Another report on housing, more recommendations. This one has 20 recommendations. Add this to the pile of recommendations, but still, no real action.
Other reports and housing recommendations
If you’ve been watching my blog that last few months you know I’ve blogged about recommendations for affordable housing and various reports including:
- Impediments to Fair Housing Report
- Equal Opportunities Commission Housing Report and
- Affordable Housing Action Alliance Ideas on Affordable Housing
Report on Equitable Development
Here’s 20 more ideas! The full report is here.
Twenty different strategies are included here in all. These strategies have been divided into following categories, based on their ability to:
• Generate revenue for affordable housing
• Preserve affordable housing (both subsidized and naturally occurring)
• Retain residents and businesses
• Create new affordable housing
• Plan for inclusive, equitable development
Strategies to generate revenue for affordable housing:
Housing levy
Housing levy is a property tax assessment that raises funds for affordable housing preservation, production and assistance. The City of Seattle established a citywide housing levy in 2009 for 5 years and this became a key resource in producing affordable housing throughout the city. A new Housing Levy beginning in 2016 was passed again to build on the success of the 2009 levy and continue to address the housing challenges the city faces.
City of Madison currently does not have a housing levy in place. Establishing a housing levy would require voter approval. Careful planning and time is required to get the housing levy passed. The planning process for Seattle’s housing levy began two years before the levy was initiated. For Seattle it was very important to get the support of non-profit organizations to get the levy passed and identify the type of programs that could be funded through this levy that would enjoy widespread public support. 6
Housing Trust Fund
Housing trust funds (HTFs) are funds established by cities, counties and states to dedicate public sources of revenue to support affordable housing.
A major source of funding that the City currently uses to create affordable housing is the Affordable Housing Fund. The Affordable Housing Funds are similar to Housing Trust Funds in theory however do not function entirely as the HTFs. The Affordable Housing Fund (AHF) is supported by the City of Madison’s general budget allocation and TIF extensions to help meet the housing needs of low and very low-income households. This program provides loans and grants to for profit and non-profit housing developers for the acquisition, capital and soft costs necessary for the creation of new affordable rental and owner occupied housing.
This fund provides gap financing which allows developers to be more competitive in the LIHTC (Low Income Housing Tax Credits) applications to WHEDA (Wisconsin Housing and Economic Development Authority).
The City established the Affordable Housing Fund in 2014 to encourage developers to build affordable units in amenity rich areas with easy access to public transit. Targeted Rehab Areas that have elevated levels of lower income households are ineligible for new construction to prevent further concentration of poverty. Preferred areas are within walking distance of high frequency, daily transit, and are often in or near moderate or higher income areas.
Since its inception, AHF has supported 18 new affordable housing developments out of which eight are now completed, two under construction, three slated to start construction in 2019 and four more developments that have been proposed and are seeking WHEDA funding.
Developer exactions
Developer exactions similar to impact or linkage fees are often used as a strategy to offset the burdens of new development on the community. Exactions are levied on developers in exchange for the approvals to proceed with a project. Some
jurisdictions have utilized developer exactions as part of a broader linkage program to support affordable housing. Linkage programs generally require exactions from developers in the form of construction of affordable housing or payment into a housing fund in return for permits or other concessions. Cambridge, MT requires commercial, hotel, retail and institutional developments pay a $3 linkage fee per sq/ft. This exaction creates a job-housing balance and helps maintain housing affordability. In this context the exactions represent an important linkage between the city’s land use regulations and the city’s economic and social equity concerns.
City of Madison currently does not use developer exactions to generate funds for affordable housing. Even though Developer Exactions are not prohibited by Wisconsin State law the City might have very limited ability to use them. If there is a State law change that gives the City greater flexibility to pursue this strategy to generate funds for affordable housing it can either be applied on a project by project basis or through an ordinance.
Tax Increment Financing
Traditionally used to finance economic development projects, some jurisdictions attach other requirements to TIF legislation, such as requiring a certain amount of revenue to be set aside for developing affordable housing.
