CENTER CITY HOUSING STUDY: HOUSING DEVELOPMENT STRATEGY

CITY OF REDMOND, OR

MAY 20134

Prepared For: CITY OF REDMOND, OREGON

By: JOHNSON REID, LLC

May 2014

TABLE OF CONTENTS

I. INTRODUCTION ...... 3

II. PROCESS ...... 4

III. TARGETS FOR HOUSING PRODUCTION ...... 5

IV. IDENTIFICATION OF NEIGHBORHOODS ...... 6

V. DISTRICT-WIDE HOUSING STRATEGY ...... 10

1. Establish a Housing Development Assistance Program ...... 12

2. Support Development of Accessory Dwelling Units and Duplexes ...... 13

3. Reduce Parking Standards for Some Multi-Family and Accessory Units .... 14

4. Park and Sidewalk Improvements ...... 14

5. Marketing ...... 17

6. Financing for Pilot Project(s) ...... 18

APPENDICES

A. INITIAL MARKET FINDINGS

B. DEVELOPMENT SITES TECHNICAL MEMO

C. DEVELOPMENT FEASIBILITY TECHNICAL MEMO

D. TELEPHONE SURVEY RESULTS

E. SUMMARY OF RESIDENT AND DEVELOPMENT FOCUS GROUPS

F. OPPORTUNITIES & BARRIERS MEMO

JOHNSON REID, LLC 319 SW Washington Street #1020 Portland, Oregon 97204

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CONTENTS OF APPENDICES

APPENDIX A. INITIAL MARKET FINDINGS I. HOUSING MARKET CONDITIONS II. HOUSING DEMAND FORECAST III. STUDY AREA CONDITIONS

APPENDIX B. DEVELOPMENT SITES TECHNICAL MEMO I. STUDY AREA SUBMARKETS II. HOUSING REDEVELOPMENT FOCUS AREAS

APPENDIX C. DEVELOPMENT FEASIBILITY TECHNICAL MEMO I. FEASIBILITY MODEL MARKET VARIABLES II. REDEVELOPMENT MODEL SCHEMATIC III. DISTRICT-SPECIFIC VARIABLES IV. SHIFTING ENVIRONMENT OVER TIME V. CONCLUSIONS

APPENDIX D. TELEPHONE SURVEY RESULTS I. SUMMARY OF FINDINGS II. COMPARISON OF AGE-WEIGHTED AND UN-AGE-WEIGHTED SAMPLES III. PRELIMINARY CONCLUSIONS IV. RESPONSE DATA

APPENDIX E. SUMMARY OF RESIDENT AND DEVELOPMENT FOCUS GROUPS I. SUMMARY OF DISCUSSION II. RESIDENTIAL FOCUS GROUPS #1 & #2 III. DEVELOPER AND REAL ESTATE PROFESSIONAL FOCUS GROUP

APPENDIX F. OPPORTUNITIES & BARRIERS MEMO I. GENERAL OPPORTUNITIES AND BARRIERS II. PUBLIC SENTIMENTS III. DEVELOPER AND PROFESSIONAL FEEDBACK IV. SUBAREA OPPORTUNITIES AND BARRIERS

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I. INTRODUCTION

The Center City Housing Strategy provides guidance to the City of Redmond and the Urban Renewal Agency in strengthening the neighborhoods and attracting new residents and private housing investment to downtown Redmond.

This Strategy is one component of a larger Central City Housing Study. The Study was undertaken to aid the City and Urban Renewal Agency in achieving the following objectives:

1) Eliminate blighted conditions including vacant and underutilized parcels, buildings experiencing disinvestment, and deteriorated neighborhoods. 2) Provide residents increased options to live in areas where they can conveniently access services with reduced reliance on private automobiles. 3) Provide housing products that meet the needs of well represented as well as underrepresented members of the community including families, work force and retirees. 4) Provide the area’s pedestrian oriented central business district an enhanced customer base—thereby supporting a more vital and diverse central business core which can better serve and attract residents, employees, and visitors. 5) Foster higher density housing in areas of the community where it can be most efficiently served with utilities and infrastructure, including alternative modes of travel.

As discussed in this report and other Study documents, the main obstacles to housing development in the Study Area are:

. Achievable Pricing vs. Land Costs . Alternative Areas for Housing Production . Available Buildable Lands

No single action can alleviate all of these challenges completely. To be effective, the Center City Housing Strategy must help bridge viability gaps of project costs and funding, reinforce the Study Area as an attractive location relative to alternative locations, and encourage infill and redevelopment activities in addition to vacant-land development. To address these challenges, the Development Strategy includes the following components:

. Incentives to reduce the cost of privately initiated development. . Policies to encourage in-fill development . Public actions to encourage high quality development where it will yield the greatest public benefit. . Public infrastructure investments

It is important to remember that the housing market does not exist in isolation. The desirability of the central city relative to other housing options is directly linked to the non-residential amenities it can offer in close proximity, including shops and services, community events, civic functions, open space and the ability to walk and bike to these things rather than drive. The success of any housing strategy will rely on a holistic approach to all of these factors.

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II. PROCESS

The Center City Housing Strategy was initiated by the City of Redmond Urban Renewal Agency and prepared through an extensive process of outreach to residents and the home building community, and analysis of existing land use and market conditions.

Begun in the fall of 2012, the process involved many analytical steps leading up the preparation of this Housing Strategy. The Urban Renewal Agency, Technical Advisory Committee, focus groups and the consulting team worked together to assess the needs and opportunities for housing in Redmond’s Center City.

Interim steps included:

• Market Analysis: Analysis of the supply and demand, pricing levels, vacancy and other market conditions for housing in the Center City. • Site Analysis: Analysis of individual sub-areas and likely development sites for new housing. • Feasibility Analysis: Analysis of the feasibility of various housing types in the Center City based on current and projected rent levels and property values. • Telephone Survey: A survey of 400 respondents in the Redmond area regarding current housing and future needs to identify likely markets for new housing and housing preferences. • Resident Focus Groups: Two focus groups of Redmond residents to discuss perceptions of the Center City as a place to live, including feedback on specific subareas, opportunities and barriers to encouraging housing development. • Developer Focus Group: A discussion among the local development community on experience in the central Redmond market, perceptions of the area as a site for new housing development, and recommendations for the Housing Strategy to entice more development. • Opportunities and Barriers: Identification of opportunities and barriers to housing development in the future, based on the feedback gathered in the above steps, and meant to inform this Housing Strategy. (For more information on these interim steps, please refer to the appendices to this report.)

The Technical Advisory Committee was regularly briefed and provided input on these interim steps throughout the process.

The intensive process leading up to the Center City Housing Strategy has provided a firm foundation of data and analysis on which to build the recommendations found in this report.

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III. TARGETS FOR HOUSING PRODUCTION

This section discusses targets for housing production in the Study Area over the short (1-4 years), mid (5-10) and long terms (11-20). In projecting housing production, the following factors were taken into account:

. Housing production in the area will be driven by a mixture of private market forces and public interventions and policies to guide and encourage that market activity. At the end of the day, actors other than the City or Urban Renewal Agency will be supplying the large majority of new housing in the area. However, the public sector can participate through methods as described in this Strategy. . Between 1990 and 2010, it is estimated that roughly 4% of new residential units were built within the Study Area. There were roughly 7,100 residential units, both single- family and multi-family, permitted in Redmond in this time frame (Census), and an estimated 285 units built in the study area (GIS). . A large share of the units built in the Study Area was in the northeast corner of the area, where two detached subdivisions were built out in the 2000 to 2006 timeframe. It will be hard to duplicate this type of production in the Study Area which is largely built out and does not feature buildable tracts of this size any longer. . However, given the focus on public policies and financial tools for incentivizing new housing development in the area, JOHNSON REID believes that a higher target of 6% capture of new units within the Study Area would be an aggressive but appropriate goal. This benchmark is not a definite projection, but a target to aim for which reflects an acceleration of housing development in the area in response to the investment of financial and planning resources. . The Market Trends & Forecast report prepared in Phase I of this projects a need for 8,467 new units in Redmond over the next 20 years. This reflects a growth rate of 3.1% which is robust, but lower than the actual 5.4% annual growth experienced since 2000. 6% of this total new unit production would be 500 new units in the Study Area. The following table presents targets for housing production over the 20-year planning period. It assumes less direct intervention in the short term, with more direct intervention, incentives, and growing market momentum in the mid- to long term.

FIGURE 2.1: HOUSING PRODUCTION TARGETS, TIMELINE Short Term Mid-Term Long Term TOTAL (1 to 4 years) (5 to 10 years) (11 to 20 years) 75 units (15%) 175 units (35%) 250 units (50%) 500 units

. Multi-family . Continued multi-family . Infill and development1 development1 redevelopment of low . Some infill of accessory . Catalyst development value properties2 or small attached . Infill and some . Increased density projects redevelopment of low . Potential additional value properties2 catalyst development 1 Multi-family development will typically be 2-3 story apartments with surface parking. 2 In the mid- to long-term, infill and redevelopment should include adding additional units to properties which have one or few units.

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IV. IDENTIFICATION OF NEIGHBORHOODS

During the prior phases of this project the Study Area has been broken up into subareas based on geography and land use. Some of these subareas are better suited for housing development and redevelopment than others.

The following is a summary of findings on how best to match the subareas with appropriate housing policy interventions, based on the likelihood of effectiveness in encouraging new housing production over the 20-year study period. Please see the “Neighborhood and Site Identification” and “Opportunities and Barriers” reports for more detail and background on these findings.

FIGURE 3.1: HOUSING STUDY SUBAREAS

1 2

3

5 4

6

Source: City of Redmond, JOHNSON REID LLC

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Prioritization includes two factors: timeline for action/development, and the level of public involvement anticipated. The following table summarizes the projected timing and housing types for the neighborhoods shown above, followed by additional explanation. Specific interventions and strategy recommendations are discussed in the following sections of this report.

FIGURE 3.2: NEIGHBORHOOD DEVELOPMENT TIMELINE, AND PUBLIC INVOLVEMENT

Expected Public Neighborhood Likely Housing Type Involvement Time-Period

NEAR TERM

Medical District Garden-style apartments Low Short (1-4 years)

Midtown District Accessory dwellings, duplex, triplex Low Short (1-4 years)

MID-TERM

Downtown Townhomes, accessory dwellings, small apartments Medium Mid (5-10 years)

Downtown Denser multi-famly pilot project; High Mid (5-10 years) 2 - 3 story attached, mixed use, or cottage cluster

Midtown District Infill on larger lots, triplex, fourplex, cottage cluster Medium Mid (5-10 years)

LONG TERM

Downtown Greater density of townhomes, small apartments Medium Long (11-20)

Downtown Denser multi-famly pilot project; Medium-High Long (11-20) 3 - 4 story attached, with mixed use

Midtown (C2 portion) Garden-style apartments, townhome projects Low Long (11-20)

Eastside Accessory dwellings, duplex, triplex Low Long (11-20)

POOR HOUSING POTENTIAL

Northeast R5 Area Built out NA NA

Souther Commercial Commercial in character NA NA

Source: JOHNSON REID LLC * Levels of expected public involvement is ranked as follows: . Low: Financial involvement limited to proposed programs offered district wide such as SDC partial reimbursement. . Medium: Financial involvement such as direct loans made to qualifying privately initiated project. . High: Leadership or stimulation of targeted projects through site assembly and/or public private partnerships.

Highest Current or Near-term Potential

. JOHNSON REID projects that the southern section of the Medical District has the greatest potential for multi-family apartment development in the near-term. This area has large underdeveloped sites with high-density R5 zoning. Currently the market should support garden-style apartments with surface parking, and recent the increased production of rental units seen in major metro areas nationwide should spread to smaller markets over the next two to three years.

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Obstacles include the interests of the current commercial or light-industrial users and/or property owners.

The northern commercial-zoned areas of the Medical District similarly feature large development parcels which would be suitable for multi-family development. These areas are envisioned in the Master Plan to be largely geared towards medical services or business park users. Assisted-living facilities may be a secondary development opportunity which should be feasible now.

. Infill and accessory dwellings on large lots in the R5 section of the Midtown area are currently feasible. Infill might take the form of duplexes or triplexes, in flats or townhomes, on lots which currently house a single family home. In the current market, these are likely to be offered as rental units, but as the ownership market improves over the next few years partitioning and sale of the units becomes more likely. This development is likely to be lower density than that allowed in the R5 zone, involving adding one or two additional units where three or four might be allowed by zoning.

. These neighborhoods and development types are closest to being currently feasible and therefore should require the least direct intervention to accomplish. However, public policy can help to ensure or incent development in these areas to meet public goals such as increasing the number of units added, or make them attractive for development relative to residential zones outside the Study Area.

Mid-term Potential

Given that the neighborhoods and development types discussed above are closest to being feasible in the next few years with minimal public intervention, this category may be the highest priority for more direct public involvement, because the right strategies can trigger development which may not otherwise occur.

. Infill and redevelopment of housing in the Historic Downtown should be viable in the four- to five-year range, but is likely to need some public policy intervention to generate interest and make some development forms pencil out. This area offers the best mixed use “town center” amenity package to attract residents from traditional detached subdivision housing to the central city. Given higher land values and need to transition to attached housing types some incentives may be necessary to induce development. The Downtown is also the best candidate for a public/private catalyst development in the mid-term time period. The City ownership of two large parcels in the area may present a good opportunity for catalyst development. Feasible development forms could include attached townhomes, accessory dwelling units, or small apartment buildings. Denser development forms such as buildings of more than three stories, or vertical mixed use buildings, will require some growth in rents/sales pricing to become feasible. Rent escalation of 10%, or equivalent financial incentives such as the programs included in this Strategy, will help the feasibility of taller buildings (though still relying on surface parking.)

. More intensive infill and redevelopment of the R5 section of the Midtown area, such as townhomes or small multi-family projects, should become more viable over

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time bringing additional density than that seen in the near-term. Incentives or zoning and policy changes may be necessary to encourage this development. “Cottage” style developments with multiple smaller detached homes around a shared community space may also be feasible here, but are similarly unlikely to occur with some policy intervention or education of the market on this housing type.

. Continuing multi-family development in the southern portion of the Medical District.

Long-term Potential

. As housing development gains momentum in the area, there should be increased interest in infill and redevelopment projects which were previously infeasible, including larger projects and more attached housing types which bring more units to the area. The Downtown and Midtown areas should benefit from this momentum, while the Medical District also continues to build out along the lines envisioned in the Master Plan. The Downtown should see some larger multi-story housing structures of three to four stories. The more commercial (C2 zone) west side of the Midtown area should begin to see infill and redevelopment projects of 3 or more units, including larger three-story apartment projects with surface parking.

. Low-density redevelopment and infill in the Eastside subarea should occur in the long-term if development momentum picks up in other parts of the Study Area. Due to its separation from the city center by the highway and industrial uses, interest in this subarea will likely occur after housing development and new population has gained momentum in the Downtown Area and the effects are spreading beyond.

Poor Housing Development Potential

. The Northeast R5-zoned area has poor housing development potential because it is occupied by built-out residential subdivisions of relatively recent vintage. These properties won’t be good candidates for redevelopment for many decades.

. The South Commercial area is a poor target for housing development strategies because it is dominated by large commercial users. Small residential areas at the south end are built out, while the Glacier/Highland corridor is likely to become increasingly commercial in nature due to traffic volumes and nearby large retailers.

. It is unlikely that housing development types requiring structured parking below or above ground will become viable during the planning period due to the large expense of building such parking. It is possible that near the end of the planning period, Type V development over a concrete podium would become viable (this is generally three or four wood-frame stories on top of a concrete podium which has parking underneath at surface level). This type of development would require public subsidy, but the amount of such subsidy may become acceptably low towards the end of planning period to meet public goals. Rents and pricing would have to grow an estimated 40% - 50% beyond the rate of general inflation to make podium parking feasible ($1.70/s.f. for rentals; $175/s.f. for ownership units; in 2013 dollars).

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V. DISTRICT-WIDE HOUSING STRATEGY

The district-wide strategy is a series of steps the City and Urban Renewal Agency can take which would apply across the Study Area to incent housing development in general.

In generating new housing production, the Study Area faces the following main issues which a Center City Housing Strategy must try to alleviate:

. Pricing and Land Costs: The Study Area is characterized by relatively low rent and sales price levels for residential uses. Achievable market pricing in the area limits the range of viable development forms without intervention to relatively low density wood frame construction with surface parking. The cost/pricing ratio of new development has also been too low to induce a substantial level of redevelopment of underutilized parcels. While the existing uses may be of low value, they retain sufficient value to make them expensive to purchase simply for demolition and rebuilding.

. Limited Local Experience with Some Housing Types: The local market, including builders have limited experience with some housing types which may serve the City’s long term housing goals. Development types such as vertical mixed use, cottage clusters, townhomes and condos have limited presence in the local market. As a result local developers may be hesitant to develop new types of product, and residents may not be familiar with the full variety of housing options. During this process, some residents have expressed interest in denser housing forms in the Downtown area, but were unable to find such housing product on the market.

. Alternative Areas for Housing Production: Redmond has remaining lots and lands for the type of housing production the community has experienced in recent decades, mostly single-family detached housing. The Study Area will continue to be out- competed for new housing unless it offers an attractive value proposition, which may be a mixture of town center amenities (walkability, shops, services), new housing types which are rare outside the area, and good unit value for the price. The housing picture and the greater renewal of the infrastructure, business and community climate in the area are inextricably linked. They are dependent upon each other, but will also build on each other.

. Buildable Land Inventory: The area does not have a sizable inventory of large buildable parcels for new housing production. Most vacant or partially vacant parcels are interspersed throughout the area, with diverse ownership and existing land uses. Housing development in the area will have to take the form of infill and redevelopment in most cases.

No single action can alleviate all of these challenges completely, but steps can be taken to meet these challenges. To be effective, the Center City Housing Strategy must help bridge viability gaps of project costs and funding, reinforce the Study Area as an attractive location relative to alternative locations, and encourage infill and redevelopment activities in addition to vacant-land development.

The following is a list of strategic recommendations aimed at meeting these goals.

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RECOMMENDATIONS

The following figure summarizes recommended district-wide strategies, which are discussed in more detail below. These activities are anticipated to be funded out of the Housing Development Opportunity Fund which is planned to total $7,000,000.

FIGURE 4.1: DISTRICT-WIDE HOUSING DEVELOPMENT STRATEGIES

Funding Strategy Time-Period Recommendation

1 Establish a Housing Development Assistance Program SDC Partial Waiver Until funds depleted $800,000

2 Support Development of Accessory Dwelling Units and Duplexes Years 1 - 20 Staff time

3 Reduce Parking Standards for Some Multi-Family and Accessory Units Years 1 - 20 Staff time

4 Park and Sidewalk Improvements Years 6 - 10 $1,500,000

5 Marketing Years 1 - 20 Staff time

6 Financing for Pilot Project(s) Publically Initiated Projects $2,500,000 Option 1: Downtown Acquisition and Assembly Years 5 - 10 (first project) Years 10+ (additional) Option 2: Midtown Acquisition and Assembly Years 7 - 15

Financing for Private Projects As available $2,200,000

TOTAL FUNDING ESTIMATE, FIRST 10 YEARS: $7,000,000

Source: JOHNSON REID LLC

Figure 4.2 presents an estimated breakdown of when program expenditures might occur over the initial 10-year period. It is broken down into five-year funding periods to which reflect the anticipated availability of funding in the Housing Development Opportunity Fund.

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FIGURE 4.2: ESTIMATED FUNDING NEEDS, CENTER CITY HOUSING STRATEGY

Strategy 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024-2028 2029-2033

Establish a Housing 1 Development Assistance $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 Program

Support Development of 2 Accessory Dwelling Units and NA Duplexes

Reduce Parking Standards for 3 Some Multi-Family and NA Accessory Units

Park and Sidewalk 4 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $100,000 Improvements

5 Marketing NA

6 Financing for Pilot Project(s) $100,000 $100,000 $100,000 $100,000 $1,200,000 $100,000 $100,000 $100,000 $100,000 $2,000,000 $700,000

Five Year Funding Needs (2014 - 2018): $1,100,000 Five Year Funding Needs (2019 - 2023): $1,200,000 $2,000,000 $700,000

Source: JOHNSON REID LLC

1. Establish a Housing Development Assistance Program

Description: The City should design a set of incentives which help to reduce the cost of development for housing which meets certain public goals in the Study area relative to other locations in the city.

The program could include the following major incentives:

• SDC Partial Pay-down

Standards To justify public contributions to private development activities, the City should determine baseline standards describing which types of development meet public goals. While other development would still be permitted under the current zoning, not all projects would rise to the level of public participation. Baseline standards for assistance might include:

. Development of three or more attached units, or three or more detached units (as in a cottage cluster development) . Addition of an accessory dwelling unit to developed lots of 7,000 s.f. or less (i.e. where one additional unit is the most a property can realistically hold.) . Partitioning of single family lots where the resulting parcels will house three units or more

SDC Partial Waiver Program For projects meeting the baseline standards established for assistance, institute a temporary waiver of System Development Charges, to be repaid to the City out of the Housing Development Opportunity Fund. The Business/Medical Park Development fund or the Redevelopment Opportunity Fund may also be appropriate in some circumstances. The program would be a one-time inducement for property owners to pursue development in the Study Area. The program would require marketing and awareness campaign to ensure that property owners and developers are aware of the benefit and timeline.

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SDCs would be paid with Urban Renewal funds upon occupancy using the deferred payment method.

