04-12-17 PC Agenda (Comp Plan) AGENDA
Planning Commission
Comp Plan Conversation
Golden Valley City Hall, 7800 Golden Valley Road
Council Chambers
Wednesday, April 12, 2017
6 pm
1. 6-6:30 pm: Open House (Housing)
2. 6:30-8 pm: Presentation and Discussion (Housing)
This dacument is available in alternate forr�iats upon a 72-h�ur request Please call
7b3-593-8006(TTY:Tb3-593-3968)to make a request. Exan�ples'of alternate formats
rnay inclutle large print,electronic, Braille,audiacassette;etc.
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Phy;sical. De�e�rs�►men# I)epar�rneant
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Date: April 12, 2017
To: Golden Valley Planning Commission
From: Jason Zimmerman, Planning Manager
Emily Goellner, Associate Planner/Grant Writer
Subject: 2040 Comprehensive Plan —Housing Conversation
Summary
Housing is the second of seven elements to be discussed as part of the 2017 work to update the
City's Comprehensive Plan. Staff will host a pubtic open house immediately prior to the Planning
Commission meeting as a way to share information and gather feedback. Members of the public
and Commissioners from the Open Space and Recreation and the Environmental Commissions are
invited to stay and participate in the discussion that follows.
Outcomes from this session include:
1. Preliminary agreement on the 2040 Goals and Objectives
2. Consensus on general themes and priorities—are any important issues missing?
3. Provide feedback on preliminary implementation options
Comprehensive Housing Study
Maxfield Research and Consulting recently completed a study of existing and future housing needs
for the City to utilize in its planning process. The executive summary is attached and the full report is
at www. oldenvalle rt�n. ov lannin com rehensive lanu date housin . h .
The following attachments will guide discussion at the meeting.
Attachments
• Comprehensive Housing Needs Analysis: Executive Summary (7 pages)
• Community Feedback Summary for Housing (1 page)
• Analysis of Housing Policies in 2030 Plan (6 pages)
• Proposed Housing Goals and Objectives for 2040 Plan (3 pages)
• Proposed Housing Categories (1 page)
• Proposed Future Land Use Map (1 page)
• Residential Land Uses, Proposed Future Land Use Map (1 page)
• Crafting a Mixed-Income Housing Strategy: Recommendations for Golden Valley (17 pages)
• Responding to the Threat to the Twin Cities Region's Supply of Naturally Occurring
Affordable Rental Housing (4 pages)
Comprehensive Housing Needs Analysis
for the City of Golden Valley, Minnesota
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Q a f�eld
V� F�esearch
& Cons�lting
7575 Golden Valley Road
Suite 385
Golden Valley, MN 55427
612.338.0012
www.maxfieldresearch.com
��� Maxfield
�� F-�esearch & Cc�r�sulting
March 6, 2017
Jason Zimmerman
Planning Manager
City of Golden Valley
7800 Golden Valley Road
Golden Valley, MN 55427
Dear Mr. Zimmerman:
Attached is the Comprehensive Housing Needs Analysis for Golden Valley, Minnesota conducted by
Maxfield Research and Consulting, LLC. The study projects housing demand from 2016 through 2025,
and provided recommendations on the amount and type of housing that could be built in Golden Valley
to satisfy demand from current and future residents over the next decade.
The study identifies a potential demand for approximately 1,680 new housing units through 2025. Be-
cause the population is aging in Golden Valley about 44%of the total demand will be for age-restricted
housing types. Due to the market rate rental housing boom in Golden Valley,the current pipeline
should meet the future demand. However, demand exists for additional affordable rental housing. Due
to lack of developable land,for-sale demand was strong for condominium product over the next decade.
However, this demand may not materialize due to the current statutory requirements on condominium
development. There continues to be strong demand for infill new single-family construction, however
this will continue to be expensive due to redevelopment and high land costs in the community.
Based on our findings,we found demand for most housing products with strong demand for mainte-
nance free for-sale general occupancy housing products. We recommend maintenance-free products
such as townhomes/twinhomes/condominiums to fulfill this need for for-sale owner-occupied multifam-
ily. At the same time demand exists for all senior housing products and service levels to meet the grow-
ing needs of an aging community. Detailed information regarding recommended housing concepts can
be found in the Recommendations section at the end of the report.
If you have any questions or need additional information, please contact us. We have enjoyed conduct-
ing this study for you.
Sincerely,
MAXFIELD RESEARCH AND CONSULTING, LLC
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Matt Mullins Mace Wescott
Vice President Associate
Attachment
(main)612-338-0012 (fax)612-904-7979
7575 Golden Valley Road,Suite 385,Golden Valley,MN 55427
www.maxfieldresearch.com
EXECUTIVE SUMMARY
Purpose and Scope of Study
Maxfield Research and Consulting LLC (i.e. "Maxfield Research") was engaged by the City of
Golden Valley to conduct a Comprehensive Housing Needs Analysis for the City of Golden Val-
ley. The Housing Market Study provides recommendations on the amount and types of housing
that should be developed to meet the needs of current and future households who choose to
reside in Golden Valley.
The scope of this study includes: an analysis of the demographic and economic characteristics
of the City; a review of the characteristics of the existing housing stock, building permit trends,
and residential land supply; an analysis of the market condition for a variety of rental and for-
sale housing products; and an assessment of the need for housing by product type in the City.
Recommendations on the number and types of housing products that should be considered in
the City are also supplied.
Demographic Analysis
• As of the 2010 Census,the City of Golden Valley had 20,950 people and 9,146 households.
The City of Golden Valley is forecast to grow by 2,229 people and 1,205 households be-
tween 2010 and 2020 and by another 1,000 people and 552 households between 2020 and
2030. Growth projections are exceeding previously projections by the Metropolitan Coun-
cil.
• From 2016 to 2021, growth is expected in all ages except 45 to 54 year olds. The 65 to 84
age cohorts are projected to have the greatest growth (percentage and numerically) in-
creasing by 941 people (+53.8%) in Golden Valley between 2016 and 2021.
• The Golden Valley Market Area had an estimated median household income of$86,028 in
2016. Non-senior household median incomes peak in the 45 to 54 age group at$112,850.
The median income for seniors age 65 to 74 is$73,025 and for 75+ is $45,790.
• Between 2000 and 2015, homeownership rates decreased from 80.7%to 76.9% in the City
of Golden Valley. The decline was a result of lender-mediated properties during the Great
Recession and the rental housing market that is currently booming in Golden Valley.
• Married without children households accounted for the highest household type percentage
in 2015 at 32.9%. However, living alone is the second largest household type accounting for
about 31% of households in Golden Valley.
MAXFIELD RESEARCH AND CONSULTING 1
EXECUTIVE SUMMARY
Employment Analysis
� Golden Valley and Hennepin County had an unemployment rate of 3.3% in December 2016
which is slightly lower than the Metro Area average of 3.4% and less than the State of Min-
nesota (3.8%).
• Of the roughly 36,018 workers who work in Golden Valley, 2.5% live in Golden Valley. Most
workers are commuting from Minneapolis (10.5%), Plymouth (5.5%) and Maple Grove
(4.2%). Golden Valley is considered a major importer of workers as over 97%of the em-
ployees working in Golden Valley are from other communities.
Housing Characteristics
� Per the City of Golden Valley Building Department there were 1,512 units permitted from
2000 to 2016. Beginning in 2006, building permits declined rapidly from 2007 to 2015; av-
eraging between 55 to 105 units per year.
� Over one-half of Golden Valley's homes were constructed in the 1950s and 1960s (52%),
while 13.8%of Golden Valley's housing stock was built since 2000.
• Approximately 68%of Golden Valley homeowners have a mortgage compared to 73%of
Hennepin County and 73% of the metro area. About 17%of homeowners with mortgages
also have a second mortgage or home equity loan.
• The median owner-occupied home in the City of Golden Valley is $265,300 in 2015. Approx-
imately 55%of the owner-occupied housing stock in the City of Golden Valley was esti-
mated to be valued at $250,000 or greater.
• The median contract rent in Golden Valley was$1,036 per month in 2015. Based on a 30%
allocation of income to housing, a household would need an income of about $41,440 to
afford the median contract rent in Golden Valley.
Rental Housing Market Analysis
• In total, Maxfield Research inventoried 1,451 general occupancy rental units in Golden Val-
ley spread across 22 multifamily developments. At the time of the survey, there were 24
vacant units resulting in an overall vacancy rate of 2.0%. Typically, a healthy rental market
maintains a vacancy rate of roughly 5%, which promotes competitive rates, ensures ade-
quate consumer choice, and allows for unit turnover.
• Market rate projects make-up 1,276 units and a total of 24 unit vacancies were found, re-
sulting in a market rate rental project vacancy rate of 2.3%.
MAXFIELD RESEARCH AND CONSULTING 2
EXECUTIVE SUMMARY
• Affordable/subsidized projects make-up 194 units and posted no vacant units.
Senior Housing Market Analysis
• There are five senior housing developments located in the Golden Valley with a total of 776
units. Not including facilities that are in their initial lease-up period, there were 32 vacan-
cies identified within the housing developments posting an overall vacancy rate of 4.8%.
Generally, healthy senior housing vacancy rates range from 5%to 7% depending on service
level.
For-Sale Housing Market Ana/ysis
• Golden Valley home values were lowest in 2011 when the median value declined to
$199,450. However, home values have increased annually since 2011 and have since sur-
passed the previous peak in 2007. Resale values in 2016 were $290,650; and increase of
nearly 10%from 2015 ($264,950).
• The number of resales in Golden Valley has averaged about 320 sales annually between
2000 and 2016. The fewest number of resales occurred after the recession in 2010 with 194
resales; while 2016 established a new record high in Golden Valley with 455 resales.
• Compared to the Metro Area average and other neighboring communities, lender-mediated
properties (i.e. short sales and foreclosures) in Golden Valley have been substantially lower.
Lender-mediated properties accounted for nearly one-third of transactions between 2009
and 2012, however today only account for 5%.
• Single-family housing stock has accounted for over 80%of the resale volume in Golden Val-
ley since 2000. Multifamily for-sale housing products are more affordable (priced from
$50,000 to $150,000) and are priced about 40% lower than the single-family housing stock.