The City of Madison’s TIF policy has several guidelines in place that benefits the community in various ways. For example; with the use of Traditional TIF developers receive TIF support from the City only if there is a financial gap thus ensuring that financing is in place for the project to move forward unlike other communities who often utilize TIF as a tool to incentivize developers. In case of Jobs TIF, the City requires a business to guarantee a certain number of jobs. In both the use of traditional TIF and Jobs TIF the City limits the amount of increments provided to the project to make sure TIF is available to fund public infrastructure projects. In the City of Madison Districts, such as TID #37 (Union Corners), have been created to fund infrastructure costs associated with larger projects including affordable housing. In the case of TID 37, additional funds were directly allocated to support affordable housing development projects. City’s TIF Policy requires that where practicable 10% of the district’s tax increments be set aside to assist affordable housing. Additionally state law allows for TIF districts to remain open for one year after paying off project expenses and associated debt service, which Madison has used as a primary funding mechanism for the Affordable Housing Fund.
Strategies to preserve affordable housing (subsidized and naturally occurring):
Rent Control
Rent control policies help maintain affordability by capping annual rent increases. Several cities such as Hoboken, Santa Monica, San Francisco, and Baltimore have enacted rent control legislations and ordinances to retain naturally occurring affordable housing. However, Rent control is currently prohibited by Wisconsin statute.
Property Tax Relief
While homeowners are perhaps better prepared to, weather increased housing costs from rising values than renters are, rapid property tax increases can strain household budgets, particularly for elderly and others with limited incomes.
The City currently offers property tax assistance for seniors through a reverse- mortgage program, capped at the amount of property tax, and not usable for living expenses. This program allows senior homeowners (65+) to age in place without the added monthly expense of budgeting for annual property tax. The program is income restricted to 80% AMI (Area Median Income) households, with maximum liquid assets of $30,000.8
Beyond this, Wisconsin State Law limits the ability of local governments to provide any type of direct tax rebate or relief to individual groups of property owners. WHEDA (Wisconsin Economic Development Authority) offers a property tax deferral loan to elderly homeowners, but it may help residents in only limited situations. 9
Eviction Protection Laws
Strong eviction protection laws can prevent eviction without just cause especially in neighborhoods that are experiencing rapid property appreciation.10 The City of Madison historically had strong tenant protections; however, those have eroded since 2011 with several changes to the State’s landlord-tenant laws that have been in favor of landlords and made them more powerful and limited the ability of local governments to regulate the landlord-tenant relationship.
Wisconsin State Law currently allows a 5-day notice with the right to cure or fix the problem and a 14-day notice with no right to cure for term leases. 30-day pay or quit notice with right to cure or fix the problem is available only to tenants with a lease for more than a year and is the only notice they can be served.11 A 5-day no-cure eviction notice is rare however given if there is suspicion of criminal activity. A change in state law to allow for greater time for right to cure available to tenants and increasing tenant protections within landlord-tenant law would greatly benefit low-income tenants who are at risk of being evicted. 12
Retain expiring-subsidy units
LIHTC (Low Income Housing Tax Credits) program provides the largest available source of subsidy to create affordable housing. Projects funded with LIHTC is required by federal law to remain affordable for at least 15 years after the credits are issued. Moreover any project funded after 1992 are also subject to a 15 year extended use period that is enforced by WHEDA after the initial 15 year compliance period, which can essentially double the life of these affordable units.13After the 30 years period expires, new strategies will be required to preserve the affordability of the LIHTC Units in order to prevent potential displacement.
This is a challenge that most cities are facing across the country. A meaningful solution to this challenge will require partnership and resources from all levels of Government – local, state and federal government. The City is currently in the process of the reviewing the list of expiring units and determining what the next steps would be.
Strategies to stabilize neighborhoods to retain residents andbusinesses:
Resident ownership Models
Resident ownership models such as cohousing, housing cooperatives and Community Land Trust (CLT) help expand homeownership opportunities and assist low-income individuals to remain in their units or homes rather than being displaced because of rising rents and property values.
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- Limited Equity Housing Cooperatives (LEHC)
Cooperative housing allow people to own and control multiunit housing collectively through cooperative structures. There are different types of cooperative housing. LEHC, benefit low-income people by enabling tenants to remain in their apartments as co-owners rather than be displaced because of rent increases. If a rental property is converted to an LEHC by giving priority to current neighborhood residents in becoming co-op owners the LEHC can prevent displacement as housing is removed from the rental housing stock. - Community Land Trusts
A community land trust (CLT) is a private, nonprofit corporation created to provide access to secure, affordable housing for community members. Community land trusts improve housing affordability by separating the ownership of land and housing. The CLT has permanent ownership of the land, which is leased to low- and moderate-income households.14There is currently one community land trust in Madison – the Madison Area Community Land Trust that sells high-quality, energy-efficient homes at below market prices to low-moderate income households.15Madison Area Land Trust Homeownership Program funded by the City of Madison retains ownership of the underlying land and sells the improvement (house) to qualified homebuyers.16
- Limited Equity Housing Cooperatives (LEHC)
Homeownership Programs
Homeownership Programs provide down payment and closing-cost assistance to first-time homebuyers and provide funds for home repair and rehab to reduce the financial burden of homeownership.
