Recommendations for Regulatory Changes to Support...

Recommendations For Regulatory Changes To Support Affordable Housing Development

A Report for the City of Bozeman, Montana

By: Werwath AssociatesJanuary 30, 2015

!Recommendations,for,Regulatory,Changes,to,Support,Affordable,Housing,Development,,,,Page,1,!

TABLE,OF,CONTENTS,,,

Executive,Summary,..................................................................................................................,2,

1.,,Project,Goals,........................................................................................................................,6,

2.,,Methodology,and,Acknowledgments,..................................................................................,7,

3.,,Regulatory,and,Policy,Background,......................................................................................,8,

4.,,Incomes,and,Affordability,....................................................................................................,9,

5.,,A,Revived,and,Less,Affordable,Market,for,Home,Purchases,.............................................,12,

6.,,Housing,Development,Activity,..........................................................................................,16,

7.,,Public,Input,on,Housing,and,Affordability,Issues,,..............................................................,19,

8.,,Recommended,Definition,of,Affordable,Housing,..............................................................,22,

9.,,Recommended,Requirements,for,Providing,Affordable,Housing,......................................,25,

10.,,Recommended,Incentives,for,Building,Affordable,Housing,............................................,30,

11.,,Other,Strategies,to,Promote,Affordable,Housing,Production,.........................................,35,

Appendix:,,Individuals,Interviewed,&,Organizations,That,Provided,Input,

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Project,team:,Daniel,Werwath,and,Peter,Werwath,Werwath,Associates,

Santa,Fe,,New,Mexico,and,Columbia,,Maryland,www.werwathassociates.com,,,,

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Executive,Summary,!The,City,of,Bozeman,adopted,an,inclusionary,zoning,ordinance,,titled,the,Workforce,Housing,Ordinance,(WFHO),,which,was,in,effect,from,2007,until,its,suspension,in,2011.,The,WFHO,required,residential,developments,to,provide,moderate^priced,homes.,The,ordinance,was,reviewed,in,2012,as,part,of,the,City’s,Affordable,Housing,Needs,Assessment1,and,the,Affordable,Housing,Action,Plan2.,The,Action,Plan,called,for,the,continued,suspension,of,the,Workforce,Housing,Ordinance,until,the,housing,market,strengthened.,,,In,November,,2014,,the,firm,of,Werwath,Associates,was,engaged,by,the,City,to,evaluate,if,key,market,data,indicate,that,the,time,is,ripe,to,consider,reinstating,the,WFHO.,,In,addition,,Werwath,Associates,was,asked,to,recommend,what,policy,or,regulatory,changes,should,be,considered,to,support,the,production,of,affordable,housing.,,,Recommendations!The,study,determined,that,Bozeman’s,housing,market,is,in,the,midst,of,a,robust,recovery,and,recommends,inclusionary,zoning,requirements,be,reinstated.,,Many,aspects,of,the,original,WFHO,ordinance,were,considered,well,designed,,and,the,consultants,recommend,carrying,over,those,provisions.,The,major,recommended,changes,are,as,follows.,,,,

1.#Apply#inclusionary#requirements#to#a#broader#range#of#housing#developments##The,original,WFHO,applied,to,subdivisions,with,10,or,more,lots.,,The,requirements,should,also,apply,to,applications,for,annexations,and,site,plans,that,include,10,or,more,residential,units,of,any,type:,detached,homes,,townhomes,and,condominiums.,#2.##Have#two#simplified#price#tiers#for#affordable#homes####Developers,should,be,given,two,simplified,options,for,providing,affordable,homes,within,each,new,residential,development.,It,is,assumed,that,future,residential,developments,will,represent,a,mix,of,both,options,,thus,serving,a,broad,range,of,low^,and,moderate^income,homebuyers.,Each,developer,would,choose,one,of,these,options:,,• Provide,Low^Priced,Homes,^,A,development,could,choose,to,provide,one,unit,out,of,

every,ten,at,a,price,affordable,to,families,at,70%,to,80%,of,area,median,income,,translating,to,a,current,three^bedroom,home,price,of,$198,000;,or,

,• Provide,Moderate^Priced,Homes,^,A,development,could,opt,to,provide,30%,of,the,

subdivision,affordable,to,families,at,100%,of,area,median,income,,translating,to,a,current,three^bedroom,home,price,of,$255,000.,

,3.##Simplify#requirements#for#buyer#income#restrictions#The,low^price,tier,of,homes,will,typically,have,below^market,prices,and,thus,represent,price,concessions,by,the,developer,,according,to,the,consultants’,analysis.,Since,buyers,of,low^

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1!Affordable!Housing!Needs!Assessment!for!the!City!of!Bozeman,!March!6,!2012,!Werwath!Associates!!2!City!of!Bozeman!Affordable!Housing!Action!Plan:!2012D2016,!April!12,!2012,!Werwath!Associates!


priced,homes,will,benefit,from,price,discounts,not,available,elsewhere,in,the,market,,the,requirements,for,income,certifications,and,long^term,affordability,controls,should,apply.,,However,,moderate^priced,homes,are,expected,to,sell,at,low^market^rate,prices,,and,therefore,no,income,certification,requirements,or,long^term,affordability,controls,are,proposed.,The,moderate^price,tier,is,essentially,designed,to,offer,a,much^simplified,“safe,harbor”,for,developers,who,normally,target,this,niche.,

,4.##Focus#on#providing#homes#

Complex,requirements,for,offering,designated,lots,for,sale,would,be,eliminated.,We,propose,that,the,developer,provide,the,required,,price^capped,homes,or,pay,a,substantial,penalty,unless,an,alternative,means,of,compliance,is,approved,by,the,City,as,a,result,of,extreme,hardship.,,,

5.##Encourage#donations#of#land#for#affordable#rental#housing##

Donations,of,larger,tracts,of,land,for,affordable,housing,construction,should,be,an,option,that,most,developers,could,use,to,meet,all,or,part,of,their,affordable,housing,requirements.,Donations,of,large,tracts,of,land,(3,to,4,acres),for,very,affordable,rental,projects,would,help,the,City,meet,its,Action,Plan,goals,for,aiding,low^income,renters.,Donation,of,house,lots,to,nonprofits,should,also,be,allowed.,

6.##Simplified#standards#for#providing#homes#of#different#types#and#sizes#

The,types,of,housing,and,bedroom,mix,of,the,price^capped,homes,should,mirror,the,product,mix,of,the,market^rate,homes,or,condos.,This,will,make,it,more,likely,that,the,price^capped,homes,fit,in,seamlessly,with,the,market^rate,homes,and,will,widen,the,choices,of,price^capped,homes,to,include,studio,and,one^bedroom,condos.,,,

7.##Strengthen#incentives#for#building#lowF#and#moderateFpriced#homes#

The,City,should,continue,the,incentives,in,the,current,Workforce,Housing,Ordinance,,as,listed,below:,,,,,

• Impact,fee,deferral,• Partial,financing,for,infrastructure,development,• Reduction,or,waivers,in,subdivision,and,building,fees,• Reduced,parkland,requirements,• Density,bonus,• Reduced,lot,sizes,• Allowance,for,simultaneous,infrastructure,and,housing,construction,• Study,of,narrower,street,options,• Expedited,review,for,100%,affordable,projects,,• Streamlined,review,of,smaller,subdivision,applications,• Lower,parking,requirements,

,8.##Make#incentives#more#widely#available#Incentives,should,apply,,as,appropriate,,to,any,construction,of,low^,and,moderate^priced,homes,and,rental,units—such,as,100%,affordable,projects,or,portions,that,exceed,the,minimum,number,of,price^capped,homes,required,by,the,ordinance.,,,,


9.##Increase#Capitalization#of#the#Affordable#Housing#Fund#Long^term,deferrals,of,impact,fees,and,low^cost,financing,for,infrastructure,development,are,identified,in,the,study,as,important,incentives,in,terms,of,reducing,out^of^pocket,costs.,,Both,of,these,incentives,will,require,increased,capitalization,of,the,City’s,Workforce,Housing,Fund,through,general,revenue,or,full,use,of,the,voter^authorized,mil,rate,for,affordable,housing.,,

Other!Recommended!Strategies!to!Promote!Affordable!Housing!Production!Regulations,alone,cannot,be,relied,upon,to,solve,the,affordable,housing,challenges,facing,the,community.,In,addition,,this,report,reiterates,key,strategies,in,the,City’s,current,Affordable,Housing,Action,Plan,,as,well,as,new,strategies,to,compliment,the,recommended,regulatory,changes.,These,strategies,include:,

• City,support,for,new,,subsidized,affordable,rental,housing,developments,

• Promotion,of,employer^sponsored,affordable,housing,development,

• New,strategies,for,the,preservation,of,mobile,homes,

• Evaluation,of,options,for,new,rental,subdivisions,

• Reassessment,of,the,restrictions,around,accessory,dwelling,units,

• More,encouragement,for,innovation,in,the,design,and,production,of,affordable,homes,,

Evaluation!Process!Leading!to!the!Recommendations!Werwath,Associates,analyzed,demographic,and,housing,market,data,that,shows,which,owners,and,renters,are,being,adequately,served,by,the,current,housing,market,and,,conversely,,what,income,groups,are,priced,out.,This,involved,analysis,of,trends,in,the,numbers,of,home,sales,,housing,development,costs,,median,home,prices,,building,permits,issued,,and,new,subdivisions,approved.,,,,This,“supply,side”,data,was,then,compared,to,the,demand,side—to,determine,what,income,groups,can,afford,rents,and,sale,prices,at,different,price,points.,,Data,analysis,identifies,the,gaps,in,the,current,housing,supply,and,helps,determine,potential,changes,in,regulations,that,will,increase,the,availability,of,low^,and,moderate^price,housing.,,,!Housing!Market!Findings,Median,sales,prices,dropped,to,a,six^year,low,of,$207,000,in,2011—a,rough,indicator,of,the,low,point,in,demand,for,home,purchases,during,the,recession.,Builders,were,starting,construction,of,detached,homes,at,only,about,half,the,rate,seen,in,the,early,2000s.,,,By,contrast,,in,2013,,Bozeman,had,issued,50,more,detached,home,permits,than,the,most,recent,peak,of,344,homes,,in,2003.,For,the,11,months,ending,November,30,,2014,,the,median,home,price,increased,by,a,very,strong,7.5%—surpassing,the,peak,median,sale,price,set,in,2006,to,settle,at,$287,000.,This,constitutes,the,highest,median,home,sales,prices,for,any,metropolitan,area,in,the,state.,This,also,presents,a,market,paradox,,where,prices,continue,to,escalate,rapidly,,despite,record,supply.,,While,this,is,good,news,for,existing,homeowners,and,the,building,community,,many,members,of,Bozeman’s,workforce,are,being,priced,out,of,the,market.,The,number,of,detached,homes,priced,below,$250,000,,a,rough,indicator,of,housing,affordability,for,a,family,of,three,at,100%,of,the,


area,median,income,,has,gone,from,48.4%,of,the,market,in,2012,to,just,18.6%,in,this,previous,year.,Even,among,the,far,more,affordable,condo,and,townhome,segment,,the,percentage,of,units,below,$200,000,has,shrunk,from,87.4,%,in,2012,to,75.6%,for,the,previous,year.,,,These,are,dramatic,market,changes,to,have,occurred,in,the,span,of,just,two,years.,,Citizens,are,well,aware,of,this,trend.,In,an,online,survey,conducted,as,part,of,this,study,,92.6%,of,respondents,identified,lack,of,affordable,housing,as,a,community,problem.,,,,With,such,a,dramatic,shift,in,the,market,conditions,,new,approaches,to,creating,and,preserving,affordable,housing,must,be,pursued.,The,following,sections,of,this,report,describe,those,market,conditions,and,recommendations,in,more,detail.,,, ,


