Affordable housing: Live blogging the Durham City Council meeting, March 10
March 10, 2016
It's a long agenda today, with several affordable housing items and a non-controversial, albeit, welcome item regarding the city's lease with Liberty Arts Foundry. The City Council is also expected to pass a resolution supporting the collective bargaining/unionization rights of non-tenure track faculty at Duke University. Download Durham City Council Work Session Agenda - March 10 2016
Note: Affordable housing discussion starts below, time listed as 2:34 p.m.
We'll blog the highlights. Note: Sometimes many minutes elapse between them.
1:03: Mayor Bill Bell wants to dedicate a full, special meeting to the affordable housing issue and presentation. Stand by: This item may not be discussed today.
1:06: Presentation will happen today, but there will be subsequent meeting to devote to it.
1:11: Briar Green Apartments, 500 Danube Lane, financed with bonds up to $19.9 million. This is in North Durham, near Hebron Road.
1:15: The City Council resolution supporting the Duke non-tenure track faculty. Cora Cole-McFadden prefers the term "endorse," but it passes unanimously.
Steve Schewel: This is 200 units for 30 percent to 60 percent AMI built by a private developer using a 4 percent tax credit. This is a tremendous win.
1:37: Regarding an audit of city employees' dependents' eligibility of health care benefits:
Jillian Johnson: Only 10 of 1,460 or so city employees' dependents were found not to be eligible for benefits [but receiving them.] It seems like it would cost more to do the audit
Germaine Brewington of the city: Statistically across the country, about 5 percent are ineligible. We're going to do this audit again, but a sample of 50%. It's my opinion we should do this audit every year. The results this time were favorable because of the up front work that was done.
Schewel: We found so few because 170 fewer children and 140 fewer spouses were signed up by employees who were concerned they would be found not to be eligible.
1:42: Item 6: Regarding Grants for High-Intensity Drug Trafficking Enforcement
Johnson: First time I heard that we receive xxx It's becoming increasingly clear that the mass incarceration is being driven by drug policies that disproportionately affect people of color. Is use of this drug funding a priority? Should we consider continuing to accept this money?
City staff: This is money allowed to be used to coordinate law enforcement at local, state and federal level. We get $250,000 year from this office to do that.
Reece: To do what?
City staff: To do drug enforcement.
Bell: High-intensity drug trafficking can mean a lot of things to different people.
Item 8: Southside project, site preparation costs are $4.45 million City could authorize spending Dedicated Housing Funds, Community Development Block Grants and Housing Bonds to pay developer McCormack Baron Salazar for development of Southside East Phase II, which includes affordable housing units.
Charlie Reece: This comes out to about $52,000 per unit.
Reginald Johnson of the Community Development Department: I would be careful about including the infrastructure costs.
J. Johnson: Could you define infrastructure costs?
R. Johnson: We have vacant land that doesn't have water and sewer that we have to put in, we have to put in new streets. The land has to be prepared for building.
Bell: The condition of the land when we bought it and what we had to do to build on it.
R. Johnson: We used federal dollars to prepare the land so the contractor could make a successful project.
Don Moffitt: This is a catalytic project, the type of project we approve for quality of life issues.
Item 10: Acquiring the old Durham Convention & Visitors Bureau from the county for the water management department. That building is on Morgan Street, on the Downtown Loop. [Background: Developer Bob Chapman had eyed this land for development should the Loop become two-way.]
J.Johnson: Concerned about the cost of upfitting the building [$1.7 million to $2.3 million]
City staff: The estimates we have for the modifications on the existing building are from consultant.
Jerry Morrone of water department: Parking for people who need to pay their water bill. Currently, the parking is limited near City Hall [where the department is now.] We have no dedicated parking right now. The current space for staff is smaller than the city standard, plus there is more space for the public, lobby, restroom.
Martha Ziglar of water department finance: We need to include cashiers, as well.
Reece: I have an existential question: Is it necessary for this space to be close to City Hall?
