Example Market Affordability Primer & Affordable Housing Toolkit Summer 2019 1
Housing Goals Overarching Objective: • Have a vibrant, growing city where all residents are able to afford and access quality housing throughout the city Direct Goals: 1. Reduce the total number of cost-burdened households 2. Minimize displacement of existing residents 3. Provide access to affordable housing to those who are most-in-need 4. Create new housing supply to accommodate city population growth 5. Promote mixed-income housing & neighborhoods 2
Housing Ecosystem • Serves: • Serves Housing Ecosystem is >~80% AMI ~60%-120% AMI linked: • Priced at market • Priced at market rates rates • Shortage of one type of housing drives the need or demand for another type of Market Rate Market Rate housing (New) (Workforce) • The overwhelming majority of housing is priced at market rates • Managing market Income Market Rate Restricted affordability is CRITICAL to Affordable (NOAH) addressing the affordable Housing housing issue • Serves: • Serves: ~30-80% AMI ~30-100% AMI • Priced at • Priced at market affordability limit rates 3
Housing Market Affordability Why is Market Affordability Important? • Market rate housing is home to the large majority of Minneapolis renters • Maintaining market affordability has the largest effect on the most people • Market affordability drives supply of NOAH • An affordable market will have fewer cost-burdened renters and will help reduce the need for income restricted-affordable units An affordable housing market will help reduce demand & need for 50%-100% AMI units. But a non-market strategy is needed to help solve housing need for 30-40% AMI. 4
New Supply Constriction & Affordability Delivering supply that meets or exceeds market demand empowers renters: • Increases market vacancy • Increases tenant bargaining power with landlords (more favorable terms & fewer rent increases) • Landlords must compete for new renters by offering lower rates and concessions • Gives renters more choices of where to live • Reduces displacement The only way to manage market affordability is by delivering new supply that keeps pace (or exceeds) new demand. 5
New Supply Constriction & Affordability What happens when supply does not meet demand? The rental market becomes less affordable • Vacancy rates decrease • Renters have less leverage with landlords • Renters are forced to move down the value chain • Renters get priced out of Class A, move to Class B. Class B gets priced out, moves to Class C, etc. • Displacement – New residents with more spending power will drive out existing residents with less spending power Eroding market affordability drives need for more income restricted affordable units 6
Pressure on Class B & C NOAH Stock Increasing the cost of new housing supply (i.e. lowering yields on new development) will add pressure to NOAH stock in two ways: New Renter Pressure: Investor Pressure: Lowering investment returns on Increased cost of supply = less new developments = less new new supply supply Less new competitive housing supply = Less new supply = fewer homes increased ‘yield’ in buying existing for new residents housing supply Fewer homes for new residents = Investors seeking ‘yield’ will buy & new residents with more renovate existing housing(i.e. NOAH) spending power will price out & instead of building new housing displace existing residents 7
Pressure on Class B & C NOAH Stock Owners/Investors/Capital Groups The capital groups who are investing in new developments are the same ones who buy and renovate existing buildings. These groups will make their decision based on what provides the best return to their investment. Invest in building a new building Minneapolis Buy and renovate an Real Estate existing building (NOAH) Investment Decision Nashville, Austin, Tree Seattle, etc. Stocks/Bonds/Other An IZ policy that lowers the returns of building new will increase the relative returns of buying existing buildings. 8
New Supply Constriction & Affordability Policy Externalities & Considerations • Any IZ policy needs to consider the implications to supply and market affordability. • If an IZ policy negatively impacts market affordability it will create a need for more additional subsidized affordable units. • Market forces are real. Capital wants to invest in Minneapolis. Does the policy help to channel that capital into building new housing? Or instead, does it push that capital into removing NOAH? Multifamily housing is the cheapest and most cost effective way to add to our city’s housing supply. A policy that directly or indirectly increases the cost to produce this type of housing is counterproductive to improving housing affordability in Minneapolis. 9