1.,,Project,Goals,!In,November,2014,,the,City,of,Bozeman,commenced,an,evaluation,of,possible,changes,in,City,regulations,to,increase,the,production,of,affordable,housing.,The,scope,of,work,for,the,evaluation,included,the,following:,,1. Review,and,assess,the,City’s,currently,suspended,Workforce,Housing,Ordinance,(WFHO),and,

Planned,Unit,Development,(PUD),Ordinance,with,regard,to,points,awarded,for,affordable,housing.,

2. Review,regulatory,changes,since,2012,and,current,housing,market,data.,

3. Provide,recommendations,regarding,the,efficacy,of,the,WFHO,and,PUD,Ordinance.,,

4. Provide,recommendations,on,the,appropriateness,of,an,Inclusionary,Zoning,program,for,the,City,of,Bozeman.,

5. Provide,recommendations,for,other,alternatives,to,current,City,policies.,

6. Analyze,affordable,housing,outcomes,associated,with,recommended,policies.,

The,primary,focus,of,this,study,is,the,suspended,WFHO,,which,required,newly,approved,subdivisions,to,offer,a,portion,of,the,homes,for,sale,at,affordable,prices.,Because,of,the,WFHO’s,focus,on,homes,for,sale,,the,analysis,of,market,conditions,and,affordability,in,this,report,focuses,primarily,on,homeownership,opportunities.,,,Regarding,Goal,#5,above,,the,City,has,authorized,an,evaluation,of,other,regulatory,changes,to,increase,the,production,of,affordable,housing,including:,deferring,or,subsidizing,impact,and,permit,fees,for,affordable,priced,homes,,changing,development,code,to,allow,higher,residential,densities,,changes,in,regulations,to,make,development,of,Accessory,Dwelling,Units,(ADU’s),easier,,examination,of,ways,to,preserve,mobile,home,parks,,and,exploration,of,ways,to,reduce,the,financial,impact,of,parkland,and,open,space,requirements,on,affordable,housing,development.,,,! !


2.,,Methodology,and,Acknowledgments,,The,City,engaged,an,affordable,housing,consultant,firm,,Werwath,Associates,,to,conduct,this,evaluation.,Key,sources,of,information,for,the,study,were,as,follows.,,,,

1. A,review,of,relevant,City,regulations,,residential,building,permits,,and,data,on,subdivision,activity.,,,

2. Trends,in,home,sales,and,median,home,prices,,from,the,Gallatin,Association,of,Realtors.,

3. Interviews,with,real,estate,industry,professionals,including,builders,,developers,,real,estate,brokers,,and,lenders.,

4. Interviews,with,public,sector,employees,,housing,service,providers,,and,elected,officials.,A,list,of,individuals,who,were,interviewed,and,organizations,that,provided,input,can,be,found,in,the,Appendix,to,this,report.,

5. An,online,survey,of,the,general,public,regarding,their,concerns,and,hopes,for,affordable,housing,,which,to,date,has,received,187,responses.,

6. A,second,online,survey,sent,individually,to,housing,industry,professionals,to,gather,data,about,new,residential,construction,building,volumes,and,costs,,which,only,received,two,responses.,,

7. A,third,online,survey,sent,to,building,industry,professionals,that,gathered,input,about,potential,regulatory,changes,,which,garnered,39,responses.,,

8. A,second,public,input,survey,aimed,at,the,general,public,and,housing,industry,professionals,requesting,ratings,and,opinions,about,possible,regulatory,changes.,This,survey,has,received,115,responses.,,,

9. In,addition,,the,City,and,its,consultants,have,conducted,two,widely,announced,public,meetings,to,obtain,feedback,on,the,goals,of,the,evaluation,and,preliminary,findings.,Approximately,30,people,attended,the,first,meeting,on,December,9,,2014.,A,second,community,meeting,was,held,on,January,13,,2015,with,attendance,of,approximately,45.,!

10. Background,and,finding,presentations,and,question,and,answer,sessions,were,conducted,at,the,December,10,,2014,and,January,14,,2014,Community,Affordable,Housing,Advisory,Board,(CAHAB),meetings,,which,are,also,advertised,public,meetings.!

Acknowledgments!!

Both,the,City,of,Bozeman,and,the,researchers,wish,to,acknowledge,and,thank,the,Gallatin,Association,of,Realtor,(GAR),and,the,Southwest,Montana,Building,Industries,Association,(SWMBIA),for,providing,data,and,input,,along,with,members,of,City,staff,,elected,officials,,real,estate,professionals,,and,community,members,who,provided,input,during,the,process,,without,which,this,evaluation,would,be,impossible.# #


3.,,Regulatory,and,Policy,Background,,Since,the,early,1980’s,,the,City,of,Bozeman,has,formally,acknowledged,the,need,for,affordable,housing,and,supported,the,creation,and,preservation,of,affordable,housing,in,the,following,ways:,,,,,

• In,1985,,the,City,established,the,first,rental,rehabilitation,Community,Development,Block,Grant,program,in,Montana.,,

• In,1993,,the,City,appointed,an,Affordable,Housing,Task,Force.,This,led,to,the,City,committing,$200,000,in,general,revenue,to,a,new,Affordable,Housing,Fund,,adoption,of,an,Accessory,Dwelling,Unit,ordinance,,as,well,as,more,active,support,to,affordable,housing,developers,in,obtaining,state,and,federal,funds.,

• Starting,in,1994,,a,succession,of,regulatory,and,process,reforms,that,included,the,allowance,of,accessory,dwelling,units,,restricted,size,lot,requirements,,reduced,size,street,standards,,reduced,setbacks,,reduction,in,minimum,apartment,size,,reduced,affordable,housing,parking,requirements,,affordable,housing,“scoring”,incentives,for,planned,unit,developments,,and,other,process,streamlining,measures,designed,to,reduce,the,cost,of,supplying,affordable,housing.,

• Since,2000,,the,City,has,used,portions,of,Big,Box,economic,impact,mitigation,fees,to,help,fund,affordable,housing.,

• In,2007,,the,City,enacted,a,Workforce,Housing,Ordinance,(WFHO),that,required,new,subdivisions,with,10,or,more,residential,lots,to,provide,0.4,affordable,dwelling,units,per,net,acre,of,developed,land.,Due,to,the,substantial,decline,in,residential,construction,,the,drop,in,home,prices,,and,concerns,with,technical,complexities,as,well,as,administrative,costs,,the,ordinance,has,been,suspended,since,August,30,,2011,,having,resulted,in,no,production,of,affordably^priced,homes.,,,

The,City’s,Affordable,Housing,Action,Plan,,adopted,in,2012,,set,two,benchmarks,to,trigger,consideration,of,reinstating,the,Workforce,Housing,Ordinance—each,of,these,signifying,different,aspects,of,the,strength,of,the,housing,recovery,,including:,,,

(1) Median,sales,prices,of,all,types,of,homes,(detached,,townhomes,,and,condos),would,have,to,climb,to,$246,000,,and,,,

(2) The,annual,number,of,building,permits,issued,for,detached,homes,would,have,to,equal,or,exceed,300,permits.,,

,As,described,in,Section,5,of,this,report,,these,thresholds,were,exceeded,by,the,end,of,2013.,! !


4.,,Incomes,and,Affordability,,Generally,,for,renters,,industry,standard^setters,such,as,the,U.S.,Department,of,Housing,and,Urban,Development,(HUD),consider,a,rental,housing,payment,(including,utilities),as,affordable,if,it,is,at,or,below,30%,of,a,household’s,income.,For,low^,and,moderateîncome,homebuyers,,there,is,no,such,“official”,standard.,However,,nonprofit,and,local,government,programs,assisting,homebuyers,have,set,various,affordability,benchmarks,for,housing,payments—typically,at,or,near,33%,of,income.,The,definition,of,“housing,payment”,comes,from,the,underwriting,rules,of,mortgage,lenders.,It,typically,includes,mortgage,principal,and,interest,payments,,taxes,,insurance,,and,condo/homeowner,association,fees.,,,,,,Using,these,guidelines,,affordable,rents,and,home,prices,can,be,determined,for,any,income,level.,HUD,and,most,housing,agencies,use,percentages,of,the,“area,median,income”,(AMI),for,the,purposes,of,designing,and,operating,housing,assistance,programs.,Here,,another,affordability,factor,comes,into,play:,household,size.,Small,families,need,smaller,,less,expensive,homes,,while,larger,families,need,more,space,,which,of,course,costs,more,money.,To,account,for,this,factor,,each,year,,HUD,publishes,income,limits,for,federal,programs,that,vary,by,household,size,as,shown,in,Figure,1,below.,Consequently,,larger,households,have,higher,income,limits.,,,The,City,of,Bozeman,and,its,affordable,housing,partners,use,these,income,standards,,and,we,recommend,that,they,continue,to,do,so,in,land,use,policies,,as,well,as,rental,and,sales,programs.,,,,

Figure 1: Incomes by HUD AMI Levels for Bozeman, by Household Sizes ,, Number,of,Persons,in,Household:, ,,

,Median, 1, 2, 3! 4, 5, 6,50%, $24,900, $28,450, $32,000, $35,550, $38,400, $41,250,65%, $32,370, $36,985, $41,600! $46,215, $49,920, $53,625,80%, $39,850, $45,500, $51,250! $56,900, $61,500, $66,050,100%, $49,800, $56,900, $64,000! $71,100, $76,800, $82,500,

,Using,the,33%ôfîncome,formula,described,above,and,assumptions,for,interest,rates,and,monthly,payment,components,appropriate,for,Bozeman,,we,calculated,affordable,home,prices,for,households,of,various,sizes,at,three,income,levels,in,Figure,2,below.,,

Figure 2: Maximum Home Prices Affordable at 4 AMI Levels in Bozeman ,, Number,of,Persons,in,Household:, ,,

,Median, 1, 2, 3! 4, 5, 6,65%, $113,129, $134,427, $155,124, $176,619, $187,183, $211,493,80%, $148,989, $176,102, $202,565! $244,562, $254,234, $278,929,100%, $212,988, $251,523, $283,008! $321,543, $337,165, $368,102,


The!Target!Market!for!Homeownership:!LowS!and!ModerateSIncome!Renters!