The City of Madison currently administers various programs such as the ‘Home- Buy the American Dream’ program, ‘Home Rehab Loans’ program, Special Assessment Loans, Section 8 Homeownership program and so on to reduce the financial burden of homeownership specially for the low-moderate income first- time homebuyers. The Home-Buy the American Dream provides down payment assistance to low income first-time homebuyers. This program operates as a deferred loan, and is not due until the title is transferred, home is sold, or the borrower refinances their mortgage in a cash-out transaction. Other programs such as the Homebuyers Rehabilitation Loans provide financial incentives to upgrade housing units in need of rehabilitation, resulting in an improved housing stock.
Commercial Stabilization
Displacement of businesses are often prevented through programs and policies that are designed to foster support and break down barriers to local entrepreneurship and business development (‘carrots’) rather than through restrictions or regulations (‘sticks’).17 City Governments and their partners in small business development (such as lenders, Chambers of Commerce, other business development organizations) offer a wide array of resources and support through technical assistance, financial advising, microlending, design assistance, and façade improvements; streetscape improvement projects and so on. For example; the City of San Francisco administers a Legacy Business Program, nearly $2 million is set aside from the city’s general fund to support historic small businesses and provides them with an employment and rent subsidy. City of Austin for its East Austin neighborhood that was gentrifying provided a loan of up to $20,000 to new and existing businesses to relocate to the East Austin neighborhood.
The City of Madison currently administers several economic development funding programs:
• Facade grants
• Coop Program
• Healthy Retail Access Program• Cap Revolving Loan
• City Match for Kiva Loans
• Enhanced TIF Policy
• CDBG Business Loan Program
Targeted Economic Development
Targeted Economic Development can be provided through programs that are dedicated towards providing job training and business development for residents in at-risk areas. For Seattle’s Central Area the Chamber of Commerce established the Urban Enterprise Center (UEC), a non-profit affiliate that identified lack of jobs as the primary issue in the area. To address this issue UEC’s two initiatives were job creation and business development by sending letters to employers to hire people of inner city areas, get employees job ready and match with employers, fund community based organizations to help develop businesses, require new businesses to hire 50 percent of their workforce from the local community and such other programs.
The City of Madison is currently working on a program that aims to target business development and job creation towards areas that need it the most. The City also currently uses economic development tools such as Opportunity Zones to support workforce development, increase access to employment, ensure access to affordable housing and lower barriers to entrepreneurship. In addition to the City’s efforts, grassroots organizations such as Urban League have workforce development programs that help train and connect individuals with employment.
Strategies to create new affordable housing:
Density Bonuses
Tools such as density bonuses incentivize developers by allowing for greater densities when affordable housing is included in a proposal, which could generate additional affordable housing opportunities. Projects are allowed to exceed density or height limits normally allowed by zoning if the units are restricted for occupancy by households under a specified income level.
However, Wisconsin statutes prohibit the use of density bonuses for affordable housing or for zoning decisions made based on the condition that residential units remain affordable, as it is seen as a form of rent control.18 If optional or voluntary density bonuses are not viewed in the same legal context as mandatory rent control, there may be a path to utilizing this tool.
Inclusionary Zoning
Inclusionary Zoning refers to a local zoning ordinance that requires developers to provide a certain number of affordable, income-restricted housing units within new developments. Inclusionary zoning as a tool creates new affordable housing.
Inclusionary Zoning is currently prohibited by the Wisconsin State Statute, which limits municipalities from enacting Inclusionary Zoning ordinances. City of Madison had an Inclusionary Zoning Ordinance which was in effect from 2006 to 2009 for owner occupied housing.19 Inclusionary Zoning for renter-occupied housing units was never implemented, as the courts deemed it a form of rent control, which is prohibited by Wisconsin statute.
Land Banking
Approaches such as land assembly or land banking can be utilized to strategically acquire vacant and underutilized properties to leverage them for equitable development, including affordable housing.
While the City of Madison has previously acquired major redevelopment properties to better control development outcomes and possibly to include affordable housing components, the program is largely inactive now. Major projects which the City has acquired for the purpose of facilitating redevelopment include the former Don Miller properties on the 700 and 800 blocks of East Washington Ave, Union Corners, and Royster Corners, which are either redeveloped or in process. It appears the two large barriers to continuing this program are a lack of adequate funding and a lack of established policies to guide land banking activities.