• On average, the price of an existing home in Golden Valley is about 40% less than the cost
of new construction. Although the cost of an existing home is on-par with Hennepin County
($138 PSF vs. 136 PSF); new construction costs in Golden Valley have recently escalated
much higher than Hennepin County averages ($223 PSF vs. $176 PSF). Hennepin County
new construction prices are also about 10% higher than the Metro Area average.
• As a fully developed first-ring suburban community, there are few available lots for new for-
sale construction in the City of Golden Valley. Only one new project is marketing at this
time—Laurel Ponds—a 24-unit detached townhome project. New home prices are market-
ing from $450,00 to $650,00.
MAXFIELD RESEARCH AND CONSULTING 3
EXECUTIVE SUMMARY
Housing Demand Ana/ysis
• Based on our calculations, demand exists in the Golden Valley Market Area for the following
general occupancy product types between 2016 and 2025:
o Market rate rental 0 units
o Affordable rental 99 units
o Subsidized rental 59 units
o For-sale single-family 177 units
o For-sale multifamily 602 units
• In addition, we find very high demand for multiple senior housing product types. By 2025,
demand in the Golden Valley Market Area for senior housing is forecast for the following:
o Active adult ownership 80 units
o Active adult rental 140 units
o Active adult affordable 122 units
o Congregate 151 units
o Assisted Living 106 units
o Memory care 146 units
Recommendations and Conclusions
• Based on the finding of our analysis and demand calculations,the following chart provides a
summary of the recommended development concepts by product type for the City of
Golden Valley through 2025. Detailed findings are described in the Recommendations sec-
tion of the report.
MAXFIELD RESEARCH AND CONSULTING 4
EXECUTIVE SUMMARY
RECOMMENDED HOUSING DEVELOPMENT
GOLDEN VALLEY
2017 to 2025
Purchase Price/ No.of Development
Monthly Rent Range' Units Timing
Owner-Occu fed Homes
Single Familyz
Move-up $400,000-$575,000 60-70 Ongoing
Executive $600,000+ 50-60 Ongoing
Total 110-130
Townhomes/Twinhomes/Detached Townhomes 2
Entry-level >$250,000 40-SO 2017+
Move-up $275,000-$375,000 50-60 2017+
Executive $400,000+ 50-60 2017+
Total 100-120
Condominums
Entry-level <$250,000 175-200 2018+
Move-up $250,000-$350,000 200-225 2018+
Executive $400,000+ 150-175 2018+
Total 525-600
Total Owner-Occupied 735-850
General Occu an Rental Housing
Affordable Rental Housing
Apartment-style Moderate Income3 80-100 2017+
Townhomes Moderate Income3 20-30 2017+
Subsidized 30%of Income° 50-60 2017+
Total 150-190
Total Renter-Occupied 150-190
5enior Housin (i.e. e Restricted)
Senior Cooperative $70,000+ 70-80 2018+
Active Adult Market Rate Rentals $1,200/16R-$1,450/2BR 80-100 2018+
Active Adult Affordable Rentals Moderate Income 100-120 2017+
Independent Living/Congregate $1,500/18R-$2,500/26R 120-140 2018+
Assisted Living $2,750/EFF-$4,000/26R 80-100 2019+
Memory Care $4,000/EFF-$5,000/2BR 100-120 2017+
Total 550-660
Total-All Units 1,435- 1,700
' Pricing in 2017 dollars. Pricing can be adjusted to account for inflation.
2 Replacement need,infill,and redevelopment. Development of single-family homes and townhomes/twinhomes will hinge on land availability. Due
to Golden Valley's location,there is pent-up demand that exceeds replacement need.
3 Affordablity subject to income guidelines per Minnesota Housing Finance Agency(MHFA). See Table HA-1 for Hennepin County Income limits.
°Subsized housing will be difficult to develop financially
Note-Recommended development does not coincide with total demand. Golden Valley may not be able to accommodate all recommended
housing types based on land availability and development constraints.
Source: Maxfield Research&Consulting,LLC
MAXFIELD RESEARCH AND CONSULTING 5
SUMMARY OF COMMUNITY FEEDBACK
� Nousing Chapter - 204o Comprehensive Plan
GV2�4� July, 20�6 through April, 2017
Summary
Staff has received a number of on-line comments about the Comprehensive Plan, as well as written comments
at the Kick-off Open Nouse on September�q, 20�6. The general themes that are emerging are:
• Preserve the natural beauty and quiet, tranquil ambiance of residential neighborhoods
• Continue to strengthen the downtown area
• Enhance and preserve a diverse and sustainable variety of housing options, especially for seniors
• Encourage energy efficiency and sustainable design in housing rehabilitation and new construction
• Maintain quality of the existing housing stock and continue the property maintenance program
• Encourage high quality development in redevelopment projects and consider design standards
• Preserve the affordability of the existing housing stock and support new affordable developments
• Support and enhance bicycle and pedestrian infrastructure, particularly near senior housing
• Integrate transit options and transit-supportive developments into appropriate locations
• Be welcoming of people with diverse ethnicities, backgrounds, incomes, and abilities
A number of these issues can and will be addressed within the four main focus areas, or districts, that are
emerging through land use discussions with the Planning Commission and City Council:
• Downtown West (from Nwy 76q to Pennsylvania Avenue and from Nwy 55 to Luce Line)
• Douglas Drive Corridor (including Duluth Street west of Nwy�oo)
• �-394 Mixed Use Corridor (from Laurel Avenue to I-394 and from Rhode Island Avenue to Nwy�oo)
• Light Rail Station Area (within a �/2 mile of the Golden Valley Road station)
Comp Plan Kick-Off Open House
At community members arrived at the open house, they were given a set of stickers to use at each "station"
or chapter of the Comp Plan. Stickers were used by attendees to represent the goals that they feel are most
important to them and should be included in the long-term vision for Golden Valley.
Top 5 Housing Goals Identified at Open House Sticker Count
Encourage energy efficiency and sustainable design 39
Remove substandard housing that cannot be rehabilitated 35
Offer a variety of housing types and designs 31
Ensure quality low and moderate-income options are available 2g
Strive for non-discrimination against anyone seeking housing 23
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ANALYSIS OF POLICIES IN 2030 PLAN
Housing Chapter
GV2�4� Comprehensive Plan Conversations - April �2, 20�7
Goal �: Housing Quality
Objectives: Ensure all housing meets or exceeds quality standards established in City ordinances, identify
and remove substandard housing units that are economically unfeasible to rehabilitate, eliminate or
appropriately buffer blighting influences such as unkempt yards, glaring lights, unscreened storage, noise,
and inappropriate vehicle storage on residential properties, preserve stable residential neighborhoods, and
improve the condition of the existing housing stock
Policy Succeed? How?
The City will use the Residential Property Maintenance Yes The International Property
Code (RPMC) and other quality standards established Maintenance Code was adopted by
in the Golden Valley City Code to determine whether a the City in 2006 and enforced on an
house is substandard or in need of repair, except ongoing basis by City staff.
where a particular funding program or regulation
s ecifies an alternate definition.
The City will routinely evaluate the RPMC and amend it Yes The program used to be complaint-
as necessary to maintain or improve the quality of the based only, but now a proactive
City's housing stock. A study will be conducted to property maintenance sweep is
investigate including in the RPMC processes for conducted by staff every spring. Staff
handling problems associated with vacant or has encountered issues with
abandoned residential properties or those residential contacting some property owners,
properties for which the owner cannot be contacted or but those issues have eventually
does not make necessary improvements to the been resolved.
pro ert .
The City and the Nousing and redevelopment Yes All new housing units have met and
Authority (NRA) will work with property owners to will continue to meet Building and
ensure that all housing units are of high quality Maintenance Codes. The Property
construction. The City will ensure that all housing units Maintenance Program addresses
adhere to applicable City Maintenance Codes, which issues with existing structures and
work to enhance the quality and visual appearance of visual appearance of properties.
the ro ert .
The City will, if necessary, use its legal authority to Yes Two homes have been demolished
remove substandard housing for which rehabilitation for this purpose in recent years.
has been determined to be economicall unfeasible.
The City will continue enforcing the Lighting Ordinance Yes The City continues to enforce the
to promote resident safety and appropriate lighting in Lighting Ordinance.
residential nei hborhoods.
The City will help protect the quality of its housing Yes/No The City has promoted inspections
stock by promoting to real estate agents and with the sale of purchase of a home,
prospective home buyers or sellers the practice of but a targeted, concerted effort to
contracting for private home inspections before promote this has not taken place.
purchase of any Golden Valley home. Promotional
efforts ma include but shall not be limited to eriodic
Comprehensive Plan Conversations - Nousing - April �2, 20�7
GY2040
Policy Succeed? Now?
educational items in City publications and information
made available to the ublic b Cit staff.
The City will establish a list of qualifying criteria to Yes The City utilizes Nennepin County's
serve as a selection standard when targeting Consolidated Plan when reviewing
Community Development Block Grants (CDBG). The applications for CDBG awards.
City will give high priority to rehabilitating its aging Golden Valley has received CDBG
housing stock when determining the appropriate use of funding for a variety of rehabilitation
CDBG funds. ro'ects.
The City will seek out or develop financial assistance Yes Nennepin County offers home
programs to help low- and moderate- income property rehabilitation loans to Golden Valley
owners address deteriorating housing problems. residents. The City will continue
exploring and promoting other similar
o tions.
The City will continue its relationship with Center for No Although the Environmental
Energy and Environment (CEE) or similar agencies to Commission included participation in
help residents locate resources and financial assistance Nome Energy Squad (administered
for home by CEE) in their 20�6 work plan, the
rehabilitation. City was not able to continue this
relationshi due to bud et concerns.
The City will continue to work with owners and Yes The City established a rental
managers of multi-family housing using the rental program for single-family and multi-
licensing and Safer Tenants and Rentals (STAR) family residences in the City to
programs. The City will consider developing a similar ensure high quality standards are
program to cover single- and two-family rental housing met.
to ensure that housing quality standards are met for all
rental units.
The City will investigate and promote resources to help Yes The City has advocated for CBDG
aging and disabled residents safely remain in their funding for Senior Community
homes as desired. Services, which promotes these
resources.