The program should include:

. Waiver of up to $5,000 in SDCs per unit for development of three or more units on a single property, up to 30 units. . Waiver of $3,000 in SDCs for addition of an accessory dwelling unit to developed lots of 7,000 s.f. or less (i.e. where one additional unit is the most a property can realistically hold.), in Neighborhoods 3 and 4 identified on Figure 3.1. . For partitions of single-family lots where the resulting parcels will house three units or more, a waiver of up to $3,000 in SDCs for each new unit. If the partition results in a single new parcel with three or more units, apply above standards. . Stay in effect until the funds are expended. This can provide incentive to developers to move forward while funding is available.

Impact: Establishes what types of housing meet threshold for assistance. Will provide additional impetus for property owners to consider adding more units than they might otherwise and achieve higher density.

Has direct impact on the cost of development, thus increasing the feasibility of new development in the Study Area and providing an incentive to development in this area vs. other locations in Redmond.

Cost: SDC Waivers: Up to $800,000 (would allow for approximately 140 units to take advantage)

Timeline: This program would stay in effect until the funds are expended. Figure 3.2 shows a hypothetical rate of expenditure over eight years, but it could be more or less.

2. Support Development of Duplexes

Description: Currently the Downtown Overlay District and C2 CBD Commercial district does not allow development of single-family detached homes. In order to encourage the development of more housing on remaining developable parcels, the City should allow the development of duplexes on lots of 7,500 s.f. or greater, while making single-family development a conditional use in these zones. An overlay should be implemented that does not allow duplexes or single family dwellings on lots fronting 5th and 6th Street.

Impact: Removes an obstacle to infill development in the Downtown Core.

Cost: Staff Time

Timeline: Year one

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3. Reduce Parking Standards for Some Multi-Family and Accessory Units

Description: Currently, residential uses in the Study Area (with the exception of the Downtown Overlay District) generally require two parking spaces per unit. Parking requirements can impact housing unit production in multiple ways: increased use of site land area for parking decreases the land available for housing units meaning fewer units are produced; this in turn makes development less feasible by reducing the number of rent- generating units to the developer/owner.

Like the Downtown Overlay District, where off-street parking requirements have been reduced to 1 space per residential unit, parking requirements should be reduced (to a lesser degree) elsewhere in the Study Area to improve project feasibility and make the area attractive for development relative to other parts of the city which lack reduced parking standards.

The following standard reductions are modest enough to provide some of these impacts while not adversely impacting the parking availability in the Study Area:

. Reduce the parking space requirement for multi-family developments from 2 spaces per unit to 1.5 spaces per unit. . Do not require additional off-street parking for accessory dwellings where it can be demonstrated that the property already has 2 spaces for the primary dwelling.

It is anticipated that with the reduction of parking requirements, some demand may be met by on-street parking. Since these changes are recommended outside of the Downtown core, street parking should be more available. There is no anticipated need for public parking solutions. Alternatively, the market may find that the reduced parking standard is sufficient to meet the parking needs of tenants with little spillover. Finally, as these are the minimum requirements, individual developers may still decide that more parking is needed if they believe that is what the market demands.

Impact: Increases the number of units accommodated on a given parcel, and encourages infill through accessory dwelling units.

Cost: Staff Time

Timeline: Year one

4. Park and Sidewalk Improvements

Description: Through the Urban Renewal Plan, Downtown Action Plan and other planning efforts in the Downtown area, a range of public improvements have been identified and funded through the Urban Renewal program. These include public improvements to multi- modal circulation, open space, and streetscape, as well as programs to incentivize improvement of private spaces such as façade and property rehabilitation programs. There are also programs to recruit, retain and grow businesses in the area.

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Programs and strategies that improve public amenities or the business environment in the study area should be recognized as key support for the Housing Development Strategy. The efforts to bring new housing and residents to the area is linked to the health of the mixed use environment and the amenities it offers, as this is how the central city differentiates itself from other locations.

Noted deficiencies include:

. Lack of sidewalks in much of the Medical District, Midtown, and Eastside subareas, as well as the east side of Downtown. . Lack of access to nearby parks for the east part of Midtown or the Eastside. Many parts of the study area a half mile or more from park space. . Need for continued façade and streetscape improvements in the Downtown core.

Priorities for general improvements should include:

. Sidewalk improvements as funding allows, prioritizing connections extending outward from the existing Downtown sidewalk grid. For individual pilot projects the City is involved in, there is an opportunity to help fund sidewalk and streetscape improvements as an additional incentive for developers. Connectivity improvements for pedestrians and bikes around such pilot projects should be prioritized. . Consider locating a small neighborhood park in the north Downtown/Midtown subareas, on the east side of the study area. While this improvement may entail some greater expense to acquire land and build a park, a new attractive park space would offer an attractive amenity for households in this area, and for new households. Currently, there is little public green space available other than the canal space which is adjacent to the highway, and the Dry Canyon which is a half mile or more from parts of the Study Area. . Façade improvements and rehabilitation of commercial space in the Downtown core is an on-going priority which makes the area attractive for residents. Commercial improvements are a parallel but connected effort to the Center City Housing Strategy.

Specific recommendations:

Sidewalk and Streetscape Improvement Program There are two options for how this program might be designed. The options may both be implemented, or one might be prioritized over the other:

1) Create a program for completing sidewalk, planter strip, and other streetscape improvements around major projects. This type of program further reduces development costs by assuming some costs that would otherwise be the responsibility of the developer. This increases the feasibility of major projects.

. Completion of sidewalk and other streetscape improvements on public street-facing boundaries of projects of over 15 units, or which otherwise meet the criteria set out for pilot projects (see Strategy #6 below).

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. Improvements should be made for projects which are undertaking development, not simply planned and proposed. A development agreement should clearly lay out public and private expectations. . Work would be completed through standard City street improvement process, and reimbursed through the Housing Development Opportunity Fund or other urban renewal program.

2) Time the construction of more intensive sidewalk connectivity improvements with other strategies in a similar area, to create synergy between multiple improvements to a single area. In particular, this may be done in the Midtown subarea, in conjunction with the park project outlined below, and one or more housing pilot projects in the neighborhood. Undertaking these projects at the same time would create a critical mass of improvement activity in the area and generate more momentum for additional private sector development. In the case of sidewalks, this would mean constructing or improving the sidewalk grid within this neighborhood, connecting existing and new housing, as well as the new park, to the Downtown area with complete bike and pedestrian facilities.

Construct New Pocket Park Study the potential to construct a small new neighborhood-focused park in the in the north Downtown/Midtown subareas, on the east side of the study area. This could be a so-called “pocket park” which covers an area as small as 15,000. The key is that it be more accessible than the Dry Canyon and related parks to households east of roughly 7th Avenue. This would entail likely acquisition of land and construction of park improvements. It may also be possible to make improvements to existing park and trail property along the canal to serve this function.

This project is aimed at encouraging housing development in Midtown and north Downtown. It is meant to create an additional amenity attractive to developers and residents. It should be timed to be implemented in conjunction with a pilot project in the area to increase overall impact.

Impact: Improvement of public amenities help to enhance the overall mixed-use character and nearby amenities in the Study Area which helps to market this area in comparison to other locations in Redmond. A lack of basic amenities such as sidewalk connectivity, or park access, will make the area less attractive for housing development.

Cost: Sidewalk and Streetscape Improvement Program & Pocket Park: $1.5 million A range of programs funded through the Urban Renewal District support additional efforts in beautification, façade improvement and connectivity.

Timeline: Sidewalk and Streetscape Improvement Program: Option 1 could be implemented in year three, allowing for program design and ramp-up. Option 2 would require coordination with other projects in the mid-term period of 6 to 10 years. Construction of Pocket Park: Mid-term, Year 6+.

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5. Marketing

Description: The implementation of incentives and amenities in the Study Area may not be recognized by market players without communication to enhance the visibility of these efforts. Marketing initiatives take a range of forms:

. Create an information clearing house for property owners, developers and investors who may have an interest in residential development in the study area. This “information exchange” is often just outreach by a designated city staff member to key property owners and developers who are active in the area in order to maintain some idea of what is happening on the ground in the Study Area. This person can connect interested parties. Automated systems of listing properties and soliciting developer interest are likely to fail on the scale of the Study Area. Therefore a key contact person trying to track activities and interest is often the best approach. This person may be city staff or a member of an outside interest such as the Chamber of Commerce. . Coordinate local businesses in terms of common operating hours, promotions, and district branding. Program concerts and other activities in Centennial Park which would double as community and marketing events. Much of this activity is already taking place in one form or another, but perhaps these functions could be better consolidated through the Chamber of Commerce with City assistance. . Place visible materials in the Building Department at City Hall advertising the benefits of programs available in the Study Area. Place similar information on the City website. . Once a package of incentives and programs is established, consider a simple but professionally-produced mailer to area developers and real estate professionals describing renewed efforts to encourage housing production in the Study Area and the tangible benefits available to developers who pursue it. . If the City or Urban Renewal Area seeks to market specific parcels it has acquired, conduct direct outreach to potential developers. These projects should generally be pursued through an RFP or RFQ process to ensure that public goals are met, which require further marketing. There is no project in the Urban Renewal Plan which speaks directly to marketing housing development, but the Housing Development Opportunity Fund and the Business Development Fund may be appropriate for some or all of these measures.

Impact: Marketing will help draw attention to the programs and benefits set up for the Study Area in order to make the area competitive with other locations.

Cost: Most of these measures require staff time and commitment, and fit under the Administrative role of the Urban Renewal Agency.

A professionally-produced mailing or brochure material could be produced for $5,000 to $10,000.

Timeline: On-going. Heavy promotion or marketing expenses should wait until incentive programs are designed and in place.

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6. Financing for Pilot Project(s)

Description: The following section of this report discusses options for more direct interventions in specific projects in the subareas. These interventions include purchasing strategically located proprieties then soliciting development proposals, as well as extending financing for privately initiated projects.

Pilot projects include public-initiated efforts such as purchasing key properties, or participating in public/private partnerships, or privately-initiated projects which may need additional financing to aid feasibility.

In general, the publicly-initiated projects are intended to set the stage for private investment in the surrounding area by achieving multiple urban renewal objectives such as: addressing blighted sites, providing new customer support for downtown retail, or serving a currently unmet or underserved niche in the residential housing market.

Private projects should be able to apply for financing assistance based on satisfaction of density and urban design criteria, as well as satisfaction of basic underwriting criteria.

Financing vehicles could include low-interest bridge loans, subordinated debt or construction loan guarantees. Some public/private partnerships may involve land write- downs or cash flow dependent or forgivable loans. In general, low interest loans should be the primary financing tool extended to privately initiated projects with cash flow dependent or forgivable loans utilized for competitively awarded publicly initiated projects.

This section of the report discusses on site- and neighborhood-specific strategies including two potential options for pilot projects. Assistance to qualified private projects would be administered from a revolving loan fund.

FIGURE 4.3: PUBLICLY- AND PRIVATELY-INITIATED PILOT PROJECT PROGRAMS Recommended Potential Pilot Projects Anticipated Timing Funding Allocation Option 1 Downtown Property Mid-Term (5 - 10 years) $2,500,000 total Assembly for first project; (or disposition of Long-Term (10+ years) owned property) for additional projects

Option 2 Midtown Property Mid- Term (7+ years) Assembly

Financing for Qualifying projects Responsive to private $2,200,000 Privately-Initiated throughout the interest Projects Center City area (Revolving Loan Fund)

The source of funding for these initiatives would be the Housing Development Opportunity Fund, which is planned to total $7,000,000. Major projects should take up a large portion of

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this fund, but not all. The total allotment of funding is $2,500,000 (not including the loan program).

This section provides detailed discussion potential public pilot projects, followed by a discussion of financing for private pilot projects.

6a. Publicly Initiated Pilot Projects

Public interventions in the acquisition, disposition and/or development of specific sites introduce the greatest risks and highest direct costs in a Development Strategy, but can yield the best results in terms of attaining desired types of development, number of units, design features, affordability levels and many other public goals.

Site-specific interventions can take many forms, but some of the main approaches are:

. Public Acquisition: The City takes ownership of a site through purchase, transfer of deed, or condemnation. Ownership of a key site gives complete control to the public over what happens on that site, as the City is not obligated to accept any purchase or development offer or enter into any partnership that doesn’t meet its objectives. This approach can also carry the highest cost as the City must pay for the property outright or through financing, and the property is off of the property tax roll while under public ownership. (Condemnation may not be used to take private property for transfer to another private user, but only for public use.) . Public Financing: The City or Urban Renewal program offers low-interest financing to a developer to decrease borrowing costs, improve the terms of their primary financing, provide a bridge between equity and private financing, or provide a loan guarantee. These deals may involve smaller amounts than acquisition, and the use of loans replenish funding upon repayment. The danger is that a failed or stalled project will result in a loss of the loan principle. In some cases, the public loan will be in a secondary position to a primary loan, in which case the public loan is more at risk. These pitfalls are avoided by working with experienced developers and applying full underwriting standards. . Additional Public Incentives: The City offers additional incentives beyond those generally available in order to influence development on a key site. The programs described in the previous section will all to some extent require generally applied standards – any property which meets the criteria will be eligible. With an explicit public/private partnership, additional incentives can be offered to meet additional public goals in the proposed development. These incentives might include a full waiver of SDCs, public construction of the sidewalk or streetscape required around the development, or grants. When offering additional incentives for development, it is critical to ensure that the public is receiving additional benefit from the development above and beyond what a project that is eligible for standard programs is providing.

The guiding principles for site-specific interventions should be:

. The intervention generates enough additional housing than would otherwise be developed to justify public involvement; and/or

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. The development will create an example of desired building form or mixed-use in a prominent location; and/or . The City feels need to control a strategically important site which is likely to otherwise develop in an inopportune manner or not develop at all.

The following is a summary of two public pilot project options.

Option 1: Downtown Pilot Project - Acquisitions and Assembly

Description: In the mid- to long term, the City should consider being involved in one or more public/private partnerships in the Downtown core to create a pilot or demonstration project. The Downtown area features the greatest potential in the Study Area to offer value as a mixed-use, walkable town center environment and thus offer amenities not found in most other locations around Redmond and the surrounding area.

The map on the following page identifies some potential development sites, both publically and privately owned. If considered, additional acquisition and assembly should be located west of 5th Street as this area, blending into residential neighborhoods and the Dry Canyon parks to the west, has the best potential to renew as a location for housing.

Impact: Catalyst development brings value in its own right by introducing new housing units and taxable assessed value. It also shows investment in the area and that it is a tested market for new housing development. For a catalyst development to encourage other private development some strength and activity should be perceived in the area. JOHNSON REID projects that the timing for a Downtown catalyst project that takes advantage of market strength will be beyond the short term horizon or the early mid-term, and may be 5 to 7 years.

Housing Type: Currently in the Downtown Area feasible housing types would include detached housing and small attached projects such as duplexes or townhomes. But the use of public funding in this project would allow housing forms that wouldn’t otherwise be viable by bridging the feasibility gap. In this case, the type of housing sought would likely depend on which site was being develop. Most of these sites would be candidates for a three or four story housing or mixed-use building with an urban design meant to complement historical buildings on 6th Street. One potential market, either explicitly or implicitly, for the development could be retirees and seniors.

FIGURE 4.4: POTENTIAL HOUSING PILOT PROJECTS BY DOWNTOWN SUBAREA Optimal Product Type for Price Level for Estimated Relative Impact on Subarea Public Pilot Project Initiation Timing Public Cost Market

Downtown Core Townhome development Rent: $1.20/ s.f. 5 - 10 years Low Low East of 5th Street of 5+ units Sale Price: $140/ s.f.

Downtown Core 4+ story multi-family, Rent: $1.35/ s.f. 10 - 20 years High High 5th & 6th Streets vertical mixed use (otional) Sale Price: $155/ s.f.

Downtown Core Cottage clusters Rent: $1.20/ s.f. 5 - 10 years Medium Medium West of 7th Street 5+ Townhomes Sale Price: $140/ s.f. Low

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Figure 4.5 shows the Downtown Core with some potential sites identified for redevelopment due to their low-intensity use and low property values relative to potential value under reuse. Some public properties are identified for potential strategic reuse in the future. This is not meant to be a complete inventory of redevelopment potential in the Core, nor will all of the sites identified redevelop.

FIGURE 4.5: DOWNTOWN CORE AND POTENTIAL REDEVELOPMENT SITES

Cost: Purchase of individual properties in this area will vary. Property values in the town center are among the highest in Study Area. Creative use of the properties the City already controls in the area is one alternative to reduce the need for direct costs. Funds could be used for property acquisition and other direct interventions necessary to move public/private partnerships forward.

Timeline: Mid-term (5+ years) for first project. Building sufficient funding for additional project(s) may take into the long-term (10+ year horizon).

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Option 2: Midtown Lot Assembly and Corridor Redevelopment

Description: The City may want to take extra steps to encourage redevelopment and infill in the Midtown area where large lots are occupied by older detached homes of low value. These properties are well suited for replacement of existing houses or addition of new units. In addition, over the longer-term, the City may want to encourage one or more larger housing projects along the 5th and 6th street corridor, where larger low-density parcels exist.

Encouraging this activity beyond general district-wide measures could involve identifying one or more key properties which could be acquired or assembled by the City to redevelop with more units. These might be attached units, or detached cottage cluster-type development in the east section of midtown, and garden apartments in the 5th and 6th street corridor.

TH TH FIGURE 4.6: MIDTOWN AREA, EAST RESIDENTIAL AREA, AND 5 AND 6 ST. CORRIDOR

NW Greenwood Ave. Street NW 6th Street NW 5th NW

W Antler Ave. NW 2nd Street

The goal would be to demonstrate new housing types and investment in the Midtown area and encourage more private development.

Most of the sites shown in the shaded area to the right generally house older units with low overall value. The blocks at the north end, between NW Elm and Greenwood Avenues offer the largest average block size, with many lots in the 10,000 to 13,000 s.f. range. These lots

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have the potential to add the most new units. The blocks to the south are smaller on average, in the 8,000 to 9,000 range, but some larger lots are dispersed among them.

Adding accessory dwelling units is currently feasible on these properties. Properties with a market value of $5 or less per square foot should be feasible candidates for more intensive redevelopment within the next two to three years. If the City were to be involved in assembling land, a public/private partnership with a builder would be the next step. To incent greater density, or a less tested property type like cottage clusters, the value of the property would likely have to be partially written down to provide cost savings to the builder.

This type of public/private development is likely to be less high-profile than a development in a more prominent location such as downtown, creating the risk that once the properties are acquired a deal may be hard to facilitate. If undertaken, it should be in the mid-term period, five or more years in the future, when some other housing momentum is established in the Study Area.

Impact: The impact of land assembly in the Midtown area would be to demonstrate to property owners of large low-value properties in the area that greater value can be unlocked through redevelopment. The goal would be to interest owners in infill and redevelopment which will add housing units over time.

Housing Type: Currently in the east Midtown area detached housing and accessory dwelling units are feasible. As the market improves over the next two to three years, attached forms such as townhomes, triplexes or four-plexes should become feasible. Cottage clusters should be feasible in the next few years as well. The greatest hurdle they face is familiarity with this development form among builders and home buyers. While cottages may be small, the need to self-contain them and build out four exterior walls and roof for each unit, make this a more expensive development type than small attached products.

In the west Midtown area, around the 5th and 6th street corridor, the evolution of this area away from its previous highway-commercial character, and restoration of two-way traffic may make the area more attractive for building attached housing. Large underbuilt parcels in the area could house garden-style apartments with surface parking.

FIGURE 4.7: POTENTIAL HOUSING PILOT PROJECTS BY MIDTOWN SUBAREA Optimal Product Type for Price Level for Estimated Relative Impact on Subarea Public Pilot Project Initiation Timing Public Cost Market

Midtown area Cottage clusters Rent: $1.20/ s.f. 5 - 10 years Medium Medium East of 5th Street 5+ Townhomes Sale Price: $140/ s.f. 1 - 5 years Low Low

Midtown Area Garden apartments Rent: $1.20/ s.f. 5 - 10 years Medium Medium 5th & 6th Streets

Cost: Purchase of individual properties in this area may range from $75,000 to $100,000. More so than cost, the greatest risks are that the City is unable to find a development partner, or that the project is completed but has low awareness being located in the interior of the Midtown area.

Timeline: Mid-term to Long-term (7+ years)

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SUMMARY OF SITE SPECIFIC RECOMMENDATIONS

The site or neighborhood-specific recommendations given above vary in their recommended timing and perceived impact. They are not mutually exclusive but may require prioritization to best use available resources and sync with market momentum.

The following table summarizes the pros and cons of each option.

FIGURE 4.8: SUMMARY OF PUBLICLY-INITIATED PILOT PROJECT OPTIONS Description Benefits Challenges Option 1 Downtown • Highest visibility area for pilot • Relatively expensive land; Property project; • Larger available sites are Assembly • Supports Downtown retail currently parking lots; (or disposition and commercial core; • Likely to require greater of owned • Takes advantage of greatest public investment due to property) concentration of amenities. property costs, or to encourage 3+ stories or mixed use development. Option 2 Midtown • Large, inexpensive sites; • Finding willing sellers Property • High-density zoning under low adjacent to each other; Assembly density uses; • Low visibility of location for “demonstration” project; • Interesting private partners if city assembles land.

JOHNSON REID recommends prioritizing Option 1 projects first in the Downtown core area, likely as a public/private partnership. Given the visibility and central importance of the core and its current amenities, we believe this is the best area to undertake pilot projects which will have an impact on residents’ housing choices, and the private development market.