Current,City,policies,and,public,input,for,this,study,both,indicate,that,a,high,value,is,placed,on,homeownership,opportunities.,As,a,practical,matter,,most,of,the,beneficiaries,of,any,new,affordable,homes,built,as,a,result,of,City,policies,will,be,renters.,Most,affordable,homeownership,programs,focus,almost,exclusively,on,first^time,homebuyers,(i.e.,renters),or,households,that,meet,have,not,owned,a,home,for,at,least,three,years,,a,definition,used,by,the,Federal,Housing,Administration,(FHA).,Figure,3,analyzes,the,most,feasible,housing,strategies,for,households,at,income,tiers,,as,expressed,in,percentages,of,area,median,income,,along,with,the,number,of,Bozeman,renter,households,in,those,income,groups.,,

,,

Figure 3: Analysis of Affordable Housing Opportunities for Renters in Bozeman Income!Range!

Number!of!Households!

!

0^30%,AMI, 2,628,

Includes,a,large,percentage,of,renter,households.,Building,new,rental,units,affordable,to,this,group,requires,substantial,grants,,rent,subsidies,,and,below^market^rate,investments,to,achieve,affordable,rent,levels.!

30^65%,AMI,

2,385,

Renter,households,can,be,feasibly,assisted,through,federal,programs,such,as,the,Low,Income,Housing,Tax,Credit,program,,and,limited,homeownership,opportunities,through,construction,of,low^cost,homes,by,non^profits.,

65^80%,AMI,

950,

Market,rents,are,generally,affordable,to,this,group.,Many,would^be,homeowners,in,this,group,face,a,scarce,supply,of,affordable,townhomes,and,condos.,,The,upper,income,limit,for,federal,affordable,housing,assistance,is,80%,of,AMI.!

80^100%,AMI,

567,Would^be,homeowners,have,limited,options,for,detached,homes,on,the,open,market,,while,most,condos,and,townhomes,are,affordable,to,this,group.,Most,rental,housing,is,affordable.,

100%+,AMI, 2211,

Would^be,homeowners,have,opportunities,for,detached,homes,,condos,and,townhomes.,Virtually,all,rental,housing,is,affordable.,However,,this,affordability,could,be,eroded,in,the,future,if,home,prices,rise,faster,than,incomes,or,mortgage,interest,rates,increase,significantly.,,

,

To,better,understand,income,distribution,in,Bozeman,,we,compiled,the,most,recent,American,Community,Survey,data,and,interpolated,the,income,data,into,segments,based,on,the,HUD,area,median,income,levels.,Figure,4,,on,the,following,page,,shows,the,comparative,numbers,of,homeowners,and,renters,in,different,income,groups.,,


,

This,data,in,Figures,4,and,5,indicate,some,important,market,realities,about,the,low,rate,of,homeownership,among,Bozeman,households.,,

• At,44.6%,the,homeownership,rate,is,dramatically,lower,than,most,communities,and,more,than,20%,less,than,both,the,statewide,(67.3%),and,national,(64%),homeownership,rates.,,

• By,far,,the,highest,homeownership,rate,in,Bozeman,(55%),is,for,households,with,incomes,higher,than,the,median,income.,,,

• Correspondingly,,households,with,incomes,below,the,median,,have,only,a,34.7%,homeownership,rate.,,

,Figure 5. Homeownership Rates Bozeman,<100%,AMI,

Bozeman,>100%,AMI,

Bozeman,Combined,

Montana,Statewide,

United,States,

34.7%, 55%, 44.6%, 67.3%, 64%,Source:,2013,ACS,Survey,3^Year,Estimates,

,Clearly,,the,lack,of,housing,affordability—particularly,for,households,with,incomes,below,80%,of,area,median,income—is,holding,down,the,homeownership,rate,in,Bozeman,to,an,exceptionally,low,level.,Certainly,,other,factors,are,involved,,such,as,university,students,driving,an,above^average,demand,for,rental,housing.,However,,while,students’,demand,for,rental,housing,is,not,a,factor,that,the,City,of,Bozeman,can,influence,,the,City,can,encourage,more,construction,of,affordable,housing.,,,,,,, ,

798, 895,530,

774,

4,147,

2,628,2,385,

950,567,

2,211,

0,

500,

1,000,

1,500,

2,000,

2,500,

3,000,

3,500,

4,000,

4,500,

<,30%,AMI, 30%^65%,AMI, 65%^80%,AMI, 80%^100%,AMI, 100%+,AMI,

Owners,

Renters,

Figure 4: Numbers of Owners and Renters by AMI Groups

Source:,,2013,U.S.,Census,Bureau,ACS,3^Year,Esqmates,interpolated,to,AMI,levels,by,Werwath,Associates,


5.,,A,Revived,and,Less,Affordable,Market,for,Home,Purchases,!The,trends,in,two,key,market,indicators—annual,permits,for,new,homes,and,median,sale,prices—demonstrate,a,very,strong,recovery,in,the,housing,development,sector,and,at,the,same,time,,a,sharp,decline,in,housing,affordability.,,!

Figure 6: Market Indicators-Median Sales Price and Homes Permitted

, 2006, 2011, 2013, 2014,New,detached,homes,permitted, 303, 156, 399, 309,Median,sale,price,–,all,types,, $258,000, $207,000, $270,000, $287,000,Source:,City,of,Bozeman,(permits),and,Gallatin,Association,of,Realtors,(median,sale,prices),

,Median,sales,prices,dropped,to,a,six^year,low,in,2011—a,rough,indicator,of,the,low,point,in,demand,for,home,purchases,during,the,recession.,See,Figure,7,for,details.,Builders,were,starting,construction,of,detached,homes,at,only,about,half,the,rate,seen,in,the,early,2000s.,,,By,contrast,,in,2013,Bozeman,had,a,larger,number,of,single^household,dwellings,permitted,(399),than,during,the,boom,years,of,2003,,2004,and,2005.,For,the,11,months,ending,November,30,,2014,,the,median,home,price,increased,by,a,very,strong,7.5%—surpassing,the,peak,median,sales,price,set,in,2006.,The,housing,market,has,clearly,recovered,and,is,sprinting,ahead.,This,is,good,news,for,existing,homeowners,and,builders.,However,,the,recovery,is,at,the,point,where,low^,and,moderate^income,homebuyers,are,being,priced,out,of,the,market.,,,,,!

,,

Figure 7: Trends in Median Sale Prices of Homes

!


Major!Differences!in!Prices!of!Detached!Vs.!Attached!Homes!The,home,sales,data,in,Figure,7,shows,that,condominiums,and,townhomes,have,increased,in,price,,but,are,significantly,more,affordable,that,detached,homes.,Following,are,details,on,the,steep,decline,and,rebound,of,home,prices,over,the,past,eight,years.,,,

• 2006:,Median,sales,price,for,detached,homes,and,condos/townhomes,in,Bozeman,and,surrounding,areas,were,$340,851,and,$202,400,respectively,with,the,combined,median,sales,price,for,all,home,types,at,a,then^record,$257,875.,,,

• 2011:,The,median,sales,price,had,declined,to,a,low,of,$252,250,for,detached,homes,and,$150,000,for,condos/townhomes.,

• 2014:,For,sales,through,November,,the,median,price,was,$326,000,for,detached,homes,and,$197,000,for,condos/townhomes,and,the,combined,median,for,all,homes,types,is,$287,000,,nearly,$30,000,higher,than,the,highest,combined,median,from,2006.,

It,is,important,to,note,that,median,sales,prices,of,condos,in,Bozeman,,as,elsewhere,in,the,nation,,are,being,held,down,by,the,difficulty,of,obtaining,mortgage,financing.,Regulators,reacted,to,the,subprime,lending,debacle,by,tightening,various,lending,standards—among,them,,much,higher,standards,for,condos,that,qualify,for,conventional,and,government^insured,mortgages.,The,result,is,that,homes,in,condominium,associations,without,a,significant,majority,of,owner^occupants,and,very,sound,governance,and,finances,do,not,qualify,for,conventional,financing.,,,,,

The!Number!of!LowerSPriced!Homes!is!Dwindling!When,home,sales,data,is,divided,into,price,segments,,it,becomes,clear,that,the,supply,of,affordable,homes,is,shrinking.,In,2012,,there,was,relative,parity,between,detached,homes,priced,under,$250,000,and,those,priced,over,$250,000,,with,those,under,$250,000,making,up,a,little,over,48%,of,all,homes,sold,that,year.,See,Figure,8,below.,This,segment,declined,to,just,over,35.1%,in,2013,and,precipitously,dropped,to,18.6%,for,2014,sales,through,November,of,this,year.,,,,

!!!!!!!!!!!,

,

Figure 8: Sales of Detached Homes in Two Price Segments

!


Even,more,dramatic,is,the,sharp,drop,in,the,number,of,detached,homes,sold,at,prices,below,$200,000—from,62,units,in,2012,to,eight,units,in,2014.,The,implication,is,that,the,supply,of,affordable,detached,homes,has,nearly,evaporated,for,households,with,incomes,below,approximately,80%,of,the,area,median.,,While,the,price,increases,for,condominiums,and,townhomes,have,been,more,muted,,the,supply,of,affordable,units,is,dropping,rapidly.,For,the,following,comparative,analysis,we,used,a,lower,affordability,threshold,of,$200,000,to,compensate,for,higher,monthly,costs,such,as,homeowners,association,dues,,which,significantly,lower,the,borrowing,capacity,of,buyers.,In,2012,,condominium,and,townhome,sales,below,$200,000,constituted,81.4%,%,of,all,condominium/townhome,sales.,This,slipped,only,slightly,to,75.4%,in,2013,,but,dropped,rapidly,to,59.5%,in,2014,sales.,It,is,also,important,to,note,that,many,of,the,sales,in,the,sub^$200,000,range,represent,income,restricted,affordable,housing,developed,by,the,Human,Resources,Development,Council,(HRDC).,,,!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!,,,Taken,together,there,is,a,clear,and,dramatic,trend:,homes,affordable,to,low^,and,moderate^income,buyers,are,dwindling,at,an,alarming,rate,and,this,decline,is,particularly,acute,for,detached,homes.,,,Another,important,indicator,of,housing,affordability,is,a,snapshot,of,housing,currently,listed,for,sale.,As,of,December,9,,2014,,there,were,29,units,listed,below,$200,000.,Of,these,,four,were,townhomes,and,the,rest,were,condominiums,,12,of,which,were,in,the,same,development.,There,were,no,detached,homes,listed,below,$200,000.,The,most,affordable,unit,was,a,two^bedroom,condo,listed,for,$147,500.,There,were,no,four^bedroom,units,currently,listed,in,this,price,range.,,,

Figure 9: Sales of Condos/Townhomes in Two Price Segments

! !Source:,Gallatin,Association,of,Realtors,


Statewide!and!National!Context!A,mid^year,analysis,produced,in,July,of,2014,by,the,Montana,Association,of,Realtors,indicates,that,Bozeman,has,the,highest,median,home,prices,of,any,metropolitan,area,in,the,state,,with,prices,for,detached,homes,nearly,$50,000,higher,than,Missoula,,the,second,highest^cost,market.,,

!!