Goal 2: Nousing Variety
Objectives: Designate at least ten percent of the city's housing supply for seniors, strive for a variety in
housing styles in order to allow all people to have housing choices
Policy Succeed? How?
The City will continue to offer the flexibility of the Yes The City utilizes the flexibility of the
Planned Unit Development (PUD) option to housing PUD option frequently for multi-
developers who demonstrate an ability to successfully family housing projects, which
apply contemporary design philosophies. includes contemporary design
philosophies and amenities.
2
Comprehensive Plan Conversations - Nousing - April �2, 20�7
�v2o4o
Policy Succeed? How?
The City will guide for infill areas and redevelopment Yes Some parcels were designated and
sites for single-family attached and multiple-family zoned for multi-family residential
residential uses along major streets and adjacent to uses along major streets in the last
commercial or other high activity areas that help meet Comp Plan update. It will be
the Cit 's senior and multi le famil housin ob'ectives. evaluated a ain in this round.
The City will assist in attempts to obtain applicable Yes The City has utilized several of these
funds for City approved development proposals funds for projects such as
designed to maximize the opportunity of providing a Cornerstone Creek and Pesch Place.
variety of housing types, costs, and densities that meet City staff continues to meet with
City objectives. Sources may include, but are not affordable housing developers who
limited to, federal programs such as the I-lome specialize in tax credits and shown
Investment Partnership Program (NOME) or Section them list of potential properties and
202 financing for senior housing, state aid such as the a list of potential grant funding
Low Income Tax Credit Program or the Low/Moderate opportunities.
Income Rental Program, Metro Council funds such as
the Local Nousing Investment Account, or nonprofit
assistance such as the Family Nousing Fund or Nabitat
For Numanit .
The City will reconsider the low-density residential No This was considered by the City, but
Land Use Plan Map designations currently applied to a change in Land Use designation and
the area west of Douglas Dr along Medicine Lake Rd to Zoning was not implemented. It will
determine whether it might be suitable for designation be reviewed again as part of the
for higher density residential use. This concern is being 204o Comp Plan update process.
addressed throu h the Dou las Drive Corridor Stud .
The City will amend the Land Use Plan Map to include Yes Mixed Use Zoning and Land Use
mixed-use development sites, including along the I-394 guidance was implemented along the
Corridor, which may include housing in the form of I-394 Corridor. Nousing projects have
town homes, residential flats, condominiums, apartment been approved on three sites so far.
homes, and other multiple-famil homes.
The City will identify underused nonresidential sites Yes All recent multi-family housing
where the vacant area may be suitable for higher projects in the city have been built
densit residential use. on underused nonresidential sites.
The City will work with appropriate legislative agencies Yes City staff investigated these options
to establish more specific rules regarding placement of for residential facilities. The
legally protected residential facilities to ensure the regulations in place ensure
appropriate integration of these facilities into appropriate integration of these
nei hborhoods. facilities into nei hborhoods.
The City will research techniques used in alternative Yes The City has researched these
dispute resolution processes, such as mediation, for options and utilizes mediation
assistance in formulatin citizen involvement uidelines services as necessary. The Cit has
3
Comprehensive Plan Conversations - Nousing - April �2, 20�7
�v2o4o
Policy Succeed? How?
that channel discussion of housing development also developed more robust
proposals along a productive course. communication efforts for
development projects in recent
ears.
The City will encourage owner-occupied, multi-family Yes The City has encouraged this, but no
housing whenever possible to provide an alternative for owner-occupied multi-family housing
those who are unable or unwilling to maintain a has been built since 2008 due to
traditional single-family type property. recession and litigation risk - both
be ond Cit 's control RIGI-IT?
Goal 3: Affordability
Objectives: Monitor the city's housing supply to ensure quality low income options are available so that low
and moderate income households can afford housing without compromising essential needs
Policy Succeed? Now?
The City will annually reapply for reservation of funds Yes Nennepin County has applied
through the Minnesota City Participation Program, annually for this program on behalf of
providing low-interest mortgages to qualifying first-time Golden Valley and other cities.
home buyers. The City will consider any potential
housing affordability impact before adopting or
amending any development-related or construction-
related regulation. Negative impacts will be balanced
against concerns for the general public health, safety,
or welfare. Where possible, strategies for mitigating
ne ative affordabilit im acts will be identified.
The City will use the Livable Communities definition of Yes This City utilizes this definition of
affordable housing, except where a particular program affordable housing.
specifies an alternate, as the standard for defining
modest-cost or affordable housing: owner-occupied
housing should cost no more than 3o percent of the
income of a household earning 80��0 of the median
income level as estimated annually by NUD, and rental
housing should cost no more than 3o percent of the
income of a household earning 5o percent of the
median income in the Twin Cities Metro olitan Area.
Currently, affordable housing options exist in the city. No The City has not developed a policy
To help meets its affordability objectives as outlined in nor have any affordable units been
this chapter of the Comprehensive Plan, the City will developed in this manner. The City is
consider that at least a percentage of each new housing currently working with a consultant
develo ment of more than 3o units contain affordable to develo a mixed-income housin
4
Comprehensive Plan Conversations - Nousing - April �2, 20�7
GV2040
Policy Succeed? How?
units. The City may consider payments in lieu of actual policy for new housing
units so the City can use such payments to make units developments.
affordable in other housin developments.
For any new development or redevelopment proposal, Yes/No The City has experienced an increase
the City will consider and attempt to reasonably in the number of single-family home
mitigate the loss of or impact on affordability and teardowns, where a new home is built
quality of the existing supply of modest-cost single- in the place of an older, modestly
family homes. This includes proposals that would priced homes. Regulations regarding
require removal of modest-cost homes or would this have been analyzed and revised.
significantly increase traffic, noise, or other negative Some multi-family units have been
characteristics near those homes. However, such remodeled and rents have been
considerations will not necessarily override other increased. The City is working on
legitimate development concerns. addressing the benefits and
challen es of this trend.
Goal 4: Sustainability
Objectives: Ensure new housing development and existing housing meet or exceed energy efficiency
standards and implement sustainable design features where possible in order to meet current needs while
leaving future generations with as many options for resource use and development as possible, enhance
economic opportunity and community well-being while protecting and restoring the natural environment
Policy Succeed? How?
The City will encourage energy efficient and Yes The City participates in the
sustainable development that meets standards GreenStep Cities program to address
established by programs such as Leadership in Energy this topic. LEED certification is an
and Environmental Design (LEED), Mayors Climate amenity option for PUD plans.
Initiative, MN GreenStar, and Ener y Star.
The City will encourage development that saves or Yes The City reviews site plans to ensure
increases green spaces, parks, and trails. inclusion of these amenities. Several
recent PUD proposals include a
si nificant amount of these amenities.
The City will review new housing development projects Yes Several recent PUD proposals
for adequate public or private park, open, and include a significant amount of these
recreational space. amenities.
The City will strive to accommodate energy conserving Yes Plans are analyzed and approved
technologies and construction techniques, including based on State Building Energy
active and passive solar energy features, by advocating Codes. Renewable energy is an
their use in application for new residential option in the PUD amenity points
development and by amending City Code or City system.
policies as appropriate to allow residents to take
advanta e of new a roaches.
5
Comprehensive Plan Conversations - Nousing - April �2, 20�7
GV2040
Goal 5: Non-Discrimination
Objectives: Provide equal opportunity in home ownership and renting and strive for non-discrimination
against persons seeking housing based on age, religion, race, ethnic origin, sexual preference, gender, or
disability.
Policy Succeed? How?
The City's I-luman Rights Commission (I-IRC) will Yes Each year, the NRC completes a
continue its role as a forum for discussion of work plan that includes this.
discrimination issues and will remain available to Grievances may be filed with the
participate in the grievance process of the Minnesota Minnesota Department of Numan
Department of Numan Services as requested, so that Services.
any allegations of housing discrimination can be
prom tl addressed at the local level.
The City's NRC will conduct ongoing education efforts Yes Each year, the NRC completes a
as necessary to promote equal availability of housing work plan that includes this.
opportunities and fair treatment of all renters and
buyers regardless of age, gender, income level, ethnic
back round, or reli ion.
The City will work with appropriate legislative agencies Yes/No City staff has researched options for
to reform regulations regarding the location of reform, but the regulations were not
residential facilities. changed since they are consistent
with state law.
The City will establish a process for early citizen Yes One subsidized housing development
involvement in the siting of new subsidized housing has been built in recent years.
developments. Neighborhood meetings are now
required for certain development
a lications.
For as long as the City remains in the Livable Yes The City continues to evaluate the
Communities program, a Livable Communities impact progress made on the Livable
evaluation shall be included as part of the Communities Program and the
consideration of any housing-related development Adopted Affordable and Lifecycle
application. Potential impacts on all Livable Unit Housing Goals.
Communities benchmark areas shall be considered, but
those areas need not be weighed equally, nor will this
evaluation necessarily take precedence over other
concerns that may be voiced in connection with the
a lication.
6
PROPOSED GOALS & OBJECTIVES
Housing Chapter - 204o Comprehensive Plan
GV2�4� Comprehensive Plan Conversations -April 12, 20�7
204o Nousing Goals & Objectives
Goa) �: Maintain Nousing Quality
Maintain a high-quality living environment,preserve stable residential neighborhoods, and where necessary, improve
of the condition of existing housing stock in the City.
Objectives
• Ensure all housing meets or exceeds the quality standards established in City ordinances.
• Identify and remove substandard housing units that are economically unfeasible to rehabilitate.
• Eliminate or appropriately buffer blighting influences such as unkempt yards,glaring lights, unscreened
storage, noise, and inappropriate vehicle storage on residential properties.
Implementation Options
• Continue the Property Maintenance Program in order to ensure that residential properties comply with the
International Property Maintenance Code.
• Promote the Nousing Rehabilitation Deferred Loan Program for income-qualified homeowners in Golden
Valley,which is administered by Nennepin County and funded by the federal government.
• Explore the opportunity to administer new housingprograms that support housing rehabilitation and aging in
place with financial support from a levy by the Nousing and Redevelopment Authority (NRA).
• Research design standards that could be implemented in Zoning Code for multi-family housing developments
as well as other significant developments,which typically requires a minimum amount of high-quality exterior
materials, such as brick,glass,and stone.The City currently has design guidelines in the I-394 Mixed-Use
Zoning District.