Land assembly for pilot projects in the Midtown area should be the second priority. There are benefits to these types of projects, but they should follow development momentum in the Downtown. However, assembly of properties and public/private partnerships to get them developed in Midtown could follow relatively quickly upon undertaking a project in the Downtown.

6b. Privately Initiated Pilot Projects

Establish a revolving loan fund to provide low-interest financing to privately initiated housing projects within the Urban Renewal Area. This fund may make smaller development projects feasible in other parts of the Study Area. Urban renewal agency participation could be focused on financing hard project costs. The idea is that lowering development costs would induce private investment to pursue a project.

The revolving loan fund allows for the funding to be repaid over time and reused on other projects.

Qualified private development should meet the primary goal of adding more housing to the Center City area, particularly in a density or form which may not otherwise occur. Target

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housing types for qualifying for financing should generally agree with goals for the public pilot projects discussed above (see following figure).

FIGURE 4.9: POTENTIAL TARGET TYPES OF PUBLIC FINANCING OF PRIVATE PILOT PROJECTS Optimal Product Type for Subarea Private Pilot Project

Downtown Core Townhome development East of 5th Street of 5+ units

Downtown Core 4+ story multi-family, 5th & 6th Streets vertical mixed use (optimal)

Downtown Core Cottage clusters West of 7th Street 5+ Townhomes

Midtown area Cottage clusters East of 5th Street 5+ Townhomes

Midtown Area Garden apartments 5th & 6th Streets

To qualify, private projects would not need to be revolutionary, but should be attempting to “stretch” what is feasible, either by providing an attached housing type or cottage cluster which is rare or new to the area, by adding greater density than has been common, or adding design features such as mixed uses, reduced on-site parking, street orientation or other “transit oriented development” features. Financing assistance may be scaled to how many of these features the private development is proposing and to what magnitude.

Impact: Financing or direct participation in major projects have a large impact on project feasibility, delivering large impact but often with large attendant cost.

Cost: The costs of individual property involvement will vary. A total recommended allotment from the Housing Development Opportunity Fund of $2,200,000 is recommended.

Timeline: The timing of the Revolving Loan fund will be highly dependent on when and if any of the above options are pursued. Given the expected rate of growth of the Housing Development Opportunity Fund, there may be limited revenue for the Revolving Loan fund until the above projects are completed.

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CITY OF REDMOND, OR

SUMMARY OF PHASE I FINDINGS MARKET TRENDS & FORECAST

JANUARY 2013

Prepared For: CITY OF REDMOND, OREGON

By: JOHNSON REID, LLC

December 2012

TABLE OF CONTENTS

EXECUTIVE SUMMARY...... 2

I. HOUSING MARKET CONDITIONS ...... 6

A. Current Demographic Profile ...... 6

B. Housing Trends ...... 11

II. HOUSING DEMAND FORECAST ...... 13

A. 20-Year Population & Household Forecast ...... 13

B. 20-Year Housing Unit Demand Forecast ...... 16

III. STUDY AREA CONDITIONS ...... 29

A. Downtown Redmond Urban Renewal District ...... 29

B. Housing Development Opportunities ...... 33

JOHNSON REID, LLC 319 SW Washington Street #1020 Portland, Oregon 97204

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EXECUTIVE SUMMARY

Demographic Trends . The City of Redmond has seen robust population and household growth over the last decade, although the pace of growth has slowed sharply in the last several years. Since 2000, the number of households in the City has grown at an average annual rate of 5.3%. Redmond grew from 12% of County residents in 2000 to 17% in 2012.

. The demographic profile of the City includes a relatively high percentage of families, with household sizes in the area actually increasing since 2000 contrary to National and State trends. The average household size in the City is estimated at 2.61 in 2012 and families accounting for 68% of the all households.

. The City of Redmond’s median household income was over $37,000 in 2010. This is roughly 25% lower than the countywide median ($50,400), and 20% lower than the statewide median ($46,816). . Median income grew 11% between 2000 and 2010, which was not sufficient to keep pace with total inflation of 27% during that time. The median household income on state and national levels also lagged inflation, at 14% and 19% respectively. This partially reflects the impact of the recent recession and financial crisis, but also a multi-decade trend of slowing income gains for many middle class and blue collar workers.

. Over the last decade, the share of households with incomes above $50,000 in the City has increased, while the share of households at the lowest end of the income spectrum has remained fairly constant since 2000. The largest gains by income cohort were for those households earning $50,000 to $100,000 reflecting general wage inflation over the decade. There was also high growth in households earning between $15,000 and $25,000 per year, representing the working poor and lower- middle income households.

. Population and household growth since 2010 has largely been driven by migration into the area. Of the 12,734 new residents between 2000 and 2010, Johnson Reid estimates that 556 new residents (or 4%) were the results of local births (minus deaths), and 12,187 (or 96%) were net new residents from outside of the area. . The largest gains by age cohort were for those aged 25 to 55, with somewhat similar growth across most other age cohorts. The growth in the very young group was slightly elevated, while growth in the elderly lagged significantly.

. At 2,540 new residents, Hispanics made up 20% of population growth since 2000. These households tend to have larger families, be more inclined to rent then the general population, and have lower incomes.

Employment Trends . The largest employment categories in the City are Educational and Health Services, Retail Trade, and Professional Services. Professional and business services was the fastest growing sector over the decade. The recent recession has hit the economy of

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Redmond quite hard. Local employment declined by 11% from 2007 through 2010, with construction employment falling by 53% during that period.

. Redmond had an estimated 0.98 jobs per household ratio in 2010, implying that the City is a modest exporter of labor (more of the local workforce is commutes to employment out of town then commuters coming in). In 2010, roughly 24% of local employees were residents, while the remaining employees commute into the city from outside the area. At the same time, it is estimated that over 5,100 local residents commuted out of the area for employment in 2010.

Housing Market Trends . The housing market in Redmond can be broadly characterized as being quite affordable. The area boasts a diverse range of ownership residential options and price points, although almost exclusively single family housing. The rental apartment market in Redmond is lacking quality rental apartment supply for both market rate and affordable units. Despite a tight market, achievable lease rates continue to be depressed by new supply originating from excess single-family homes.

. In 2010, Redmond’s housing units were 59% owner-occupied, and 41% renter- occupied (excluding vacant units.) This ownership rate is lower than the countywide rate of 66%, as well as that of Oregon (62.2%). The ownership rate in Redmond fell 2% between the 2000 and 2010 Census.

. The number of single-family permits climbed sharply beginning in the late 1990s and peaking in 2005 with over 800 units permitted. It has since fallen off very sharply as the housing boom was followed by bust and recession. Multi-family development remained modest by comparison, but also saw an uptick in the first half of the 2000s. Since 2000, single family units have constituted 91% of units permitted.

Housing Demand Forecast

. The City of Redmond has historically exhibited a net outflow of young student-age residents just after high school (18-24), off-set by a tremendous boom of in- migration among young working class households as a result of construction and trades employment growth during the decade, and stabilized demographically driven growth of the retirement age population.

. The forecast indicates that over the 20-year period the city can be expected to add roughly 22,200 new residents while averaging 3.1% annual growth. This compares to the very robust 6.9% rate exhibited between 2000 and 2010. Redmond is forecast to grow to over 48,000 residents by 2030, growth of 85% from 2010. This estimate is in keeping with the more recent Deschutes County Coordinated Population Estimate, which forecasted 45,700 residents by 2025.

. The analysis projects the addition of over 8,467 new households in the 20-year period, to over 18,414 total households. As with the total population, this would represent growth of roughly 85% over 2010.

. The net new growth in households in Redmond is expected to continue to skew towards older households as the Baby Boom generation continues to age into

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retirement and old age. This is in keeping with broader societal trends. In terms of income, new households are expected to skew a bit more towards the lower end of the income spectrum, with less growth in the highest income categories. However, households in the middle incomes will continue to represent the bulk of demand.

. Of the projected 8,467 net new households in Redmond over 20 years, an estimated 3,422 (or 40.4%) are projected to be ownership units. The model projects that rental demand in the City will skew to younger, lower income families. It is projected that more of this demand will be met by multi-family units than single-family units. Over 50% of demand for rental housing is concentrated at the lower rent levels of $620 and below. The market provides some rental housing in the $500 to $650 level, while very inexpensive rental units are most often supplied by non-profit agencies such as a housing authority.

. Of the projected 8,467 net new households in Redmond over 20 years, an estimated 5,045 (or 59.6%) are projected to be ownership units. Ownership demand is more skewed to middle income groups and older householders than rental demand.

. Demand for for-sale housing over the next 20 years will be fairly well distributed below the $350,000 level. There is some demand in the <$80,000 level which is often met by mobile homes or older substandard housing. There is modest projected demand for housing over $500,000.

Study Area Conditions . The study area is covered by ten different zoning designations, including residential, commercial and industrial zones. These zones apply differing permissions and limitations on residential development. The R5, R4, MULW, and C2 zones are likely to be the key opportunity areas for future housing development in the study area.

. Other commercial zones (C1, C3, C4) restrict residential development. The C1 and C4 zoned portions of the study area are better suited to commercial development, being located on established commercial strips. The C3 zone is currently being planned as a Business/Medical District which not envisioned to include housing on the C3 portion (the southern part of the district is zoned R5 and will include housing.)

. The two industrial zones and the Public Facility zone do not allow residential development.

. An assessment of vacant and partially vacant parcels in the study area finds the largest potential residential parcels in the R5 area just south of the Medical Center, and the Mixed Use Live/Work zone to the east of Downtown and Highway 97. This is where larger development sites will allow the greatest flexibility to add concentrations of housing in single developments.

. The core of the study area, including Downtown and area to the north, include many smaller vacant and under-built parcels which are candidates for infill development. Such developments may not be as large as potential developments are larger parcels, but due to the location in the core and proximity to Downtown amenities, they will likely have greater potential for high-visibility new residential or mixed-use

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development with the ability to increase the profile of housing in central Redmond, and provide a benchmark for other development.

. Aside from vacant and partially vacant sites, there are many parcels which are currently built out with low value and/or obsolete properties will provide additional redevelopment opportunities over time. The greatest potential for redevelopment exists in Downtown, the R5 area to the north of Downtown, and the MULW zoned area to the east. A subsequent phase of this analysis will include financial analysis to determine the likelihood of redevelopment in these areas over time.

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I. HOUSING MARKET CONDITIONS

This section discusses demographic and market trends which have shaped Redmond’s population and housing growth, and will impact future development trends.

A. Current Demographic Profile

The nature of the local housing market over time is impacted first and foremost by the local growth rate and demographic characteristics.

The following table (Figure 1.1) presents a profile of City of Redmond demographics from the 2000 and 2010 Census. It also presents projected demographics in 2012, based on assumptions detailed in the table footnotes.

FIGURE 1.1: REDMOND DEMOGRAPHIC PROFILE POPULATION, HOUSEHOLDS, FAMILIES, AND YEAR-ROUND HOUSING UNITS 2000 2010 Growth Rate 2012 Growth Rate (Census) (Census) 00-10 (Proj.) 10-12

Population1 13,481 26,215 6.9% 26,345 0.2% Households2 5,402 9,947 6.3% 9,978 0.2% Families3 3,662 6,789 6.4% 6,810 0.2% Housing Units4 5,584 10,965 7.0% 10,995 0.1% Group Quarters Population5 110 300 10.6% 301 0.2%

Household Size 2.54 2.61 0.3% 2.61 0.0% PER CAPITA AND AVERAGE HOUSEHOLD INCOME 2000 2010 Growth Rate 2012 Growth Rate (Census) (Est.) 00-10 (Proj.) 10-12

Per Capita ($) 16,219 17,380 0.7% 17,622 0.7% Average HH ($) 41,713 46,264 1.0% 47,232 1.0% Median HH ($) 33,701 37,252 1.0% 38,006 1.0%

SOURCE: Claritas, Census, and Johnson Reid 1 Population in 2012 is from preliminary estmate of PSU Population Research Center 2 2012 Households = 2012 population/2012 HH Size 3 Ratio of 2012 Families to total HH is kept constant from 2010. 4 2012 housing units are the 2010 Census total plus new units permitted 2011 (source: HUD State of the Cities Data System)

5 Ratio of 2012 Group Quarters Population to Total Population is kept constant from 2010.

. Between 2000 and 2010, Redmond was one of the fastest growing cities in the fastest growing county in Oregon. While Deschutes County’s population grew 37% over the decade, Redmond grew 95%, adding 12,700 people. Redmond’s annual growth rate of 6.9% was second only to Sisters (7.8%). . Redmond grew from 12% of county residents in 2000 to 17% in 2010.

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. Redmond was home to nearly 10,000 households in 2010. The city grew by over 4,500 households during the decade. . The percentage of family households grew slightly between 2000 and 2010 from 67.8% to 68.3% of all households. This is roughly in line with the countywide share of 67% family households. . Redmond’s average household size is 2.61 persons, up from 2.54 persons in 2000, reflecting the addition of more and larger family households.

Income Levels . Redmond’s median household income was over $37,000 in 2010. This is roughly 25% lower than the countywide median ($50,400), and 20% lower than the statewide median ($46,816). This gap has expanded slightly since 2000. . Median income grew 11% between 2000 and 2010, which was not sufficient to keep pace with total inflation of 27% during that time (Bureau of Labor Statistics.) The median household income on state and national levels also lagged inflation, at 14% and 19% respectively. This partially reflects the impact of the recent recession and financial crisis, but also a multi-decade trend of slowing income gains for many middle class and blue collar workers. . Despite lagging income growth, Figure 1.2 shows households with incomes over $50,000 grew in share by 2010. The share of households at the lowest end of the income spectrum has remained fairly constant since 2000.

FIGURE 1.2: DISTRIBUTION OF HOUSEHOLDS BY INCOME GROUPS, CITY OF REDMOND 25.0% 2000

2010 20.0%

15.0%

10.0%

5.0%

0.0%

SOURCE: Census, American Community Survey, JOHNSON REID LLC

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Employment Figure 1.3 presents the employment profile for the City of Redmond, according to US Census Employment Dynamics data. In 2010, Redmond housed an estimated 9,723 jobs, or 0.98 jobs per household. The largest industry categories by employment are Educational and Health Services, Retail Trade, and Professional Services. Professional and business services was the fastest growing sector over the decade.

The impacts of the recent recession are somewhat disguised by these numbers. Employment had grown to an estimated 10,800 by 2007, or 11% higher than the 2010 employment. There were an estimated 920 construction jobs in 2007, at 8.5% of total employment. Construction employment has since fallen by 480, or by 53%.

The Oregon Employment Department projects job growth rates by industry sector by region. In Region 10 (including Deschutes, Crook and Jefferson Counties), natural resource employment is projected to growth the fastest at 3% per year, while Educational and Health employment grows at 2.5% per year.

FIGURE 1.3: EMPLOYMENT PROFILE, CITY OF REDMOND Industry 2002 2010 Ann. Growth Proj.Growth Employment Employment % of Total 2002 - 2010 2010 - 2020

TOTAL NONFARM EMPLOYMENT 7,511 9,723 100% 3.3% 1.6%

Natural Resources 40 91 1% 10.8% 2.8% Construction 455 437 4% -0.5% 1.7% Manufacturing 1153 781 8% -4.8% 1.9% Wholesale Trade 168 185 2% 1.2% 1.9% Retail Trade 1272 1342 14% 0.7% 1.3% Transportation, Warehousing, Utilities 303 332 3% 1.1% 1.6% Information 77 76 1% -0.2% 1.6% Financial Activities 534 500 5% -0.8% 1.1% Professional & Business Services 427 1297 13% 14.9% 1.8% Educational & Health Services 1489 2051 21% 4.1% 2.5% Leisure & Hospitality 850 1180 12% 4.2% 1.5% Other Services 232 277 3% 2.2% 1.5% Government 511 1174 12% 11.0% 1.0%

SOURCE: US Census, Oregon Employment Department, JOHNSON REID LLC

Figure 1.4 shows the inflow and outflow of employees to the City of Redmond, as estimate by the US Census Employment Dynamics. In 2010, roughly 24% of local employees were residents, while the remaining employees commute into the city from outside the area. At the same time, it is estimated that over 5,100 local residents commuted out of the area for employment in 2010.

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FIGURE 1.4: EMPLOYMENT INFLOW AND OUTFLOW, CITY OF REDMOND

SOURCE: US Census, JOHNSON REID LLC

Components of Population Growth Of the 12,734 new residents between 2000 and 2010, Johnson Reid estimates that 556 new residents (or 4%) were the results of local births (minus deaths), and 12,187 (or 96%) were net new residents from outside of the area. (This is discussed more in the following section of this report.)

Figure 1.5 shows the net change in population in Redmond over the decade by age group according to the Census.

. The largest gains by age cohort were for those aged 25 to 55, with somewhat similar growth across most other age cohorts.

. The growth in the very young group was slightly elevated, while growth in the elderly lagged significantly.

Figure 1.6 shows the net change in households in Redmond over the decade by income group according to the Census.

. The largest gains by income cohort were for those households earning $50,000 to $100,000 reflecting general wage inflation over the decade. There was also high growth in households earning between $15,000 and $25,000 per year, representing the working poor and lower-middle income households.

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FIGURE 1.5: COMPONENTS OF NET POPULATION CHANGE, 2000 – 2010 BY AGE GROUP, CITY OF REDMOND 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

SOURCE: US Census, JOHNSON REID LLC

FIGURE 1.6: COMPONENTS OF NET POPULATION CHANGE, 2000 – 2010 BY INCOME GROUP, CITY OF REDMOND

1200

1000

800

600

400

200

0

-200

SOURCE: US Census, JOHNSON REID LLC

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Data on foreign-born residents from the American Community Survey is not available for the Redmond market, so tracking the immigrant population is difficult. The percentage of Hispanic residents grew from 5.5% to 12.5% between 2000 and 2010. At 2,540 new residents, Hispanics made up 20% of population growth.

In terms of housing needs, there are some characteristics of the average immigrant household which impact housing choice. These households tend to have larger families, be more inclined to rent then the general population, and have lower incomes.

The main impact of these groups will be continuing demand for low-to-moderate cost housing options, and larger housing units. As long as the policies and land inventory allow for the production of multi-family units, it will be possible to meet the rental need for immigrants and similar populations. Their demand for for-sale housing will largely be met by older existing housing units, rather than new housing.

B. Housing Trends

In 2010, Redmond’s housing units were 59% owner-occupied, and 41% renter-occupied (excluding vacant units.) This ownership rate is lower than the countywide rate of 66%, as well as that of Oregon (62.2%).

The ownership rate in Redmond fell 2% between the 2000 and 2010 Census. Growth in renter-occupied households outpaced growth of ownership households, as shown below.

FIGURE 1.7: OWNER AND RENTER HOUSEHOLDS, 2000 – 2010 Unit Type 2000 2010 Growth # %

Owner-occupied 3,294 61% 5723 59% 2,429 74% Renter-occupied 2,084 39% 3987 41% 1,903 91%

SOURCE: US Census, Johnson Reid LLC

Permits Figures 1.8 and 1.9 (following page) present the permitting activity of residential units in Redmond since 1980.

The number of single-family permits climbed sharply beginning in the late 1990’s and peaking in 2005 with over 800 units permitted. It has since fallen off very sharply as the housing boom was followed by bust and recession. Multi-family development remained tame by comparison, but also saw an uptick in the first half of the 2000’s.

Since 2000, single family units have constituted 91% of units permitted.

Total permits fell from a peak of 874 units in 2005 to an estimated 71 in 2012, a fall of 92%. However, it appears that there may be an uptick of production in 2012 based on preliminary numbers after six years of declines.

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FIGURE 1.8: SINGLE FAMILY AND MULTI-FAMILY UNITS PERMITTED, 1980 – 2011

900 Single Family Units 800 Multi-Family Units 700

600

500

400

300

200

100

0

SOURCE: US Census State of the Cities Database, JOHNSON REID LLC

FIGURE 1.9: RESIDENTIAL UNITS PERMITTED, REDMOND, 1980 – 2012 Product Type Single 3- or 4- 5+ Units Year Duplex Total Family plex MFR

Units Permitted 1980 - 1989 154 8 12 58 232 1990 - 1999 2,013 98 71 218 2,400 2000 358 0 3 7 368 2001 477 0 16 0 493 2002 392 4 12 0 408 2003 487 0 85 48 620 2004 699 0 76 32 807 2005 829 0 45 0 874 2006 529 0 31 0 560 2007 281 0 0 48 329 2008 140 4 0 0 144 2009 59 0 0 0 59 2000 - 2009 4,251 8 268 135 4,662 2010 52 0 0 6 58 2011 31 0 0 0 31 2012 43 0 16 12 71 Totals: 6,544 114 367 429 7,454 % of Total: 88% 2% 5% 6% 100%

Totals Since '00: 4,377 8 284 153 4,822 % of Total: 91% 0% 6% 3% 100%

SOURCE: US Census State of the Cities Database, JOHNSON REID LLC

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II. HOUSING DEMAND FORECAST

JOHNSON REID has developed demographically driven housing demand model to forecast housing need by housing type, as well as price point. Our demand forecast begins with projections of population and household growth. We then stratify forecasted household growth by age and income cohort, which are the best predictors of tenure split (i.e. will a household rent or own their home). We utilize rates of housing expenditures and psychographic analysis to derive assumptions of housing preferences and ability/willingness to pay. The projected new households are converted to a forecast for rental and ownership housing units by type and price point.

