions and existing zones of the Downtown Density Bonus Program area and return to Council with, if necessary, an item for action no later than August 26, 2021, or prior to budget approval if possible. 17 2021 Interim and Recommended Fees Base Zoning or District Interim Residential Interim Commercial Proposed Residential Proposed Commercial CBD $12 $18 $24 $2.50 All other base zones Rainey (all zones) $10 $12 $16 $2.50 $5 $12 $17.50 $2.50 $ per square foot of bonus area  The in-lieu fees for residential development could be higher than the interim fees. – Increased condo sales prices – Removal of artificial reduction on sales prices  The interim in-lieu fees for commercial development are not supported by current commercial market conditions. – Decrease in market office rents – Increase in operating costs 18 Staff Recommendations - Staff recommend revisiting again next fiscal year due to uncertainty in commercial market - Consider reevaluation of DDBP policy to achieve more onsite affordable housing and more equitable outcomes for the community 2021 Proposed Fees Base Zoning or District Residential Commercial CBD $24 $2.50 All other base zones $16 $2.50 Rainey (all zones) $17.50 $2.50 19 Fee Calibration Methods 20 zoning • • environmental regulations • permitting and development requirements • bonus entitlements and community benefit requirements Public Policy Viable sites Land Development Can Occur Market Feasibility • Construction Costs • Rents, Sales Prices • Operating and Maintenance Costs Capital Competitive Returns on Capital 21 Fee Calibration Guidelines  DDBP is a voluntary program that relies on an incentive-based approach to having the private market deliver community benefits  We employ the same financial considerations a real estate developer would use to evaluate the value of bonus entitlements compared to base entitlements  Careful calibration needed to maximize public benefit and achieve policy goals Value of Bonus Entitlement Cost to Provide Community Benefit 22 Fee Calibration 1) Understand Development Conditions – Varying base zoning and bonus entitlements – Availability and size of potentially developable land downtown – Account for City Development Regulations 2) Evaluate Value of Bonus Entitlements – Residential Market Downtown is Strong – Commercial Future is Uncertain – Construction Costs have gone up – Competitive Returns on Capital Potentially Developable Land •Variety of base zoning and bonus combinations •Variety of lot sizes Calibration Modeling •Considering current market dynamics •Considering variety of possible development types •Evaluating incentive to build a building using bonus entitlements 3) Calibrate Community Benefit Requirements - Great Streets - Green Building - Urban Design Guidelines - Affordable Housing (or 12+ other options) community benefit Fee in Lieu Policy •Not calibrated to each and every site •Implementable •Capture value within range of variable conditions 23 Modeling Inputs  Zoning – Tune to existing LDC zones and bonus entitlements – Identify most prevalent zoning/bonus combinations on potential (re)development parcels  Affordable Housing Policy – Percentage of bonus value directed towards community benefit  Real Estate Market Data – Market rate rents and sales prices – Vacancy rates – Parking ratios – Construction costs – Operating costs – Competitive investment returns 24 Residential In Focus Key Differences from 2019 Calibration  Significantly Increased Construction Costs  Significantly Increased Sales Prices – Removed artificial reduction in sales prices to compensate for proposed parking maximum impact  Moderately Increased Rents  Increased Operating Expenses  Inclusion of Street Impact Fees and increased Parkland Dedication Fees CBD All other base zones Rainey (all zones) 2021 Proposed Fees $24 $16 $17.50 Key Considerations: Maximizing Housing • Maximize the affordable housing community benefit • Keep flexibility and resilience in program to account for fluctuations in market • Retain incentive to create housing downtown 25 Commercial In Focus Key Differences from 2019 Calibration  Moderately Increased Construction Costs  Decreased Market Rents  Increased Operating Expenses  Uncertainty in future demand for Downtown office space  Inclusion of Street Impact Fees CBD All other base zones Rainey (all zones) 2021 Proposed Fees $2.50 $2.50 $2.50 Considerations: Future of Commercial Market • Under current conditions, commercial development downtown using bonus entitlements is not feasible per our modeling • Staff modeled circumstances under which bonus commercial development would be viable again and set fee to that rate • Need to reevaluate next fiscal year 26 Discussion and Next Steps 27 Objectives Maximize Community Benefit • Fees in lieu of affordable housing are specifically directed towards low barrier approaches to housing people who are chronically homeless Keep flexibility and resilience in program to account for fluctuations in market • Development conditions are rapidly evolving, but the future of demand for downtown office space is uncertain Recalibration Frequency • Annually in the near term due to uncertain circumstances, but potentially less frequently going forward • Provide some predictability for projects to plan around • Tune to market conditions to maximize community benefits while not disincentivizing development Next Steps  Community Development Commission: November 9  City Council Agenda: November 18 Learn more and download the calibration model at austintexas.gov/page/development-incentives-and-agreements 29 Contacts Program Implementation Alex Radtke Project Coordinator, Housing and Planning Department Alex.Radtke@austintexas.gov Program Calibration Sam Tedford Principal Planner, Housing and Planning Department sam.tedford@austintexas.gov 30