Council of the District of Columbia s3

C O U N C I L O F T H E D I S T R I C T O F C O L U M B I A C O M M I T T E E O N E C O N O M I C D E V E L O P M E N T D R A F T C O M M I T T E E R E P O R T 1350 Pennsylvania Avenue, NW, Washington, DC 20004

TO: All Councilmembers

FROM: Muriel Bowser, Chairperson Committee on Economic Development

DATE: July 8, 2014

SUBJECT: Report on Bill 20-594 “Disposition of District Land for Affordable Housing Amendment Act of 2014”

The Committee on Economic Development, to which Bill 20-594, “Disposition of District Land for Affordable Housing Amendment Act of 2014” was referred, reports favorably thereon and recommends approval by the Council.

CONTENTS

I.Background And Need……………………………………………….…...………….……..1 II.Legislative Chronology……………………………………………………………………...9 III.Position of the Executive…………………………………………………………………....9 IV.Comments of Advisory Neighborhood Commissions…………..………………….…10 V.Summary of Testimony.……………………………………………………………..…….10 VI.Impact On Existing Law…………………..…………………….………………………....12 VII.Fiscal Impact………………………………………………………………………………...13 VIII.Section-By-Section Analysis………………..…..………………………………………….13 IX.Committee Action…………………...…………………………………………………..…14 X.Attachments..……………………………………………………………………………….14

I . B A C K G R O U N D A N D N E E D

On Tuesday, December 3, 2013, B20-594 the “Disposition of District Land for Affordable Housing Amendment Act of 2013” was introduced by Councilmembers McDuffie, Bowser, Graham, and Bonds, and referred to the Committee on Economic Development.

1 Need for Affordable Housing:

This legislation stems from the District’s need to address the critical shortage of affordable housing that must be addressed to close the wealth gap, end homelessness, and sustain a growing economy to the benefit of all residents. 1-in-5 District households—over 50,000 families—have a severe housing burden, meaning they spend at least half their income on housing. There is a waiting list of 70,000 people who want public housing, and 8,000 existing units that are in critical need of renovation or replacement. The District also has 7,750 homeless families in the District, which is up 13% from last year.

With this need in mind, the District has therefore set a goal of creating 10,000 new affordable units by 2020 and is well on its way to meeting that goal ahead of schedule thanks to considerable funding increase in recent years for the Housing Production Trust Fund (HPTF) administered by the Department of Housing and Community Development (DHCD). However, more can and must be done to address the crisis.

How the Bill Works:

B20-594 establishes affordable housing set-aside requirements when District-owned land is being disposed for the development of multi-family residential projects with 10 or more units.

A 30% affordable housing set-aside is required for projects that qualify as transit- oriented development, and a 20% set aside for all other projects. This is because low- and moderate-income households that would qualify for affordable units produced under this new requirement also tend to be more reliant on public transit. Secondly, land near public transit is generally more valuable, providing developers with greater profit margins, some of which can be put towards subsidizing affordable units.

B20-594 defines affordability as a 25% set-aside for households earning up to 30% of the Area Median Income (AMI) and 75% of units for households earning up to 50% of AMI for the development of rental units. For ownership units, affordability is defined as a set-aside of 50% of units for households earning up to 50% of AMI, and 50% of units for households earning up to 80% of AMI. These numbers are comparable to the requirements of the District’s Inclusionary Zoning (IZ) program.1 It is worth noting that IZ units would also count towards the units required under B20-594 for public dispositions. The breakdown between rental and ownership units is justified by the fact that the latter are generally financially feasible for more moderate- income households than rental units for which low- and extremely low-income households qualify.

1 Inclusionary Zoning Implementation Amendment Act of 2006, effective March 14, 2007 (D.C. Law 16- 275; D.C. Official Code § 6-1041.07).

2 Waiver Provision:

The Committee acknowledges the executive’s concern that this legislation may hinder the District’s flexibility in developing public lands to their highest and best use, thus reducing revenue from the sale of public lands and future property taxes. That said, the District has a great need for affordable housing and should be willing to subsidize it through a lower return on the sale of District lands. The Deputy Mayor for Planning and Economic Development deserves credit for achieving a 30% affordability goal on the units developed on District land since 2011. But, codifying a portfolio-wide set-aside requirement or allowing developers to build affordable units offsite would only aggravate the problems of gentrification and displacement with which the District is already grappling.