A. 20-Year Population & Household Forecast

We forecast the future population of the City of Redmond using a Cohort-Migration Model. The Cohort-Migration Model forecast integrates the existing population in each age/sex cohort, the estimated number of births in the current year, and anticipated migration via anticipated age/sex-specific migration rates.

The Surviving Population The first analytical step is to calculate the likely "surviving" population, based on assumptions of mortality by age and sex. Because timely local data are rarely available, and survival rates remain relatively constant within age/sex cohorts, we utilized rates age specific rates from the State of Oregon, calibrated by our observations at the county level.

FIGURE 2.1: SURVIVAL RATES BY AGE AND SEX COHORT, STATE OF OREGON Survival Rates Five Year FIVE-YEAR SURVIVAL RATES BY AGE AND SEX Age Males Females 1.200 <1 0.972 0.971 1-4 0.998 0.999 <5 0.994 0.994 1.000 5-9 0.999 0.999 10-14 0.999 0.999 15-19 0.995 0.998 0.800 20-24 0.994 0.998 25-29 0.995 0.994 30-34 0.994 0.997 0.600

35-39 0.992 0.994

Year Survival Year Survival Rates -

40-44 0.987 0.992 5 0.400 45-49 0.982 0.989 50-54 0.973 0.983 55-59 0.959 0.974 0.200 Males 60-64 0.930 0.954 65-69 0.892 0.926 females 70-74 0.831 0.884 0.000 75-79 0.727 0.810 80+ 0.384 0.487 SOURCE: Oregon Health Authority Age Cohort

These survival rates indicate each age/sex cohort's propensity to survive into the next five-year age cohort. For example, in 2010 there were 634 males aged 55-59 years in Redmond. Under the assumptions in Figure 2.1, 616 are expected to survive into the 60-64 age cohort. Excluding any migration impacts, this would become the new population base in 2015 for 60-64 year-old males.

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Birthing the Population The second analytical step involves adding the estimated number of annual births to the population in each subsequent year. For this process, we utilize the average fertility rate for between 2000 and 2010 for the 97756 zip code. For this geographic area, the fertility rate held relatively constant, measuring 80.0 per 1,000 mothers in 2000 and 81.0 per 1,000 mothers in 2010.

Continuing with an example, in 2010 there were 2,853 women of prime childbearing age in Redmond (aged 20 to 34). Assuming an average annual fertility rate of 81.0 births per 1,000 mothers, we estimated that between 2001 and 2005, absent any migratory effects, there were 1,155 babies born in Redmond (which then "survived" according to the aforementioned method). These births are then distributed by the natural sex ratio at birth1 and added to the City population. These persons are then subjected to rates of survival and migration just as the remainder of the population.

Calculating Migration Rates Because we have known population points by age and sex for the City from the 2000 and 2010 Census, and estimates of deaths and births from above, we can estimate the actual age and sex specific migration rate over the last decade by reconciling population change with the expectations of "survived" and "born" population above. This method reveals that between 2000 and 2010, the City of Redmond exhibited an exceptional rate of in-migration.

FIGURE 2.2: ESTIMATED MIGRATION RATES BY AGE AND SEX, CITY OF REDMOND (2000-2010) 180

160 Males Females 140

120

100

80

60

40

Migration Migration Rate (Persons 1,000)Per 20

0

9

-

14 19 24 34 39 44 59 64 79 29 49 54 69 74

<5

------

5

80+

10 15 20 30 35 40 55 60 75 25 45 50 65 70

SOURCE: Oregon Health Authority, US Census, and Johnson Reid

Figure 2.2 reflects what we anecdotally know about Redmond over the last 10 years. That is an exhibited lag in net-migration of young student-age residents just after high school (18-24), off-

1 The natural gender ratio at birth in the United States in 105 males, 100 females.

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set by a tremendous boom of in-migration among young working class households as a result of construction and trades employment growth during the decade, and stabilized demographically driven growth of the retirement age population.

Forecasting the Population Utilizing the survival and birthing methods above, along with estimates of in-migration, we forecast the population using the Cohort-Migration Model. This forecast analysis assumes the following underlying assumptions.

Survival Rates: Age specific survival rates remain constant according to Figure 2.1.

Fertility Rates: The average fertility rate remains constant at 81.0 births per 1,000 mothers annually over the 20-year period.

Migration Rates: Migration rates tend to decline over time, as young residents are the most mobile, and most likely to migrate. The migration rate falls among older cohorts.

Using these underlying assumptions, we produce the forecasts in Figure 2.3.

FIGURE 2.3: 20-YEAR POPULATION FORECAST BY AGE COHORT, (2010-2030) Total 2010 2015 2020 2025 2030 Births ('11-'15): 1,155 Births ('16-'20): 1,737 Growth % Births ('21-'25): 2,061 10 to '30 Growth Births ('26-'30): 2,151 < 5 2,130 2,399 2,479 2,432 2,321 191 8.9% 5-9 2,060 3,028 3,086 2,839 2,587 527 25.6% 10-14 1,985 2,630 3,414 3,343 2,970 985 49.6% 15-19 1,755 2,343 2,872 3,563 3,437 1,682 95.8% 20-24 1,665 2,136 2,590 3,018 3,643 1,978 118.8% 25-29 2,045 2,730 2,873 2,976 3,209 1,164 56.9% 30-34 1,895 2,806 3,306 3,215 3,134 1,239 65.4% 35-39 1,861 2,452 3,176 3,545 3,346 1,485 79.8% 40-44 1,767 2,295 2,726 3,329 3,631 1,864 105.5% 45-49 1,613 2,091 2,500 2,835 3,374 1,761 109.2% 50-54 1,517 2,033 2,368 2,646 2,895 1,378 90.8% 55-59 1,354 1,945 2,329 2,523 2,702 1,348 99.6% 60-64 1,242 1,864 2,308 2,520 2,588 1,346 108.4% 65-69 922 1,526 2,060 2,386 2,501 1,579 171.2% 70-74 771 1,127 1,605 2,034 2,277 1,506 195.3% 75-79 555 803 1,073 1,454 1,804 1,249 225.1% 80+ 1,078 1,353 1,519 1,684 1,987 909 84.3% Total Population: 26,215 35,562 42,284 46,343 48,405 22,190 84.6% Average Annual Growth Rate: 3.1%

SOURCE: US Census, JOHNSON REID LLC

Over the 20-year period the city can be expected to add roughly 22,200 new residents while averaging 3.1% annual growth. This compares to the very robust 6.9% rate exhibited between 2000 and 2010. Redmond is forecast to grow to over 48,000 residents by 2030, growth of 85%

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from 2010. This estimate is in keeping with the most recent Deschutes County Coordinated Population Estimate, which forecasts 45,700 residents by 2025.

As Figure 2.3 shows, the greatest numerical growth is expected in young people, aged 15 to 24, and in middle aged people aged 40-50. In terms of percentage growth, those aged 65 to 80 are expected to grow the fastest.

Converting Population to Households To convert population by age to a forecast of Households by age, we apply age specific projections of population growth to the distribution of households by age of householder (Figure 2.4). This process provides us with estimates of future households by age-cohort for our housing demand model.

FIGURE 2.4: CONVERSION OF POPULATION TO HOUSEHOLDS, (2010-2030) Population % Households % Age 2010 2015 2020 2025 2030 Change 2010 2015 2020 2025 2030 Change 15-24 4,074 5,333 6,414 7,494 7,915 94% 614 739 889 1,070 1,288 110% 25-34 5,194 7,173 8,003 7,941 7,943 53% 1,953 2,231 2,549 2,913 3,328 70% 35-44 5,032 6,578 7,942 8,832 8,767 74% 1,953 2,339 2,800 3,353 4,015 106% 45-54 4,197 5,516 6,419 6,969 7,630 82% 1,790 2,113 2,494 2,944 3,475 94% 55-64 3,400 4,858 5,805 6,164 6,315 86% 1,545 1,779 2,049 2,360 2,718 76% 65-74 2,374 3,541 4,655 5,369 5,646 138% 1,058 1,239 1,452 1,701 1,992 88% 75+ 1,945 2,563 3,046 3,574 4,189 115% 1,034 1,153 1,286 1,434 1,599 55% TOTAL 26,215 35,562 42,284 46,343 48,405 85% 9,947 11,593 13,519 15,774 18,414 85% SOURCE: US Census, JOHNSON REID LLC

The analysis projects the addition of over 8,450 new households in the 20-year period, to over 18,400 total households.

B. 20-Year Housing Unit Demand Forecast

Demographic Profile of the Market Figure 2.5 presents the demographic profile of all market area households. The largest single cohort of households is those who earn between $15,000 and $25,000 annually, at 22% of households. But those middle-income households earning between $25,000 and $75,000 make up 49% of all households. Those earning over $75,000 are estimated to be 13% of the population.

Households grouped by the age of the head of household show a more even pattern, with those between 35 and 44 being the single largest cohort. 42% of Redmond householders are 44 or younger. 58% are 45 or older.

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FIGURE 2.5: HOUSEHOLD DEMOGRAPHIC PROFILE OF THE MARKET, CITY OF REDMOND, 2012 HOUSEHOLDS BY INCOME HOUSEHOLDS BY AGE 25% 20%

18%

20% 16%

14%

15% 12%

10%

HH DistributionHH 8% HH DistributionHH 10%

6%

5% 4%

2%

0% 0% < $15,000 $15,000 - $25,000 - $35,000 - $50,000 - $75,000 - $100,000 - $125,000 - $150,000 - $200,000+ 15-24 25-34 35-44 45-54 55-64 65-74 75+ $24,999 $34,999 $49,999 $74,999 $99,999 $124,999 $149,999 $199,999

SOURCE: Nielsen Claritas

Market Characterization/Psychographics Psychographic analysis is an analytical tool by which households within a geographic region are clustered into similar market segments based on age, income, life-stage, household size, ethnicity, market preferences, and countless other factors. The tool allows us to move beyond a simple framework of age, income, and HH size, and begin to think about how those factors, among others, impact the decisions and preferences made by households in their consumption of housing. For example, middle-aged, lower income households with multiple children have a far lower propensity for luxury rental apartments than highly mobile young singles and couples with medium incomes. We use psychographic analysis to derive estimates of housing preferences by household type.

Psychographic segmentation datasets are typically developed by specialized third-party market research firms specializing in the process. Our preferred provider is Nielsen Claritas' PRIZM market segmentation. PRIZM identifies 66 unique cluster groups determined by life-stage and social group.

In Figure 2.6 we present the highest concentration market segments along with their demographic and housing characteristics.

Figure 2.7 (following page) highlights Redmond’s broad psychographic profile.

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FIGURE 2.6: CHARACTERIZATION OF THE MARKET Index Age Average Housing Distribution of the Market Value Profile Income Preferences Red, White and Blues 10% 951.0 45-64 $45,230 Owners Kid Country, USA 11% 839.9 < 55 $44,328 Mix, Owners Young and Rustic 15% 744.8 < 55 $33,559 Renters

Old Milltowns 10% 640.4 65+ $32,107 Mix

Bedrock America 8% 439.4 25-45 $28,978 Renters

New Homesteaders 8% 418.0 25-44 $59,158 Mostly Owners

Crossroads Villagers 7% 342.3 45-64 $33,752 Owners

Mayberry-ville 8% 313.8 45-64 $56,558 Mostly Owner

Golden Ponds 5% 288.6 65+ $33,029 Mix

Heartlanders 4% 194.3 45-64 $45,809 Mostly Owners

SOURCE: Nielsen Claritas and Johnson Reid

Additional detail about the characteristics of these groups is presented on the following page. What most of these groups have in common are modest incomes and small-town preferences. These include households which have aged in place in Redmond from when it was a smaller community to new households who are looking for affordable housing options, and do not necessarily seek some of the higher-cost amenities of Bend.

As figure 2.6 shows, the largest single demographic segment represents 15% of households, so no one group dominates the city’s overall profile. The four largest segments together account for 46% of households. The following are generalized descriptions of these four largest segments from Nielsen Claritas:

Young & Rustic (15%) – Like the soap opera that inspired its nickname, Young & Rustic is composed of young, restless singles. Unlike the glitzy soap denizens, however, these folks tend to be lower income, high school-educated and live in small apartments in the nation's exurbs and other small towns. With their service industry jobs and modest incomes, these folks still try to fashion fast-paced lifestyles centered on sports, cars and dating.

Kid Country, USA (11%) – Widely scattered throughout the nation's heartland, Kid Country, USA is a segment dominated by large families living in small towns. Predominantly white, with an above-average concentration of Hispanics, these young, working-class households include homeowners, renters and military personnel living in base housing; about 20 percent of residents own mobile homes.

Red, White & Blues (10%) – The residents of Red, White & Blues typically live in exurban towns rapidly morphing into bedroom suburbs. Their streets feature new fast-food restaurants, and locals have recently celebrated the arrival of chains like Wal-Mart, Radio Shack and Payless Shoes. Middle-aged, high school educated and lower-middle class, these folks tend to have solid, blue-collar jobs in manufacturing, milling and construction.

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Old Milltowns (10%) – America's once-thriving mining and manufacturing towns have aged–as have the residents in Old Milltowns communities. Today, they are retired singles and couples, living on downscale incomes in pre-1960 homes and apartments. For leisure, they enjoy gardening, sewing, socializing at veterans clubs or eating out at casual restaurants.

The implication of this demographic make-up is that traditional housing types, including single- family homes if affordable, will remain the most popular housing options. In considering the make-up of future housing types, the shift to relatively untested development forms such as multi-family condominiums, will likely be modest. There is always some segment of the market which will be attracted to new options, but it should not be overestimated.

Other than this implication, this demographic breakdown represents a mixture of age groups, incomes, and tendency to rent or own homes.

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Composition Typical Racial White White White White White White,Black, Asian White White,Hispanic White,Black, Hispanic White White White White White White White,Black Type Occupation WC,BC FarmWC,BC, WC,Service, BC WC,Service, BC WC,Service, FarmBC, Prof,WC WC,BC WC,Service, FarmBC, Service,FarmBC, Prof,WC Exec, Prof,WC FarmWC,BC, MostlyRetired WC,Mix MostlyRetired MostlyRetired Typical Education Level Education SomeCollege H.S.Graduate H.S.Graduate H.S.Graduate Elem.School, H.S. College SomeCollege SomeCollege Elem.School, H.S. CollegeGrad.+ CollegeGrad.+ SomeCollege H.S.Graduate H.S.Graduate H.S.Graduate Elem.School, H.S. Social Group RusticLiving RusticLiving RusticLiving RusticLiving RusticLiving LandedGentry LandedGentry LandedGentry MiddleAmerica MiddleAmerica MiddleAmerica MiddleAmerica CountryComfort CountryComfort CountryComfort

SecondCitySociety

SFDU SFDU SFDU SFDU SFDU SFDU SFDU SFDU SFDU Typical Apartments Housing Type Housing Apartments,SFDU SFDU, MobileSFDU, Homes MobileSFDU, Homes Mix, SFDU, ApartmentsSFDU, Mix, Mix, SFDU, Low-RiseSFDU, Mix, Condos/Apts. Mix, SFDU, Apts,RetirementSFDU, Mix, Homes Mix Mix Owners Owners Owners Owners Renters Renters Housing Preference

Mix, Owners Mix,

MostlyOwner MostlyOwner MostlyOwners MostlyOwners MostlyOwners MostlyOwners MostlyOwners Singles Couples Couples Couples Couples Couples Couples Couples Families Families Families Families HH Status FamilyMix Predominant

Singles/Couples Singles/Couples Singles/Couples

: : PRIZMProfile, City of Redmond 7 55+ 65+ 65+ 65+ < 55 < 55 <

45-64 45-64 45-64 45-64 35-54 25-44 25-45 45-64 45-64 45-64 2. Typical

Age Age Range ure Income Median

$75,315 $56,558 $45,230 $33,559 $33,752 $78,775 $59,158 $44,328 $28,978 $87,539 $82,495 $58,032 $45,533 $45,809 $33,029 $32,107 Fig Class Town Town Town Urbanicity Town/Rural Town/Rural Town/Rural Town/Rural Town/Rural Town/Rural Town/Rural SecondCity Town/Rural Town/Rural Town/Rural Town/Rural Town/Rural Class Income Upscale Upscale Upscale Upscale Upper-Mid Lower-Mid Lower-Mid UpperMid Lower-Mid Upper-Mid Lower-Mid Lower-Mid Downscale Downscale Downscale Downscale Mid MId Mid MId MId Age Class Older Older Older Mid-Older Mid-Older Mid-Older Mid-Older Mid-Older Mid-Older Young-Mid Young-Mid 0.0 Index Value 169.1 313.8 951.0 744.8 342.3 121.3 418.0 839.9 439.4 132.8 157.6 130.8 194.3 288.6 640.4 0 193 552 731 509 149 559 774 557 213 316 210 277 320 680 Local HH's 1,040 7,080 Demographic Segment Demographic Country Casuals Mayberry-ville Red, White and Blues Young and Rustic Crossroads Villagers Fast-Track Families New Homesteaders Kid Country, USA Bedrock America Big Fish, Small Pond Second City Elite Traditional Times Simple Pleasures Heartlanders Golden Ponds Old Milltowns 9 25 37 42 48 56 20 32 50 64 10 28 38 43 55 57 LIFESTAGE GROUP YOUNGER YEARS Success Midlife Striving Singles LIFE FAMILY Accumulators Young FamiliesMainstream FamiliesSustaining MATURE YEARS Empty Nesters Affluent Classics Conservative Couples Cautious Seniors Sustaining HH's ALL TOTAL, Claritas andSOURCE: Johnson Reid

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Net-New Household Growth In the previous section, we project the addition of over 8,450 new households in the 20-year period. Figure 2.8 presents these households stratified by age and income.

FIGURE 2.8 NET NEW HOUSEHOLD GROWTH, CITY OF REDMOND (2012-2032) 2012-2032 Growth Age Cohort Income Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ Total < $15,000 97 127 115 230 214 273 329 1,386 $15,000 - $24,999 72 357 335 297 248 305 298 1,912 $25,000 - $34,999 126 215 205 204 188 203 141 1,283 $35,000 - $49,999 99 289 337 252 201 210 102 1,491 $50,000 - $74,999 63 214 276 316 236 154 64 1,325 $75,000 - $99,999 22 138 225 158 115 94 36 787 $100,000 - $124,999 2 28 65 27 27 13 6 169 $125,000 - $149,999 0 4 13 8 10 3 1 39 $150,000 - $199,999 1 5 7 18 11 1 11 55 $200,000+ 0 1 3 5 5 7 1 22 TOTAL: 482 1,380 1,582 1,516 1,256 1,262 989 8,467

2,500 2,500 New Households New Households 2,000 2,000

1,500 1,500

1,000 1,000 Number Households of 500 Number Households of 500

0 0

SOURCE: Nielsen Claritas and Johnson Reid

Future households are projected to be fairly well distributed among those earning less than $75,000 per year, and across the age groups older than 25.

Income  Among income groups, the greatest net new growth is expected among those earning between $15,000 to $24,999 (in 2012 dollars). This group represents the working poor to lower-middle class range. There are 1,912 projected households in this group, or 22.5% of new households.  An additional 16.4% of households are projected to make less than $15,000.  48% of new households are projected to earn middle incomes between $25,000 and $75,000, while 13% are projected to earn more than $75,000 per year.  As discussed more below, household income effects future housing choices in terms of preference to rent or own, and ability to afford different types of housing.

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Age  The age of new households is fairly well distributed across age segments. This metric is actually the age of the primary householder.  New households among the youngest group is the smallest segment of projected demand. These are generally 18- to 24-year olds heading their first autonomous living situation.  Households aged 25 to 44, including younger families, make up 35% of projected new households.  Households aged 45 to 64, including older families and empty nesters, make up 33% of new households.  Those aged 65 and older will be a projected 26% of new households. Currently, those aged 65 and older make up 21% of households, so this will represent a shift towards older households in Redmond, in keeping with national aging trends.  In general, older households will be more likely to own than rent their homes, while the youngest households are more likely to rent (see below).

Over the next 20-years, the net new growth in households in Redmond is expected to continue to skew towards older households as the Baby Boom generation continues to age into retirement and old age. This is in keeping with broader societal trends. In terms of income, new households are expected to skew a bit more towards the lower end of the income spectrum, with less growth in the highest income categories. However, households in the middle incomes will continue to represent the bulk of demand.

Tenure The model stratifies households by a tenure matrix demonstrating the propensity to own/rent by age and income cohort. This process involves cross tabulating 2010 American Community Survey (ACS) data to calculate the propensity of different demographic segments to choose rental housing over ownership, or vice versa. ACS 5-year data for Redmond finds an ownership rate of 58.9% and rental rate of 41.1%.