Goal 2: Expand the Variety of Nousing Options
Expand the variety of housing types and designs to al/ow all people a housing choice. The production and
rehabilitation of a variety of housing types, designs, and prices creates housing options for all life stages and all
economic means.
Objectives
• Meet the senior housing needs identified in the Comprehensive Nousing Needs Analysis.
� Strive for variety in housing types,designs, and prices for all life stages,family compositions, and incomes.
Implementation Options
• Implement a Nousing Action Plan to enable the City to meet the housing needs identified in the
Comprehensive Nousing Needs Analysis by Maxfield Research and Consulting, completed in March, 20�7.
• Conduct a housing study every 5 years and adjust goals based on identified needs.
• Identify properties that are appropriate for moderate intensity residential use(equivalent to the R-2 Zoning
District) in order to provide what is commonly referred to as the"missing middle" housing options.
• Research opportunities to allow multi-generational housing, such as accessory dwelling units or "granny flats"
Comprehensive Plan Conversations - Nousing - April �2, 20�7
GV2040
Goal 3: Increase Nousing Affordability
Increase housing opportunities at a cost that low and moderate-income households can afford without compromising
their ability to pay for other essential needs.
Objectives
• Monitor the City's housing supply to ensure quality low income options are available.
• Preserve the affordability of the existing housing stock.
• Ensure that a portion of units within new multi-family housing developments are made affordable.
Implementation Options
• Implement a Nousing Action Plan to enable the City to meet Metropolitan Council requirements for
affordable housing, which has been determined to be��� units by 2040.The City will investigate a variety of
policy and financial tools to ensure that this requirement is met.
• Consider adopting policies that preserve"naturally occurring" (or unsubsidized)affordable housingLsuch as an
advanced notice period prior to sale of such buildings and the creation of financial incentives for investors
willing to keep units affordable.
• Adopt a Mixed-Income/Inclusionary Nousing PolicX that requires new housing developments to include some
affordable units Grounded Solutions Network has conducted detailed research and provided the City with a
recommended policy
Goal 4: Encourage Environmentally Sustainable I-lousing
Encourage housing development that maintains or enhances economic opportunity and community well-being while
protecting and restoring the natural environment. Nousing development should meet current needs while leaving
future generations as many options for resource use and development as possible.
Objectives
• Ensure new housing developments meet or exceed energy efficiency standards and implement sustainable
design features where possible.
• Ensure improvements to existing housing meet or exceed energy efficiency standards and implement
sustainable design features where possible.
• Plan for multi-family residential developments near transit, bicycle routes, trails,and sidewalks in order to
reduce reliance on automobiles, thereby reducing energy consumption.
Implementation Options
• Explore potential partnerships and housing programs that aid property owners in making retrofits that
increase energy efficiencX.
• Educate residents about energy efficiency and energy conservation in residential properties.
• Continue preserving open space and vegetation in the Zoning Code requirements for residential properties,
which include setback and lot size minimums, impervious surface maximums,tree and landscaping minimums,
and lot coverage maximums.
• Consider adopting a Sustainable/Green Building PolicX for new housing developments.
• Research incentives, partnerships, and programs that increase the capacity for renewable ener�y in residential
properties.
• Identify locations near transit, bicycle routes,trails,and sidewalks that are appropriate for multi-family
residential uses.
2
Comprehensive Plan Conversations - Nousing - April �2, 20�7
GV2040
Goal 5: Advance Equity in Nousing Practices and Policies
Advance equal opportunity in home ownership and renting for people of all backgrounds and abilities.
Objectives
Ensure that discrimination does not occur against persons seeking housing in Golden Valley based on age, religion,
race, ethnic origin, sexual preference,gender, or disability.
Implementation Options
� Continue participating in trainings with the Government Alliance on Race and Equity(GARE)or other similar
agencies and programs that work with governments to achieve racial equity in all policies and procedures.
• Consider adopting policies that limit exclusionary rental practices, such as polices prohibiting discrimination
against Section 8 voucher holders, requiring"for cause" eviction clauses in leases, and prohibiting
unreasonable admission standards or screening criteria.
• Continue to educate community members and provide a forum for discussion on discrimination issues and Fair
Nousing practices with the Numan Rights Commission.
3
,.
, PROPOSED HOUSING CATEGORIES
��_ Land Use Chapter - Zo4o Comprehensive Plan
•�7•V2o4Q Comprehensive Plan Conversations -April �2, 2017
Residential, Low This category includes primarily single-family detached units, but may
Intensity include single-family and two-family attached units in scattered locations as
(up to 5 homes per gross acre appropriate. This land use should be surrounded by other land uses with
of land area) minimal impacts, such as institutional and open space.
Residential, Moderate This category includes single-family detached homes and two-family
Intensity attached and detached homes at a moderate density. This land use can
(5 to 8 homes per gross acre of Provide a variety of housing types while acting as a buffer between low
land area) intensity residential uses and commercial, office, or institutional uses.
Residential, Medium This category includes townhomes, apartment buildings, and condominiums
Intensity at a medium density or senior facilities at a high density. This land use can
(8 to 2o homes per gross acre be located in a wide variety of locations in the city and can act as a buffer
of land area) between residential uses and other land uses.
Residential, High This category includes apartment buildings and condominiums with senior
Intensity facilities allowed at higher densities in some locations. This land use is
(20 or more homes per gross generally located near commercial, office, or institutional uses with access
acre of land area) to multi-modal transportation options.
Flex Use This category is flexible to allow a range of uses, including higher density
(20 or more homes per gross residential, neighborhood commercial, office, and institutional. These uses
acre of land area) may share space vertically in mixed use buildings or be located on adjacent
properties in or to create a horizontal mix. Sub-district designations that
�� specify the split between housing and employment could be utilized in
order to best complement surrounding properties. This use can provide a
transition between single family and non-residential districts as well as
encourage compact urban development that will serve as a gateway to the
cit .
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GROUNDED
SOLUTIONS
strong communities
from the ground up
Crafting a Mixed Income Housing Strategy:
Recommendations for Golden Valley
Prepared by: Robert Hickey
Apri16, 2017
Introduction
With its strong schools, major-employers, and close In 2015,the Family Housing Fund and the
proximity to downtown Minneapolis, Golden Valley is a Urban land Institute of
highly desirable place to live. Home prices appreciated Minnesota/Regional Council of Mayors
rapidly over the past decade, building wealth for launched the Mixed Income Housing
homeowners, and strengthening the city's tax base. But Feasibility, Education and Action Project.
as home prices and rents continue to soar, Golden Grounded Solutions Network, a national
Valley is becoming inaccessible to modest-income not-for-profit with relevant expertise, was
renters and first-time homebuyers.Affordably-priced � engaged by these partners to lead the
rental buildings are being bought up, and existing three-part project. More information is
residents are being forced to move. Strong market available at housingcounts.org.
demand and limited land mean that new apartments
and new single-family homes are being priced at some
of the highest levels in the region.
How can Golden Valley avoid becoming a city exclusive only to the very wealthy?This memo sheds light
on potential, local policy responses.
Beginning in late 2016,the City of Golden Valley secured technical assistance from Grounded Solutions
Network and the Minneapolis/St. Paul Region Mixed Income Housing Feasibility, Education and Action
Project to examine how the city could use a mixed-income housing strategy to help achieve its 2040
affordability goals and create housing options for more types of residents.
At a time when the federal government is discussing significant cuts to federal housing resources, local
governments are increasingly looking to the development approvals process as a tool for meeting local
affordability needs. Grounded Solutions was asked to examine ways that the city could incentivize or
require new housing developments to serve a greater mix of incomes, drawing on Grounded Solutions'
expertise in mixed-income housing policy and programs. Additionally,we were asked to outline options
for helping preserve "naturally affordable" housing in the city.
This memo presents our research findings and recommendations.Special attention was given to
recommendations that would be relevant to the city's decennial update of its Comprehensive Plan,
which is currently underway.
Page 1 of 17
Research Process
This memo's recommendations were informed by a four-step research process:
1) Zoning and Planning Review—we examined the city's zoning ordinance, subdivision regulations,
and planning documents to better understand limits and opportunities for new development in
the city;
2) Housing Needs and Market Conditions—we consulted recent research prepared by Maxfield
Research and Consulting and by City staff to better understand the local housing market and its
affordability for current and prospective residents;
3) Financial FeasibilityAssessment—we tested the impact of potential affordability requirements
and incentives on two housing prototypes: an apartment building and a single-family home
subdivision; and
4) Peer-City Scan—we catalogued mixed income housing policies already in place in the Twin
Cities,and prepared case studies of policies in Edina (MN),St. Louis Park (MN),St. Cloud (MN),
and Chapel Hill (NC).
Zoning and Planning Review
Planning staff at the City of Golden Valley expect that sites along Douglas Drive, in the I-394 Business
District, in Downtown Golden Valley, and near the METRO Blue Line Extension Light Rail Station Area
have potential for future housing development.
With the help of a GIS database prepared by City staff,Grounded Solutions calculated that there are a
total of 591 acres of land in these potential "Areas of Change and Growth." If only 10 percent of this
land were to redevelop with residential uses between 2017 and 2040, and assuming an average density
of 30 units per acre (i.e. some at lower densities and some at higher),the city's Areas of Change and
Growth could support 1,773 new housing units.This development potential, along with early evidence
from Maxfield Research and Consulting regarding market demand, suggests that a housing policy asking
for a measure of affordability in new construction could make a significant contribution to addressing
local affordability needs.
A large share of sites in the Areas of Change and Growth will need rezoning to support residential
development. Our calculations indicate that only 23 percent of the total acreage falls under a
"Residential" land use designation in the current General Plan.The largest category of land (29 percent)
is within the I-394 Business District designated "Mixed-Use."The remaining 48 percent includes Light
Industrial, Industrial, Office, Retail-Service, and Semi-Public designations.
In addition to changing the underlying zoning designation, some development plans may necessitate
conditional zoning approvals as well.The city's current I-394 Mixed-Use zoning district accommodates
compact, multi-family residential development at heights of 3, 6,or 10 stories(depending on the sub-
district). However, a developer must seek a conditional approval to produce a stand-alone residential
property in this district.The city's Medium Density Residential district restricts by-right densities to 10
units per acre—considerably lower than the average density of recently built apartment complexes in
the city. In the city's High Density Residential district, 5 stories is allowed by-right, and density is not
otherwise capped, but development taller than 5 stories must secure a conditional use permit.