Bo Ferguson, deputy city manager: Not required. Certainly, this function could go in any number of places around the city. We care that we access this location by transit and by vehicles. Transit is critical. Walk-in customers are generally lower-income, they have to set up payment plans, etc. Central to downtown is of interest to us for our customer base. We save duplications for our staff by being close to City Hall. We don't have to find additional staff parking. Adjacencies to other departments, as well.
Moffitt: We got several emails about this. One person suggested Northgate Mall. I'd like to suggest another one. The city is fast tracking a new parking deck with retail in it. I want to suggest that location might do well for this use.
Ferguson: WE considered the deck. We agree it's viable, but the staff team kicked around a few things: We don't consider the DCVB to be permanent, 15 or 20 years. The city could control the gateway for future development if it buys this building. If the city uses the garage, it will be paying a much higher premium for those spaces than the building. That garage 15,000 square feet of retail space, and water would take up about half of that. Would it take away the economic development potential? Plus the DCVB space would provide evening parking for the public.
[Note: There was a discussion started by Reece about the city-owned bathroom inside the Aloft Hotel/condo space. It was hard to follow, but yes, it appears the City owns a toilet.]
2:34 p.m. The presentation about affordable housing begins now. We will follow up with a story making sense of this discussion.
Here is the draft proposal. A list of goals, the city's housing profile. The city's proposed strategies, potential subsidies, analysis of federally and locally subsidies, density bonuses.
Christine Westfall of Coalition for Affordable Housing and Transit: Our committee is ready to present the city with some planning tools to incentivize developers to build affordable housing in the Compact Neighborhood Tier. We've passed it by the School of Government to
These tools will only be effective before densities increase in the Compact Neighborhood Tier. We ask the city to suspend any decisions about the CNT before discussing these tools.
Karen Lado of Enterprise Community Partners: We will have an opportunity to dig in more deeply. There is a lot of information here, 128 pages of materials. The goal here is we've gone through the data to "where are the needs," and what are the strategies to meet those needs, and now what are we going to focus on and how will we measure our success over the years?
We have a shortage of homes for people below 50 percent of the area median income. It's a common problem. It's hard to house people at this level. For every 100 renter households under 30 percent AMI, there are only 38 affordable units for them. A housing shortfall in total of 8,000 units. This is a very big problem and we are only going to start chipping away.
Durham is an attractive city. It's growing and neighborhoods are becoming unaffordable, where people have lived for a long time. There is a time limit on a lot of affordable housing, and some of those agreements are expiring, so housing could be lost.
In comparable terms, this is an affordable city, but we need to get ahead of the curve. A transit line could change the face of the city and housing. We have a housing authority with a strategically positioned portfolio; there are opportunities for partnership with DHA.
At all levels, this city share a concern about affordability and motivated to act. It's pretty cool from our perspective. It doesn't happen all the time.
[Lado is briefly explaining the documents, which we've linked to above.]
We want to meet the needs of the most vulnerable. Some opportunities are time-limited and we don't get a do-over. City has other goals it has to balance, economic development, for example. Citywide goals need to be evaluated differently than community development goals.
The first goal: Produce affordable rental housing. The City has not prioritized the construction of affordable rentals until Southside development. What we're seeing from the data, we need to prioritize. Building that pipeline requires a lot of subsidies that requires using the 9 percent tax credits, and those are limited. City and DHA both draw on that tool. Focus on houses for people earning below 50% AMI.
Pursue smaller scale rental developments, leverage city owned land and engage institutional landowners.
Five year target is 300 affordable units, citywide, with a focus on priority neighborhoods for city investment, transit corridors and rapidly appreciating neighborhoods.
[Councilwoman Cora Cole-McFadden and Mayor Bill Bell have to head to the Hillary Clinton campaign appearance.]
Second goal: Homeless housing and low-income housing often receive different funding sources, can get complicated. Durham includes homeless services and housing in same department; that's good. City should support rapid rehousing, increase humber of high-risk households served, put formerly homeless households close to support services.
What does it mean to serve homeless? It can mean the people most easily served instead of the people who need the services the most.
Third goal: Preservation.
