Barriers to
Affordable Housing
March 8, 2022
City Council
Office of Economic Development
& Cultural Affairs
Jerad Ferguson, Housing Catalyst
Housing Department
Rachel VanderVeen, Deputy Director
Background
2 August 2021 – City Council update on Housing Crisis Work Plan. • Recommendation: Outreach to developers who have entitlements but have not started construction – focus on affordable.
Housing Catalyst Team with the Mayor’s Office conducted individual interviews with affordable developers with projects approved or under construction in City.
Overall Highlights / Key Takeaways
• Multiple factors can delay start of construction that often vary by project.
• Rising construction costs remain a significant factor. • Competitiveness in obtaining funds has increased, especially for tax credit financing.
– Developments have had to apply multiple times to receive award.
3 Permitting Process
Dedicated Planner for Affordable Housing – Position funded through grant from Destination: Home SV instrumental in entitlement process. Building Permit Process – Interest in similar assistance obtaining permits to start construction.
Housing Crisis Work Plan Item: Establish regular coordination meetings to understand timelines tied to funding sources of affordable housing. 4 Land Use and Design Standards
• Commercial Space Requirements – Feedback supported
eliminating this requirement for affordable projects.
• Parking Requirements – Welcome further reductions or the elimination of parking requirements. Staff currently evaluating parking and Transportation Demand Management (TDM) Standards.
• Electric Vehicle Charging – New requirements to provide EV spaces adds to project costs.
5 City Fees & Taxes
Construction Taxes – Mentioned as an added cost/barrier to affordable development. • From 1992 to 2011 City suspended the four residential construction taxes for very low- income units.
• Older code section suspends Building and Structure Tax and CRMP Tax for many affordable projects receiving certain types of federal funding. • Action Item: Staff recommends updating the older sections, and exploring a new temporary suspension of residential construction taxes for affordable rental housing. 6 FY 2020-2021 Construction Taxes from 100% Affordable Development 7 Building & Structure
Tax
Commercial-Residential
Mobilehome Park
Tax
Residential
Construction Tax
Construction and
Conveyance Tax
$993,157 $1,560,677 $75,870 $63,225
Total FY20-21: $2,692,929
City Fees & Taxes
Fee Estimates / Calculation – Feedback received that estimating fees and taxes can be challenging.
• Development Fee Framework – long term work item that will make estimating easier.
• Housing Crisis Work Plan Item: Develop an impact fee registry that is a unified listing of all fees and taxes in one place with a point of contact in the responsible department.
8 City Fees & Taxes
Bond Issuance – City requires it be the issuer of all bonds financing multi-family rental projects (Council Policy 1-16).
• Numerous advantages to City role as issuer; ability to grant exemptions. • Raised issue of competitiveness of issuance fee and ongoing monitoring fee. • Housing Crisis Work Plan Item: Staff will evaluate and compare bond fees from outside issuers and consider strategies to eliminate incentive to use outside bond issuers.
9 Other Topics and Non-governmental Barriers
• Impact on Policy Changes to Site Selection – Shifting policies and priorities can stall a project.
• Construction Costs – Continued to rise through the pandemic. • Projects may need to utilize additional funding sources. • Adds time while costs are also increasing.
10 Next Steps
11 Incorporate highlighted work items into Housing Crisis Work Plan. • Next Update to Community & Economic Development Committee in May.
Complete further analysis and return to Council with
recommendations regarding tax suspension.
Additional Outreach through Housing Element Update Process.
Recommendation
12 Accept the report on barriers to affordable housing construction, and approve the following:
a) Add the following work items to the Housing Crisis Work Plan to further assist affordable housing development based on the feedback received during outreach:
1) Create an impact fee registry.
2) Establish internal coordination meetings to help facilitate key deadlines for affordable developments.
3) Evaluate the City’s bond issuance and monitoring fees and consider strategies to eliminate the incentive to use outside bond issuers and encourage participation in the City’s bond program. b) Explore a new temporary suspension, and clarification of existing exemptions, for the collection of the residential construction taxes listed below for affordable housing development:
1) Building and Structure Construction Tax;
2) Commercial-Residential Mobilehome Park Building Tax; 3) Residential Construction Tax; and
4) Construction Portion of the Construction and Conveyance Tax.
Barriers to
Affordable Housing
March 8, 2022
City Council
Office of Economic Development
& Cultural Affairs
Jerad Ferguson, Housing Catalyst
Housing Department
Rachel VanderVeen, Deputy Director