Figure 10. Median Home Prices By City ,, Detached, Condo/Townhome,Bozeman, $275,000, $199,900,Missoula, $225,250, $159,900,Helena, $219,950, $156,900,Billings, $207,000, $169,900,,Source:,Montana,Association,of,Realtors,2014,Midyear,Housing,Statistics,

!

Median,sales,prices,in,Bozeman,are,much,more,in,line,with,median,sales,prices,seen,in,similar,resort,area,communities,in,the,Western,states.,Figure,11,depicts,the,2014,median,sales,price,of,home,types,for,the,respective,communities.,,

,

Figure 11. Comparable Median Sales Prices Bozeman,,Montana,, $287,000,Durango,,Colorado,, $338,728,Santa,Fe,,New,Mexico, $299,150,Bend,,Oregon, $289,950,,Source:,Gallatin,Association,of,Realtors,,Santa,Fe,Association,of,Realtors,,Central,Oregon,Association,of,Realtors,,Durango,Realtor’s,Association,

,,! !


6.,,Housing,Development,Activity,!

Building,permits,and,creation,of,house,lots,through,the,subdivision,of,land,are,two,primary,indices,that,help,us,better,understand,development,activity,and,the,future,housing,development,pipeline.,Figure,12,depicts,building,permit,activity,in,the,City,of,Bozeman,by,housing,type.,,,

,,While,the,total,number,of,building,permits,issued,has,not,yet,reached,the,peak,of,895,set,in,2005,,it,is,important,to,note,that,the,total,number,of,permits,from,that,time,period,was,largely,driven,by,multi^unit,housing,development.,When,we,isolate,permits,for,detached,homes,,we,find,that,399,permits,were,issued,in,2013,,which,exceeds,the,peak,of,344,permits,issued,in,2003,by,55,housing,units.,While,not,as,robust,,there,were,309,permits,issued,for,detached,homes,in,the,first,11,months,of,2014,,a,number,that,exceeds,all,but,the,years,from,2003,to,2006,,the,peak,of,the,mortgage^driven,housing,boom.,,,The,lack,of,multifamily,housing,construction,starts,is,clear,in,the,statistics,showing,permit,issuance.,But,this,trend,should,soon,be,reversed.,,A,significant,number,of,multifamily,housing,units,are,scheduled,to,start,construction,soon.,A,pending,private,student,housing,development,is,slated,to,produce,more,than,700,beds,,with,499,beds,coming,on,line,in,the,first,phase,scheduled,open,in,the,fall,of,2015.,There,is,also,a,new,residence,hall,that,will,provide,400,more,beds,,planned,for,a,fall,2016,opening.,Lastly,there,are,several,residential,multi^family,projects,currently,seeking,occupancy,,which,will,provide,around,100,additional,rental,units.,The,Stoneridge,affordable,rental,development,was,awarded,Low,Income,Housing,Tax,Credits,and,will,provide,48,income,and,rent^restricted,apartments.,,,,While,building,permits,provide,an,understanding,of,the,immediate,housing,development,pipeline,,the,rate,of,applications,and,approvals,of,new,subdivisions,give,us,an,understanding,of,

843, 895,

651,,

750,

242,180,

208, 179,295,

504, 431,

0,

250,

500,

750,

1000,

2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014,

Perm

its!

5,or,More,3^4,Family,Two^Family,One^Family,

Source:,Census,Bureau,,Building,Permits,Survey/City,of,Bozeman,

Figure 12: Permit Data by Housing Type


the,longer^term,housing,development,pipeline,,which,is,driven,by,the,availability,of,developable,home,lots.,The,subdivision,of,land,is,regulated,through,the,City,,which,requires,a,two^step,approval,process,,preliminary,plat,and,final,plat,,the,latter,being,when,a,subdivided,parcel,has,received,appropriate,approvals,to,proceed,with,development.,,,

,,In,2014,,930,lots,had,received,preliminary,plat,approval,,a,higher,number,than,all,but,2005,(1,637),and,2007,(1,434).,This,indicates,a,trend,toward,more,robust,future,housing,development,activity.,However,,some,of,these,lots,are,from,re^platting,of,existing,subdivisions,,so,do,not,necessarily,add,to,the,total,inventory,of,home,lots.,,,Housing!Development!Costs!The,major,components,of,new,home,costs,are,land,,infrastructure,,construction,materials,and,labor.,To,determine,typical,costs,of,building,homes,in,Bozeman.,Data,was,obtained,from,several,members,of,the,Southwest,Montana,Building,Industry,Association,(SWMBIA).,,,A,key,factor,driving,up,new,home,construction,costs,in,Bozeman,is,the,relatively,large,average,size,of,homes,being,built,here:,2,300,square,feet.,This,exceeds,the,average,in,most,other,similar,markets,,and,is,far,higher,than,the,typical,size,of,new,entry^level,homes.,,,We,worked,with,several,members,of,the,Southwest,Montana,Building,Industries,Association,to,determine,the,minimum,cost,to,develop,a,modest,home,in,the,Bozeman,market.,For,the,purposes,of,assumptions,,building,cost,estimates,were,based,on,a,1,200,square,foot,“affordable”,home,being,built,in,Bozeman,city,limits.,The,lowest,estimate,of,development,costs,resulted,in,a,total,hard,cost,,including,12.5%,overhead,and,profit,,of,$205,155,for,the,1,200,square,foot,home,,a,total,cost,of,$171,per,square,foot.,This,exceeds,the,2013,National,Association,of,Homebuilders,Construction,Cost,Survey,estimate,of,$145,a,square,foot,by,18%.,,

0, 200, 400, 600, 800, 1000, 1200, 1400, 1600, 1800,

2004,2005,2006,2007,2008,2009,2010,2011,2012,2013,2014,

Final,Plat, Preliminary,Plat,

Source:,City,of,Bozeman,

Figure 13: Subdivision Activity: Newly Platted Lots


Interviews,with,members,of,the,building,community,indicated,issues,with,labor,availability,as,a,major,factor,driving,up,local,construction,costs.,,With,high,demand,for,labor,in,the,Bakken,oil,fields,,competent,construction,labor,is,scarce,and,command,higher,wages.,Likewise,,high,demand,for,subcontracting,services,driven,by,the,current,high,level,of,home,construction,activity,also,drives,up,costs,for,essential,services,such,as,plumbing,,concrete,and,electrical,work.,,,To,summarize,,while,construction,costs,per,square,foot,are,above,average,in,Bozeman,,builders,can,substantially,reduce,the,cost,of,entry^level,homes,by,reducing,square,footage.,In,many,U.S.,markets,,builders,are,constructing,and,selling,very,livable,small,homes,by,designing,floor,plans,that,use,space,very,efficiently.,

,, ,


7.,,,Public,Input,on,Housing,Affordability,Issues,

As,part,of,this,evaluation,,several,online,public,input,surveys,were,conducted,as,well,as,two,surveys,specifically,directed,at,building,industry,professionals.,,,The,primary,public,input,survey,was,activated,on,December,9,,2014,,and,as,of,January,27,,2015,had,received,over,187,responses,,a,very,robust,response,rate,for,a,survey,of,this,type,in,a,community,of,this,size.,Consistent,with,public,discussions,during,community,meetings,held,on,December,9,,2014,and,January,13,,2015,,and,the,vast,majority,of,stakeholder,interviews,,there,is,little,disagreement,about,the,reality,of,housing,affordability,issues,currently,facing,the,community.,The,survey,asked,for,basic,information,about,respondents,,then,offered,the,opportunity,for,open^ended,comments.,,,Lack!of!Affordable!Housing!Seen!as!a!Community!Problem!Of,the,164,total,responses,to,the,survey,,86%,of,respondents,live,in,Bozeman,,and,of,the,14%,who,did,not,,82%,responded,that,they,would,like,to,live,in,Bozeman.,The,vast,majority,of,respondents,(76%),also,work,in,the,Bozeman,with,responses,split,almost,evenly,at,48%,renters,and,52%,owners.,Fifteen,responses,,or,approximately,10%,of,all,responses,,were,from,members,of,the,real,estate,or,homebuilding,industries.,,,Of,the,176,respondents,who,provided,narrative,responses,,only,7.4%,of,respondents,expressed,that,there,was,no,issue,with,housing,affordability,in,Bozeman.,,,Leading,the,general,comments,were,issues,with,homeownership,,which,was,specifically,mentioned,in,57,responses.,Close,behind,were,comments,referring,to,issues,with,affordable,rental,housing,which,garnered,51,comments.,Third,most,prominent,were,references,to,low,wages,being,a,large,factor,in,housing,affordability,with,26,people,offering,responses,to,this,effect.,In,addition,to,these,general,sentiments,,several,other,themes,arose,that,have,bearing,on,our,analysis.,,,Numerous,respondents,noted,that,it,was,entry,level,professionals,who,were,not,being,served,by,the,current,market,,stuck,between,subsidized,housing,offerings,from,organizations,like,HRDC,and,Habitat,for,Humanity,,and,entry^level,market,rate,homes.,Several,self^identified,young,professionals,indicated,that,lack,of,housing,might,push,them,to,move,to,other,communities,where,housing,costs,were,more,in,line,with,wages.,,!The,impact,of,the,Montana,State,University,on,the,housing,market—the,demand,pressure,from,employees,and,students—was,a,frequent,topic,of,comment.,Another,reoccurring,theme,for,many,respondents,was,the,desire,for,less,sprawl,within,the,valley,,which,implies,the,need,for,more,dense,housing,approaches.,Also,noted,by,numerous,respondents,was,the,shrinking,availability,of,mobile,homes,as,a,viable,affordable,housing,option,,suggestions,included,updating,