Further, projects where such an affordable housing set aside is simply not feasible or in the District’s best interest, B20-594 allows for the Mayor to waive set-aside requirements when the Chief Financial Officer (CFO) certifies that it would not be economically feasible to comply. But, the developer must still make every effort, as verified by the CFO, to maximize the number of affordable units produced given the financial constraints of a particular project.

It is also briefly worth noting that the homeless shelter located at 425 2nd Street, NW, cannot be exempted from this requirement through the waiver provision unless the revenues from the sale of this land are used exclusively to build a new shelter to house homeless populations.

Conclusion:

The District has made considerable strides in recent years to improve affordable housing production for residents, including through greater funding of the Trust Fund or implementation of the Inclusionary Zoning program. B20-594 provides one more tool in that arsenal that more effectively leverages the District’s public land holdings and the private sectors’ financing and expertise in housing development. The Committee therefore recommends its adoption.

3 II. LEGISLATIVE CHRONOLOGY

December 3, 2013 Bill 20-594, “Disposition of District Land for Affordable Housing Amendment Act of 2013,” is introduced by Councilmembers McDuffie, Bowser, Graham, and Bonds, co-sponsored by Councilmembers Alexander, Cheh, Grosso, and Orange, and referred to the Committee on Economic Development.

December 6, 2013 Notice of Intent to act on Bill 20-594 is published in the District of Columbia Register.

April 25, 2014 Notice of May 29, 2014 public hearing on B20-594 is published in the District of Columbia Register.

May 29, 2014 The Committee on Economic Development holds a public hearing on Bill 20-594.

July 8, 2014 The Committee on Economic Development marks-up Bill 20-594 and adopts the Committee’s report.

III. POSITION OF THE EXECUTIVE

Victor Hoskins, Deputy Mayor for Planning and Economic Development, expressed concern that B20-594 restricted the District’s ability to develop public lands to their highest and best use. He noted that the District had achieved a 30% affordability set-aside goal throughout all projects in their portfolio since 2011. If the Council were to proceed with the legislation, Deputy Mayor Hoskins recommended that the set-aside requirement be made portfolio-wide.

IV. COMMENTS OF ADVISORY NEIGHBORHOOD COMMISSIONS

The Committee received no comments from any Advisory Neighborhood Commissions.

V. SUMMARY OF TESTIMONY

The Committee on Economic Development held a hearing on Bill 20-594 on May 29, 2014. The testimony of witnesses who submitted written statements is available as Attachment 2 to this report. Video from the hearing is also available at http://dccouncil.us/granicus/archive/.

4 VI. IMPACT ON EXISTING LAW

B20-594 amends Section 1 of An Act Authorizing the sale of certain real estate in the District of Columbia no longer required for public purposes, approved August 5, 1939 (53 Stat. 1211; D.C. Official Code § 10-801) to establish affordable housing set-aside requirements when public lands are disposed of and to require that specific documents accompany a proposed resolution for land disposition when transmitted to the Council.

VII. FISCAL IMPACT

A fiscal impact statement, prepared by the Chief Financial Officer, is attached as Attachment 3.

VIII. SECTION-BY-SECTION ANALYSIS

Section 1: Long title.

Section 2: Amends Section 1 of An Act Authorizing the sale of certain real estate in the District of Columbia no longer required for public purposes, approved August 5, 1939 (53 Stat. 1211; D.C. Official Code § 10-801) to establish affordable housing set-aside requirements when public lands are disposed of and to require that specific documents accompany a proposed resolution for land disposition when transmitted to the Council.

Section 3: Adopts the fiscal impact statement in the committee report.

Section 4: Establishes the effective date of the bill.

IX. COMMITTEE ACTION

The Committee on Economic Development met on July 8, 2014 to consider Bill 20-594, the “Disposition of District Land for Affordable Housing Amendment Act of 2013.” Committee Chairperson Muriel Bowser called the meeting to order with Councilmembers ______of the Committee present and offered remarks on the Act.

Chairperson Bowser then moved Bill 20-594 with leave for staff to make technical and conforming amendments.

5 Committee members voting in favor: Bowser, ______Committee members voting against: None Committee members voting present: None Committee members absent: None

Chairperson Bowser then moved the Committee Report of Bill 20-594.

Committee members voting in favor: Bowser, ______Committee members voting against: None Committee members voting present: None Committee members absent: None

X. ATTACHMENTS

1. Bill 20-594 as introduced.

2. Written testimony.

3. Fiscal impact statement.

4. Legal sufficiency determination.

5. Comparative Print for Bill 20-594.

6. Committee Print for Bill 20-594.