FIGURE 2.9: TENURE SPLIT, CITY OF REDMOND (2010) RENTER Age Cohort Income Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ Total Under $15,000 90.2% 81.8% 67.8% 63.4% 49.8% 33.2% 61.3% 59.8% $15,000-$24,999 84.4% 72.5% 55.1% 50.1% 36.3% 21.6% 47.9% 50.9% $25,000-$34,999 78.3% 63.6% 44.6% 39.7% 26.8% 14.5% 37.5% 43.2% $35,000-$49,999 76.6% 61.3% 42.1% 37.2% 24.7% 13.1% 35.1% 41.3% $50,000-$74,999 63.8% 45.7% 27.4% 23.3% 13.7% 5.9% 21.6% 26.5% $75,000-$99,999 53.7% 35.3% 19.1% 15.8% 8.4% 2.6% 14.4% 19.0% $100,000-$124,999 42.1% 25.0% 12.0% 9.5% 4.1% 0.2% 8.4% 12.1% $125,000-$149,999 42.1% 25.0% 12.0% 9.5% 4.1% 0.2% 8.4% 10.2% $150,000-$199,999 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $200,000 or More 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total 77.9% 60.3% 39.5% 37.7% 27.1% 17.8% 45.9% 41.1% OWNER Age Cohort Income Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ Total Under $15,000 9.8% 18.2% 32.2% 36.6% 50.2% 66.8% 38.7% 40.2% $15,000-$24,999 15.6% 27.5% 44.9% 49.9% 63.7% 78.4% 52.1% 49.1% $25,000-$34,999 21.7% 36.4% 55.4% 60.3% 73.2% 85.5% 62.5% 56.8% $35,000-$49,999 23.4% 38.7% 57.9% 62.8% 75.3% 86.9% 64.9% 58.7% $50,000-$74,999 36.2% 54.3% 72.6% 76.7% 86.3% 94.1% 78.4% 73.5% $75,000-$99,999 46.3% 64.7% 80.9% 84.2% 91.6% 97.4% 85.6% 81.0% $100,000-$124,999 57.9% 75.0% 88.0% 90.5% 95.9% 99.8% 91.6% 87.9% $125,000-$149,999 57.9% 75.0% 88.0% 90.5% 95.9% 99.8% 91.6% 89.8% $150,000-$199,999 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% $200,000 or More 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total 22.1% 39.7% 60.5% 62.3% 72.9% 82.2% 54.1% 58.9% SOURCE: 2010 American Community Survey

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Housing Preferences Next, utilizing the household growth estimates and the local psychographic analysis from figures 6 and 7, we develop estimates of housing preference for each age and income group. Here, JOHNSON REID developed estimates of typical housing preferences by age and income cohort, using housing preference propensities by PRIZM segment from Nielsen Claritas. To use an example, Nielsen qualitatively classifies the "Red, White & Blues" PRIZM segment as:

“The residents of Red, White & Blues typically live in exurban towns rapidly morphing into bedroom suburbs. Their streets feature new fast-food restaurants, and locals have recently celebrated the arrival of chains like Wal-Mart, Radio Shack, and Payless Shoes. Middle-aged, high school educated, and lower-middle class, these folks are transitioning from blue-collar jobs to the service industry.”

Nielsen's discrete index of housing preferences by PRIZM segment describes "Red, White & Blues" as primarily owners of single-family housing. When viewed in light of our survey results and age by income segments, we assume that age and income cohorts with a high concentration of "Red, White & Blues" households will have a corresponding high preference for single-family product.

This process is repeated across all our age and income groupings to arrive at Figure 2.11 below, which presents assumptions of rental and ownership housing preferences by age and income. We also reconcile this with the existing build-out of housing units in Redmond by units in structure from the U.S. Census as well as what the market has delivered over the last 10-years.

FIGURE 2.10: CHANGE IN HOUSING UNIT TYPE, 2000 – 2010

3.5% Other type -1.7% 0.0% Owner 50+ units -0.9% 0.0% Renter 20-49 units -7.1% 0.0% 10-19 units 5.7% 0.0% 5-9 units 13.2% 0.0% 3-4 units 18.7% -0.7% 2-units 10.8% 3.5% 1-unit Attached 12.7% 93.2% 1-unit Detached 48.6% -20% 0% 20% 40% 60% 80% 100% Share of Housing Unit Growth (2000-2010) SOURCE: U.S. Census Bureau

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FIGURE 2.11: HOUSING TYPE PREFERENCE BY AGE, INCOME AND TENURE (RENTER VS. OWNER)

RENTER HOUSEHOLDS Income SINGLE-FAMILY MULTI-FAMILY Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ 15-24 25-34 35-44 45-54 55-64 65-74 75+ < $15,000 10% 10% 10% 10% 10% 10% 10% 90% 90% 90% 90% 90% 90% 90% $15,000 - $24,999 15% 15% 20% 20% 20% 22% 22% 85% 85% 80% 80% 80% 78% 78% $25,000 - $34,999 20% 25% 30% 30% 35% 40% 40% 80% 75% 70% 70% 65% 60% 60% $35,000 - $49,999 20% 25% 30% 35% 35% 35% 30% 80% 75% 70% 65% 65% 65% 70% $50,000 - $74,999 25% 30% 35% 40% 45% 45% 40% 75% 70% 65% 60% 55% 55% 60% $75,000 - $99,999 30% 30% 35% 40% 45% 50% 50% 70% 70% 65% 60% 55% 50% 50% $100,000 - $124,999 60% 60% 60% 60% 60% 60% 60% 40% 40% 40% 40% 40% 40% 40% $125,000 - $149,999 75% 75% 75% 75% 75% 75% 75% 25% 25% 25% 25% 25% 25% 25% $150,000 - $199,999 90% 90% 90% 90% 90% 90% 90% 10% 10% 10% 10% 10% 10% 10% $200,000+ 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5%

Owner Households Income SINGLE-FAMILY MULTI-FAMILY Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ 15-24 25-34 35-44 45-54 55-64 65-74 75+ < $15,000 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $15,000 - $24,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $25,000 - $34,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $35,000 - $49,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $50,000 - $74,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $75,000 - $99,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $100,000 - $124,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $125,000 - $149,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $150,000 - $199,999 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% $200,000+ 95% 95% 95% 95% 95% 95% 95% 5% 5% 5% 5% 5% 5% 5% SOURCE: US Census, JOHNSON REID LLC

According to Census figures, there is little precedence of multi-family ownership units in Redmond. Ownership units are divided between detached single family units, attached single family (townhome), and mobile home units. The preferences assumptions shown above for ownership households reflect an assumption that in the future, greater (but still modest) demand will exist for multi-family condo-type development.

Ability/Willingness to Pay The analysis takes into account the average amount that owners and renters tend to spend on housing costs. For instance, lower income households tend to spend more of their total income on housing, while upper income households spend less on a percentage basis. In this case, it was assumed that households in lower income bands would prefer housing costs at no more than 30% of gross income (a common measure of affordability). Higher income households pay a decreasing share down to 20% for the highest income households. This reflects the reality that lower-income households are forced to pay a higher share of income towards housing costs, while higher income households can achieve their housing preference while still paying something less than 30% of income.

The affordable price level for ownership housing assumes 30-year amortization, at an interest rate of 5%, with 15% down payment. Interest rates are impossible to forecast long term. However, the trend has been a declining mortgage rate since 1982. The most conservative assumption is that interest rates will remain low in coming years. 5% represents somewhat higher level than current rates, but close to the 10- year average.

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These assumptions are designed to represent prudent lending and borrowing levels for ownership households. The 30-year mortgage commonly serves as the standard. Down payment assumptions tend to range from 20% for older/established households, and 10% for first-time buyers. In recent years, down payment requirements have fallen significantly. The 15% used here represents both the average between newer and older households and recognition that despite currently tightening standards due to the 2008/2009 credit crisis, over the long-run it is anticipated that down payment standards will remain sub- 20% (i.e. a new “normal” has been established).

Housing Unit Demand Finally, we are able to combine the analytical steps above to arrive at estimates of housing unit demand by tenure, type, and price. As shown in Figure 2.4 above, this analysis projects the addition of over 8,450 new households in Redmond in the 20-year period, to over 18,400 total households.

The following figures show the components of 20-year demand for new rental and new owner units.

New Rental Demand Of the projected 8,467 net new households in Redmond, an estimated 3,422 (or 40.4%) are projected to be rental units.

FIGURE 2.12: PROJECTED NEW RENTAL UNIT DEMAND, 20-YEAR Net-New Demand Age Cohort Income Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ Total

< $15,000 87 104 78 146 107 91 202 814

$15,000 - $24,999 61 259 185 149 90 66 143 952

$25,000 - $34,999 99 137 91 81 50 29 53 541

$35,000 - $49,999 76 177 142 94 50 27 36 602

$50,000 - $74,999 40 98 76 74 32 9 14 343

$75,000 - $99,999 12 49 43 25 10 2 5 145

$100,000 - $124,999 1 7 8 3 1 0 1 20

$125,000 - $149,999 0 1 2 1 0 0 0 4

$150,000 - $199,999 0 0 0 0 0 0 0 0

$200,000+ 0 0 0 0 0 0 0 0 TOTAL: 376 832 624 572 341 225 453 3,422 SOURCE: JOHNSON REID LLC

Figure 2.13 shows the projected breakdown of these units by income and age, as well as single-family and multi-family units, based on rental preferences. Not surprisingly, rental demand will skew to younger, lower income families. It is projected that more of this demand will be met by multi-family units than single-family units.

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FIGURE 2.13: DEMOGRAPHIC BREAKDOWN OF NEW RENTAL UNIT DEMAND, 20-YEAR Structural Demand

< $15,000 15-24 $15,000 - $24,999 25-34 $25,000 - $34,999 $35,000 - $49,999 35-44 $50,000 - $74,999 45-54

$75,000 - $99,999 Age Cohort Age

$100,000 - $124,999 55-64 IncomeCohort $125,000 - $149,999 65-74 $150,000 - $199,999 Single-Family Single-Family $200,000+ Multi-Family 75+ Multi-Family

0 200 400 600 800 1,000 0 200 400 600 800 1,000 Households Households SOURCE: JOHNSON REID LLC

New Owner Demand Of the projected 8,467 net new households in Redmond, an estimated 5,045 (or 59.6%) are projected to be ownership units.

FIGURE 2.14: PROJECTED NEW OWNERSHIP UNIT DEMAND, 20-YEAR Net-New Demand Age Cohort Income Cohort 15-24 25-34 35-44 45-54 55-64 65-74 75+ Total

< $15,000 9 23 37 84 107 182 127 571

$15,000 - $24,999 11 98 150 148 158 239 155 960

$25,000 - $34,999 27 78 113 123 138 173 88 742

$35,000 - $49,999 23 112 195 158 151 182 66 889

$50,000 - $74,999 23 116 201 243 204 145 50 982

$75,000 - $99,999 10 89 182 133 105 92 30 641

$100,000 - $124,999 1 21 57 25 26 13 6 149

$125,000 - $149,999 0 3 11 7 9 3 1 35

$150,000 - $199,999 1 5 7 18 11 1 11 55

$200,000+ 0 1 3 5 5 7 1 22 TOTAL: 106 548 958 944 915 1,037 536 5,045 SOURCE: JOHNSON REID LLC

Figure 2.15 shows the projected breakdown of these units by income and age. Ownership demand is more skewed to middle income groups and older householders than rental demand. As discussed in Figure 2.11, this analysis contained an assumption that future homebuyers would have some modest demand for multi-family housing types such as condominiums. This assumption of 5% of demand for multi-family units is uniform in the following chart.

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FIGURE 2.15: DEMOGRAPHIC BREAKDOWN OF NEW OWNERSHIP UNIT DEMAND, 20-YEAR Structural Demand

< $15,000 15-24 $15,000 - $24,999 25-34 $25,000 - $34,999 $35,000 - $49,999 35-44 $50,000 - $74,999 45-54

$75,000 - $99,999 Age Cohort Age

$100,000 - $124,999 55-64 IncomeCohort $125,000 - $149,999 65-74 $150,000 - $199,999 Single-Family Single-Family $200,000+ Multi-Family 75+ Multi-Family

0 500 1,000 1,500 0 200 400 600 800 1,000 1,200 Households Households SOURCE: JOHNSON REID LLC

Housing Unit Demand by Price and Rent Levels Figure 2.16 presents projections of the demand for rental and ownership units by home price and rent level (in 2012 dollars). The unusual price levels (i.e. $380 to $620 in rent) are due to mapping affordability levels to the income cohorts that have been applied throughout this analysis.

As discussed above, the projections include assumptions about ability and willingness to pay, as well as financing assumptions for for-sale housing. In general, lower income households are expected to prefer to pay up to 30% of income for housing costs, while higher income households are expected to pay up to 20% of income.

. Demand for for-sale housing is fairly well distributed below the $350,000 level. There is some demand in the <$80,000 level which is often met by mobile homes or older substandard housing. There is modest projected demand for housing over $500,000.

. Over 50% of demand for rental housing is concentrated at the lower rent levels of $620 and below. The market provides some rental housing in the $500 to $650 level, while very inexpensive rental units are most often supplied by non-profit agencies such as a housing authority. This breakdown of demand by rent level supports Census data showing that over 50% Redmond renters are currently paying more than 30% towards housing costs.

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FIGURE 2.16: PROJECTED NEW OWNER UNIT DEMAND Ownership 25% # of % of Price Range Income Range Cumulative Households Total 19% 19% 20% 18% $0k - $80k 571 Less than $15,000 11.3% 11.3% 15% $80k - $130k 960 $15,000 - $24,999 19.0% 30.3% 15% 13% 11% $130k - $190k 742 $25,000 - $34,999 14.7% 45.0% 10% $190k - $220k 889 $35,000 - $49,999 17.6% 62.7% $220k - $350k 982 $50,000 - $74,999 19.5% 82.1% 5% 3% 1% $350k - $400k 641 $75,000 - $99,999 12.7% 94.8% 1% 0% 0% $400k - $500k 149 $100,000 - $124,999 3.0% 97.8% $500k - $600k 35 $125,000 - $149,999 0.7% 98.5% $600k - $710k 55 $150,000 - $199,999 1.1% 99.6% $710k + 22 $200,000+ 0.4% 100.0% Totals: 5,045 % of All: 59.6% Price Range

FIGURE 2.17: PROJECTED NEW RENTAL UNIT DEMAND Rental 30% 28% # of % of Rent Level Income Range Cumulative 24% Households Total 25%

$0 - $380 814 Less than $15,000 23.8% 23.8% 20% 18% $380 - $620 952 $15,000 - $24,999 27.8% 51.6% 16% 15% $620 - $870 541 $25,000 - $34,999 15.8% 67.4% 10% $870 - $1050 602 $35,000 - $49,999 17.6% 85.0% 10% 4% $1050 - $1510 343 $50,000 - $74,999 10.0% 95.0% 5% 1% $1510 - $1700 145 $75,000 - $99,999 4.3% 99.3% 0% $1700 - $2130 20 $100,000 - $124,999 0.6% 99.9% $2130 - $2550 4 $125,000 - $149,999 0.1% 100.0% $2550 - $3410 0 $150,000 - $199,999 0.0% 100.0% $3410 + 0 $200,000+ 0.0% 100.0% Rent Range Totals: 3,422 % of All: 40.4%

All Households Source: Johnson Reid LLC 8,467

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III. STUDY AREA CONDITIONS

This section discusses initial review of properties in the study area and a discussion of potential for future housing development.

A. Downtown Redmond Urban Renewal District

The study area consists of the boundaries of the Downtown Redmond Urban Renewal District (URD) in Central Redmond. The district includes key areas in Redmond including the historic Downtown and Central Business District, the St. Charles Medical Center to the north, and the 5th and 6th Street commercial corridor. It also includes industrial and residential lands to the east of Highway 97. (See Figure 3.1)

This area has been the focus of extensive study in recent years, before and after the most recent URD boundary amendment in January of 2011. In late 2010, a survey of the area and assessment of blight conditions was conducted. This housing analysis seeks to leverage that recent inventory work, without duplicating efforts.

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FIGURE 3.1: STUDY AREA BOUNDARIES AND ZONING

SOURCE: City of Redmond, “Downtown Redmond Urban Renewal Plan Update”, 2011

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The study area is covered by ten different zoning designations, including residential, commercial and industrial zones. These zones apply differing permissions and limitations on residential development (Figure 3.2).

FIGURE 3.2: ZONING AND PERMITTED RESIDENTIAL FORMS Single ZONE Townhome Duplex 3-4 plex 5+ Units Family

R4 General Residential P C P C C R5 High Density Res. P P P P P MULW Mixed Use Live/Work N P P P P C1 Strip Service Comm. N N N C C C2 CBD Commercial N N N P P C3 Special Service Comm. N N N C C C4 Limited Service Comm. N N N C C M1 Light Industrial N N N N N M2 Heavy Industrial N N N N N PF Public Facility N N N N N

SOURCE: City of Redmond, Johnson Reid LLC

Figure 3.1 shows the geographic coverage of these zones in the study area.

. The R5 High Density Residential zone permits all types of residential development, while the other zones permit some types, while limiting others. The R4 and MULW zones, located in the Eastern/Central subarea to the east of Highway 97, both allow a variety of residential forms. The C2 Central Business District Commercial zone covers the largest portion of the study area and allows denser types of attached housing. These zones (R5, R4, MULW, and C2) are likely to be the key opportunity areas for future housing development in the study area.

. The C1 and C3 zones (northwestern part of the study area), and the C4 zone (small western section at Highway 126 Gateway), allow residential development under some conditions, but are not expected to include much new housing as currently envisioned. The C1 zone covers an existing strip commercial stretch of NW 6th Street arterial, which will likely be inappropriate for housing development, or at least not optimal given the availability of sites in more residential areas. The C3 zone covers the Business/Medical District which is currently being planned around the St. Charles Medical Center. This master planned area is envisioned to include residential uses in the southern portion which is covered by the R5 zone, but mostly office and institutional uses in the C3 portion. However, some assisted living or hospice housing is possible near the medical complex. The C4 zone includes some legacy residential uses, but is small in size and located between two relatively busy commercial streets.

. The two industrial zones, and the Public Facility zone, do not permit residential development, and therefore these sites are of minor importance to this housing analysis.

As stated above, the following zones are likely to be the key opportunity areas for housing redevelopment in the study area: C2 (pink central), R5 (dark red), R4 (light orange) and MULW (central blue).

City of Redmond | Housing Need Analysis 31

December 2012 Multi-FamilyHousing

Permitted Conditional PermittedNot

NITS

U

5+

EVELOPMENT OF OF EVELOPMENT

D

AMILY AMILY

F

-

ULTI

M AND AND

,

OMES

H

AMILY AMILY

F

INGLE INGLE S Single Family Housing Single Family

Permitted PermittedNot

ERMIT ERMIT

P

HICH HICH

W

AXLOTS AXLOTS

T

3.4:

IGURE

F SOURCE: City of Redmond, Johnson Reid LLC Reid Johnson of SOURCE:City Redmond,

City of Redmond | Housing Need Analysis 32

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B. Housing Development Opportunities

This section discusses initial findings of housing potential in the study area. Subsequent phases of this project will include more in-depth analysis of redevelopment potential based on financial parameters such as real market property value, achievable rents and sales pricing.

Figure 3.5 shows parcels which are vacant or partially vacant within the study area. This data is from the 2010 blight inventory, with a small number of edits based on new observations. However, there were not many edits, meaning that the most of the underdeveloped land identified previously remains undeveloped. Parcels in zones which are not primarily residential, are shaded darker in the following map.

FIGURE 3.5: VACANT AND PARTIALLY VACANT PARCELS

Vacant

Partial Vacant

Improved*

Shaded = Non Res. Zone

SOURCE: City of Redmond, Johnson Reid LLC

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. Many of the largest vacant or underbuilt properties are in the north industrial area, which does not permit residential development, and in the C3 area of the Medical Center where housing development is unlikely under current plans.

. Significant infill candidates remain within the Downtown core itself, and the Eastern/Central subarea to the east. In the core, many of these parcels are currently parking lots of varying age and quality. As is common in historically built-out town centers, most of the vacant sites are relatively small, making them candidates for individual infill developments rather larger master- planned development.

. There is also development potential in the R5 area, south of the Medical Center. This area is included in the Business/Medical District planning area, with an emphasis on higher density development in the future.

. The R5 area in the northeast of the study area is largely built-out with fairly recent development. It is a poor candidate for future housing development for many decades.

. Some infill parcels exist around the Fred Meyer development. Given surrounding uses and proximity to the highway, these are likely best suited for commercial development.

Redevelopment Opportunities Vacant and partially vacant parcels represent the “low hanging fruit” as development sites, but redevelopment of sites which are currently built out with low value and/or obsolete properties will provide additional redevelopment opportunities over time. In the study area, many such opportunities exist within the Core and the MULW and R4 zones to the east of the highway.

. The R5 zone which runs through the central portion of the study area, between NW 4th Street to the west and Highway 97 to the east (see Figure 3.3), features some old and lower-value housing stock. Much of it was built before 1970. Much of this housing stock may have good potential for redevelopment over time. Being in the R5 zone, these parcels allow higher density and potentially more valuable housing types. Redevelopment of this area over time could add density and quality to Redmond’s core. Because these parcels are small and under fractured ownership, redevelopment here is likely to occur over time rather in large “catalyst” development.

. Across Highway 97, the R4-zoned area has similar development pattern as that described above, however, much of the housing was built more recently, and is also farther from the amenities of Downtown. It will have lower immediate redevelopment potential within the next 20 years.

. The MULW zoned area adjacent to the R4 zone has greater redevelopment potential. Historically under industrial and commercial uses, it features larger parcels, many of which are vacant or built to low density. These are potentially more attractive as development sites. The live/work units envisioned in this area would be a new housing type in Redmond, and subsequent phases of this housing study will assess the opportunities and barriers for achieving this development type in this location.