the,current,regulations,to,allow,for,new,mobile,home,park,development,or,other,factory^built,construction,options.,,,On,the,more,technical,side,,several,respondents,cited,the,need,for,a,dedicated,funding,source,for,affordable,housing,,with,suggestions,ranging,from,a,real,estate,transfer,tax,,local,option,sales,tax,,airline,ticket,surcharge,,and,water,bill,surcharge.,The,overarching,theme,of,these,comments,was,a,desire,to,spread,the,burden,across,multiple,sectors,of,the,local,economy,,and,not,simply,rely,on,the,new,construction,housing,industries,to,support,affordable,housing,development.,Increased,funding,was,also,cited,as,a,critical,mechanism,to,amplify,current,affordable,housing,development,activities,by,groups,such,as,HRDC,and,Habitat,for,Humanity.,,,A,second,public,survey,on,affordable,housing,regulatory,and,incentive,options,was,released,January,13,,2015,and,had,returned,118,responses,as,of,January,27,,2015.,A,majority,of,respondents,to,this,survey,(72%),were,members,of,the,general,public,,with,14%,representing,affordable,housing,organizations,,and,13%,representing,building,or,real,estate,industry,professionals.,In,this,survey,,respondents,were,asked,to,rank,various,options,on,a,scale,of,“undesirable”,,“moderately,undesirable”,,“neutral”,,“desirable”,,and,“very,desirable”.,,Majority!of!Survey!Respondents!in!Favor!of!Affordable!Housing!Requirements,The,central,question,was,whether,the,City,should,create,a,requirement,for,affordable,housing,in,new,development,,with,the,caveat,that,it,would,be,balanced,with,incentives,,to,which,54.2%,of,respondents,indicated,that,this,policy,was,either,desirable,or,very,desirable.,This,proposal,was,seen,as,moderately,or,completely,undesirable,to,37.5%,of,respondents,indicated,that,it,was,moderately,or,completely,undesirable,and,,8.3%,were,neutral,to,the,idea.,,,This,survey,also,asked,participants,to,rank,various,potential,incentives,for,the,creation,of,affordable,housing.,The,most,desirable,strategies,were,easing,restrictions,on,the,creation,of,accessory,dwelling,units,,which,was,seen,as,undesirable,or,very,undesirable,by,only,16.5%,of,respondents,,followed,closely,by,creating,strategies,for,creation,of,new,mobile,home,parks,,which,was,seen,as,undesirable,or,very,undesirable,by,only,18.8%,of,respondents.,None,of,the,strategies,mentioned,were,found,undesirable,or,very,undesirable,by,a,majority,of,respondents,,with,the,least,popular,strategy,being,the,elimination,of,parkland,requirements,for,small,subdivisions,,which,was,undesirable,or,very,undesirable,to,47%,of,respondents.,,,Mobile!Home!Parks!and!Relief!on!City!Fees!Seen!as!Very!Important!A,similar,survey,about,regulatory,incentives,was,posed,to,the,development,community,,(released,December,19,,2014),,and,had,received,39,responses,by,January,27,,2015.,This,survey,asked,respondents,to,rank,various,incentive,strategies,based,on,their,potential,to,lower,costs,,with,options,including,“no,potential”,,“little,potential”,,“average,potential”,,“high,potential”,,and,“very,high,potential”,for,lowering,costs.,Among,this,subset,of,respondents,with,specialized,knowledge,in,housing,development,costs,,the,easing,of,restrictions,governing,the,creation,of,


new,mobile,home,parks,was,the,most,popular,with,82%,of,respondent,indicating,that,this,posed,an,average,to,very,high,potential,to,lower,housing,development,costs.,This,was,followed,in,order,of,priority,by,lowering,or,eliminating,permit,and,subdivision,fees,for,affordable,units,(74%),,as,well,as,deferring,impact,fees,for,affordable,units,(74%),,revision,of,subdivision,regulations,(68%),,easing,requirements,around,accessory,dwelling,units,(67%),and,streamlined,replatting,of,existing,subdivisions,(56%).,,When,asked,to,rank,the,importance,of,strategies,,allowing,for,lot,creation,for,affordable,housing,with,reduced,parkland,dedication,requirements,was,the,most,important,to,builders,with,73%,reporting,that,this,was,“important”,to,“extremely,important”.,This,was,followed,by,lot,size,reductions,,which,were,found,to,be,important,to,extremely,important,for,62%,of,respondents.,,,It,should,be,noted,that,a,subdivision,activity,survey,was,sent,out,to,10,housing,developers,in,early,December,2014,with,the,aim,of,determining,projected,future,housing,starts,in,different,price,categories,,as,well,as,typical,development,costs.,Unfortunately,only,two,responses,were,received,,too,few,to,provide,reliable,results.,,,

, ,


8.,Recommended,Definition,of,Affordable,Housing,!

This,report,recommends,that,the,City,of,Bozeman,adopt,both,incentives,and,requirements,to,increase,the,production,of,affordable,housing.,To,provide,the,incentives,and,administer,the,requirements,the,City,must,have,a,clear,definition,of,“affordable,housing.”,,Challenges!of!Current!City!Definitions!!The,City’s,original,Workforce,Housing,Ordinance,(WRHO),refers,to,two,classes,of,housing,needs:,,,,

• Affordable,Housing:,housing,for,persons,earning,less,than,65%,of,the,area's,median,income,for,rental,housing,and,less,than,100%,of,the,area,annual,median,income,for,purchased,housing.,

• Workforce,Housing:,housing,for,persons,earning,less,than,120%,of,the,area,median,income,for,purchased,housing.,

There,are,several,problems,with,these,two,terms,,the,concepts,behind,them,,and,the,targeted,income,groups.,,

1. The,definitions,are,not,consistently,applied,in,the,original,ordinance.,For,example,,certain,sub^sections,of,the,WFHO,refer,to,homebuyers,at,70%,and,80%,of,area,median,income,(AMI),as,“workforce,housing,units.”,But,housing,at,the,70%,AMI,level,is,“affordable,housing”,according,to,the,definitions,in,the,same,ordinance.,

2. Public,input,received,in,this,study,indicated,no,consensus,on,the,definitions,of,“affordable,housing”,and,“workforce,housing.”,For,example,,some,officials,interviewed,considered,“affordable,housing”,to,only,refer,to,rental,housing,targeted,at,incomes,below,30%,AMI.,,

3. In,promulgating,new,policies,and,regulations,,the,City,lacks,an,all^encompassing,term,for,housing,that,is,needed,and,in,short,supply,in,Bozeman.,Since,the,universal,problem,is,lack,of,affordability,,many,communities,set,goals,for,producing,rental,and,owner^occupied,“affordable,housing”,at,rents,and,sale,prices,which,are,at,and,below,the,bottom,end,of,the,residential,real,estate,market.,

4. This,study,and,the,City’s,adopted,Housing,Needs,Study,and,Housing,Plan,,completed,in,2012,,identifies,100,percent,of,AMI—not,120%,AMI—as,the,top,end,of,the,income,group,that,is,facing,shortages,of,affordably^priced,housing.,Market,conditions,have,changed,since,that,120%,AMI,limit,was,set,in,2007,and,will,likely,change,again.,That,is,why,the,City,should,periodically,adjust,its,income,and,pricing,targets,as,the,market,changes.,,


5. There,are,more,direct,,effective,ways,to,assure,that,members,of,the,workforce,benefit,from,any,required,affordable,homes.,Language,could,be,carried,over,from,original,ordinance,that,requires,buyers,of,discount^priced,homes,to,be,employed,in,Bozeman.,

6. To,clearly,articulate,its,vision,and,goals,,the,City,would,benefit,from,having,one,all^encompassing,term,for,housing,that,meets,the,needs,of,all,of,its,citizens,who,face,housing,challenges.,The,City’s,Affordable,Housing,Action,Plan,uses,the,term,“affordable,housing.”,,,,

Applicability!of!Proposed!New!Definitions!The,original,Workforce,Housing,Ordinance,lists,14,different,incentives,for,construction,of,“workforce,units”,in,newly^platted,subdivisions.,Only,one,of,the,incentives,(fee,waivers),is,mentioned,as,being,available,to,“housing,projects,that,are,100%,affordable”—and,this,,only,at,the,City’s,discretion.,,,

Construction,of,affordable,rental,housing—a,high,priority,in,the,City’s,Affordable,Housing,Action,Plan—should,also,benefit,from,some,regulatory,incentives.,The,scarcity,of,very,affordable,rental,housing,was,noted,in,public,comments,and,the,City’s,2012,housing,needs,study,and,throughout,this,evaluation.,Yet,,none,of,the,incentives,in,the,original,WFHO,clearly,apply,to,affordable,rental,housing.,,

These,major,changes,in,applicability,are,recommended:,

1. Some,incentives,should,apply,to,the,creation,of,affordable,rental,housing,projects—but,as,with,the,original,ordinance,,new,construction,of,rental,housing,should,not,be,subject,to,inclusionary,requirements.,,

2. Affordable,rental,housing,should,be,narrowly,defined—limited,to,dwelling,units,that,are,contractually,restricted,for,at,least,20,years,to,occupancy,by,households,with,incomes,at,or,below,65%,of,area,median,income,and,paying,affordable,rents.,,

3. Affordable,housing,incentives,and,requirements,should,apply,to,annexations,and,new,site,plans,proposing,10,or,more,dwelling,units,,not,just,subdivisions,with,10,or,more,dwelling,units.,,

Recommended!New!Definition!of!Affordable!Homes!For!Sale!• Affordable,homes,for,sale,should,be,targeted,to,households,with,incomes,between,65%,

and,100%,of,area,median,income,(AMI),,based,on,the,City’s,2012,Housing,Needs,Study,and,current,market,data,evaluated,for,this,report.,,,

• Affordable,prices,should,be,calculated,based,on,a,homeowner,paying,a,maximum,of,33%,of,income,for,mortgage,payments,,taxes,,insurance,,assessments,,and,condo,or,homeowner,association,fees.,This,is,in,line,with,current,prevailing,standards,in,many,successful,homebuyer,assistance,programs.,,

!


Recommended!New!Definition!of!Affordable!Rental!Housing!• Affordable,rental,housing,should,be,targeted,to,households,with,incomes,at,or,below,

65%,of,area,median,income,(AMI),,based,on,the,City’s,2012,Housing,Needs,Study,and,current,market,data,evaluated,for,this,report.,For,purposes,of,qualifying,for,incentives,,projects,should,be,contractually,obligated,to,follow,rent,and,income,restrictions,for,at,least,20,years.,,

• Affordable,rents,should,be,calculated,at,30%,of,a,tenant’s,income,for,rent,and,tenant^paid,utilities.,This,is,consistent,with,the,contractual,requirements,of,federal,subsidies,for,rental,housing,programs.,

!

!


9.,,Recommended,Requirements,for,Providing,Affordable,Housing,!