Default parking requirements in Golden Valley are such that parking reduction incentives could be a
meaningful zoning incentive for multifamily developers.The city requires 2.0 spaces per unit in the I-394
Page 2 of 17
Mixed-Use district, 2.0 spaces in the Medium Density Residential district,and 1.5 spaces in the High
Density Residential district.
Given the city's existing zoning restrictions for multifamily development, a policy conditioning zoning
changes or conditional approvals on the inclusion of lower-priced housing could be effective.
As would be expected,the city's zoning and subdivision regulations are more restrictive with density in
single-family districts. Generally, parcel sizes must be a minimum of 10,000 square feet.This is
comparable to a density of 4.4 units per acre. In areas where large-lot homes predominate,the parcel
minimum of 15,000 square feet translates to a maximum density of 2.9 units per acre. Where small
parcels are allowed, lot coverage limits for single-family districts set an effective maximum density of 6.3
units per acre.
Given the city's density limits for single-family districts, and the high cost of land in these
neighborhoods, a small decrease in allowable lot size could also be meaningful to the bottom-line for
new single-family developments that include affordable homes.This presumes, however,that there is a
market for slightly more compact subdivisions.
Financial Feasibility Assessment
To explore the feasibility of mixed-income requirements,various combinations of affordability
expectations and zoning benefits were tested on two development prototypes—a hypothetical high-
density apartment complex, and a hypothetical single-family housing development.The inputs for each
prototype were informed by review of proformas from recently-built developments, and discussions
with Maxfield Research and Consulting and Golden Valley Planning Department staff about current
market conditions and development costs.
Prototypes and feasibility modeling are illustrative of market conditions, but each specific development
project faces a unique set of location-specific and design-specific costs that cannot be perfectly mirrored
in a generalized model. Findings from the financial feasibility assessment should be considered
reasonable estimates rather than definitive answers.A larger-scale financial feasibility analysis, including
more extensive modeling and sensitivity testing,could yield a higher level of precision, but was not
possible within the scope of this project.
RentalPrototype
The tested rental prototype is outlined in Table 1.The prototype was configured to resemble recent
multifamily developments in Golden Valley. Conservative assumptions were used for total development
costs(assumed at the upper end of the typical range described by market observers) and the cap rate
(set at 5.25). Since rents can vary from property to property,three different rent scenarios were tested
as well.
Based on conversations with Twin Cities developers,we assumed relatively high profit thresholds for
residential developments to move forward: 10 percent profit for rental developments,and 9 percent
profit for single-family developments. Profit here is defined by taking net present value (NPV) as a
percentage of total development costs (TDC).
Page 3 of 17
Table 1: Rental Prototype Core Assumptions
Total Development Costs per unit $208,000
(before density bonus or parking space reduction)
Units/acre (before density bonus) 55 units/acre
Average unit size 824 sf
Average market-rate rent(across unit types) $1.80,$1.90 or$2.00/sf(3 scenarios tested)
Average affordable rent $848/month
Operating and Marketing Costs 32%of rental revenue (includes tenant utilities)
Market-rate vacancy rate 4%
Cap rate 5.25%
Parking ratio 1.5 spaces/unit
Parking revenue $50/unit
Table 2. Rental Mixed-Income Scenarios
Affordability share 10%, 15%, 20%(3 affordability scenarios tested)
Income target 50%of AMI
Average affordable rent $858/month (1-bedroom unit)
Utilities Paid by property owner
Parking requirement benefit 33%reduction (e.g. 1.5 spaces» 1.0 spaces/unit)
Density bonus benefit 10%or 20%(2 density scenarios tested)
The following three graphs show the results of rental feasibility assessments at 10 percent, 15 percent
and 20 percent affordability respectively.
Figure 1. Rental Prototype:l0%Affordability
30.0%
Rent Aswmptions
25.0%
$1.80/sf
$1.90/sf
20.0% �— ---- ..�_-- -----�.x�`--- — $2.00/sf
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10.0% ��� Feasihi�llty Hurdle
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0.0% ,_ _.
None(density=55 33%Parking reduction 20%density bonus Reduced parking Reduced parking
units/acre) +10%density +20%density
Cost Ofhets
Page 4 of 17
Figure 2. Rental Prototype:l5%Affordability
zs.o%
ReM Auumptions
20.0% . _ _ _ —-- $1.80/sf
51.90/sf
�'. "�"� ��. 52.00/sf
15.0% _._.__._____._v ____ _ .__.
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None(density=55 33%Parking reduction 20%density bonus Reduced parking Reduced parking
units/acre) +10%density +20%density
Cost OfFsets
Figure 3. Rental Prototype:20%Affordability
25.096
ReM Assumptions
20.0% $1.80/sf
$1.90/sf
52•00/sf
15.0% — —
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None(density=55 33%Parking reduction 20%density bonus Reduced parking Reduced parking
units/acre) +30%density +20%density
Cost OfFsets
As these graphs show, a development with a middle-of-the-road rent assumption ($1.90 per square
foot) could support 10 percent affordability and still achieve a minimum return without any zoning
benefits other than what might be necessary to build at 55 units per acre (the rental prototype's
baseline density).Adding incentives such as a 33 percent parking space reduction or 10-to-20 percent
additional density provides more room for error. At$1.90 per square foot,the development could also
achieve a minimum return while providing 15 percent affordability,though in this instance parking or
density cost-offsets would be necessary.
Page 5 of 17
If the city were able to offer as much as 20 percent (additional) density, plus parking reductions, a 15
percent affordability standard would be viable across all rent assumptions(including at$1.80 per square
foot). With a parking reduction and 10 percent density bonus, 10 percent affordability would be viable
across all rent assumptions.
For-Sale Model
The for-sale prototype models a single-family development,given a shortage of available information
about condominium development.The model assumes average land costs and sales prices for
developments in neighborhoods on the south side of Golden Valley, and regionally-average single-family
construction costs,given that local construction-cost data was not available.The subsequent graph
shows the results of feasibility tests for 10 percent, 15 percent and 20 percent affordability.Affordability
here is defined as serving homebuyers earning 80 percent of the area median.
Table 3: For-Sale Prototype Core Assumptions
Construction cost $88/sf
Density 3.3 homes per acre
Land cost $200,000/lot ($600,000/acre)
Soft cost 15%of construction costs
Total Development Costs per unit $489,534
Market-rate sales price $600,000
Average unit size 2,750 sf
Price per sf $218
Table 4: For-Sale Mixed Income Scenarios
Affordability share 10%, 15%, 20%(3 affordability scenarios tested)
Income benchmark for affordable homes 80%of AMI
Affordable home price (3-bedroom) $260,000
Cost offsets Marketing assistance for affordable homes (10%reduction
in marketing costs); impact fee waiver for the affordable
homes (estimated at$5000 per affordable unit)
Page 6 of 17
Figure 4.Single-Family, For-Sale Prototype
FeasibilityThreshold(9%)
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; 12.0% __ _�____._ ___-- __.__._
' _._._. _ __._ �
i o i 9.6%
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Profit as%of 6�7�
I Development 6.0% — , ., — -___ _._
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i 10% 15% 20% �
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A 10 percent affordability requirement is the only scenario that exceeds a 9 percent profit threshold for
our single-family prototype. Significantly,this scenario presumes city marketing assistance and fee
waivers for the affordable homes. Removing marketing assistance for the affordable homes,the
projected return falls to 9.1 percent under a 10 percent affordability scenario. Removing fee waivers as
well,the projected return would be 8.9 percent.
Peer City Scan
Table 5. Mixed-Income Housing Policies in the Twin Cities Region
Page 7 of 17
City Type of Policy %Units Affordable Affordability Level
Bloomington City Subsidy Project by project Project by project
(typically 10-20%) decision
Chaska Goal that all developments 30% 80%AMI
participate (zoning flexibility offered)
Eden Prairie City Subsidy 20% 50%AMI
Edina ZoningChanges 10-20% Renta1: 50-60%AMI
For-sale: � 110%AMI
Minnetonka Goal that all developments Generally 10%; 60%AMI generally;
participate (zoning flexibility offered) 20%if using city$ 50% if using city$
St. Louis Park City Subsidy 8-10%of Units Rental: 50-60%AMI
For-sale: 80%AMI
Minneapolis Density Bonus; City Subsidy 20%of Units 50-60%AMI
St. Paul Density Bonus 15-25%of Units 30-60%AMI
Case Study:St. Louis Park
St. Louis Park has long spoken about affordable housing in its comprehensive plan. But as one council
member observed at a housing-focused retreat in 2014, "We have promoted affordable housing for a
decade but not produced any affordable homes." So the city began to hold discussions about what the
city could actually do to create workforce housing units.
The city held a series of public meetings and work sessions discussing various options.A clear preference
emerged for mixed income housing, so that affordable units could be spread among the high-cost rental
units that developers tended to produce.A recurring focal point for discussions was the city's tax
increment financing(TIF)assistance,which is commonly provided to new developments in St. Louis
Park. Many felt that if the city contributed money toward a development,the city should have high
standards and expect clear benefits.
In 2015,the city decided to adopt a policy requiring 8 to 10 percent affordability in all developments of
10 or more units that receive public funding. If the developer makes 8 percent of rental homes
affordable,these homes must be priced at 50 percent of area median income (AMI). If the developer is
willing to do 10 percent,the rental units can be priced at 60 percent of AMI.With for-sale
developments, 10 percent must be affordable to households at 80 percent of AMI.
TIF is the most common subsidy in St. Louis Park, but the city's mixed-income housing policy applies to
all types of public funding. While some stakeholders wanted higher requirements, the council and staff
felt that it was better to have a modest policy that did not adversely impact development.The city
Page 8 of 17
intentionally created a policy and not an amendment to the zoning ordinance to avoid potential legal
challenges.
The policy appears to be working.A year and a half in,there are 253 affordable homes in the pipeline.