Identify areas most at-risk and/or serve most vulnerable populations. Work with the owners to retain affordability: tax credits, for example. Rehab homes with extension of affordability period, sell to mission-driven owners, city could purchase "market affordable" properties. The majority of affordable rental housing isn't income-restricted, but happens to be renting for affordable prices. Maybe the city could purchase apartment complexes if the property is appropriate, using a tax credit.
We heard loud and clear the price increases in a lot of neighborhoods. Loss of long-term affordability. How do you ensure those neighborhoods have a mix of incomes? There are already low-income homeowners in these neighborhoods? How do we keep those owners in their homes? It's one of the most challenging areas in the housing field. It's very labor intensive, expensive, unit by unit. We're suggesting 50 affordable homes created and 50 owner-occupied homes rehabbed over the next five years.
Target neighborhoods for city investment, transit corridors, rapidly appreciating neighborhoods.
People aren't using tools that are available to them as well.
Fifth goal: Expanding home ownership citywide: Focus on households under 80% of AMI. Need downpayment and closing cost assistance, minor repair program, increased use of existing property tax relief programs. Over the next five years, target would be 50 homeownership opportunities, 150 minor repairs, increased participation in property tax relief programs. This would apply citywide.
Sixth goal: Finish the Southside redevelopment. Complete remaining phases with appropriate adjustments to reflect changing market conditions. Multifamily rental development using 9% tax credits. Homeownership with long-term affordability restrictions.
No one could have predicted the market interest in this project.
Seventh goal: Stabilize existing low-income households in Northeast Central Durham which are at-risk of displacement. There are a lot of pressures at work in NECD, a lot of upward price pressure, Angier, Driver, Alston, that is already creating the concern and anxiety around displacement.
City should take on a neighborhood stabilization role, unlike the Southside, where it made the deal happen. Here the city will provide a forum to develop some agreed-upon goals for the neighborhood. Residents and other stakeholders included.
Five-year city subsidies needs: $31.2 million to $47.8 million dollars. The financial shortfall to meet these needs ranges form $6.7 million to $21.3 million. Not achievable with current resources; prioritization will be necessary.
There were four city wide goals: increase resources for affordable housing to meet the goals. This can be a housing bond or an increase in the Dedicated Housing Fund. The federal funds are decreasing, so more local resources will be necessary. AS you think about increasing resources, they should be tied to a set of goals, accountable to the residents of Durham.
I can't overstate how significant DHA is as a partner. Well over 90% of available units or vouchers serving very low income households are managed through the housing authority. It's undergoing a RAD conversion, it can redevelop sites at a higher-density. [We'll explain RAD later, but it involves semi-privatization of affordable housing.]
Build an inclusive downtown: Promote redevelopment in the eastern half of downtown to promote a unified downtown area. Leverage city-owned properties and engage other property owners, such as the county, churches. Convene stakeholders to develop a vision and strategy. There are a lot of pieces at play. We can activate the public-owned property for a vibrant part of downtown with a mix of incomes. It's a long term plan but the clock is ticking. DHA (Oldham Towers) will have a role.
Consider an enhanced density bonus: Trying to figure out is there a way before we rezone to higher density to create a mechanism that access to that higher density has an affordable housing component. A city can offer incentives (but not require them). You have a density bonus and it doesn't work very well.
Moffitt: You're being kind.
Lady: The nation is littered with density bonuses that don't work. They have to be so economically attractive to incent a developer to get out of their lane and do something that is risky. Set the base density lower than what it is now for stick construction (that's essentially a wood frame, which restricts buildings to five stories unless materials are concrete and steel).
If the density is something people already want, then it doesn't work. Set a lower density and give the developer higher density in return for affordable housing. Will it work? Not sure. Should there be commercial restrictions too? We should figure it out sooner than later. Get units at the high end of the affordable spectrum, above 60% AMI. Not the biggest area of need right now, but some day will be.
3:21 Reginald Johnson: our plan is to have interaction with Council to get priorities and feedback, but to put it out for community feedback to weigh in. Department of Community Development will come back for Phase II and meet the goals.