Regulations,,particularly,on,the,local,level,,play,an,important,role,in,the,cost,of,housing,creation.,Subdivision,and,housing,development,is,a,highly,regulated,industry,,which,is,desirable,because,these,regulations,are,designed,to,ensure,the,quality,and,safety,of,our,community.,These,regulations,dictate,how,many,,and,what,types,of,housing,units,can,be,placed,in,a,given,area,of,land,(zoning),,and,basic,standards,for,how,those,homes,are,built,(building,code),,and,often,certain,regulations,about,how,homes,must,fit,into,their,surrounding,area,(design,guidelines),,all,aspects,that,factor,heavily,into,the,cost,of,housing,production.,,,As,with,any,type,of,regulation,,there,is,always,the,potential,for,unintended,consequences.,For,instance,,requirements,for,ample,open,space,can,lower,the,total,number,of,homes,that,can,be,developed,on,a,given,piece,of,land,,thus,lowering,the,number,of,homes,that,can,share,the,embodied,costs,of,development,such,as,roads,,infrastructure,,acquisition,and,financing,cost.,,,The,same,is,true,for,regulatory,mechanisms,,such,as,WFHO,,that,place,a,requirement,on,market,rate,housing,developers,to,provide,a,certain,amount,of,affordable,housing.,If,a,requirement,is,too,burdensome,,the,cost,of,compliance,can,be,pushed,onto,market,rate,homes,,raising,prices.,In,the,most,extreme,cases,,too,stringent,a,requirement,can,function,to,slow,the,overall,production,of,housing,by,making,housing,development,financially,unfeasible.,,,Because,of,these,risks,,any,mandatory,requirement,for,the,inclusion,of,affordable,housing,in,market,rate,housing,developments,must,be,balanced,by,offering,significant,enough,financial,incentives,to,developers,to,offset,losses,associated,with,the,sales,of,some,homes,at,below^market^rate,prices.,,!Proposed!New!Articles!Proposed!for!City’s!Code!of!Ordinances!This,report,recommends,replacement,of,the,original,Workforce,Housing,Ordinance,with,two,new,articles,in,the,City’s,Code,of,Ordinances,,Chapter,10,,Buildings,and,Building,Regulations,,as,follows:,

• Affordable!Housing!Definitions!and!Incentives,,as,described,in,sections,8,and,10,of,this,report., This, article, would, apply, to, both, required, provision, of, affordable, homes,, and,voluntary,construction,of,affordable,housing,,including,affordable,rental,housing.,,

• Affordable!Homes!Program,,which,would,focus,solely,on,requirements,for,building,and,selling,lower^priced,homes,in,certain,new,residential,and,mixed^use,developments.,This,Article,would,be,similar,in,some,respects,to,the,original,Workforce,Housing,Ordinance,,but,simpler,and,with,some,key,differences,as,described,below.,,

,


Applicability!of!Affordable!Housing!Requirements!The,original,Workforce,Housing,Ordinance,(WFHO),applied,only,to,applications,for,new,subdivisions,with,10,or,more,homes.,We,recommend,that,it,apply,more,broadly,to,the,following,types,of,new,applications,for,development,approvals.,

1. New,subdivision,plats,with,10,or,more,homes,or,amendments,of,existing,such,plats,affecting,more,than,30%,of,the,platted,lots.,,

2. Annexations,that,include,residential,zones.,

3. Applications,for,site,plans,for,construction,of,10,or,more,dwelling,units.,,

As,with,the,original,WFHO,,rental,housing,units,would,be,exempt,from,these,requirements.,The,market,evaluation,that,was,part,of,this,study,indicated,that,a,majority,of,rental,housing,in,Bozeman,has,rents,affordable,to,households,with,incomes,at,or,below,80%,of,the,area,median.,Demand,pressure,that,drives,up,rents,should,be,relieved,by,the,upcoming,construction,of,hundreds,of,new,rental,housing,units.,Even,so,,housing,with,rents,affordable,to,households,with,incomes,at,or,below,65%,of,the,area,median,is,in,scarce,supply.,We,recommend,that,this,need,be,addressed,by,the,incentives,described,in,Section,10,of,this,report,and,by,the,City,supporting,qualified,developers,who,are,applying,for,federal,subsidies,for,below^market^rate,rental,housing,as,described,in,Section,11.,,,,

Recommended!Requirements!for!Providing!Affordable!Homes!Developments,that,meet,the,applicability,criteria,would,choose,from,one,of,two,options,,with,the,assumption,that,new,developments,would,represent,a,mix,of,both,options.,,

1. Build!and!sell!“LowSPriced”!homes:,10%,of,the,total,housing,units,proposed,must,be,built,and,sold,at,affordable,prices,to,households,with,incomes,at,or,below,80%,of,area,median,income.,Current,pricing,for,a,three^bedroom,home,would,be,approximately,$198,000;,or,

2. Build!and!sell!significant!portion!of!“ModeratelySPriced”!homes:,,30%,of,the,total,housing,units,proposed,would,be,“naturally,affordable”—i.e.,market^rate,homes,built,and,sold,at,prices,affordable,to,households,with,incomes,from,81%,to,100%,of,area,median,income.,Income,qualification,of,buyers,would,not,be,required.,Current,pricing,for,a,three^bedroom,home,would,be,approximately,$255,000.,,It,is,not,expected,that,this,option,would,feasible,for,developments,offering,primarily,higher^priced,detached,homes,or,condos.,It,is,intended,to,offer,a,much,simpler,“safe,harbor”,for,many,condo,and,townhome,projects—and,perhaps,a,few,detached,home,projects,with,modestly,sized,homes,and,lots.,,

With,regard,to,the,two,tiers,of,pricing,,the,major,difference,from,the,original,ordinance,is,to,offer,a,“safe,harbor”,to,projects,that,build,and,sell,at,least,30%,of,the,homes,at,market^rate,prices,that,are,calculated,to,be,affordable,to,households,below,100%,of,area,median,income,,without,income,restrictions.,The,only,burden,on,these,projects,is,to,agree,to,deed,restrictions,capping,initial,sale,prices,on,30%,of,the,house,lots,or,condo,units.,,


No,special,marketing,requirements,are,proposed,,and,buyers,do,not,have,to,be,income^qualified.,,We,assume,that,most,condo,and,townhome,developers,will,be,able,to,meet,this,requirement,without,any,alteration,of,their,usual,marketing,and,pricing,strategies.,This,is,proposed,as,a,vehicle,for,greatly,simplifying,compliance,for,a,subset,of,affected,projects,that,in,any,case,would,have,had,prices,affordable,to,the,65%^100%,AMI,tier,or,can,be,nudged,by,incentives,to,achieve,lower,price,caps,for,30%,of,the,homes.,,,,,

Other!Recommended!Changes!in!Compliance!Rules!

1. A,primary,goal,should,be,for,developers,or,successors,in,title,to,build,and,sell,affordable,homes,,not,“affordable,lots”.,,The,WFHO,has,“bailout”,clauses,in,the,event,that,a,designated,Workforce,Housing,lot,or,home,was,not,sold.,Such,bailouts,are,not,found,in,most,inclusionary,zoning,ordinances.,The,result,in,Bozeman,during,the,brief,time,that,the,WFHO,was,in,force,,several,lots,were,designated,for,price^capped,homes,,which,were,marketed,but,not,sold—extinguishing,the,requirements,to,build,and,sell,the,homes.,,,,

2. Accordingly,,references,to,the,mechanics,and,pricing,of,lot,sales,should,be,removed,,as,irrelevant.,Developers,,successors,in,title,(builders),and,the,City,staff,should,keep,their,eye,on,the,end,goal—selling,finished,homes,in,two,price,tiers,,Low^Priced,and,Moderately^Priced.,It,should,be,the,responsibility,of,the,land,developer,to,assure,that,the,required,affordable,homes,(at,discount,prices),are,built,and,sold,,providing,to,builders,whatever,lot,price,concessions,are,reasonable,and,necessary.,As,for,the,Moderately,Priced,homes,,the,developers,are,simply,agreeing,to,price^cap,a,significant,number,of,the,homes,they,plan,to,sell.,

3. Enforcement,of,the,“buildând^sell^the^homes”,requirement,should,be,simple,and,tough.,,Lots,or,condo,units,should,be,designated,as,subject,to,Low^Priced,or,Moderately,Priced,requirements.,If,Low^Priced,homes,aren’t,sold,to,qualified,buyers,in,a,set,period,of,time,,the,developer,or,successor,in,title,should,have,to,donate,the,lot,to,a,nonprofit,or,pay,a,feeîn^lieu.,A,Moderate^Priced,home,should,be,subject,to,a,recorded,deed,covenant,restricting,the,home,price,at,a,set,dollar,amount.,

4. The,feeîn^lieu,“penalty”,for,not,selling,a,Low^Priced,home,should,be,different,from,those,in,the,Workforce,Housing,Ordinance.,The,WFHO,requires,a,payment,of,three,times,the,“lot,cost”,if,no,affordable,home,is,built.,We,propose,that,the,builder,have,no,choice,but,to,build,a,Low^Priced,home,unless,an,alternative,means,of,compliance,was,included,and,approved,in,the,developer’s,Affordable,Housing,Plan,as,a,result,of,extreme,hardship.,If,the,Low^Priced,home,does,not,sell,to,a,qualified,buyer,in,a,defined,period,of,time,,then,the,developer,or,builder,would,have,to,pay,a,feeîn^lieu.,The,fee,would,be,calculated,as,the,difference,between,the,appraised,value,of,the,home,and,the,discount,price,that,is,required,by,the,Affordable,Homes,Ordinance.,The,rationale,is,that,this,amount,of,cash,should,be,sufficient,to,subsidize,the,purchase,of,a,similar,market^priced,home,for,a,Low^Priced^tier,buyer.,,,


5. The,new,ordinance,should,incorporate,most,of,the,alternative,means,of,compliance,allowed,in,the,WFHO,,with,the,exception,of,providing,offsite,home,lots,(as,opposed,to,finished,affordable,homes),and,providing,existing,homes,presumably,bought,in,the,open,market,and,resold,to,income^qualified,buyers.,We,recommend,that,the,fee^in^lieu,alternative,be,offered,as,an,option,only,for,certain,projects—principally,luxury,home,or,condo,projects,in,which,taxes,and,condo/HOA,fees,tend,to,be,unaffordable,to,low^,and,moderate^income,homebuyers.,,,,

6. Donations,of,large,tracts,of,land,(3,to,4,acres),for,affordable,rental,projects,should,be,strongly,encouraged,for,project,with,larger,affordable,requirements,,as,should,donations,of,townhome,or,detached,home,lots,to,nonprofit,builders.,

7. Minimum,standards,for,“affordable”,homes:,The,original,ordinance,calls,for,30%,of,the,required,WFH,units,to,be,detached,homes.,It,is,proposed,that,the,Low^Priced,homes,be,provided,as,condos,,townhomes,,and/or,detached,homes,in,the,same,proportions,as,the,market^rate,homes,in,the,development.,The,minimum,design,standards,for,affordable,homes,in,the,original,WFHO—addressing,such,matters,as,housing,types,,numbers,of,bedrooms,,design,features,,etc.—should,be,reviewed,if,the,City,decides,to,draft,a,new,ordinance.,Some,provisions,can,be,simplified.,Minimum,square,footages,of,Low^Priced,homes,should,be,included,for,homes,of,different,types,and,numbers,of,bedrooms.,,,

8. Structure,types,and,design,guidelines,for,Moderately^Priced,homes:,,Due,to,the,large,percentage,of,homes,required,and,the,assumption,that,they,are,essentially,market,rate,homes,with,no,price,discounts,,we,see,no,need,for,design,requirements,to,be,imposed,on,this,price,tier.,,,

Qualification!and!Selection!of!Homebuyers!It,is,recommended,that,buyer,qualification,requirements,apply,only,to,Low^Priced,homes.,A,method,of,income,certification,should,be,prescribed,in,the,ordinance,,typically,conforming,to,standards,used,by,federal,affordable,housing,programs.,As,noted,above,,there,would,be,a,much,larger,percentage,requirement,(e.g.,30%,vs.,10%,for,new,subdivisions),for,the,Moderately^Priced,home,option,with,price,caps,but,no,income,restrictions,on,buyers.,The,presumption,is,that,a,significant,number,of,Moderately^Priced,homes,resulting,from,a,new,inclusionary,ordinance,would,be,bought,by,buyers,with,incomes,at,or,below,the,median,income,in,Bozeman,,even,though,there,would,be,no,formal,income,restrictions.,,

We,also,recommend,eliminating,the,lottery,requirement,in,the,original,ordinance,,which,tend,to,instill,false,hopes,,preclude,realistic,expectations,and,circumvent,the,type,of,rational,planning,that,should,accompany,a,consumer,decision,of,this,magnitude.,A,superior,method,is,to,maintain,a,sequential,waiting,list,for,each,subdivision,or,condo,project,(first,come,,first,served),that,includes,only,prospective,Low^Priced,home,buyers,that,meet,the,income,limits,,ordinance,qualifications,,and,have,also,obtained,a,prequalification,letter,from,a,lender.,,

!