"We have really not gotten much pushback from developers," explains Michele Schnitker, Housing
Supervisor and Deputy Community Development Director. In fact, several developers have voluntarily
provided more affordable homes, 20 percent of all units, so they could qualify for Low-Income Housing
Tax Credits.The City Council is discussing strengthening the policies.A recent development was exempt
from the policy because it did not ask for any public subsidy, and at least one council member
questioned whether there was anything that could be done to ensure that the development was mixed
income. In response, staff are now studying the strategy of tying affordable housing requirements to
zoning changes, density bonuses or other incentives.
Schnikter offered lessons for other cities: "Creating a policy is a balance. Look at your market,and work
with the developers.Think about multiple strategies because there is not just one solution."
Contact: Michele Schnitker, 952-924-2571, mschnitker@stlouispark.org.
Case Study: Edina
The Edina City Council has advocated for mixed-income housing for many years. But prior to 2015,the
city did not have a policy to guide staff in their conversations with developers about the city's mixed-
income housing goals.
To make the city's intentions clearer to developers,the city adopted a policy in 2015 that requires all
multifamily housing developments of 20 or more units seeking a rezoning to rezone to a PUD
designation,which in turn requires a degree of affordability. Rental developments must include 10
percent affordability at 50 percent of AMI (or 20 percent if the affordable rental units will be made
available for households at 60 percent of AMI). For-sale developments must be 10 percent affordable at
110 percent of AMI. Developments seeking a Comprehensive Plan Amendment must also comply with
the policy.
Various community concerns fueled support for the policy. One concern was that Edina's children
struggled to return to the community in which they grew up.The shortage of workforce housing has also
become an issue. Concern has grown that people who work in Edina, including nurses,teachers, and
sales clerks,often have trouble finding a home within reasonable commute distance to theirjob.
The city works with developers to help them meet their affordability obligations.The city indicates that
it is willing to consider various forms of assistance for developers, including density bonuses and parking
reductions,tax increment financing (TIF),tax abatements, and help accessing 4-percent low income
housing tax credits.
To further help developers comply with the policy,the city allows developers to deliver affordable
homes in various ways. As an alternative to providing the affordable homes on the same site as the
market-rate development, developers can:
1) Reduce the price of existing homes in Edina to equivalent affordability levels;
2) Build the affordable dwelling units at an alternative site;
Page 9 of 17
3) Participate in the construction of equivalent-quality affordable dwelling units by another
developer on a different site within the city; or
4) Propose another alternative that directly or indirectly provides or enables provision of an
equivalent amount of affordable housing within the city.
Given the policy's newness, only one development has been subject to the mixed-income housing policy
as of early 2017.This project met its affordability obligation with a $2 million contribution to the city's
affordable housing fund.The city council agreed to this alternative, proposed by the developer, because
the development is located far from bus service or basic amenities.Additionally,the two developments
that were grandfathered under previous policy each voluntarily proffered 5 percent affordability as a
show of good faith.Together,those developments will contribute a total of 29 new affordable rental
units once the projects are fully built. None of these three recently-built projects were awarded TIF
funds.
Developers understand that mixed-income housing is the expectation of the community, according to
Edina Senior Planner Joyce Repya. The public reaction has also been positive. "We have not had any
outcry here," says Repya. "[City staff] recognize that including affordable homes is not necessarily easy,
which is why we've created a policy designed to work with developers in making this a desirable
community for all people to live."
Contact:Joyce Repya, 952-826-0462,JRepya@EdinaMN.gov.
Case Study:St. Cloud
In 2002,the cities of St. Cloud,St.Joseph, Sartell,Sauk Rapids, and Waite Park entered into a regional
Joint Powers Agreement pledging to ensure 15 percent of all housing units built in each city would be
lower-priced "Life Cycle Housing Units."
To meet its commitment, St. Cloud adopted a voluntary policy that offered incentives for builders that
priced 15 percent of rental or for-sale developments below market rate. Rental Life Cycle units were to
be affordable to households earning up to 65 percent of AMI. For-sale Life Cycle homes were to be sold
for no more than $135,000(affordable to roughly 70 percent of AMI at the time).
Participating developers received a package of incentives: a 15 percent density bonus, modifications of
other development standards, a 20 percent fee waiver for each Life Cycle unit, and city assistance with
marketing the affordable homes.
There were early signs that the city's housing market was too weak, however,to make the affordability
incentives appealing—particularly in the city's under-developed downtown where the city hoped to
draw more development.According to St. Cloud Community Development Director Matt Glaesman,
homeowners were having trouble selling existing homes in the downtown, suggesting a weak market
independent of the Life Cycle policy. New housing, along with Life Cycle units, were being built in the
suburbs, but the city did not want affordable housing to be skewed toward the outskirts where new
development was occurring.
In 2005, a Maxfield Research and Consulting study recommended that the percentage goal of Life Cycle
Housing be reduced from 15 percent to 5 percent to allow housing demand to catch up with supply.The
policy was subsequently downgraded in 2006. With the deepening of the Great Recession,the policy
was terminated in 2007.
Page 10 of 17
The policy's relatively deep income targeting for affordable homes-for-purchase certainly did not help in �
the face of market weakness.With a regional median income of only$58,200 in 2003 (roughly two-
thirds of the Twin Cities regional median income presently), even pricing 15 percent of homes at an 80
percent of AMI benchmark would have stretched a development's financial feasibility. But St.Cloud set
its affordable price at a flat$135,000(equivalent to 70 percent of AMI affordability), which would be
expected to have added add greater strain still,especially when the housing market collapsed in 2007.
Despite its short life,the city's Life Cycle policy produced 64 affordable units. An additional 413
affordable units were committed but never built due to the housing market downturn. Many of the
original developers no longer control the properties where the units were committed, on account of
forfeiture,foreclosure, or having to sell the subdivisions.According to the city's 2015 Comprehensive
Plan, "the LCH program proved beneficial during periods of growth," but"fell out of use as platting for
new housing developments slowed."
Indeed, between 2007 and 2015, no single-family plats were proposed in the city,according to
Glaesman. Nor was any multifamily housing constructed until the market began to pick back up in 2012.
Not wanting to condition any financial or zoning support on affordability,the city kept its policy
dormant.
In 2016, however, Glaesman reported strong new momentum for re-instating some type of workforce
housing policy across the five cities. One reason:there is now a market for downtown living near jobs
that didn't exist in the mid-2000s.Glaesman says that while the argument for Life Cycle housing
incentives was"human" in the early 2000s,the motivation now is economic development. Employers
are pushing for mixed income incentives to support their businesses.They are being joined by members
of the local faith community,which was supportive of the Life Cycle policy in the early 2000's as well.
Contact: Matt Glaesman, 320-650-3110, Matt.Glaesman@ci.stcloud.mn.us.
Case Study: Chapel Hill, NC
Chapel Hill is home to the flagship campus of the University of North Carolina and approximately 58,000
residents.Together with its larger-city neighbors, Durham and Raleigh, Chapel Hill forms the third point
in North Carolina's job-rich Research Triangle.
In 2000,the town council adopted a voluntary, mixed-income housing policy as part of its new
Comprehensive Plan.The policy grew out of concern that rising housing costs were making the town a
place where only students and the wealthy could live.The new policy stipulated that any developer
requesting a rezoning before the town council would be expected to make approximately 15 percent of
new homes affordable to homebuyers earning no more than 80 of AMI. Furthermore, half of these
lower-priced homes were to be affordable to households at 65 percent of AMI.The policy was not
applied to rental housing initially, out of concern that it would run afoul of the state's ban on rent
control.
Over time, 15 percent affordability became an informal expectation for any for-sale development
seeking a discretionary approval by town council—even for those not needing a rezoning.To the
concern of some developers,the council deviated at times from the 15 percent requirement, making it
difficult to predict how much affordability would be expected ultimately.
Page 11 of 17
In response to requests for a more standard, predictable program,the town shifted to its current,
mandatory inclusionary housing program in 2010.The new 15-percent requirement applies to any for-
sale development of five units or more. In the Town Center, however, the affordability requirement
drops to 10 percent.The town's original voluntary policy has not been retired, but instead now applies
to rental projects that voluntarily agree to set-aside 15 percent of apartments as affordable.
A distinctive feature of Chapel Hills' "inclusionary zoning" program is its partnership with the local,
nonprofit Community Homes Trust(CHT), which helps administer the program. Developers sell their
affordable homes to CHT,which then oversees the sale of affordable homes to qualified homebuyers.
CHT is responsible for the ongoing stewardship of these homes, as well as subsequent resales.
Affordable homes produced through the policy must remain affordable for 99 years.An annual
appreciation rate of 1 percent is allowed at the time of resale.
Upon request, developers can pay an "in-lieu"fee to meet their affordability obligation. In-lieu fees are
also used in cases where 15 percent of the total would result in fractional affordable units. Other
compliance alternatives include off-site construction of the affordable homes, land dedication, and
conversion of existing, market-rate units into affordable homes.The policy's default expectation,
however, is that affordable homes are provided on the same site as the market-rate homes.
Between 2000 and 2015,the city's mixed-income housing policy created 332 new affordable homes
(approximately 20 per year).The policy also generated $4.7 million in "in-lieu fees" for the town's
housing fund,which supports homelessness prevention and other programs.
Contacts:
Loryn Clark, Chapel Hill Planning Department, 919-969-5076, Iclark@townofchapelhill.org.
Robert Dowling,Community Home Trust, 919-967-1545, rdowling@communityhometrust.org.
Recommendations
The strength of Golden Valley's housing market can be an asset in efforts to support mixed-income
development. By using the zoning process to encourage new market-rate housing to include a share of
lower-priced homes,the city can harness the energy of its market to create more housing opportunities
for young households, seniors, and others with strong ties to the community.
Based on our zoning and planning review, market scan,financial feasibility assessment, and peer-city
review,we recommend that the city consider the following mixed-income housing policies:
1.Rental Housing:Adopt a 10 percent affordability requirement for all new rental developments that
request a zoning change,conditional zoning approval,or PUD designation.
Golden Valley has the market strength necessary to ask more from developers who wish to build rental
housing in the city. However, legal observers believe that a mandatory affordability policy applied to
rental housing could run afoul of the state of Minnesota's prohibition on rent control.This potential
incompatibility can be eliminated by tying affordability expectations to instances when developers
voluntarily request zoning flexibility. For example, when a developer petitions to develop under the
terms of a PUD zone, rezone a property from commercial to residential use, build taller than permitted
under existing zoning, or reduce parking requirements, the city could condition these changes on the
inclusion of dedicated, lower-priced rental units.