J. Johnson: I'm so glad we hired you.
Moffitt: Restructuring the department is between you and manager, right Reginald?
R. Johnson: Not just that, but the goals we're trying to reach. We might need to reconfigure ourselves to achieve those outcomes. We need to focus on the goals more than restructuring. This won't coincide within budget cycle.
Reece: I don't want to say what I'm about to say but it's important. This is a fantastic presentation. You've given us options that are achievable, and furthers the goal of keeping housing affordable for families. The fundamental problem we face and limitations we have: 15,000 households, primarily renters, pay more than 50% of income on housing. The number of severely cost-burdened households is not going to decrease. We need to fund the goals or some version of them in as vigorous a manner as possible. We need to be realistic about affordability in Durham, and our ability to put resources behind it. Expecting us to reduce that cost-burdened population is not a realistic goal. We're going to need other partners, HUD, county, state. The city is going to play a bigger part than other cities do in this country but we have to.
Lado: I agree. I would add on, this isn't a problem we can house our way out of. The problem of persistent, deep entrenched poverty. Housing is part of the solution but not the only solution. The challenge for the city and all cities is figuring out how you pull enough threads: education, jobs, housing --and measurably impact people's lives. It's as much an income problem as a housing problem.
You get the biggest bang for the buck when you concentrate activities in certain areas. Preserving affordability in certain neighborhoods rather than citywide. Hard thing to say because some areas don't get served.
Davis: Are there models of small groups of people forming co-ops not to buy homes to flip, but to be able to have an altruistic view, 10 people pool resources to buy a home for a low-income family to eventually buy it?
Lado: Is there a role for individual investorship? Not familiar with a model. But faith communities often band together try to stabilize, mentor families, temporarily house families. There have been examples of institutions trying to purchase mortgages (mission driven institutions) and prevent people from being foreclosed upon.
Schewel: Thanks Reginald Johnson and Keith Chadwell for budgeting money for the consultant. You said to develop new rental and for the DHA to redevelop, both will need 9% tax credits. But you also talked about getting two of those a year. How realistic is that?
Lado: I'm being optimistic that if we can submit applications --one the rehab and one new construction --then they aren't judged against each other. You have to lay a lot of groundwork. The state is under a consent agreement with the Department of Justice called the Olmsted agreement saying it must create 3,000 homes for people with disabilities. State has fallen short of that goal. These people want to live in urban areas. My hope for the two 9% tax credits [is based in part on that.]
Schewel: Talking about Briar Green, approved earlier in the meeting. Are there ways the city can act to incentivize more of that?
Lado: The deal is very unusual. It is one of the few companies out there who consistently do 4% tax credit construction for affordable housing. 4% is usually the rehab credit; they are always available. If you could drive the bus down that lane, it would be awesome. They're able to command very good pricing all the way through. They max the 60% AMI rent. You could incent it, but most of what you build will be 60% AMI [not very low-income].
Schewel: Is there another 24 acres we should be thinking about for similar projects?
Lado: You do. The more obvious 4% strategy is the acquisition of existing privately owned apartment buildings. This is more of a suburban strategy, not an urban, where you have to have low construction costs. The City of Raleigh is using a city subsidy to make up the gap between 4% and 9% and providing $50K per unit to do that.
Schewel: Is capacity building anything more than staff?
Lado: Yes, continuum of care is very segmented, and it's difficult to manage the federal funding because so many strings attached. They're being pushed by HUD to serve the highest barrier households. There are fewer of them, and you lose funding if you don't use the money.
[A Unified HUD agency between DHA and City Community Development might help.] Rental housing will be a bigger priority. The agency will be a convener, a different way of engaging. The department might need the same number of people, but doing different things.
Schewel: The capacity of the DHA on the voucher side. We haven't been able to use vouchers because landlords aren't taking them. A lot of concern about the ability of DHA to effectively administer the program because of understaffing on that program. We have 250 vouchers outstanding all of the time--people have them but can't find a landlord to take them. Do you have anything to offer on that?