. Finally, in the Downtown core itself many parcels are currently developed, but with aging, low density, and/or low value uses. These sites, in conjunction with vacant parcels, will provide opportunities for infill development in the core. The core area will provide the greatest

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opportunity for high-visibility new residential or mixed-use development with the ability to increase the profile of housing in central Redmond, and provide a benchmark for other development. Given the limited resources of the Urban Renewal program to apply to housing projects, the Downtown core is a strong candidate for public/private partnerships on housing.

A subsequent phase of this analysis will include financial analysis to determine the likelihood of redevelopment in these areas over time.

City of Redmond | Housing Need Analysis 35

MEMORANDUM DATE: January 25, 2013

TO: Jon Williams CITY OF REDMOND

FROM: Brendan Buckley JOHNSON REID LLC

SUBJECT: Neighborhood and Site Prioritization

This memorandum discusses the housing development and redevelopment potential of submarkets within the study area. Opportunities and constraints for housing development within the submarkets are discussed, and potential opportunity sites are identified.

GENERAL OVERVIEW

The study area includes areas in a range of zoning designations, including some industrial zones which do not permit residential development. Figure 1 summarizes where and what types of residential development is and is not permitted, as the basis for considering areas of prospective housing development in the future.

FIGURE 1: ZONING AND PERMITTED RESIDENTIAL FORMS Single ZONE Townhome Duplex 3-4 plex 5+ Units Family

R4 General Residential P C P C C R5 High Density Res. P P P P P MULW Mixed Use Live/Work N P P P P C1 Strip Service Comm. N N N C C C2 CBD Commercial N N N P P C3 Special Service Comm. N N N C C C4 Limited Service Comm. N N N C C M1 Light Industrial N N N N N M2 Heavy Industrial N N N N N PF Public Facility N N N N N

SOURCE: City of Redmond, JOHNSON REID LLC

Figure 2 presents this information geographically for the study area. Those parts of the study area which allow single-family detached housing also allow some form of multi-family housing. Other areas (shown in orange) allow only some form of attached housing, either outright, or conditionally. Areas presented in gray do not permit housing.

319 SW WASHINGTON STREET, SUITE 1020 PORTLAND, OR 97204503/295-7832 503/295-1107 (FAX)

FIGURE 2: PERMITTED RESIDENTIAL FORMS, STUDY AREA

Maple Ave

Street

6th Hwy 97 Hwy Antler Ave

Evergreen Ave

Highland Ave

Street 5th

SFR and MFR permitted

Veterans Way MFR permitted

No Housing Permitted

SOURCE: City of Redmond, JOHNSON REID LLC

Figure 3 presents the estimated real market value (RMV) per square foot of properties within the study area, based on assessments of value from the Deschutes County Assessor’s office. The real market value is the combined value of the land, and any improvements on it. By measuring value on a per-square-foot basis, we can compare value among properties of differing size and intensity of development.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 2

The areas with the lowest value per square foot are presented in dark to light green. These are the areas where development is most likely to occur due to the greater affordability of the land to the developer (all other considerations aside). The areas presented in yellow to red have escalating estimated property value, making them less affordable development sites for a prospective developer.

FIGURE 3: REAL MARKET VALUE PER SQUARE FOOT, BY TAXLOT STUDY AREA

Maple Ave

Street

6th Hwy 97 Hwy Antler Ave

Evergreen Ave

Highland Ave RMV/Sq.Ft.

Street $0 - $5

5th $6 - $10

$11 - $15 $16 - $20 Veterans Way $21 - $30 $31 +

SOURCE: City of Redmond, JOHNSON REID LLC

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 3

The map reveals some clear areas of higher and lower value throughout the study area. Lower value areas include the vertical area stretching from the medical center complex in the north, southward through the R5 residential area between Highway 97 and 4th Street. The area to the east of the highway between Antler and Evergreen also has lower estimated values. The downtown area to the west of 4th Street, including the commercial core tends to have higher property values, though some lower-value sites are interspersed throughout the area, representing potential infill opportunities.

Initial feasibility analysis indicates that properties with a RMV/s.f. of roughly $10 or lower may be appropriate for duplex/townhome type development (dark to light green). Areas of value $18 or lower may be appropriate for Type V multi-family construction with surface parking (yellow to orange). (Type V construction is represented by garden-style apartments served by surface parking. See accompanying Feasibility Technical Memo.)

Separate submarkets are discussed in more detail below.

STUDY AREA SUBMARKETS

Figure 4 on the following page identifies specific housing submarkets in the study area, followed by discussion of housing development potential over the coming 20-year period. These submarkets have been identified based on distinctions in current land use, zoning, and physical separation. The boundaries of these areas are not hard and fast, but provide a framework for discussing the different dynamics in the study area.

1) Northeast R5 Area 2) Medical District 3) Midtown 4) Downtown Core 5) Eastside 6) South Commercial

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 4

FIGURE 4: POTENTIAL HOUSING SUBMARKETS, STUDY AREA

Maple Ave

Street 1 2 6th

3 Hwy 97 Hwy Antler Ave 5 4 Evergreen Ave

Highland Ave Street

1 Northeast R5 Area 5th 2 Medical District 6 SFR and 3MFR permittedMidtown 4 Downtown Core Veterans Way MFR permitted 5 Eastside No Housing6 PermittedSouth Commercial

SOURCE: City of Redmond, JOHNSON REID LLC

The general characteristics of these areas are summarized below, followed by more detailed discussion on specific potential development opportunities.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 5

1) Northeast R5 Area

This submarket consists of a single family detached subdivision, much of which was built out in the last decade. With all lots developed, the potential of this area for redevelopment or infill in the coming decades is low. Due to the size of the lots, fragmented ownership, and distance from the city core, this neighborhood is likely to remain single-family detached for the foreseeable future.

Redevelopment and Infill Potential: Low

2) Medical District

This area has recently been master planned as a medical services district centered on the St. Charles Medical Center. The district will include medical office and related uses, as well as some residential uses. The northern two thirds of the district is covered by the C1 and C3 zones, which would include mostly office and institutional uses. However, some assisted living or hospice housing is possible in this area as well. With large remaining vacant parcels in this northern portion, there is significant development potential here if such residential uses are demanded by the medical community.

The southern portion of the district is covered by the R5 zone and features many large underbuilt properties with relatively low valuations. This represents one of the best opportunities in the study area to add larger multi-family housing development over the next 20-years. The large parcels give the ability to develop residential structures set back from NW 5th Street arterial. The master plan forecasts dense residential uses in this area.

Redevelopment and Infill Potential: Mid- to High

3) Midtown

This submarket lays between the Medical District to the north, and the Downtown core to the south. It is split vertically by two different zones. R5 High Density Residential zone to the east, and the C2 CBD Commercial zone on the west.

The C2 zone in this section of the study area straddles the NW 5th Street and NW 6th Street couplet which used to be the route of Highway 97 through Downtown Redmond. Since Highway 97 was rerouted to the east, these streets function as main north/south arterials through the city, but carry much less traffic then previously. The area is largely dominated by auto-oriented commercial uses one would expect along a previous highway route, or major arterial route. This zone permits residential uses of three or more units. As a location for future residential development it faces some challenges. The current character of NW 5th and 6th in this area as an established commercial strip will present some perception challenges to switching to residential uses, particularly if other opportunities exist in less

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 6

commercial and auto-oriented locations. In addition, this area features some higher property values on average, than other parts of the study area. Residential redevelopment in this area may be dependent on such development happening in adjoining areas first, and spreading this area over time.

The R5 section of the Midtown submarket to the east has good redevelopment potential over time. While this area is largely built out as a single-family neighborhood, many homes here are aging, feature large lots, and have low property values. In contrast to C2 zone to the west, this area is more residential in character, though it is just two or three standard blocks in width. The combination of low value and large lots, with zoning that allows for greater density, makes this area a good candidate for infill redevelopment over time.

Redevelopment and Infill Potential: Low (C2 section); Mid- to High (R5 section)

4) Downtown Core

This submarket includes the area south of West Antler Ave., west of the Highway, and north of SW Glacier Ave. It includes the historic downtown core of Redmond and the surrounding blocks. This area is the densest in compact use of blocks, and the types of urban amenities available within a walkable distance. It is the natural town center.

The area features relatively high property values though the historic downtown area along NW 5th and 6th. These blocks will feature some opportunities for creative reuse of existing buildings, but few outright redevelopment opportunities without additional incentive to developers.

The blocks surrounding the historic core of 5th and 6th Streets feature many commercial and small office uses, with older housing stock mixed in. Some potential small-lot infill opportunities exist in the heart of this area. The lot sizes will limit the scope of infill projects, while few opportunities for large-lot development exist.

The west side of the Downtown submarket between roughly 4th Street and the Highway features an older single-family neighborhood, which offers redevelopment potential similar to that discussed on the Midtown section above.

South of these residential areas is an industrial area including the Eberhard Dairy facility. While these industrial blocks are relatively low-density and low-value, they are likely to feel little redevelopment pressure in the near-term because they area also well-situated near the highway for warehousing and other transportation uses. Many of these yards are currently used for truck storage. The dairy operation has expressed its intention to remain and expand in this area. Over time, as the Downtown core increases in desirability as a residential location, market pressure may build on these property owners to redevelop some of these properties.

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Redevelopment and Infill Potential: Medium (core infill); Mid- to High (fringe residential uses in northeast and northwest of submarket.)

5) Eastside

The eastside submarket is located east of Highway 97, between Antler Ave. to the north and Evergreen Ave. to the south. The area is also binary in character, with industrial uses near the highway and rail line to the west, and single-family homes on the east side. This area features many lower-value properties in both the industrial and residential sections.

The industrial section is zoned to allow live/work units, a housing type not currently found in Redmond. (Though many Redmond residents no doubt work from home in some capacity, units designed specifically for this shared use would be new to the market.) The greatest challenge for achieving this type of development in the area is the potential negative impacts of industrial users in the area, which can include smoke, dust, noise, fumes and truck traffic. The parcels nearest the highway and rails are likely to remain industrial to take advantage of this transportation infrastructure. However, there are some industrial parcels in the center of the submarket, nearest the residential area which may be candidates for redevelopment.

This type of infill will face the same obstacles as redevelopment of the residential area to the east. While these homes include some low-value, low-density uses of the lots, redevelopment to denser forms may be hampered by the lack of amenities in the area. The downtown core, with commercial, dining and entertainment amenities, is more than one half miles from this residential neighborhood, and separated by the highway. Live/work units, which are often used for service or personal care businesses may be a better fit in the core, or near the core, rather than in this more isolated location.

This neighborhood may be a good candidate for some denser infill over time (i.e. low-value manufactured homes replaced by duplex), but may not be the best focus for public efforts in the study area, until more central areas are established with residential redevelopment.

Redevelopment and Infill Potential: Low (industrial area); Medium (R4 residential section)

6) South Commercial

The commercial area south of Glacier Ave. is not a strong candidate for residential redevelopment. It is dominated by large retailers Fred Meyer and Lowes, and the types of smaller commercial users which tend to locate nearby these large retailers. While some residential uses persist between Highland Ave. and Glacier Ave., this strip will increasingly attract commercial users due to traffic volumes and auto-orientation. Overall, this submarket is not a strong candidate for residential development and likely not the best target for policy initiatives to encourage it.

Redevelopment and Infill Potential: Low

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HOUSING REDEVELOPMENT FOCUS AREAS

JOHNSON REID identifies the following specific areas of residential opportunity within the study area. These areas feature some combination of attractive property values for redevelopment, large potential sites, or (in the case of the core) strategic importance in establishing residential uses in the Downtown area.

FIGURE 5: HOUSING OPPORTUNITY AREAS

Maple Ave

Street 6th

Multi-family Opportunity

Densification Opportunities

Urban Infill 97 Hwy Opportunities Antler Ave

Evergreen Ave

Modest Redev. Highland Ave Opportunities RMV/Sq.Ft.

Street $0 - $5

5th $6 - $10

$11 - $15 $16 - $20 Veterans Way $21 - $30 $31 +

SOURCE: City of Redmond, JOHNSON REID LLC

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 9

South Medical District The area at the south end of the Medical District offers a collection of low-density, low property value properties with infill potential as multi-family development. The area is zoned for high- density residential use, and is also envisioned this way in the recent Medical District Master Plan.

The following figure shows the general area in which these opportunities exist. Some of these properties have more recent or higher value uses, and therefore not all of these properties are good candidates for redevelopment. But there are many large vacant, or partially vacant, parcels throughout this area.

FIGURE 6: MEDICAL DISTRICT RESIDENTIAL SITES

SOURCE: Google Earth

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 10

The site has the advantage of offering large residential sites with high-density zoning, which are lacking in most of the study area. These parcels are among the few which could accommodate a large new apartment complex, and even multiple such complexes.

Multi-family housing at this location would be largely auto-oriented. While some commercial amenities exist in the immediate area, many other types of shopping and services would require use of a car or transit. The location is conveniently located to the medical district, and about .75 miles from the Downtown core. The area represents best opportunity to add a large concentration of new residents to the study area. Current property valuation would likely support garden-style apartments, with surface parking.

FIGURE 7: R5 RESIDENTIAL AREA Midtown R5 Residential Area The area of midtown zoned R5 presents opportunities for residential redevelopment near the central city. The area features many older homes, some on large lots which can accommodate many more units under the R5 zone. Infill and redevelopment opportunities may be good here over time if demand and amenities make the area attractive.

To the north end of this area there are homes of 1920’s vintage on lots in the 12,000 to 13,000 square foot range. Under R5 zoning, these lots could hold as many as five units. Smaller lots in the area could hold duplex or triplex developments. Rentals or for-sale townhomes may be appropriate as infill development in this area.

The southern portion of this area is within walking distance of the Downtown core and civic center.

Based on property values, this area may be the best contiguous redevelopment opportunity area over the coming decades, as prices and rent levels rise, and amenities grow in the core.

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Eastside The mixed industrial and residential area to the east of Highway 97 has moderate redevelopment potential. While the residential area has low property values and many manufactured homes which make for easy redevelopment opportunities, the area is removed from the city core, and the narrative for revitalization of this area is less compelling than in areas nearer Downtown.

The industrial area on the west side, bordering the highway and rail has low redevelopment potential because this location remains attractive for industrial users seeking access to the transportation infrastructure. The transition areas in the middle may be more attractive for multi-family development, or live/work development as envisioned.

FIGURE 7: EASTSIDE LIVE/WORK AND RESIDENTIAL AREA

SOURCE: Google Earth

Live/work units as they have been achieved in Oregon (mostly in Portland) tend to be oriented to commercial uses which are not particularly industrial in nature. Live/work units typically follow a townhome format, with office/commercial space on the ground floor, oriented to the

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 12

street. This space may be used to offer personal care services such as beauty salon, massage or therapy, or to offer commercial services to walk-in customers such as legal or real estate services. Other users may be creative businesses such as web or graphic design. These business types are better suited to the area of the Downtown core in Redmond, rather than this more industrial area. On the other hand, this area may offer live/work opportunities for more hands- on users such as artists and craftsmen who do fabrication work in their studio. This is an unproven product type in Redmond and may take education or incentives to encourage in this area.

The residential area here is most likely to redevelop over time either with new higher-quality single-family homes, or small attached projects such as duplexes. With this an add residential density near the central city, it may not be the best target for policy and incentive programs, particularly considering better prospects in the R5 “midtown” area discussed above.

Downtown Core The Downtown Core area is mostly developed with a range of commercial, civic and residential uses. The opportunities to add housing in this area will largely come from infill development on smaller parcels. There are some opportunities to fill in larger parcels such as parking lots, or mostly vacant lots.

Figure 8 shows some of these potential infill opportunities in Downtown Redmond. This is not an exhaustive inventory, as other small lots with redevelopment potential are scattered throughout the area. This inventory includes many parking lots in the area. While area businesses may be reluctant to give up off-street parking spaces, it is possible that new parking strategies could help mitigate the impact, and make it attractive to reuse these well-located parcels for development.

Some City-owned property is included here as well. The redevelopment potential of this obviously will hinge on the City’s needs for the land and facilities. However, if the city chooses to relocate in the future to Evergreen Elementary School or other facility, the current parking lot and City offices should be considered as a large potential site for a catalyst project in the heart of the Downtown core. Reuse of this site for residential development could generate residential density and set the tone for development standards in the area.

On the north end, residential blocks are highlighted. Ownership of these blocks is fragmented, so they are unlikely to redevelop as a single area. Infill development of new single-family, duplex or townhome housing is more likely.

The Downtown core presents the greatest concentration of walkable urban amenities, including parks, shops and restaurants, commercial services and civic services. This is the most natural area for renewed interest for housing in the central city to develop. The combination of small parcels and higher average property values present some challenges, but opportunities exist if this area is prioritized.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 13

Many properties in this area average $20 or more per square foot in value, making properties somewhat expensive for the types of attached unit housing which are currently viable based on market rent. However, there are some properties throughout the area which are $15 or below per square foot in value, and these can present infill opportunities.

FIGURE 8: DOWNTOWN REDMOND, INFILL OPPORTUNITIES

SOURCE: Google Earth

CONCLUSIONS

 Analysis of the study area based on permitted uses, vacancy and estimated property values help narrow down those areas where residential redevelopment is most likely to occur.  Initial estimates of feasibility indicate the current rent levels in the area should support development of some attached housing types from townhomes up to garden apartments.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 14

 Sites for building large apartment complexes are rare, and the best prospective area is in the north end of the R5 zone, which is also the south end of the Medical District.  The R5 zone in the middle of the study area presents some infill and densification potential due to aging low-density uses on large lots. This type of redevelopment would likely involve the piecemeal development of three-, four- and five unit developments over time.  The Eastside submarket offers more difficult redevelopment opportunities because the legacy industrial and residential uses will face little economic pressure to redevelop, particularly if more attractive residential areas exist closer to the core.  The Downtown Core presents few obvious large-lot development opportunities. This are is largely developed and blocks are generally partitioned and under multiple ownership. However, infill opportunities do exist, and this is the area where a high- profile catalyst project would likely have the greatest impact in establishing the study area as a desirable residential location, due to the proximity of amenities.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 15

MEMORANDUM DATE: February 26, 2013

TO: Jon Williams CITY OF REDMOND

FROM: Jerry Johnson JOHNSON REID LLC

SUBJECT: Predictive Residential Development Model Description

This memorandum outlines the general framework of the predictive development model developed for the characterizing the dynamics of residential development in the downtown study area.

GENERAL OVERVIEW

Our approach to this assignment was to develop a “production” model, which mimics a developer’s decision tree and solves for the highest and best use residential development form. We use a pro forma based predictive model to generate predominant residential development profiles for a series of delineated subareas. This model evaluates highest and best use development forms under a range of assumptions, based on the implied residual property value1 under each use. This allows us to calculate the likely predominant development form within a series of geographic subareas.

This section outlines the characteristics of the production model developed, and the relationship between changes in assumptions and key variables and predicted development form. As this project evolves, additional work will be done to quantify to the extent possible price premiums associated with a range of factors, primarily based on literature review and previously completed analysis by Johnson Reid. A key output of this work will be the identification of the marginal impact of a range of potential public actions on the anticipated form and magnitude of development activity.

The model can be broken up into three primary categories that are determinative of final development form: achievable pricing, cost to develop, and threshold returns.

In addition to describing current market dynamics, a key objective of this model is to develop a theoretical construct within which to evaluate the impact of a range of public investments and actions on the anticipated form of development. The analysis will assess the level to which investments such as public parks or streetscape can change achievable residential pricing, which the model can convert into a marginal anticipated impact on development form using a development model approach (production model). Public investments and actions can have a significant impact on pricing, the cost to develop as well as threshold returns.

1 Residual Property Value reflects the maximum supportable acquisition value of the property under an assumed development program.

319 SW WASHINGTON STREET, SUITE 1020 PORTLAND, OR 97204503/295-7832 503/295-1107 (FAX)

The following is a schematic of the general range of assumptions in the model, as well as a discussion of the key components.

SCHEMATIC OF MODEL BASE PRICING Rental CAPITALIZATION RATE Secondary Market Ownership MINIMUM YIELD SPREAD Profit Component DISTRICT ADJUSTMENT Amnity Driven THRESHOLD RETURN TIME PERIOD Current Market Future Periods

ACHIEVABLE PRICING ENTITLEMENT SCREEN Zoning

MARKET SCREEN Demand Match

BUILDING TYPE Mid Rise w/Podium RESIDUAL PROPERTY VALUE Mid Rise w/Podium Type V w/Podium Type V w/Podium Type V w/Surface Type V w/Surface Duplex/Townhome Duplex/Townhome ZLL/ HD Detached ZLL/ HD Detached

HARD COSTS RS Means Median HIGHEST AND BEST USE

SOFT COSTS Architectural Engineering Fees/Permits Financing Taxes

COST TO DEVELOP

ACHIEVABLE PRICING

Achievable pricing in the market is the variable that has the most significant impact on development form. The model approaches pricing at a geographic district level, and then allows for additional adjustments to pricing based on anticipated changes within the district. Current achievable pricing can be determined with a considerable level of reliability, but pricing would be expected to shift over time.

Current achievable pricing can be established for both rental and ownership housing at the regional level using readily available sources of current market information. The variables in the model are based on an assumed achievable price per square foot for rental as well as ownership product. Adjustments by district are based on professional opinion, and can be modified as additional information becomes available.

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 2

COST TO DEVELOP

Cost to develop is another key determinant on final development forms. For this analysis, we chose four alternative development forms:

Development Form Description Example Photo Mid-Rise Also steel and concrete construction, but limited in height to 4-7 stories. These are seen locally in early urban projects, or areas in which a high-rise solution is considered too large in scale. This form has not been done in Redmond to-date Type V Construction over Wood frame and/or steel Podium stud construction over a single story concrete podium. This is a common construction type on infill sites in the close-in eastside neighborhoods.