Program!review!We,recommend,only,minor,refinements,of,the,review,provisions,contained,in,the,original,WFHO.,We,would,add,triggers,for,possible,review,of,the,program,more,often,than,every,two,years—namely,an,annual,review,or,at,any,time,there,is,a,substantial,change,in,prevailing,mortgage,interest,rates,and,in,the,numbers,of,homes,listed,and,sold,in,the,lower,price,tiers.,The,program,should,also,be,assessed,annually,to,ascertain,if,developers,are,manipulating,their,subdivisions’,composition,to,avoid,the,10^unit,threshold.,If,measurable,increases,occur,in,subdivision,of,nine,units,or,less,,modifications,should,be,made,to,the,program,requirements,for,smaller,projects,to,close,this,potential,loophole.,,

Administration!As,with,the,original,WFHO,,requirements,for,providing,affordable,homes,should,be,detailed,in,a,written,“affordable,housing,plan”,that,the,developer,presents,to,the,City,for,its,approval,as,part,of,the,subdivision,or,site,plan,approval,process.,Fill^in^the^blanks,forms,for,different,options,can,make,this,process,relatively,simple,and,predictable.,City,staff,knowledgeable,about,the,details,of,the,requirements,should,be,available,to,work,with,developers,when,developing,their,plans.,,,In,most,communities,,we,do,not,recommend,that,day^to^day,program,functions,including,client,management,and,income,qualification,be,handled,by,City,staff.,Rather,,these,functions,are,typically,more,efficiently,administered,by,local,organizations,specializing,in,affordable,housing,that,already,conduct,income,certifications,and,provide,requisite,homebuyer,training,and,education,services.,These,activities,usually,involve,administrative,support,funding,from,the,local,government,and,are,typically,awarded,competitively,based,on,an,annual,proposal,process.,,!


10.,,Recommended,Incentives,for,Building,Affordable,Housing,

The,table,on,the,following,page,depicts,a,range,of,incentives,identified,through,the,evaluation,process.,These,options,include,some,incentives,from,the,original,Workforce,Housing,Ordinance,(WFHO),,others,identified,by,stakeholders,in,the,context,of,the,evaluation,process,,as,well,as,opportunities,and,best,practices,taken,from,our,work,in,other,communities.,In,addition,,we,provide,recommendations,about,the,types,of,affordable,housing,development,that,should,receive,these,incentives.,,

We,are,recommending,that,these,incentives,be,made,available,to,all,affordable,housing,developments,that,satisfy,defined,beneficiary,and,pricing,criteria,,a,key,deviation,from,the,approach,of,the,original,WFHO,,which,only,made,incentives,available,to,mandatory,affordable,housing,creation.,The,key,recommendations,are,those,that,offer,tangible,financial,incentive,to,those,producing,affordable,housing,,as,these,mitigate,the,financial,losses,of,selling,homes,at,below^market,prices.,Among,these,are,deferral,of,impact,fees,and,the,ability,to,create,additional,home,lots,for,affordable,housing.,Short,discussions,accompany,each,of,the,following,recommendations,along,with,a,matrix,indicating,what,income,range,and,housing,type,they,should,be,applied,to.

!Recommendations,for,Regulatory,Changes,to,Support,Affordable,Housing,Development,,,,Page,31,

!

Recommended(

Incentives(Discussion(

0165%(

AMI(

Rental(

66180%(

AMI(for(

Sale(

811100%(

AMI(for(

Sale(

Impact(Fee(Deferral(

A,deferral,of,impact,fees,is,one,of,the,tangible,ways,that,a,municipality,can,directly,

reduce,the,hard,costs,associated,with,development.,The,original,WFHO,allowed,for,

sliding,scale,fee,deferral,based,on,income/price,targets,of,individual,homes,,with,

full,deferral,for,units,serving,70%,AMI,and,partial,deferral,for,units,priced,at,100%,

AMI.,We,recommend,full,deferral,of,impact,fees,for,units,serving,80%,AMI,and,

below,,by,means,of,the,Workforce,Housing,Fund,paying,for,the,full,cost,of,the,fees,,

and,securing,that,payment,with,a,lien.,Upon,the,resale,of,the,home,by,the,original,

incomeOqualified,buyer,,or,the,expiration,of,rental,restrictions,,the,original,amount,

of,impact,fees,would,be,paid,back,into,the,fund.,,

X( X( (

Targeted,(Partial(

Financing(of(

Infrastructure(for(

Affordable(Homes(

The,City,should,consider,providing,lowOcost,or,deferred,loans,to,housing,

developments,providing,very,affordable,rental,and,forOsale,housing.,This,should,be,

restricted,to,affordable,rental,housing,and,LowOPriced,homes,for,sale.,The,most,

feasible,approach,would,be,for,the,City,to,apply,to,the,State,of,Montana,for,CDBG,

funds,that,would,be,used,by,the,City,for,this,purpose.,CDBG,has,matchOfunding,

requirements,,which,could,be,met,by,use,of,funds,from,the,City’s,Workforce,

Housing,Fund.,Criteria,would,need,to,be,made,defining,the,amounts,and,process,by,

which,these,are,made,available,and,to,what,specific,types,of,developments.,,

X( X( (

Increased(

Capitalization(of((

Workforce(Housing(

Fund(

Key,to,any,major,increase,in,affordable,housing,production,in,Bozeman,will,be,

increased,capitalization,of,the,City’s,Workforce,Housing,Fund.,The,most,powerful,

incentives,(above)—impact,fee,deferrals,and,partial,funding,of,infrastructure,

costs—require,cash,investments,from,the,public,sector.,Due,to,legal,restrictions,,

the,City,cannot,waive,impact,fees,or,defer,them,for,more,than,a,short,period,of,

time.,However,,as,described,below,,the,Workforce,Housing,Fund,(which,might,be,

renamed,the,Affordable,Housing,Fund),can,pay,the,fees,and,take,back,a,lien,that,is,

due,when,an,affordable,home,is,resold.,Increased,capitalization,of,the,Workforce,

X( X( (


!

Recommended(


0165%(

AMI(

Rental(

66180%(

AMI(for(

Sale(

811100%(

AMI(for(

Sale(

Housing,Fund,could,come,from,an,increase,of,the,affordable,housing,mil,rate,levy,

to,its,legal,maximum,,from,general,revenue,,or,from,a,general,obligation,bond.,,

Waiver(of(Subdivision(

and(Permit(Fees(

A,feature,of,the,original,WFHO,,a,waiver,of,subdivision,application,and,review,fees,

for,projects,that,build,affordable,housing,could,have,a,modest,impact,on,the,hard,

development,costs,of,a,subdivision.,Similarly,,waiving,building,fees,for,affordable,

units,could,also,have,a,positive,benefit,on,development,costs,of,individual,homes.,

The,cost,of,providing,this,incentive,would,be,borne,by,administrative,overhead,in,

applicable,City,departments,that,currently,rely,on,fees,to,offset,staff,costs.,Options,

include,deferring,all,fees,for,developments,that,create,affordable,units,,or,deferring,

fees,according,to,the,percentage,of,affordable,housing,created.,,

X( X( (

Reduction(of(Parkland(

Requirements(For(

Developments(of(11(

or(More(Homes(

This,aspect,of,the,original,WFHO,allowed,for,a,reduction,in,parkland,requirement,

equal,to,the,minimum,lot,size,allowed,by,that,zoning,district,for,each,affordable,

unit,produced.,Allowed,only,for,developments,that,build,onsite,housing,,this,

provision,was,very,popular,with,the,building,community,and,has,the,potential,for,a,

very,tangible,impact,on,overall,development,costs.,Functionally,in,a,40Ounit,

subdivision,,with,a,minimum,5000,square,foot,lot,size,,that,provided,four,affordable,

units,,this,would,have,the,effect,of,lowering,the,parkland,requirements,from,a,

minimum,of,52,000,ft2,down,to,32,000,ft

2.,

X( X( (

Reduction(of(Parkland(

Requirements(for(

Developments(of(10(

or(Fewer(Homes(

Currently,,all,subdivision,developments,are,required,to,contribute,parkland,at,a,rate,

of,1,300,square,feet,per,unit.,The,state,minimum,is,11%,of,gross,subdividable,area.,

For,tenOunit,subdivisions,this,creates,parks,,which,are,approximately,⅓,acre.,This,

provision,would,lower,parkland,requirements,for,smaller,subdivisions,to,meet,only,

the,minimum,requirement,and,allow,for,automatic,cash,in,lieu,for,park,areas,

smaller,than,one,¼,acre.,

X( X( X(


!

Recommended(


0165%(

AMI(

Rental(

66180%(

AMI(for(

Sale(

811100%(

AMI(for(

Sale(

Density(Bonus(

This,provision,would,allow,developers,to,increase,the,maximum,number,of,housing,

units,per,acre,allowed,by,the,current,zoning,to,accommodate,inclusion,of,lots,for,

affordable,housing.,Generally,this,type,of,density,bonus,has,a,smaller,impact,on,

overall,development,costs,because,it,can,be,a,difficult,for,developers,to,truly,utilize.,

Even,with,allowed,increases,in,density,the,developable,area,for,an,affordable,unit,

must,still,be,taken,from,other,home,lots,and,the,overall,projectOlevel,unit,density,is,

often,limited,by,other,factors,such,as,terrain,and,wetlands.,

X( X( (

Reduced(Lot(Size(

This,incentive,is,included,in,the,original,WFHO,and,allowed,for,smaller,detached,

home,lots,than,underlying,zoning,in,categories,(down,to,3,500,square,feet),where,

larger,lots,are,typically,required.,Most,developers,are,not,currently,utilizing,

minimum,lot,sizes,in,new,subdivisions.,But,this,should,be,kept,as,an,incentive,for,

those,developers,who,choose,to,use,it,,since,it,reduces,both,land,and,infrastructure,

costs.,,,

( X( X(

Simultaneous(

Infrastructure(

Housing(Construction(

The,original,WFHO,allowed,for,the,simultaneous,development,of,subdivision,

infrastructure,and,housing,for,projects,that,build,at,least,5%,of,the,total,number,

units,in,a,project,as,onOsite,affordable,housing.,Builders,also,referenced,this,as,a,

potential,incentive,to,help,lower,costs,with,the,trigger,for,permit,issuance,at,the,

installation,of,a,gravel,base,roads.,If,this,was,adopted,as,an,incentive,,the,City,

would,want,to,require,a,performance,bond,to,ensure,completion,of,the,road,

infrastructure.,

X( X( (

Narrower(

Streets/Sidewalks(In(

Subdivisions(

Current,street,widths,are,relatively,small,,and,some,recent,PUD,approvals,have,

allowed,for,smaller,roads,in,recent,years.,Still,,some,builders,suggested,that,the,

cost,of,housing,could,be,reduced,by,more,liberal,approvals,of,narrower,streets.,The,

City,should,consider,convening,a,study,group,that,include,City,staff,and,local,

planners,,architects,,engineers,and,builders,to,assess,the,ways,in,which,narrower,

X( X( X(


!