Lado: What are the internal processing problems within the agency? What is the market problem? That's only going to get worse as landlords don't want to take vouchers. We need to learn about other places that support tenants and landlords, that build a property manager network with support systems in place [to make sure at-risk tenants are responsible.]
The city should look to partner with developers who are committed to Durham and long-term affordability. They can be different players, both nonprofit and for-profit. We don't have that right now. You don't have it because rental housing hasn't been a priority in Durham on a tax credit level, so no one developed it. We're a relatively small city, hard for a developer to stay alive on that level. Long-term DHA could get through its RAD process and be a developer partner.
Schewel: Talking about giving mini-grants to people whose property tax valuations have gone up significantly.
Lado: I have a lot of reservations about this as a strategy. It's unclear to what extent we have a problem. It's not just how many people whose property taxes have increased, but how many are housing cost-burdened by it. This isn't going away as an issue. If we do a mini-grants program now? Do we do it every time there is a valuation increase? We're not fixing the problem, just creating a draw on the city's budget. I'd rather focus weatherization funding and reduce energy bills long-term.
It has the makings of an administrative nightmare. Your costs of administration often equal the cost of the grant. It seems simple, but then you get into complexities. A property owner who meets the requirements. OK, we'll give them the grant. What's the household income? Have to certify everyone in the household. Are we giving it to them because of the increase or are they housing cost-burdened? Is it for people who owner their property outright and pay only property taxes? And what happens when the money goes away?
Lado: If you look at housing authorities and cities — their relationships —this could be more of an overlap of board structure. There can be be rules, three seats allocated to city and others to agency, to create an intersection, a shared set of goals. Least common is the community development department and housing authority are the same. Different boards, same department.
[Discussion of land banking, an important tool of private, but not public, financing already used by Duke U. and Self-Help in Walltown. Lado says it's a great tool.]
Lado: Turning the direction of community development and its funding priorities. In addition to the RAD, there is a need to prioritize the DHA/city relationship, especially in light of a new executive director. [DHA CEO Dallas Parks is retiring in June.]
Davis: The Olmsted decision, could other people stand in —guarantors — for someone who can't get a house, like those with criminal background. Would this allow for a guarantor?
Lado: This mostly applies to people with disabilities, they have very low-income. But the other class of people you're talking about, I can see that working if community organizations are committed to making it happen.
4:14 p.m. The presentation is finished. Start reading!
Thank you for taking and sharing such detailed notes!
Posted by: Joyce | March 11, 2016 at 09:10 AM
"This is 200 units for 30 percent to 60 percent AMI built by a private developer using a 4 percent tax credit. This is a tremendous win."
500 Danube Ln has no bus service currently. Since it's at the edge of the city, any route that served it would either have to turn around there (and thus abandon its current turnaround) or make a time-consuming deviation that slows down all the other customers.
If residents require bus service, this could end up costing the city tens or hundreds of thousands of dollars per year in bus operating costs, and/or require cutting service elsewhere. That *may* still be a cost savings compared to other ways of obtaining 200 units, but I hope the city considers this in the transit budget when those apartments open.
Posted by: Matthew | March 11, 2016 at 10:23 AM
@Matthew: Google Maps shows this property to be at the corner of Danube and Hebron. (Google Maps also shows that that is the 4000 block of Danube, so caveat on garbage in/garbage out still applies.)
If that is accurate, then it looks like it's a 0.4 mile to a 0.7 mile walk to the Route 9B stop at the edge of Independence Park? Assuming, of course, sidewalks are present, which one should never assume. Regardless, seems like looking at and extension of that route and/or feasibility of walking that distance is worthwhile.
Posted by: Kevin Davis | March 14, 2016 at 09:32 AM
@Kevin The 9B is a very long route. I don't know if extending it would work. It might be possible to extend it to Technology Drive but all the way to Hebron seems like it would kill on-time performance. I ride the 9B frequently, although not the northern end of the route, and on-time performance seems shaky.
Posted by: Jeff Bakalchuck | March 14, 2016 at 01:30 PM