Type V Construction with Typically wood frame Surface construction with surface parking, carports or stand-alone garages. Construction is usually two to three stories high, with a density approaching 30 units per acre. This is the predominant form in most suburban contexts in the metro area.

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 3

Duplex/Townhomes Also typically wood frame, these units often have parking under the unit. Projects can be fee simple or with condominium ownership of the ground.

As a general rule, the higher density development forms have a higher cost per square foot to construct. This is offset by a greater achievable density (units/acre), which has value when the achievable price is higher than the cost of construction excluding land. When achievable pricing is below construction costs, there is no marginal value associated with the increase in density and development forms with delivery values greater than achievable pricing are deemed to be not viable.

Construction cost assumptions are derived in the model based on R.S. Means median values for the development forms evaluated. The R.S. Means numbers are based on real project experience, but are necessarily backward looking as they are based on recent experience. This can provide for some short- term bias in the estimates, but the bias will shift over time and be less significant over a longer term planning horizon.

We recognize that the basic development forms used in our analysis do not represent the full spectrum of potential outcomes, but at a district level we feel that they can adequately address what a “predominant development form” assumption and associated residual property value should be.

THRESHOLD RETURN

Achievable pricing and the cost to develop are reconciled with an assumed threshold rate of return necessary to induce development. While developers don’t always make money, their going in assumption always reflects an expectation of return to offset the risk inherent in development. Acceptable rates of return can vary considerably over time, and reflect factors such as the perceived risk associated with a particular form of real estate relative to other available returns. Not all developers calculate returns in a consistent manner, as their individual deal structures and anticipated dispositions vary.

Within the model, the “threshold return” is intended as a proxy for the expected profit necessary to induce development. Real estate development entails considerable risk, and predicted returns need to be commensurate with that risk if new development is to be assumed. As with any investment, higher perceived risks require higher expected rates of return. The following are key areas of risk in real estate development:

. Entitlement – Securing entitlements for development is often an uncertain and time consuming portion of the development process. Even when the proposed development represents an outright allowed use under the code, a project may be subject to issues such as

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 4

design review requirements and neighborhood outreach which may impact entitled uses and/or add time to the process.

. Financing – Financial commitments can be fluid during the development process, with lenders and/or equity partners backing out of deals or renegotiating terms mid-development. These players can also limit flexibility. In addition, financing commitments are subject to appraisal, which always carries risk.

. Construction – There are many risk factors associated with construction. The cost of materials can fluctuate significantly, timing delays can impact contractor availability windows, unforeseen problems may emerge during site-work, etc.

. Market – Actual achievable rent levels and/or sales prices may be significantly different than assumed at the time development was initiated. In addition, capitalization rates often shift significantly, which has a pronounced impact on income properties.

Developments that are unprecedented locally are typically considered to carry an unusual amount of risk, if not by the developer then certainly by the lender. The amount of debt financing available will be largely subject to the results of a bank-commissioned appraisal, which will have difficulty establishing a value for an atypical development form.

The primary underlying dynamics of a threshold return are largely outside of local control, and are related to variables such as available interest rates. There are two key areas of return that are significant in assessing yield, the cost of first position debt (secured by the property and often a personal guarantee) and equity (cash, or subordinated debt, which serves as equity). First position debt often has attractive interest rates, as it is considered more secure. The equity portion of financing typically has a considerably higher cost, as it has a higher level of risk.

For this analysis, we selected a measure of threshold return that is easily tracked and simple to calculate. For income properties, the threshold return is expressed as a risk spread between current market capitalization rates2 and the project’s initial return on cost at stabilization. Within the analysis, we are assuming a 2% risk spread. This allows for some dynamism by area as well as over time. Capitalization rates move substantially over time, and tend to track with outside variables such as treasury rates and financing costs. In addition, capitalization rates can vary considerably by the nature and type of product, with lower capitalization rates seen in areas perceived to represent lower levels of risk.

For the ownership residential product, the assumed threshold rate of return was set at a 15% return on sales, which reflects that the gross profit after sales commission is 15% greater than the cost of construction.

As a general rule, the threshold return is a function of returns available for other investments, and their relative perceived level of risk. Real estate is a highly cyclical industry with extended delivery times and considerable construction and market risk, and as such typically demands higher return levels. Threshold returns dropped during the last construction cycle as higher rates of leverage (allowable debt levels, which lower equity requirements) and increased non-recourse loan availability reduced perceived risk

2 A capitalization rate (cap rate) is a commonly used way to value an income property (investment property). Net operating income before taxes is divided by the cap rate to establish a market value.

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levels to developers. This is no longer the case in terms of the availability of non-recourse loans, but market rates of return have remained quite low, keeping threshold yields commensurately low.

POLICY EFFORTS

There are areas in which public policy can impact the three primary components of a highest and best use determination. The following categories reflect some policy-sensitive variables and/or market interventions, and their impact on components of the highest and best use determination:

ACHIEVABLE PRICING AMENITIES HC TRANSIT PUBLIC REALM

COST TO DEVELOP SDC WAIVERS LAND WRITE-DOWNS PARKING MANAGEMENT VERTICAL HOUSING TAX CREDITS LENDING TERMS

THRESHOLD RETURN LENDING TERMS MASTER LEASES PUBLIC INVESTMENTS

HIGHEST AND BEST USE

Each of these areas of market intervention can change the highest and best use determination, and subsequently the prevailing form of development assuming it is consistent with local entitlements. The marginal impact of any particular policy measure can be addressed using the methodological construct outlined in the model, and will vary substantially by geographic area.

INCIDENCE

A key consideration in evaluating public interventions in the development market is the concept of “incidence”. Incidence is a common concept in economic disciplines such as tax theory, and relates to who actually pays or benefits from a particular policy. In the case of market interventions, it is important for jurisdictions or agencies to understand the impact of their actions. Over time, the market will capitalize a subsidy into factors such as land value.

Many areas with a substantial record of market intervention have altered local market conditions as a result of the likelihood of intervention in future projects. An area that cuts development cost by waiving SDCs or offsite requirements may find that land values are subsequently higher to reflect the availability of lower construction costs in that area. This can offset the marginal advantage offered by the public intervention, and reduce its usefulness over time.

If the policy objective for market intervention is to alter the form of development, these impacts need to be understood and monitored.

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HIGHEST AND BEST USE

The underlying assumption was that development patterns would largely occur in the form determined to represent the highest and best use, defined as the development form that generated the greatest residual property value. In other words, marginal development activity would largely be consistent in form with what the model indicates would support the greatest value for the underlying property.

The highest and best use determination is based on the allowable use that has the highest indicated residual property value between the five alternative development forms and two tenure options (owner and renter). An entitlement screen is necessary, as use types identified as having the greatest residual values may not be allowable under existing zoning. This can represent either a density restriction (allowable densities are below what is market supportable), or a mandated density (minimum densities are above what is market supportable).

Another key screen that should be monitored is what is referred to as a “market screen”. While the analysis is likely to identify a use as the highest and best use in an area, the market may not support full build-out in that use type. As an example, if rental residential development in Type V construction over a podium is identified as the highest and best use, it is unlikely that all new housing developments will be rental apartments, as the rental market serves approximately 35% of households in the Redmond area. If the market was completely built-out in this manner, it would likely get substantially over-built and achievable pricing would drop.

REDEVELOPMENT

The determination of residual property values also provides key input into predicting redevelopment activity. As a general rule, redevelopment is considered plausible when the residual land value under the highest and best use development scenario is equal to or greater than the estimated current value of the property, including improvements.

REDEVELOPMENT MODEL SCHEMATIC

RESIDUAL PROPERTY VALUE (PSF) MARKET VALUE PROXY (PSF) Value of Property if Redeveloped Real Market Value with Adjustments

If Residual Value > or = Market Value (PSF) If Residual Value < Market Value (PSF)

RATIONAL DEVELOPMENT/REDEVELOPMENT NOT RATIONAL DEVELOPMENT/REDEVELOPMENT Point in Time Determination: Subject to Change DEVELOPMENT PACE ASSUMPTION % of Rational Assumed Per Year Not Only Measure of "Rational" Can be Stratified Based on Relative Viability Must be Market Balanced

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 7

If the residual value is greater to or equal to the market value of the property, it is assumed to represent a rational development or redevelopment opportunity. While development and/or redevelopment is considered viable in these instances, it does not necessarily mean that it will be developed with the study time frame. There are a number of additional factors that impact redevelopment, and we assume that only a portion of opportunities identified as viable will be realized within the study horizon.

GENERAL OUTPUT

The residential development model generates a general relationship between the four basic development forms, under both a rental and ownership assumption. Within the model, achievable pricing is the independent variable while costs to development and threshold returns are givens and outside of the developer’s control. Based on the assumptions used, we can generate a simple graphic that demonstrates the basic relationship between the development forms.

As shown in the following graphic, the pro formas for the development prototypes support different residual property values under different achievable lease rates for rental residential product. Under each assumed lease rate, the development form that supports the highest residual property value is considered the highest and best use, assuming the form is entitled. As shown in the graphic, a market with achievable pricing at $1.25 per square foot would see Type V construction with surface parking as representing the highest and best use. As achievable rents approach $1.50 per square foot, Type V construction with podium parking transitions into the highest and best use. When achievable pricing assumptions move above $2.30, we see Mid-Rise products becoming the indicated highest and best use.

RENTAL RESIDENTIAL DEVELOPMENT

$250

Duplex/Townhome 0.948388035

$200 Type V w/Surface

Type V w/Podium

$150 Mid Rise

$100 RESIDUAL VALUE/S.F. RESIDUAL

$50

$0 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 $2.40 $2.60 $2.80 $3.00 LEASE RATE/S.F.

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 8

The model indicates a similar pattern for ownership residential product. In this case the transition between Type V surface parked development and Type V podium development is at an achievable sales price of around $220 per square foot.

OWNERSHIP RESIDENTIAL DEVELOPMENT

$180

1.021194567 $160 Duplex/Townhome

$140 Type V w/Surface Type V w/Podium $120 Mid Rise $100

$80

$60 RESIDUAL VALUE/S.F. RESIDUAL $40

$20

$0 $120 $170 $220 $270 $320 $370 SALES PRICE/S.F.

In both cases, the marginal benefit of the higher costs per square foot for construction are offset by greater achievable densities when achievable pricing is high enough.

The generalized relationships shown cannot account for all potential permutations associated with the cost of delivering products. There are significant economies of scale associated with many development forms, which are difficult to efficiently design and construct on small sites, or sites with topographical on configuration limitations. Conversely, there are market driven limits to the amount of product that is feasible to develop in a market, which argues against large-scale developments in markets that are insufficiently deep to support them.

DISTRICT-SPECIFIC VARIABLES

Viable development forms vary substantially throughout the downtown study area. This is primarily due to differences in achievable pricing and can be reflected in the model. While the generalized relationships between development forms remain constant, we find that geographic districts within the region vary substantially in achievable pricing, and subsequently likely predominant residential development forms.

Within the model, pricing is adjusted based on a metropolitan area norm, adjusted by geographic submarket and then by assumed amenity level. A total of four geographic submarkets are set:

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 9

. Historic Downtown . Mid-Town . Medical District . Eastside

In the current market, there is a limited discernible pricing differential associated with these districts, with much of the anticipated pricing variability expected to be associated with site specific attributes. Nonetheless, due to the scale of the district, public investments or shifts in investment patterns would be expected to vary the pricing by district.

The inclusion of an adjustment for amenity level is intended to provide flexibility in future period forecasting for assumptions with respect to shifts in achievable pricing .

SHIFTING ENVIRONMENT OVER TIME

The model is designed to account for the likelihood that key variables will shift over time, altering the fundamentals of development. While there are a wide range of variables that will impact the indicated form of development, residual land value and rate of redevelopment, the following market-driven variables have the most substantial impact:

Variable Impact Capitalization Rate The capitalization (cap) rate reflects the return assumed to be acceptable to the market for income properties such as rental apartments. This is typically highly correlated to interest rates. The cap rate also drives threshold rates of return. Rates are currently at historic lows, and increasing cap rates reduce the viability of rental apartment development. Achievable Pricing Pricing for both ownership and rental residential product is a primary driver of development form. Over time, pricing can change in real3 terms when the marketability of an area increases. For urban locations, this is typically seen when local amenities increase, perceptions of safety increase, and investment risk is perceived to be lower. Over the long term, in an expanding market achievable pricing tends to be correlated with replacement cost. In other words, when pricing is below what is necessary to support new construction, new supply halts until pricing increases. In the current Redmond market, pricing is considered to be still largely below replacement cost.

The preceding two variables incorporate the impacts of a range of other variables, including interest rates, rates of return for alternative investments, financing terms, urban amenities and perceptions of public safety. While these are largely factors outside of the City's control, there are interventions that impact the function of the market that are policy sensitive.

3 Adjusted for inflation

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 10

Many of the variables can be impacted by intentional market interventions, and those interventions can have a substantive impact on the magnitude and character of development. Potential market interventions include:

Variable Impact Urban Amenities While typically retail in nature, public agencies can influence the degree to which urban amenities are present. Interventions can include public support for tenant improvements and park/plaza space. Transit Availability The provision of transit can increase the utility of an area, as well as allowing for lower parking ratios. Pedestrian proximity to transit stops is often marketable for residential development Public Realm Public investment in items such as streetscape, pedestrian amenities Improvements and better transportation function can have a positive impact on achievable pricing , as well as potentially reducing off-site costs that could be charged to a development. Financial Assistance The financial returns can be fundamentally impacted by a wide range of actions. These include items such as fee/SDC waivers, property tax exemptions and subordinated debt. Site acquisition can also provide significant tangible impacts on viability. Entitlements To the extent that entitlements limit the ability to develop to a higher or better use, changes can increase viability.

The following table summarizes the general impact of the market interventions on the development model, and describes in broad terms the marginal direction of impact associated with these interventions.

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 11

OVERVIEW OF SELECTED MARKET INTERVENTIONS AND THEIR ANTICIPATED MARGINAL IMPACTS

Impact Intervention Description Pricing Cost Return Residual Net Impact Amenities Increased availability of amenities Yes No Some Yes Research indicates that amenities can substantially increaes achievable shifts achievable pricing and pricing, particularly for residential uses. This can change development subsequently development form form, as well as increase the likelihood of redevelopment through higher supportable land values. It should be noted that premiums for amenity types are likely to decline over time, as the marginal value of these amenities will vary by household. Transit High capacity transit, or Yes No Yes Yes Enhanced transit system performance serves as an amenity, and this type enhancements to transit access of intervention functions much like other amenities. To the extent that the and function transit investment is location specific, investors have shown an increased interest in locations proximate to fixed transit access points, which is reflected in lower yield requirements Public Realm Improvements in areas such as Yes Some No Yes Public realm improvements can improve the aesthetics as well as function streetscape of districts. This can be reflected in higher achievable pricing levels for residential and commercial uses. To the extent that these improvements remove or reduce off-site requirements for a development, it can also reduce costs. Fee/SDC Waiver or reduction in No Yes No Yes This translates into a relatively direct reduction in development costs, Waivers development impact fees which yeilds both a higher likelihood of redevelopment, and potentially a more intensive development form. Property Tax Ten year property tax exemption No Yes Some Yes Property tax exemptions are dealt with in different ways depending upon Abatement the developer. While the net impact is to reduce the operating costs and enhance net operating income (NOI) over a ten year period, most developers recognize the temporary nature of these savings. The savings can be viewed as a discounted cash flow and valued in current dollars, or as an enhancement in value by indicating a higher yeild. An abatement program can reduce equity requirements by allowing greater debt levels due to a higher NOI and better debt coverage. Entitlements Conversion of entitlements to a No No No Yes This type of intervention can substantially increase the pace of higher value land use development and/or redevelopment, assuming the new entitlement is something valued in the market. Entitlements beyond what the market can support are of little marginal value.

REDMOND DOWNTOWN HOUSING STRATEGY – DEVELOPMENT FEASIBILITY TECHNICAL MEMO PAGE 12

The model is set up to evaluate a range of prospective shifts in key variables and their impact on the form and magnitude of development/redevelopment activity in the study area. We have run the model for four future periods in addition to the current market, allowing for escalation in achievable pricing for both rental and ownership product, as well as incorporating an expectation that capitalization rates will rise 200 basis points. Our expectation is that the market will rebound for ownership residential product, while rental residential sees steady improvement in achievable pricing. The improvement in pricing over time for rental product is more than offset by the shift in cap rates, yielding a drop in indicated residual property value for rental product over the next twenty years.

The following table summarizes the baseline assumptions used in this analysis:

Base Pricing 2013 2018 2023 2028 2033 Rental Residential/$PSF/Month $1.15 $1.21 $1.27 $1.33 $1.40 Ownership Residential/$PSF $125 $138 $151 $156 $160 Cap Rate 6.00% 7.00% 8.00% 8.00% 8.00%

CONCLUSIONS

Based on current achievable pricing for both ownership and rental residential product in the City of Redmond, the local market would be expected to support primarily Type V construction with surface parking. The details of a baseline highest and best use determination for each projection period is included in Appendix A. This reflects a pure market outcome, which can be substantively impacted by market interventions that change key variables.

Under a baseline scenario that assumes no public market interventions, the development forms expected to represent the highest and best use over the next twenty years would be largely Type V construction. Residual land values are currently highest for rental apartments, but ownership housing would be expected to support higher values in the future as pricing recovers and cap rates rise.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 13

RENTAL Residual OWNER Residual Year Development Form Value/PSF Development Form Value/PSF 2013 Garden Apartments $13.82 Condo Flats - Type V $5.26 2018 Garden Apartments $15.48 Condo Flats - Type V $20.07 2023 Garden Apartments $8.94 Condo Flats - Type V $28.37 2028 Garden Apartments $13.06 Condo Flats - Type V $32.76 2033 Garden Apartments $17.43 Type V over Podium $39.72

$45

$40 OWNER

$35 RENTAL

$30

$25

$20

$15

$10

$5

$0 2013 2018 2023 2028 2033

The indicated residual values reflect maximum pricing supported under the assumed scenarios, not the market pricing. To the extent that property is available at a lower price, the market clearing price would be expect to be lower. An additional factor to consider when evaluating the viability of ownership vis-à-vis rental alternatives is the reluctance of households to take an ownership interest in emerging markets, where their investment may be perceived to have a greater level of risk.

