Monthly Archives: June, 2018

Is Charlottesville ready for Collins’ Affordable Housing “Marshall Plan”?

By Neil Williamson, President

Former Charlottesville City Council candidate and Public Housing Advocate Brandon Collins is energetic and passionate, but he is rarely described as optimistic or even jubilant.

Late in Monday night’s (6/18) City Council meeting he was both as he called for Charlottesville to give up on developer incentives that produce precious few affordable housing units and instead launch a “Marshall Plan” for affordable housing to meet the current shortfall of 3,318 units.

Please let me explain.

Council received two important, somewhat disconcerting,  housing reports.  Prepared by Partners for Economic Solutions, the housing needs assessment was blunt in its analysis of current and projected market conditions.  It concluded that the city had a current need for 3,318 affordable units, growing to 4,020 units in 2040. The reasons for these conditions were summarized:

The forces creating this affordability crisis and impeding fair and affordable housing include:

• The city’s constrained supply of developable land supply limits the potential for new residential construction.

• More than 200 year-round housing units have been diverted to short-term transient rentals through Airbnb and other leasing services.

• High land and development costs limit the market’s ability to build new units that could rent at levels affordable to households at less than 60 to 80 percent of AMI.

• Federal funding for construction of new affordable housing and for Housing Choice Vouchers has not kept pace with the growing need. Public housing funding to the Charlottesville Redevelopment and Housing Authority includes almost no support for renovating existing public housing.

• Zoning policies such as minimum lot sizes, height restrictions, setback requirements and maximum residential densities can prevent more intensive development of the city’s limited land resources. Community resistance to change leads to policies that prioritize preserving existing single-family neighborhoods over the development of new affordable housing.

• The lack of predictability in the City’s development approval process has a chilling effect on developers considering projects that require City Council and Planning Commission approval. A last-minute decision can scuttle or significantly delay projects in which the developer has proceeded in good faith, investing hundreds of thousands of dollars.

• The approval process is expensive and time-consuming, adding directly to the total development costs and ultimate housing prices.

• The tight housing market allows landlords to discriminate against low-income households with limited financial resources, spotty or no credit histories, arrest records, children, housing choice vouchers or other perceived risk factors.

• Housing affordability for many households is an income problem. Low levels of education, limited skills training, inadequate public transit and difficulty finding quality affordable child care can prevent individuals ability to reach financial self-sufficiency.

With this report in hand, the folks at Partners for Economic Solutions examined the height bonuses currently under consideration in both the Strategic Investment Area and the Comprehensive Plan.  The concept explored was how many units could be provided and at what level of affordability.

The very detailed report included carrying costs, a 7% profit margin as well as other development costs.  This profit margin was explained as necessary or the project would not gain investors – they would instead put their money into other projects with a better return on investment.

Development costs are impacted by several factors, but most significant are the style of construction and the type of parking. Height has a direct impact on costs with lower-cost wood-frame construction limited to four stories. A fifth story can be added if the first floor is constructed in concrete rather than wood. Above five stories, most apartment buildings are constructed on concrete or steel and concrete at a much higher cost per square foot.

Parking is a major cost factor, averaging $5,000 per surface space, $20,000 per space in an above-ground parking structure and $32,000 per space in a below-ground structure. Surface parking is the least expensive option, by far, but it consumes a great deal of land.

The model assumed up to four stories of development would be served by surface parking with taller buildings requiring structured parking.

The analysis also suggests a limited ability for height bonuses to secure committed affordable housing units. Generally speaking, Charlottesville rents do not support the construction of mid-to high-rise residential buildings with the exception of student housing adjacent to the University of Virginia grounds, high-end condominiums and possible niche products such as luxury senior housing. Five-story structures are feasible only at the higher rents achievable in Downtown neighborhoods.

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In conclusion, the report found that if density is the only incentive, based on market conditions, it does not work.   Providing perhaps 15% of the incremental increase in units @ 60% AMI or 10% of the incremental increase @ 50% AMI.   The consultant went so far as to say, “some of the Planning Commission concepts have no value to the developer; it is NOT an incentive”.

After this well presented and documented report was presented, Councilor Kathy Galvin said,

This would depress a hyena

Mayor Nikuyah Walker said, “This is bad”, and continued to express concern that the economic analysis included a profit margin for the developer.  She contended that until we change that conversation we are never going to fix this.  She said that if you are willing to house just a few people at a time – that’s not a direction I support.

Councilor Mike Signer called out Albemarle County’s role in the housing affordability issue.  He indicated the politics of increasing density is very tough highlighting his affirmative vote in the 3-2 decision to rezone 10th and Jefferson.  He also pushed back on the contention that a profit margin did not matter.