Recommended(


0165%(

AMI(

Rental(

66180%(

AMI(for(

Sale(

811100%(

AMI(for(

Sale(

streets,and/or,right,of,ways,could,be,more,widely,allowed.,,

Streamlined(review(of(

smaller(subdivisions.(

Smaller,subdivisions,will,have,a,harder,time,meeting,mandatory,affordable,housing,

requirements.,While,state,law,dictates,many,aspects,of,the,subdivision,review,

process,for,“small,subdivisions”,,there,still,may,be,aspects,of,the,local,review,

process,that,can,be,streamlined.,The,City,should,consider,convening,a,group,of,

developers,,builders,,land,planners,,surveyors,and,civil,engineers,to,explore,ways,

that,smaller,subdivisions,could,be,created,more,quickly,and,cost,effectively.,,

X( X( X(

Expedited(Review(for(

Project(that(Build(

Affordable(Housing(

Expedited,review,for,all,departments,(planning,,engineering,,building),for,projects,

that,are,100%,affordable,was,another,aspect,of,the,original,WFH,Ordinance.,This,

could,prove,a,valuable,incentive,when,City,planning,is,experiencing,high,volume,of,

applications,for,review.,,

X( X( X(

Lower(Parking(

Requirements(

Current,requirements,dictate,that,parking,be,created,at,the,rate,of,one,space,per,

bedroom.,This,incentive,would,allow,for,a,reduced,parking,requirement,of,two,

spaces,per,threeObedroom,dwelling,for,incomeOcertified,homeowner,occupied,

units.,This,requirement,would,ensure,that,the,residents,of,homes,with,reduced,

parking,are,families,,and,not,cohabiting,adults,who,would,presumable,have,one,car,

per,bedroom.,This,could,also,include,other,criteria,regarding,proximity,to,public,

transportation,in,line,with,the,current,allowed,10%,parking,reduction.,,

( X( (

!


,11.,Other,Strategies,to,Promote,Affordable,Housing,Production,Regulations,alone,cannot,be,relied,upon,to,completely,solve,the,affordable,housing,challenges,facing,the,community.,Through,the,evaluation,process,,a,number,of,new,ideas,were,brought,up,that,could,help,to,support,affordable,housing.,It,is,also,an,opportune,time,to,reiterate,some,of,the,more,pertinent,findings,from,the,2012,Affordable,Housing,Action,Plan.,,,,Rental'Housing'A,reoccurring,theme,of,this,investigation,has,been,the,urgent,need,for,more,affordable,rental,housing,,this,is,apparent,from,input,surveys,and,public,meetings.,While,there,is,a,significant,pipeline,of,multiIfamily,housing,that,will,be,built,in,the,coming,year,,more,can,be,done.,The,recent,award,of,Federal,Low,Income,Housing,Tax,Credits,(LIHTC),to,the,Stoneridge,affordable,rental,project,is,an,important,model,for,future,projects,that,can,provide,more,very,affordable,,incomeIrestricted,rental,units.,The,affordable,rental,development,recommendations,from,the,City’s,Affordable,Housing,Action,Plan,called,for,development,incentives,,which,we,have,addressed,to,an,extent,here,,but,more,can,be,done.,,,The,scale,of,affordable,housing,subsidy,for,Low,Income,Housing,Tax,Credits,is,without,comparison,and,can,represent,between,$5,million,and,$10,million,in,affordable,housing,development,subsidies,brought,into,the,community,for,each,successfully,awarded,project.,Because,of,the,competitiveness,of,LIHTC,awards,,there,are,several,strategies,that,the,City,should,employ.,,,

• Support,applications,for,LIHTC,funding,every,year,,if,possible,,which,may,mean,actively,seeking,out,development,partners.,

,• Work,with,advocates,,affordable,housing,developers,,and,critically,,the,private,sector,

building,community,to,identify,development,constraints,unique,to,Bozeman,,which,could,be,used,to,inform,changes,to,Bozeman,development,code,as,well,as,to,provide,recommendations,to,the,Montana,Board,of,Housing,for,future,iterations,of,their,LIHTC,Qualified,Allocation,Plan.,

,• Use,suitable,land,donations,(CityIowned,land,,land,acquisitions,,or,land,acquired,through,

inclusionary,requirements),to,support,applications,for,LIHTC,funding,and,increase,the,level,affordability,in,those,projects,

,• Work,to,advocate,for,a,more,rational,allocation,method,,which,currently,does,not,

automatically,award,credits,to,the,highest,scoring,projects.,,,Employer'Assisted'Housing'Some,of,the,most,vocal,proponents,of,affordable,forIpurchase,housing,are,administrators,and,employees,of,major,institutions.,These,workers,may,earn,decent,wages,,but,still,face,challenges,

!


finding,homes,they,can,afford.,Major,Bozeman,employers,such,as,Montana,State,University,,Bozeman,Deaconess,Hospital,,and,the,Bozeman,Public,Schools,all,possess,ample,land,for,housing,development,,but,often,lack,the,skills,necessary,to,execute,high,quality,,efficient,,affordable,housing,development.,,,The,City,should,work,to,assist,these,institutions,access,technical,assistance,,and,solicit,potential,partners,in,the,private,sector,(forIprofit,and,nonIprofit,housing,developers),to,assist,with,this,development.,The,City,can,then,offer,affordable,housing,incentives,for,qualified,units,to,help,increase,affordability.,The,resulting,developments,can,then,be,reserved,for,employees,of,those,institutions.,,,Mobile'Homes'Mobile,homes,are,still,a,very,viable,affordable,housing,option,for,many,who,live,in,the,greater,Bozeman,area.,They,also,offer,a,critical,step,between,renting,and,ownership,for,many,lower,income,households.,There,are,major,issues,facing,the,preservation,of,existing,mobile,home,developments,,including,pressure,to,convert,to,other,more,profitable,uses.,The,2012,Affordable,Housing,Action,Plan,recommended,provision,of,City,water,and,sewer,services,to,aging,parks,that,may,still,be,on,septic,systems,,particularly,those,just,outside,of,City,limits.,In,addition,to,this,strategy,,the,City,should,investigate,affordable,housing,impact,fees,for,the,conversion,of,mobile,home,parks,into,nonIresidential,uses,as,they,are,significantly,decreasing,the,community’s,affordable,housing,inventory.,,Current,mobile,home,development,regulations,,technically,considered,the,creation,of,a,“subdivision,for,rent,or,lease”,are,onerous,and,require,all,the,same,development,review,requirements,of,a,forIsale,subdivision,,yet,this,method,lacks,the,tangible,increase,in,land,value,associated,with,actual,subdivision.,This,,plus,the,site,plan,requirements,and,associated,development,costs,are,so,burdensome,that,it,is,unlikely,landowners,would,undertake,the,work,involved,with,approval.,,,The,City,should,convene,a,task,force,to,evaluate,mobile,home,preservation,and,the,subdivision,for,rent,or,lease,elements,in,the,City,development,code.,Options,to,consider,could,include,the,creation,of,byIright,mobile,home,parks,with,clear,performance,standards,,rather,than,the,current,point,system,,particularly,for,projects,that,offer,innovative,improvements,over,traditional,mobile,home,communities,such,as,energy,efficient,home,designs,and,onIsite,energy,generation.,,,Accessory'Dwelling'Units'The,creation,of,more,accessory,dwelling,units,(ADU’s),is,frequently,cited,as,an,important,means,of,providing,affordable,housing,,which,dates,back,to,their,creation,in,1994.,The,public,survey,of,regulatory,options,indicated,that,this,is,by,far,the,most,popular,of,all,the,regulatory,options,provided.,There,are,currently,a,number,of,restrictions,that,could,be,considered,for,modification,

!


to,make,ADUs,easier,to,create.,Current,development,code,dictates,that,to,develop,a,new,ADU,,the,subject,property,must,be,owner,occupied,,and,ADU’s,must,comply,with,strict,limits,to,the,size,and,bedroom,composition.,The,City,should,consider,modifying,these,requirements,to,lift,the,ownerIoccupied,requirement,and,potentially,allow,modification,to,size,limits.,In,addition,,the,City,should,work,with,the,private,sector,building,community,to,create,a,design,or,designs,for,ADUs,that,could,be,preIapproved,for,design,review,in,neighborhoods,where,those,requirements,exist.,,,Investing'in'Housing'Innovation'The,average,home,size,in,Bozeman,is,much,larger,than,needed,for,a,modest,first,home,for,an,affordable,buyer.,The,City,should,assist,local,industry,professionals,to,share,information,and,learn,new,methods,of,designing,and,building,very,livable,smaller,homes,on,smaller,lots,that,demonstrate,low,life,cycle,costs.,This,could,take,the,form,of,a,series,of,design,charrettes,,informationIsharing,workshops,and/or,design,competitions.,Aside,from,traditional,detached,dwellings,,other,types,of,housing,units,that,could,benefit,from,this,approach,include,modern,designs,for,energy,efficient,and,visually,attractive,mobile,homes,as,well,as,preapproved,design,plans,for,accessory,dwelling,units.,,,,,,,,,,,,,,,,,,,,,,,,,

!


Appendix:'Individuals'Interviewed'&'Organizations'That'Provided'Input''''

Interviewee' Affiliation'

Commissioner,Cynthia,Andrus, City,of,Bozeman,

Rob,Evans, Constructive,Solutions,

Heather,Grenier, Human,Resources,Development,Council,

Mayor,Jeff,Krauss, City,of,Bozeman,

Collette,Lang, Gallatin,Association,of,Realtors,

Anders,Lewendal, Sustainable,Building,Solutions,

Marie,Lowe, ERA,Landmark,Real,Estate,

Commissioner,Chris,Mehl, City,of,Bozeman,

Commissioner,IIHo,Pomeroy, City,of,Bozeman,

Brian,Popiel, Arete,Builders/Resource,Site,Services,

Jeff,Rupp, Human,Resources,Development,Council,

Chris,Saunders, City,of,Bozeman,

Sara,Savage, Human,Resources,Development,Council,

Kevin,Spencer,, North,Ranch,Homes,

Valerie,Sutton, City,of,Bozeman,

Sharron,Southard, Big,Sky,Western,Bank,

Commissioner,Carson,Taylor, City,of,Bozeman,

Wendy,Thomas, City,of,Bozeman,

Group'Meetings' Dates'

SWMBIA, 12/9/14,

GAR, 12/9/14,

CAHAB, 12/10/14,,1/14/15,

,

Recommendations for Regulatory Changes to Support...

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