1B - Briefing on Downtown Density Bonus Program — original pdf

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Downtown Density Bonus Program May 23, 2022 Design Commission Content • Background • Progress to Date • Staff Recommendation • Next Steps Background In April 2021, Austin City Council adopted Resolution No. 20210422-039, asking staff to:  Move the voluntary Downtown Density Bonus Program fees from the LDC  Implement interim fees in-lieu of affordable housing based upon prior and into the fee schedule research  Explore changes to the current Floor to Area Ratio (FAR) policy Update the fees in-lieu of affordable housing 3 Progress to Date Research and analysis • Market Analysis and modeling • Development trends Commission briefings • Design Commission • Downtown Commission Stakeholder engagement • Downtown Austin Alliance • Real Estate Council of Austin 4 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 Monitor and Evaluate Outcomes • Reevaluate program outcomes regularly • Provide some predictability for projects to plan around Staff Recommendation 2014 Fee ($/SF Bonus Area) 2021 Interim Fees ($/SF Bonus Area) 2022 Proposed Fee ($/SF Bonus Area) Residential - CBD zoned properties $10 or $5 Residential - all other $5 or $3 Residential - Rainey Street district Commercial - CBD zoned Commercial - all other $5 $0 $0 $12 $10 $5 $18 $12 $12 $10 $5 $9 $6 6 Residential In Focus Staff recommend maintaining the interim residential fee in-lieu rates adopted in 2021 Residential Development FY23 Proposed Fee ($/SF Bonus Area)  Consistent Participation – 4 site plan applications have come through for projects that intend to use the Downtown Density Bonus Program since the interim fees were adopted  Development costs have risen since 2019 CBD zoned properties All Other Zones Rainey Street district $12 $10 $5  Housing values have risen since 2019 • Hard costs City fees Sales prices Rents • • • 7 Commercial In Focus Staff recommend lowing commercial fee in-lieu rates from the interim fees adopted in 2021 Commercial Development FY23 Proposed Fee ($/SF Bonus Area)  Substantial variation from prior policy – the high degree of variation from the $0 fee prior to $18 interim rates was drastic change  Stakeholder input – stakeholder input to date continuously indicated that the interim commercial fees were too high  Market uncertainty – there are headwinds in the real estate market for commercial development CBD zoned properties All other Zones $9 $6 8 Density Bonus Calibration  DDBP is a voluntary program that relies on an incentive-based approach to having the private market deliver community benefits  Careful calibration needed to maximize public benefit and achieve policy goals Value of Bonus Entitlement Cost to Provide Community Benefit 9 Development Trends •Consider recent participation Stakeholder Input •Listen to multiple perspectives Existing Policy •Avoid drastic variation Feasibility Studies •Understand market dynamics •Test sensitivity Calibration of Density Bonuses Based on findings from Strengthening Inclusionary Housing Feasibility Studies from Grounded Solutions Network 10 Staff Recommendations  Maintain interim residential fees in-lieu  Lower commercial fees until market dynamics are more clear  Continue to monitor participation in the program  Reevaluation of Downtown Density Bonus Program more holistically to achieve more equitable outcomes for the community 11 Next Steps  Staff recommendation for the Downtown Density Bonus Fees will be incorporated into the fee schedule as part of the City Manager’s budget – Council adoption anticipated in August 2022  A memo to Mayor and Council will be distributed conveying staff research and recommendations – Anticipated in June 2022 12