Developing formal policies and investigating funding sources would benefit future acquisitions of land for redevelopment by focusing funding towards the most significant opportunities.
Adjust zoning standards
Adjusting the zoning code standards and thresholds can allow for greater flexibility in affordable housing development. In the City’s response to the White House Housing Development Tool Kit, staff had identified three paths where zoning standards could be adjusted to encourage more affordable housing
- Adjust thresholds (# dwelling units, building size, height, etc.) between permitted and conditional uses to “relax” the zoning code and allow more “by-right” development.
- Revisit and relax the requirement for Plan Commission approval of the demolition of existing buildings.
To establish a comfort level with “by-right” development, add maximum height maps to the zoning code to better manage expectations.
Currently, all exclusively residential buildings over 8 units and nearly all mixed use buildings over 24 units require some form of discretionary approval, from Plan Commission, UDC and/or Common Council. This lengthens the development process, adding carrying costs and uncertainty. Further, these unit number thresholds may not work well in tandem with requirements of lot area per unit and usable open space per unit, which effectively operate on a unit per acre scale.
Another alternative that the City could consider pursuing is to expedite the permitting process by fast tracking land use approvals for affordable housing development to accelerate the addition of new affordable housing units.
Impact Fee Waivers
Many communities have developed impact fee waivers, exceptions, and rebates in an attempt to create new affordable housing. The City of Madison currently requires every development containing residential units to pay park impact fees to offset the costs associated with parkland acquisition and improvement. However, after the City’s 2015/16 Park Land Dedication Ordinance update, park impact fees can be waived for units that meet the affordability criteria.
Accessory Dwelling Units
Accessory dwelling units also referred to as granny flats, accessory apartments, or second units are single-family dwelling units that include an additional housing unit. They are often seen an opportunity to expand the supply of the affordable housing stock. Madison’s current ADU standards, however, are financially out of reach for many homeowners. The ADU ordinances is crafted around an external structure, such as a residential unit over a two car garage. While this may be desirable building form, it is very expensive and often isn’t compatible with typical residential mortgages. Additionally, all ADUs are conditional uses and require an often contentious decision by the Plan Commission.
ADU regulations should be evaluated to determine if modifications could benefit the City’s efforts to encourage affordable housing. Possible strategies include greater emphasis on less-costly ADUs in the principal building and shifting to a permitted use in some or all cases. This approach may be better suited to help existing homeowners weather increases in housing costs in rapidly appreciating areas by providing an option for an additional source of income. Further, in most cases an ADU would not result in a greater number of occupants than are already allowed; the zoning code currently permits owner-occupied single family homes to be occupied by one family and up to four roommates.
Strategies to plan for inclusive, equitable development:
Community Impact Report or Health Impact Assessment/Environmental Impact Assessment
Tools such as Community Impact Reports (CIRs) can be utilized during early stages of development process to assess fiscal, employment, housing, neighborhood services, and such other impacts of projects. CIRs provide a mechanism for documenting and considering all of the public costs and benefits of proposed projects to inform public approval and subsidy decisions. Other tools such as Health Impact Assessments or Environmental Impact Assessments are similar to CIRs that include socio-economic impacts of developments; and are used to minimize adverse effects of development.
Other cities are utilizing these tools in following ways: City of Petaluma, California requires developers to complete a Fiscal and Economic Impact (FEIA) process for large commercial projects-25,000 square feet or larger. The FEIA measures impacts on existing local businesses, net sales tax revenues, job quality and wage and benefit levels. Tools such as Health Impact Assessment have been used for the Twin Cities Central Corridor light rail project that presented findings related to economic development, affordable housing, and transportation for affected communities.
Community Benefit Agreements
Tools such as Community Benefit Agreements (CBAs) with developers for commercial, retail, mixed-use and residential projects often provide a framework to include living wage jobs, local hiring, and/or affordable housing. Should City of Madison consider using tools such as Community Benefits Agreements – ‘Community Benefits Agreements: Making Development Projects Accountable’ a handbook written by Good Jobs First and California Partnership for Working Families is a great resource for CBAs. This handbook covers the CBA basics, pros and cons, implementation, monitoring and enforcement, and range of benefits that community groups can negotiate. It also includes several examples as well as CBA language from existing agreements.