Page 12 of 17
Presently the city awards amenity points to residential developments that include a share of affordable
housing. But with affordable housing one of many possible routes to securing the points needed for
approval,this system is not likely to incentivize mixed-income housing. One could conceive of a
developer accumulating the five required amenity points with a series of less costly amenities. Indeed,
this dynamic plays out in other communities that use a similar incentive approach as Golden Valley, e.g.
Rochester and Minneapolis.A more effective approach would be for the city to make affordability a
requirement for new development seeking to access the flexible zoning terms of the PUD zone,while
preserving the remainder of the existing PUD point system to incentivize other amenities that the city
would like to encourage.
A 10 percent affordability expectation would be essentially voluntary—a developer would still be free to
build under the terms of standard zoning designations. Nonetheless,the policy would be likely to
incentivize many mixed-income housing developments given the popularity of the flexibility offered
under the PUD designation, and the value of increasing heights or reducing parking requirements in
many of the city's other zones.
Affordable for Whom?
We recommend that"affordable" be defined using the standard definition of 30 percent of monthly
gross income, and that rental beneficiaries be households earning up to 50 percent of area median
income (AMI). In 2016,this was equivalent to a two-person household earning$34,320 per year,or a
four-person household $42,900.Table 6 below shows corresponding affordable rent levels.
Table 6.50%of AMI in Real Terms
2-person household 3-person household 4-person household
Household Income $34,3200 $38,610 $42,900
Example Retired couple Single parent, 2 kids 2 parents, 2 kids
Unit type 1-bedroom 2-bedroom 3-bedroom
Affordable Rent $858/month $965/month $1,073/month
(utilities included)
An income target of 50 percent of AMI would benefit the city's average renter,which earned$42,027 as
of 2015,according to Maxfield Consulting and Research.This income target is also employed in the
policies used in several cities in the Twin Cities region.
Rental Developer Benefits
Most mixed-income policies nationwide are designed with cost offsets to help ensure the policy does
not compromise a development's financial viability.To ensure that a 10 percent affordability
expectation is feasible for new rental developments in Golden Valley,we recommend that participating
developments receive a minimum zoning benefit in the form of a 33 percent parking space requirement
reduction. For example, in the city's existing High-Density Residential zone,the existing parking
minimum of 1.5 spaces per unit would be reduced to 1.0 space per unit.
Coupling a parking incentive with a minimum density bonus(for example 10 percent greater than our
prototype's base density of 55 units per acre,or just over 60 units per acre)would further improve the
viability of mixed-income housing developments with 10 percent affordability.
Page 13 of 17
Rental Affordability Duration
It has become industry best practice for local mixed-income housing policies to set long-term
affordability durations for affordable apartments and for-sale homes. In choosing affordability durations
of at least 30 years, localities are able to maximize the benefit of the investment made by the developer
(and in some cases also the city), and multiply the number of households that are able to benefit from
each affordable home created.
Nationwide,the trend has been from shorter to longer affordability periods, as localities that began with
short durations experience the loss of affordable homes that occurs as these units term-out and revert
to market-rate.Today, more than 80 percent of mixed-income programs require at least 30 years
affordability for participating rental and for-sale properties, and a third require affordability in
perpetuity(99 years or for the life of the building).
Rental Policy Exemptions
We recommended that smaller properties of 9 units or fewer be exempted from the rental mixed-
income housing policy,given their reduced ability to include below-market-rate rents feasibly, and given
the reduced utility of parking space reductions in such properties.
Table 7. Proposed Rental Policy Summary
Applicability Developments of 10 units or greater seeking a PUD
designation, conditional approval,or zoning
cha nge
Affordability Expectation 10%of total units
Minimum Developer Benefits 33% reduction in minimum parking ratio;
density bonus allowing 60 units per acre or greater
Households Served 50%of AMI and below
Affordability Duration 30 years
Policy Alternative:Greater Affordability Share for 60 Percent of AMI
Golden Valley may wish to consider a variation on its rental affordability expectations.Several cities in
the region allow developers to price their rental affordable units at either 50 percent of AMI or 60
percent of AMI,so long as a greater share of units are affordable at 60 percent of AMI. Offering both
options may be worth considering in Golden Valley. Developers can better utilize low income housing
tax credits to produce rental units at 60 percent of AMI, and if they are applying for these credits, they
will need to make at least 20 percent of total units affordable to be competitive in their application.
While not shown in the financial feasibility section, we calculate that a 20 percent affordability
requirement at 60 percent of AMI would be feasible for our rental prototype under all rent assumptions,
assuming a 33 percent parking reduction and 10 percent additional density bonus.
2.For-Sale Housing:Adopt a 10 Percent Mandatory,Affordability Policy
This policy should apply whether or not a developer is seeking some form of discretionary zoning
flexibility. It should also apply to any form of for-sale housing, including single-family subdivisions,
townhomes,and condominiums.
Page 14 of 17
Affordable for Whom?
To reach first-time homebuyers and senior households not already served by the local housing market,
we recommend that the affordable homes be priced affordably for households earning no more than 80
percent of area median income.This is equivalent to a two-person household earning$54,912 (the
approximate,average senior household income in Golden Valley)or a four-person household earning
$68,640.A four-person household with that income could afford a home of approximately$260,000.
This is likely the highest that a new, affordable home could be priced to be meaningfully less than the
overall (new as well as resale) median home in the city($289,900,according to research by Maxfield
Research and Consulting).
Table 8.80%of AMI in Real Terms
2-person household 3-person household 4-person household
Household Income $54,912 $61,776 $68,640
Example Senior couple Single parent, 2 kids 2 parents, 2 kids
Unit type 1-bedroom 2-bedroom 3-bedroom
Affordable Home* $221,000 $232,500 $260,000
*Assumes 10%downpayment,4.5%-interest mortgage,annual property taxes at 1.21%, annual homeowner's
insurance at 0.35%,and private mortgage insurance.
For-Sale Developer Benefits
To support developers,the city should offer marketing assistance to help identify income-eligible,
qualified households ready to purchase the affordable homes in each development. Also,the city
should waive impact fees for the affordable homes in the development.
For-Sale Affordability Duration
As with rental housing, affordability restrictions for homes-for-purchase should last at least 30 years,to
align with industry best practice.To extend the impact of scarce affordability resources, and to allow
more households to benefit from the policy,we recommend that the affordability term reset for the
next homebuyer if the property is sold within the 30-year period.This emerging best practice has been
adopted by multiple, mature mixed-income housing programs, including those in Montgomery County,
MD, Fairfax County,VA, and San Mateo,CA.Administrators of these programs believe that a reset
requirement can have the same impact as"perpetual"affordability requirements, because most homes
tend to be sold within 30 years.
As helpful as it is to have lasting affordability,effective mixed income housing programs also provide
owners of price-restricted homes with an opportunity to accumulate wealth. Some policies allow a set,
annual rate of appreciation(e.g. 2 percent)when the home is sold. Other policies allow price increases
tied to the growth in AMI or other indices such as the CPI. Ultimately,the City of Golden Valley will need
to determine which resale price formula balances wealth accumulation and ongoing affordability in a
way that works best for the city.
Page 15 of 17
Exem ptions
Developments of nine or fewer for-sale developments should be exempted from the mixed-income
housing policy,given that such developments would generate the need for a fraction of an affordable
home.
Table 9. For-Sale Policy Summary
Applicability All for-sale housing developments of 10 units or
more homes
Affordability Expectation 10%of total units
Developer Benefits Either:
Marketing assistance for the affordable homes; or
Impact fee waivers for the affordable homes
Households Served 80%of AMI and below
Affordability Duration 30 years
One product type not examined in this memo is condominium development. One reason for this
omission is the relatively little new condominium development occurring in the city, possibly as a result
of current Minnesota condominium liability laws. Nonetheless, a 10 percent affordability policy applied
to new condominium developments would likely benefit from the same parking and density flexibility
that we recommend for rental developments.
Projected Impact of a Mixed-Income Housing Policy in Golden Valley
As discussed earlier,the city's Areas of Change and Growth are likely capable of supporting more than
1,750 future housing units,assuming 10 percent of these acres redevelop with residential uses at an
average density of 30 units per acre. Based on this projection, a policy of 10 percent affordability applied
to both rental and for-sale housing would be expected to generate a total of 175 total homes, exceeding
the city's 2040 minimum affordability goal of 111 affordable units.
Ideas for Preserving"Naturally-Occurring"Affordable Housing
Cities like Golden Valley have various options for helping preserve affordable rental and for-sale homes
to further sustain a mixed-income community. Most approaches require financial resources, but they
can make a big impact nonetheless. Here are some options for consideration in Golden Valley:
Financial Assistance for Property Rehabilitation
Local governments can partner with local financial institutions or act independently to provide resources
that enable necessary repairs and maintenance at low-cost rental properties.This can help protect
affordable rental housing from being lost due to deterioration. It can also enable a property to continue
serving low-income residents by addressing a backlog of repair needs without having to raise rents.
Local funds work best when used to leverage other local or state resources. Assistance is often linked to
legal commitments from the property owner to maintain rents at affordable levels over a set period of
time. Otherwise, rehabilitation assistance may simply enable rental increases.
Page 16 of 17
Property Acquisition Assistance
In many cases,the only way to preserve a property is through purchase by a nonprofit, mission-driven
corporation, or community land trust.Some communities have established their own predevelopment,
acquisition,or interim financing programs to facilitate these transactions.
Right of First Refusal Law
To facilitate the purchase of at-risk rental properties, some localities have adopted laws that grant
tenants, or the jurisdiction itself,the right to match purchase offers on older rental properties.A
jurisdiction can then assign its right to a nonprofit partner or community land trust to purchase,
renovate,and subsequently restrict rents to affordable levels for the long-term.
Relocation Assistance and Notification Requirements
In cases where it is impossible to prevent the sale, demolition, or condo conversion of a naturally
affordable rental property,a policy that requires advance notification and relocation assistance helps
displaced tenants. In Boston,for example, property owners must provide displaced tenants a relocation
stipend of up to$10,000 if they are low-income, elderly or disabled. Seattle's Tenant Relocation
Assistance Ordinance requires landlords to provide displaced renters approximately$3,000.The
landlord pays half and the city pays half.