Vice Mayor Heather Hill called out the Air BnB taking up some of the Accessory Dwelling Units are being pulled out of affordable housing stock.

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Brandon Collins

At the end of the meeting, Collins presented a different perspective on the reports.  He admonished City Council to think big.  If they are really serious about fixing the housing affordability issue, they should stop depending on developers; they should do it themselves with their existing Charlottesville Redevelopment and Housing Authority.  Collins’ “Marshall Plan” might include $140 million dollar bond issuance dedicated simply to the creation of new affordable units that will stay perpetually affordable. When pressed by Councilor Wes Bellamy how the city might pay for that debt service, Collins admitted he had not figured that out yet but thought it could be resolved.

Beyond the ironic title “Marshall Plan”, the Free Enterprise Forum has several questions.

  • If providing significant affordable units was not economically feasible with a 7% profit margin does the loss of that 7% make the economics work?
  • Considering the current political climate in Charlottesville, could a $140 million bond be supported by the citizens?
  • Would this council support the tax increases needed to service the debt issuance?
  • Does addressing Affordable Housing head on start to address some of the other socioeconomic challenges in the City?
  • Could this program actually increase the demand for affordable housing?

As usual, we have more questions than answers.  Stay tuned.

Respectfully Submitted,

Neil Williamson, President

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Neil Williamson is the President of The Free Enterprise Forum, a public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa  and Nelson County.  For more information visit the website www.freeenterpriseforum.org

Photo Credit: TV10

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Albemarle Rushes Rural Rights Reduction

imageBy. Neil Williamson, President

Do commercial uses fit in Albemarle County’s rural areas?

Looking at the photo to the right of Earlysville General Store, I would say not only do they fit, such uses (and the owners, employees and patrons) are the very fabric of the community for generations.

But such community supportive land uses are now in jeopardy.

Please let me explain.

On Wednesday night (6/13), the Albemarle Board of Supervisors will be considering a zoning text amendment (ZTA201800002) that would significantly reduce the number of uses allowed on property that is zoned commercial in the rural areas.

This proposal has sped through the County’s approval process faster than any in recent memory.  Their “need for speed” is not clear and an e-mail requesting more information has not been returned.

Throughout this speedy process, there has been significant discussion regarding the impact of this land use change on property values.  In testimony before the Planning Commission several residents suggested the value could drop by up to 90%.  One speaker indicated that a potential real estate contract is in peril because of the proposed ZTA.

The concept of “takings” was discussed at the Planning Commission.  In the meeting minutes Deputy County Attorney John Blair explained the issue:

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Anecdotally, we have seen property values diminish with reduction in rights but it was not until we read a 2006 paper by Oregon State University professor William K Jaeger that we found empirical evidence of such property value deimmunization.  Jaeger’s research is very careful to paint a broad brush regarding property values but provides an interesting window on the comparison between regulated and unregulated land costs.

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In explaining this issue, Jaeger mentions the significant externalities involved in any real estate valuation:

Given the possibility of a price effect for both regulated and unregulated land due to the land-use regulation, it would be presumptuous to attribute the entire price differential between the two markets to a reduction in property values for the regulated lands. To use an analogy, if you tie your boat to a coastal pier and then, after a period of hours, notice that the level of the boat is now below the level of the pier, you are unlikely to ask: Did the pier move up or did the boat move down? You will immediately understand that piers don’t move up, but that an outgoing tide could have easily caused the boat to fall.

Considering the significant number of variables in any real estate transaction, and the Supreme Court’s decision regarding loss of up to 90% dictating a taking, I believe this loss of property rights would not meet the legal definition of a taking.

Even if it is legal is it right?

Albemarle County’s Rural Chapter of its comprehensive plan recognizes the need for commerce in the rural areas.  Specifically calling for such communities to develop:

Crossroads communities that provide support services and opportunities to engage in community life;

Why then are these ~80 rural properties being effectively downzoned so quickly?

We do not know specifically but here is what we do know:

1.  Albemarle’s Board of Supervisors closed meeting earlier this summer one topic announced to be discussed was a Zoning Text Amendment and ongoing litigation.

2.  According to several sources, Albemarle has a court case on June 22nd regarding a rural area land use decision

3.  The Planning Commission was clearly pushed by the Supervisors to have this ready for the June 13th BOS meeting

4.  An e-mail asking the direct question of Albemarle County staff went unanswered last week.

If the Albemarle Board of Supervisors is pushing this agenda due to a specific court case, the Free Enterprise Forum believes the public has a right to know.

It’s a shame a bad law (400 gallons of water use per acre per day) is now being replaced by one that is even worse.

We continue to believe a thoughtful discussion of performance standards could produce a significantly improved ordinance that could more properly balance property rights and the community goals.

But that would take time, something seemingly the Supervisors don’t have.