Total IH Compliant Units since Feb 2017 94 522 Affordable Units Market Rate Units 10
11
Portland Case Study – Takeaways Portland Takeaways • New housing development has decreased significantly because projects are no longer financially feasible. • Portland’s IH Policy is severely exacerbating the housing shortage • The IH Policy is not a reasonable means of adding new income-restricted affordable units • Portland will increase their number of cost-burdened households as a result of this policy. 12
Example BMT Affordable Housing Toolkit Housing policy tools that will : • Improve rental opportunities at a variety of price points • Increase affordability access without reliance on new construction alone • Encourage more NOAH preservation • Expand housing supply to accommodate future residents Housing policy tools that won’t: • Restrict new housing supply • Increase the cost of rental housing in the city • Exacerbate loss of existing NOAH housing • Displace existing NOAH residents 13
Affordable Housing Toolkit Affordable Housing Tools: • Expand 4d Affordable Housing Incentive Program • Expand Housing Choice Vouchers • Encourage housing cooperatives Affordable Housing Funding Sources: • Inclusionary Development & Investment Fund(TIF pooling) • MPHA Property tax levy on all property types Affordable Housing Legislation at the State & County Level • Support state legislative change to make 4d tax rate .25% • Mixed-Income Tax Exemption Program • Support state legislative change to create state housing tax credit 14
Tools: Expand The 4d Affordable Tax Pilot Program Why would this work?: 1. Fastest and most efficient means of preserving existing NOAH stock. 2. Minimize tenant displacement, and encourages existing building investment. 3. Modest loss of tax revenue ($800/unit i.e. $80,000 for a typical 100 unit building) is a fraction of the $200- $300k cost for a single new affordable unit. 4. Increases overall affordable housing supply, without using Tax Increment or other city (AHTF) resources. 5. MHFA regulates the 4D program. Existing state monitoring for compliance makes this low cost to city. BMT Policy Recommendation: 1. Increase City’s 4D Affordable tax Pilot Program to at least 1000 units per year. Prioritizing new 2040 density & transit corridors 2. Leverage Inclusionary Development & Investment Fund to grow the 4d program. 3. Lobby at the state level to lower the class tax rate to .25%. • This will help make almost $5k/unit of new debt service available for new production. (i.e. $500,000 of additional private debt available for a typical 100 unit building) 15
Tools: Expand MPHA Housing Choice Vouchers Why would this work?: 1. Provides fastest placement for 30% AMI Households. 2. Helps those most in-need. 3. Uses existing housing stock to serve community of need. 4. One of the most effective & efficient ways for the city to deploy limited affordable housing resources. 5. Lower cost than building new units. BMT Policy Recommendation: 1. Increase dedicated MPHA resources, to permit expansion of HCV eligibility list. 2. Increase MPHA HCV monthly rent allowance levels up to 60% AMI rents. 3. Offer damage guarantee letters to landlords to accept HCV applicants, rather than current cumbersome damage claim fund. 4. Prioritize pricing incentives to landlords in non-poverty concentrated and transit/density zones. 16
Tools: Encourage Housing Cooperatives Why would this work?: 1. Buildings that are collectively owned & managed by residents reduce the overall housing cost and can offer tenants greater affordability, stability, and a sense of ownership. 2. Avoids displacement/incent housing re-investment. 3. Class ‘B’ and ‘C’ housing is primary target of investment conversion to Class ‘A’. Preserve NOAH assets rather than suffer displacement BMT Policy Recommendation: 1. Leverage city credit to help tenants convert small apartment buildings into housing Co-Ops. 2. As part of new sale/notice ordinance, offer cooperatives assistance in matching purchase offers. Use IRB/Conduit Bonds for 2 nd mortgage gap financing. 3. 4. Use tax abatement (mini-TIF) to fund closing costs and other costs of ownership conversion like coop documents. 17
Recommend
More recommend