Before converting a rental unit to condominium, Boston also requires developers and property owners
to give a five-year notice to senior, disabled and low-income tenants. Cities such as Washington, DC,
require 120-day advance notification for all tenants, regardless of whether they are elderly or low-
income. Notification laws not only help tenants but also entities that might be interested in purchasing
the property to preserve its affordability. For this reason, notification requirements go well with laws
that grant a right of first refusal to preservation-minded entities.
Eviction Protections for Low-Income Seniors
Some cities, such as Washington, DC, simply make it illegal to evict a low-income elderly tenant for the
sake of a condominium conversion.
Tax Incentives for Preservation
States and localities have adopted various types of tax incentives to encourage owners to preserve the
affordability of subsidized and unsubsidized affordable rental homes.Tax incentive programs often work
by freezing or lowering real estate tax assessments for properties that preserve affordability over a
designated period of time.These incentives can help make it financially feasible for owners of low-cost
rentals to continue operating their.property, or to bring their properties up to current living standards
without raising rents to levels unaffordable to low-income residents.Or in some cases,tax incentives
may simply provide financial incentive for the owner to agree to lock in current rents and forgo future
rent increases.
Preservation Option in a Mixed-Income Zoning Policy
Several cities, including Edina and St. Louis Park,offer developers the option of ineeting their
affordability obligation by guaranteeing the long-term affordability of existing homes in the community.
For example, a developer could purchase an at-risk property slightly greater in size than the developer's
affordable unit obligation and deed-restrict the units to guarantee ongoing, affordable rents.
Page 17 of 17
Responding to the Threat to the Twin Cities Region's Supply of Naturally Affordable Rental Housing
The region's supply of naturally occurring affordable rental housing (unsubsidized) is at risk. National
investment companies have turned to the Twin Cities market seeking investment opportunities and are
increasingly buying up Class C apartment properties. In many of those cases,the new owners are then
repositioning the buildings in the market—undertaking rehab, adding amenities to appeal to more
upscale tenants, dramatically escalating rents,toughening admission standards, ending or cutting back
involvement in government programs like Section 8, and generally attempting to move the building
more upscale. The result has been a dramatic reduction in the supply of affordable housing and the
involuntary displacement of many lower income households,who find themselves competing for an
ever smaller supply of affordable housing. In one recent example,the Crossroads apartments in
Richfield, 700 units of deeply affordable housing have been converted, which, effectively canceling out
virtually all of the gains from new affordable units built in the Region in 2014.
Also contributing to this threat are the escalating land values in parts of the Region where strong market
conditions exist or where the construction of public amenities like transit lines will likely enhance value
over time.
Given that this housing is privately owned and not subject to rent and income restrictions associated
with subsidized housing,what can be done? This memo is an attempt to begin a discussion on possible
strategies and policy responses.
1. Document the problem. There should be an organized effort to track the most significant
examples of this trend. Getting the facts clear in each case is important. Not all the situations
are the same.
2. Strategies to preserve affordability.
a. Identifying buildings as soon as they come on the market, and, if possible, before that.
Identification as early as possible is critical if a preservation purchase is to be negotiated.
b. Helping preservation buyers to buy at risk buildings. Several of our non-profit housing
providers are actively competing in the market for these properties, but they are
disadvantaged in competing against for profit purchasers on price and on timing (the long
delay in assembling funding from public and philanthropic sources). The Greater Minnesota
Housing Fund is currently leading an effort to create a fund of low cost financing which will
allow preservation buyers to compete more effectively.
c. Policies which can help facilitate preservation purchases. These would be actions by local
governments or by the Legislature which would be designed to help preservation purchasers
to buy these properties.
i. Right of First Refusal. When owners offer their buildings for sale,they would be required
to notify the tenants and a designated unit of government of any purchase agreement
entered into. The tenants or the government unit would then have a defined period of
time to meet the price and purchase the building themselves. There are existing
examples of this approach, most often applicable to subsidized buildings, most notably in
Washington D.C. and Chicago (for SROs). Minnesota has a ROFR for the sale/closure of
manufactured home parks, though it doesn't work very well, primarily because the time
to respond to the purchase price is only 45 days. One challenge with this approach is
that it can be hard to anticipate where these purchase opportunities will materialize,
making it difficult to know where to push for local ordinances.
ii. Notice Period. A softer approach than ROFR,this would be a local (or regional if by state
law) requirement that for certain defined buildings,the tenants and local government
must be given advance notice prior to the sale of any building. The tenants or local
government would have the opportunity to attempt to negotiate a purchase with the
seller,though they would not have a legal right to match any price negotiated by another
buyer. Several cities have taken this approach, including Denver and Portland.
d. Creating incentives for a "socially responsible' alternative business model. The reality is
that many of these properties are as affordable as they are due to long deferred investment
and upgrades. Such investments are necessary in the long run.The goal, though, should be
to encourage an alternative business model to simply upscaling the building and driving out
those who most need the housing. How do we create incentives for owners or buyers to
invest in their buildings while maintaining affordability?
i. Local programs offering rehab financing in return for affordability commitments. Some
cities offer attractive financing to multifamily property owners in exchange for
affordability covenants. How well are they working? Could they be expanded/improved?
ii. Property tax and rent subsidy incentives. Minnesota's 4d property tax program provides
a 40%tax break for subsidized rental properties. However, this benefit could be
extended to any properties receiving local "financial assistance" as long as the owner
agrees to rent and income restrictions. One idea is that the local government provides a
modest rent subsidy for some share of the units, meeting the "financial assistance"
requirement,thus making those units also eligible for the 4d tax break. In return,the
owner would commit to keeping that share of the units affordable for an agreed upon
period of time.
iii. Incentives to address landlord concerns about renting to certain groups of tenants.
This year the Legislature funded a pilot program to provide a landlord guarantee fund
which would cover certain landlord losses in return for agreeing to rent to tenants with
issues in their rental history. When the Oregon legislature recently enacted anti-
discrimination protections for Section 8 tenants,they also created a fund to reimburse
landlords for losses. A similar program could be created at a local level or,through state
law, at a regional level.
e. Increasing local government leverage through zoning. A city could perhaps structure its
zoning so as to require an owner engaging in certain conversion actions from doing so
before obtaining the city's zoning related approval. Standards would have to be defined to
spell out the scope of the city's approval requirements in this situation but it could provide
the city with substantial leverage to influence the outcome of the building changes. In
Washington State,for example, some cities have expressly zoned manufactured parks as
such, so that attempts to change use would require a zoning change and city approval.
f. Limiting exclusionary rental practices. Another approach is to adopt local or regional
requirements that limit a landlord's ability to unfairly exclude tenants.
i. Prohibiting discrimination against Section 8 voucher holders and other recipients of
government programs. Although landlord participation in the Section 8 Housing Choice
Voucher program is generally considered voluntary, a number of local and state laws have
prohibited excluding applicants simply because they use a rent subsidy(often referred to as
source of income discrimination). Minneapolis is currently considering such an ordinance.
The state Human Rights Act includes a prohibition on source of income discrimination, but
the Minnesota Court of Appeals has interpreted that provision to not cover Section 8 (a
ruling which the Legislature could reverse by amending the Act.) The ultimate impact of
such laws is not clear,though they do seem to dramatically reduce the number of landlords
advertising, "No Section 8." To be maximally effective, these laws need to include the
proposed Minneapolis provision that the prohibited discrimination is based on status with
regard to public assistance or any requirement of a public assistance program. The
Massachusetts state law is similar.
ii. Other unfairly exclusionary admission standards. Though this may be partly a function of
the tight market and the ability landlords have to choose among many tenants,there does
seem to be a trend toward tightening admission standards. In some cases these standards
may go too far. HUD recently issued a guidance setting out situations where overly broad
criminal background checks may violate the Fair Housing Act.
https:/Ipartal.hud.�ov/hudportal/documents/huddoc7id=HUD OGCGuidAqpFNAStandCR.p
df. Standards around minimum income requirements and minimum credit scores could go
too far as well, and could be regulated through local ordinance or state legislation if a
consensus can be developed on reasonable versions of these standards.
iii. For cause eviction. This would establish a standard incorporated into leases requiring
landlords to only evict for good cause, similar to the standard in most subsidized housing
leases. Minnesota law also establishes a good cause standard for evictions from
manufactured home parks,and two states and 16 cities have enacted similar laws to
prevent arbitrary evictions. A recent legal analysis concluded that a local government just
cause requirement would not conflict with or be preempted by Minnesota law.
3. Strategies to mitigate the harm of displacement. Where the affordability of the housing cannot
be preserved,there may be ways to partially mitigate the harm caused by displacement.
a. Relocation benefits. In certain situations, the law now requires that displaced tenants be
paid relocation benefits(such as government sponsored redevelopment or the closure of
manufactured home parks). Chicago's SRO ordinance requires this of owners of purely
private housing. The obligation to pay relocation benefits to displaced tenants could be
imposed upon the owner by local ordinance or state law. In some cases, if the relocation
obligation is substantial enough, it may deter the owner from the displacement actions
altogether. There may be legal issues however.
4. Strategies to replace or create more affordable housing in anticipation of losing some.
a. One for One replacement. This would impose on the owner an obligation to replace any
affordable units removed or rendered no longer affordable. Chicago has a provision like
tnis, and Minneapolis has one for the limited situation where an owner eliminates SRO
housing with the help of city financial assistance.
b. Inclusionary Zoning. This is a strategy often recommended for areas experiencing
gentrification because the same conditions that cause the gentrification—a robust
residential real estate market—often provide the circumstances for an effective Inclusionary
Policy. IZ(or Inclusionary Housing or Mixed Income Housing ) is a local government policy
that either requires or incents owners building market rate apartments to include affordable
units.
c. Metro Home Grown Fund. Efforts are underway to develop a proposal to the Legislature
which would create a dedicated funding source for affordable housing, in addition to the
annual appropriations the legislature typically provides. If enacted,this Fund could be
useful in creating replacement housing.
Housing Justice Center
6-3-16 draft