Respectfully submitted,

Neil Williamson

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Neil Williamson is the President of The Free Enterprise Forum, a public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa  and Nelson County.  For more information visit the website www.freeenterpriseforum.org

Photo Credit: Earlysville General Store Facebook Page

Greene County Planning Commission Lowers Proffers

By. Brent Wilson, Field Officer

The Greene County Planning Commission  heard a rezoning request at their May meeting to remove or reduce the cash proffer required for a Planned Unit Development (PUD) originally granted in 2008. For the last ten years, Kinvara Properties, LLC has tried to develop approximately 33 acres fronting Route 29 southbound just north of the Food Lion plaza.

A cash proffer is a “voluntary” financial contribution the applicant makes per unit designed to offset a project’s fiscal impacts to the locality.  The Free Enterprise Forum has written extensively about proffers including the 2013 white paper “Contradictory Consequences“.

In 2016, Virginia’s General Assembly passed significant proffer reform.  The legislation required that any proffer provided must be answering a specific demand created by the project.  Most localities (including Greene) have not rewritten their zoning code to reflect these changes.

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Lily Ridge Apartments

A recent Greene County project, Lily Ridge Apartments, did pay the $9,000 per unit cash proffer for those units developed above the by right number of units (prior to the rezoning).

However, Kinvara Properties, represented by Attorney Butch Davies from Madison County, argued that their PUD will be more dense and have only 2 bedroom units therefore creating less demand on the school system – one of the major drivers of the cash proffer policy.

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Butch Davies

Davies explained that Kinvara has had several clients interested in the property but they have said that the size of the proffer makes the project economically unfeasible. In addition, the developer has already made expenditures for water and sewer hookups and road improvements. Chairman Jay Willer pointed out that these items, while having value to the county, are not part of the proffer calculation.

Davies offered $1,200 per unit in cash proffers with the logic being that the change in the law starting in July, 2018 will require proffers to be specific in the items related to the project. Davies referred to several other projects where proffers in the $1,200 range had been accepted by Greene County.

The hearing shifted to comments from the public, which there were none. Planner Stephanie Golon pointed out that the rezoning would allow 50 residential units to be built and she estimated that the number of students would range between Lily Ridge, 27 students or .58 students per unit and Terrace Greene, 30 students or .11 students per unit.

If the Lily Ridge ratio is used then the development would have approximately 29 students but Weldon Cooper Center for Public Policy data would only project 16 students. Commissioner Ron Williams pointed out that given the current proffer and that schools are the main contributor to the costs involved then the amount should be approximately $4,500 vs. the $1,200 offered by the developer. Williams asked how the $1,200 was calculated and Davies answered that it is based on the smaller number of students.

Willer brought up the fact that Kinvara Properties accepted the original proffer agreement  and he had a difficult time lowering the proffer.  Davies again stated that potential sales to developers have fallen through with the current proffer and he believes a reduction will allow the sale to be completed and the development to go forward.

Williams stated that he thinks the development is a good fit for the area and he isn’t sure when the $9,000 proffer would become affordable. Inversely, the $1,200 proposed proffer lacks supporting detail as how it was calculated. But the county needs commercial development and he believes more residents in Greene County will attract more businesses.

While Willer agreed that more people attract businesses, he has a difficult time in revising an agreement that the two parties made and the lowering of the proffer would cost Greene County $390,000 in proffers when the development is completed.

Williams made a motion to recommend approval of a revised cash proffer of  $1,200 per unit and it was approved 3-1, with Willer voting against it and one commissioner absent. The rezoning application now goes to the Board of Supervisors for their decision with the recommendation of approval from the Planning Commission.

The reduction of the proffer in this specific case continues to set a precedent for a lower proffer. The original proffer amount was set over 10 years and should be updated with current cost and the impact of the 2016 proffer law. Another option would be to have separate proffers for individual homes, townhomes, condos, etc. and possibly down to the number of bedrooms in each unit. These are the issues that have been discussed in past meetings.

Definitely future requests from developers will point to the $1,200 amount, if approved by the Board of Supervisors, as a basis to set (or lower) their cash proffer.

An argument could be made that since lower proffers attract more developers wouldn’t doing away with proffers altogether attract the most developers?

Is 0% of the current proffer more valuable than 100% of $1,200?

Or is more residential development worth the upside of more driving potential commercial development and increased tax revenue?

It will be interesting to see how the Greene County Board of Supervisors deal with this application and if they ever get around to adjusting their cash proffer policy to be congruent with state code.

Brent Wilson is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization.  The Free Enterprise Forum Field Officer program is funded by a generous grant from the Charlottesville Area Association of REALTORS® (CAAR) and by readers like you.  To support this important work please donate online at http://www.freeenterpriseforum.org