The potential permutations for future shifts in key variables are numerous, and the intent of modeling the relationship between these variables is to allow for active testing of new assumptions and their impact on the magnitude and character of residential development in the study area. The assumptions currently in the model reflect a gradual improvement in the market, as well as a marginal increase in the marketability of the study area relative to the overall market. Specific market interventions are not considered at this time, but can be incorporated in ongoing modeling.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 14

APPENDIX A: INITIAL HIGHEST AND BEST USE OUTCOMES

CURRENT MARKET SCENARIO RENTAL OWNERSHIP Mid w/ Type V/ Type V w/ Duplex/ Mid w/ Type V Type V w/ Duplex/ Structured Podium Surface Townhome Structured On Podium Surface Townhome Program Site Size (SF) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Average Unit Size 849 865 857 1,000 852 856 857 1,000 Number of Units 62 26 7 5 61 26 7 5 Parking Spaces 62 26 9 5 76 33 9 6 Rents/Pricing AveragPricing/SF $1.27 $1.27 $1.27 $1.27 $174 $173 $173 $183 Achievable Pricing/Unit/Month $1,074 $1,095 $1,084 $1,265 Vacancy/Collection Loss 5.00% 5.00% 5.00% 5.00% Annual NOI $543,882 $232,026 $61,981 $51,739 Gross Revenue/Unit $148,125 $148,125 $148,125 $182,500 Gross Revenue $9,035,625 $3,851,250 $1,036,875 $912,500 Cost of Sales 6.00% 6.00% 6.00% 6.00% Net Revenue $8,493,488 $3,620,175 $974,663 $857,750 Construction Costs Cost/Construct/SF $154 $120 $120 $120 $169 $132 $132 $132 Cost/Construct w/o prkg. $9,999,708 $3,011,000 $722,640 $600,000 $10,999,679 $3,312,100 $794,904 $660,000 Parking Costs/Unit $27,800 $20,500 $0 $13,500 $27,800 $20,500 $0 $13,500 Total Parking Costs $1,723,600 $533,000 $0 $67,500 $2,119,750 $666,250 $0 $84,375 Total Costs $11,723,308 $3,544,000 $722,640 $667,500 $13,119,429 $3,978,350 $794,904 $744,375 Costs/Unit Excluding Land $189,086 $136,308 $103,234 $133,500 $215,073 $153,013 $113,558 $148,875 Residual Property Value Project Cost Excluding Land $11,723,308 $3,544,000 $722,640 $667,500 $13,119,429 $3,978,350 $794,904 $744,375 Project Value @ Completion $9,064,703 $3,867,094 $1,033,011 $862,315 $8,493,488 $3,620,175 $974,663 $857,750 Residual Property Value ($4,169,389) ($321,422) $138,203 $51,096 ($5,733,788) ($830,372) $52,629 $1,495 Total Project Cost w/Land $7,553,919 $3,222,578 $860,843 $718,596 $7,385,641 $3,147,978 $847,533 $745,870 Value/Cost 120% 120% 120% 120% 115% 115% 115% 115% RPV/SF ($416.94) ($32.14) $13.82 $5.11 ($573) ($83) $5 $0 Residual Value per Unit -$67,248 -$12,362 $19,743 $10,219 -$93,997 -$31,937 $7,518 $299

Highest and Best Use $13.82 $5.26 PROJECT VALUE AND COST EXCLUDING LAND RESIDUAL PROPERTY VALUE/SF RENTAL PRODUCT RENTAL PRODUCT

Townhome/Duplex Townhome/Duplex $5

Garden Apartments Garden Apartments $14

Type V over Podium Type V over Podium -$32

Midrise Midrise w/Structured -$417 w/Structured

$0 $5,000,000 $10,000,000 $15,000,000

OWNERSHIP PRODUCT OWNERSHIP PRODUCT

Townhome/Duplex Project Value @ Completion Townhome/Duplex $0 Project Cost Excluding Land Garden Apartments Garden Apartments $5

Type V over Podium Type V over Podium ($83)

Midrise w/Structured Midrise w/Structured ($573) $0 $5,000,000 $10,000,000 $15,000,000

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 15

2018 MARKET SCENARIO

RENTAL OWNERSHIP Mid w/ Type V/ Type V w/ Duplex/ Mid w/ Type V Type V w/ Duplex/ Structured Podium Surface Townhome Structured On Podium Surface Townhome Program Site Size (SF) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Average Unit Size 849 865 857 1,000 852 856 857 1,000 Number of Units 62 26 7 5 61 26 7 5 Parking Spaces 62 26 9 5 76 33 9 6 Rents/Pricing AveragPricing/SF $1.33 $1.33 $1.33 $1.33 $189 $189 $188 $199 Achievable Pricing/Unit/Month $1,128 $1,149 $1,139 $1,328 Vacancy/Collection Loss 5.00% 5.00% 5.00% 5.00% Annual NOI $571,076 $243,627 $67,638 $55,747 Gross Revenue/Unit $161,375 $161,375 $161,375 $199,188 Gross Revenue $9,843,875 $4,195,750 $1,129,625 $995,938 Cost of Sales 6.00% 6.00% 6.00% 6.00% Net Revenue $9,253,243 $3,944,005 $1,061,848 $936,181 Construction Costs Cost/Construct/SF $138 $108 $108 $108 $154 $120 $120 $120 Cost/Construct w/o prkg. $8,999,738 $2,709,900 $650,376 $540,000 $9,999,708 $3,011,000 $722,640 $600,000 Parking Costs/Unit $27,800 $20,500 $0 $13,500 $27,800 $20,500 $0 $13,500 Total Parking Costs $1,723,600 $533,000 $0 $67,500 $2,119,750 $666,250 $0 $84,375 Total Costs $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Costs/Unit Excluding Land $172,957 $124,727 $92,911 $121,500 $198,680 $141,433 $103,234 $136,875 Residual Property Value Project Cost Excluding Land $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Project Value @ Completion $9,517,938 $4,060,448 $1,127,305 $929,121 $9,253,243 $3,944,005 $1,061,848 $936,181 Residual Property Value ($3,924,810) ($342,580) $154,842 $56,158 ($4,073,161) ($247,680) $200,706 $129,696 Total Project Cost w/Land $6,798,527 $2,900,320 $805,218 $663,658 $8,046,298 $3,429,570 $923,346 $814,071 Value/Cost 140% 140% 140% 140% 115% 115% 115% 115% RPV/SF ($392.48) ($34.26) $15.48 $5.62 ($407) ($25) $20 $13 Residual Value per Unit -$63,303 -$13,176 $22,120 $11,232 -$66,773 -$9,526 $28,672 $25,939

Highest and Best Use $15.48 $20.07 PROJECT VALUE AND COST EXCLUDING LAND RESIDUAL PROPERTY VALUE/SF RENTAL PRODUCT RENTAL PRODUCT

Townhome/Duplex Townhome/Duplex $6

Garden Apartments Garden Apartments $15

Type V over Podium Type V over Podium -$34

Midrise Midrise w/Structured -$392 w/Structured

$0 $5,000,000 $10,000,000 $15,000,000

OWNERSHIP PRODUCT OWNERSHIP PRODUCT

Townhome/Duplex Project Value @ Completion Townhome/Duplex $13 Project Cost Excluding Land Garden Apartments Garden Apartments $20

Type V over Podium Type V over Podium ($25)

Midrise w/Structured Midrise w/Structured ($407) $0 $5,000,000 $10,000,000 $15,000,000

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 16

2023 MARKET SCENARIO RENTAL OWNERSHIP Mid w/ Type V/ Type V w/ Duplex/ Mid w/ Type V Type V w/ Duplex/ Structured Podium Surface Townhome Structured On Podium Surface Townhome Program Site Size (SF) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Average Unit Size 849 865 857 1,000 852 856 857 1,000 Number of Units 62 26 7 5 61 26 7 5 Parking Spaces 62 26 9 5 76 33 9 6 Rents/Pricing AveragPricing/SF $1.39 $1.39 $1.39 $1.39 $206 $206 $205 $217 Achievable Pricing/Unit/Month $1,184 $1,207 $1,195 $1,395 Vacancy/Collection Loss 5.00% 5.00% 5.00% 5.00% Annual NOI $599,630 $255,808 $71,020 $58,535 Gross Revenue/Unit $175,872 $175,872 $175,872 $217,466 Gross Revenue $10,728,184 $4,572,669 $1,231,103 $1,087,328 Cost of Sales 6.00% 6.00% 6.00% 6.00% Net Revenue $10,084,493 $4,298,309 $1,157,237 $1,022,088 Construction Costs Cost/Construct/SF $138 $108 $108 $108 $154 $120 $120 $120 Cost/Construct w/o prkg. $8,999,738 $2,709,900 $650,376 $540,000 $9,999,708 $3,011,000 $722,640 $600,000 Parking Costs/Unit $27,800 $20,500 $0 $13,500 $27,800 $20,500 $0 $13,500 Total Parking Costs $1,723,600 $533,000 $0 $67,500 $2,119,750 $666,250 $0 $84,375 Total Costs $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Costs/Unit Excluding Land $172,957 $124,727 $92,911 $121,500 $198,680 $141,433 $103,234 $136,875 Residual Property Value Project Cost Excluding Land $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Project Value @ Completion $9,993,835 $4,263,471 $1,183,670 $975,577 $10,084,493 $4,298,309 $1,157,237 $1,022,088 Residual Property Value ($4,477,191) ($578,231) $89,418 $2,236 ($3,350,334) $60,410 $283,653 $204,398 Total Project Cost w/Land $6,246,147 $2,664,669 $739,794 $609,736 $8,769,125 $3,737,660 $1,006,293 $888,773 Value/Cost 160% 160% 160% 160% 115% 115% 115% 115% RPV/SF ($447.72) ($57.82) $8.94 $0.22 ($335) $6 $28 $20 Residual Value per Unit -$72,213 -$22,240 $12,774 $447 -$54,924 $2,323 $40,522 $40,880

Highest and Best Use $8.94 $28.37 PROJECT VALUE AND COST EXCLUDING LAND RESIDUAL PROPERTY VALUE/SF RENTAL PRODUCT RENTAL PRODUCT

Townhome/Duplex Townhome/Duplex $0

Garden Apartments Garden Apartments $9

Type V over Podium Type V over Podium -$58

Midrise Midrise w/Structured -$448 w/Structured

$0 $5,000,000 $10,000,000 $15,000,000

OWNERSHIP PRODUCT OWNERSHIP PRODUCT

Townhome/Duplex Project Value @ Completion Townhome/Duplex $20 Project Cost Excluding Land Garden Apartments Garden Apartments $28

Type V over Podium Type V over Podium $6

Midrise w/Structured Midrise w/Structured ($335) $0 $5,000,000 $10,000,000 $15,000,000

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 17

2028 MARKET SCENARIO RENTAL OWNERSHIP Mid w/ Type V/ Type V w/ Duplex/ Mid w/ Type V Type V w/ Duplex/ Structured Podium Surface Townhome Structured On Podium Surface Townhome Program Site Size (SF) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Average Unit Size 849 865 857 1,000 852 856 857 1,000 Number of Units 62 26 7 5 61 26 7 5 Parking Spaces 62 26 9 5 76 33 9 6 Rents/Pricing AveragPricing/SF $1.46 $1.46 $1.46 $1.46 $215 $214 $214 $226 Achievable Pricing/Unit/Month $1,244 $1,267 $1,255 $1,464 Vacancy/Collection Loss 5.00% 5.00% 5.00% 5.00% Annual NOI $632,388 $269,763 $74,974 $61,685 Gross Revenue/Unit $183,560 $183,560 $183,560 $226,401 Gross Revenue $11,197,145 $4,772,554 $1,284,918 $1,132,007 Cost of Sales 6.00% 6.00% 6.00% 6.00% Net Revenue $10,525,316 $4,486,200 $1,207,823 $1,064,086 Construction Costs Cost/Construct/SF $138 $108 $108 $108 $154 $120 $120 $120 Cost/Construct w/o prkg. $8,999,738 $2,709,900 $650,376 $540,000 $9,999,708 $3,011,000 $722,640 $600,000 Parking Costs/Unit $27,800 $20,500 $0 $13,500 $27,800 $20,500 $0 $13,500 Total Parking Costs $1,723,600 $533,000 $0 $67,500 $2,119,750 $666,250 $0 $84,375 Total Costs $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Costs/Unit Excluding Land $172,957 $124,727 $92,911 $121,500 $198,680 $141,433 $103,234 $136,875 Residual Property Value Project Cost Excluding Land $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Project Value @ Completion $10,539,794 $4,496,047 $1,249,570 $1,028,088 $10,525,316 $4,486,200 $1,207,823 $1,064,086 Residual Property Value ($4,135,966) ($432,871) $130,605 $35,055 ($2,967,010) $223,794 $327,641 $240,917 Total Project Cost w/Land $6,587,372 $2,810,029 $780,981 $642,555 $9,152,449 $3,901,044 $1,050,281 $925,292 Value/Cost 160% 160% 160% 160% 115% 115% 115% 115% RPV/SF ($413.60) ($43.29) $13.06 $3.51 ($297) $22 $33 $24 Residual Value per Unit -$66,709 -$16,649 $18,658 $7,011 -$48,640 $8,607 $46,806 $48,183

Highest and Best Use $13.06 $32.76 PROJECT VALUE AND COST EXCLUDING LAND RESIDUAL PROPERTY VALUE/SF RENTAL PRODUCT RENTAL PRODUCT

Townhome/Duplex Townhome/Duplex $4

Garden Apartments Garden Apartments $13

Type V over Podium Type V over Podium -$43

Midrise Midrise w/Structured -$414 w/Structured

$0 $5,000,000 $10,000,000 $15,000,000

OWNERSHIP PRODUCT OWNERSHIP PRODUCT

Townhome/Duplex Project Value @ Completion Townhome/Duplex $24 Project Cost Excluding Land Garden Apartments Garden Apartments $33

Type V over Podium Type V over Podium $22

Midrise w/Structured Midrise w/Structured ($297) $0 $5,000,000 $10,000,000 $15,000,000

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 18

2033 MARKET SCENARIO RENTAL OWNERSHIP Mid w/ Type V/ Type V w/ Duplex/ Mid w/ Type V Type V w/ Duplex/ Structured Podium Surface Townhome Structured On Podium Surface Townhome Program Site Size (SF) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Average Unit Size 849 865 857 1,000 852 856 857 1,000 Number of Units 62 26 7 5 61 26 7 5 Parking Spaces 62 26 9 5 76 33 9 6 Rents/Pricing AveragPricing/SF $1.54 $1.54 $1.54 $1.54 $225 $224 $224 $236 Achievable Pricing/Unit/Month $1,306 $1,331 $1,318 $1,538 Vacancy/Collection Loss 5.00% 5.00% 5.00% 5.00% Annual NOI $667,061 $284,532 $79,166 $65,016 Gross Revenue/Unit $191,719 $191,719 $191,719 $235,846 Gross Revenue $11,694,885 $4,984,705 $1,342,036 $1,179,231 Cost of Sales 6.00% 6.00% 6.00% 6.00% Net Revenue $10,993,192 $4,685,623 $1,261,514 $1,108,477 Construction Costs Cost/Construct/SF $138 $108 $108 $108 $154 $120 $120 $120 Cost/Construct w/o prkg. $8,999,738 $2,709,900 $650,376 $540,000 $9,999,708 $3,011,000 $722,640 $600,000 Parking Costs/Unit $27,800 $20,500 $0 $13,500 $27,800 $20,500 $0 $13,500 Total Parking Costs $1,723,600 $533,000 $0 $67,500 $2,119,750 $666,250 $0 $84,375 Total Costs $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Costs/Unit Excluding Land $172,957 $124,727 $92,911 $121,500 $198,680 $141,433 $103,234 $136,875 Residual Property Value Project Cost Excluding Land $10,723,338 $3,242,900 $650,376 $607,500 $12,119,458 $3,677,250 $722,640 $684,375 Project Value @ Completion $11,117,679 $4,742,192 $1,319,436 $1,083,596 $10,993,192 $4,685,623 $1,261,514 $1,108,477 Residual Property Value ($3,774,788) ($279,030) $174,272 $69,748 ($2,560,161) $397,205 $374,329 $279,518 Total Project Cost w/Land $6,948,549 $2,963,870 $824,648 $677,248 $9,559,298 $4,074,455 $1,096,969 $963,893 Value/Cost 160% 160% 160% 160% 115% 115% 115% 115% RPV/SF ($377.48) ($27.90) $17.43 $6.97 ($256) $40 $37 $28 Residual Value per Unit -$60,884 -$10,732 $24,896 $13,950 -$41,970 $15,277 $53,476 $55,904

Highest and Best Use $17.43 $39.72 PROJECT VALUE AND COST EXCLUDING LAND RESIDUAL PROPERTY VALUE/SF RENTAL PRODUCT RENTAL PRODUCT

Townhome/Duplex Townhome/Duplex $7

Garden Apartments Garden Apartments $17

Type V over Podium Type V over Podium -$28

Midrise Midrise w/Structured -$377 w/Structured

$0 $5,000,000 $10,000,000 $15,000,000

OWNERSHIP PRODUCT OWNERSHIP PRODUCT

Townhome/Duplex Project Value @ Completion Townhome/Duplex $28 Project Cost Excluding Land Garden Apartments Garden Apartments $37

Type V over Podium Type V over Podium $40

Midrise w/Structured Midrise w/Structured ($256) $0 $5,000,000 $10,000,000 $15,000,000

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 19

APPENDIX B: CONSTRUCTION COST ESTIMATES

SUMMARY OF CONSTRUCTION COST ESTIMATES

Prevailing Number Gross Building Cost/ Construction Type Wage of Stories Floor Area Cost SF

Mid Rise Apartment, 4-7 Story with Face Brick with Concrete Block Back-up / Steel Frame Yes 6 60,000 $10,542,000 $176 Apartment, 4-7 Story with Decorative Concrete Block / Steel Frame Yes 6 60,000 $10,087,500 $168 Apartment, 4-7 Story with Decorative Concrete Block / Steel Frame No 6 60,000 $9,230,500 $154 Low Rise Apartment, 1-3 Story with Face Brick with Concrete Block Back-up / Wood Joists Yes 3 22,500 $3,371,850 $150 Apartment, 1-3 Story with Face Brick with Concrete Block Back-up / Wood Joists No 3 22,500 $3,096,450 $138 Apartment, 1-3 Story with Wood Siding / Wood Frame Yes 3 22,500 $2,998,350 $133 Apartment, 1-3 Story with Wood Siding / Wood Frame No 3 22,500 $2,709,900 $120 Single Family Home with Wood Siding / Wood Frame No 2 1,100 $132,000 $120 Parking Garage Garage, Parking with Reinforced Concrete / R/Conc. Frame Yes 5 145,000 $9,487,000 $65 Garage, Parking with Reinforced Concrete / R/Conc. Frame No 5 145,000 $8,488,000 $59

SOURCE: RS Means, Central Oregon Adjusted, 2013

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 20

APPENDIX C: DEFINITION OF TERMS

. Site Size: This refers to the site size in square feet, and is intended to represent usable. In most urban contexts, the usable will be close to the total square footage, but the actual usable may be substantially lower if impacted by inefficient configuration, wetlands or other site characteristics that reduce the site’s developable area. In general, as sites get smaller configuration issues become more significant, as there are less options to mitigate impacts.

. Floor Area Ratio (FAR): This is a common planning term, reflecting the ratio of built space to usable site area.

. Efficiency: Building efficiency refers to the percentage of a building that is leaseable or saleable. Corridors and common areas are not typically counted in this calculation, and building forms with extensive public areas and enclosed corridors will have lower efficiency ratios. The efficiency ratio is inherently lower in condominium buildings as opposed to rental apartments, as unit sizes are measured in different ways.

. Parking Ratio: This is an important variable, and one that is impacted by market demands, financing requirements as well as zoning requirements. This is policy sensitive to the extent that policy is fundamentally impacting parking. While publicly-mandated parking requirements can be removed, market and/or financing factors may still require significant ratios.

. Operating Expenses: These apply to rental apartments, and represent items such as property management fees, property taxes, utilities and maintenance.

. Cost/Construct: The cost to construct reflects the costs to improve the property, largely related to the new structures but may also include substantial demolition or off-site cost requirements. In this model, the costs are limited to construction of the building(s), interior finishes, contractor profit and architectural fees. This is derived from RS Means, which summarizes building experience reports by construction type and area.

. Soft Costs: Additional soft costs are an integral part of the overall cost of construction. These include engineering, traffic studies, system development charges, impact fees, financing costs and developer fees.

. Parking Costs: This is broken down as an average all in cost per space delivered.

. Capitalization Rate: The Capitalization Rate or Cap Rate is a ratio used to estimate the value of income producing properties. Put simply, the cap rate is the net operating income divided by the sales price or value of a property expressed as a percentage. Investors, lenders and appraisers use the cap rate to estimate the purchase price for different types of income- producing properties. A market cap rate is determined by evaluating the financial data of similar properties which have recently sold in a specific market.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 21

. Risk Spread: This represents the percentage differential between an acceptable rate of return on cost and the prevailing market capitalization rate.

. Efficiency: Building efficiency refers to the percentage of a building that is leaseable or saleable.

CONSTRUCTION TYPES

Type I Typically these are concrete frame buildings made of noncombustible materials. All of the building elements (structural frame, bearing walls, floors and roofs) are fire resistance rated.

Type II These buildings are constructed of noncombustible materials. Typically these are masonry bearing walls structures with steel studs for walls and steel bar joists for floor and roof structures. IIA has fire rated building elements (structural frame, bearing walls, floors and roofs). IIB is the most common construction type for commercial buildings because the building elements are not required to be fire resistance rated but still must be non-combustible.

Type V Type V construction is typically wood frame construction. V-A requires fire rated assemblies for all building elements (structural frame, bearing walls, floors and roofs); this is often seen in older construction that predates sprinklers but still not commonly used. V-B is very common because it does not require any fire rating.

REDMOND DOWNTOWN HOUSING STRATEGY PAGE 22

MEMORANDUM DATE: April 5, 2013

TO: Jon Williams CITY OF REDMOND

FROM: Brendan Buckley JOHNSON REID LLC

SUBJECT: Redmond Housing Telephone Survey – Summary of Age-Weighted Results

Introduction In late January, a telephone survey was administered to 400 respondents in the Redmond area regarding their current housing circumstances and housing preferences. A previous memo discussed the general results of this survey and the characteristics of those respondents who expressed interest in the City Center study area.

After discussing the results with the project’s Technical Advisory Committee, there was concern that the pool of respondents was weighted too heavily towards older households, and that younger households were not sufficiently represented. This memo summarizes the findings of an attempt to provide an age-weighting of the results, to better reflect the actual age breakdown in the Redmond community.

Summary of Findings this memorandum presents age-weighted results of the Redmond housing survey from respondents who are very or somewhat likely to consider homes within the defined study area (Historic Downtown, Midtown, Medical District Area, and East Side), based on the 186 responses collected from this segment. The current Redmond age distribution was used as the basis for the weighting, with the effect of putting more emphasis on younger respondents and lesser emphasis on older respondents who were over-represented in the respondent pool.

NOTE: In the following discussion, the responses of 18 to 39 year old respondents are sometimes compared to the answers of “general respondents.” In this context, the “general respondents” are the age-weighted pool of respondents who did express interest in one or more of the study area submarkets. Those who did not express interest in any part of the study area are not included.

 Of the 186 total responses expressing interest in the subject area, just 24 (13%) had members 18 to 39 years old who are non-dependents.

 18-39 y.o. respondents are more likely to report that they currently already live in downtown Redmond, with 12.5% reporting this, compared to 8% of the general sample.

319 SW WASHINGTON STREET, SUITE 1020 PORTLAND, OR 97204503/295-7832 503/295-1107 (FAX)

 The younger group is also more likely to consider living in one of Likely to Consider Living in Subarea the subareas. Out of the 80% interested group, interest Age Weighted Sample 70% 67% ranged from 38% for the 63% 18-to-39 Year Olds Medical District to 67% for the 60% 58% East Side. Levels of support 50% 50% 46% among the general pool ranged 42% 38% from 36% to 58%. In three of 40% 36% the four subareas, interest from 30% the younger group exceeded the general interest. Interest in the 20% Medical District was lower. 10%

0% Historic Midtown Medical District East Side downtown Area

FIGURE 1: CITY CENTER STUDY AREA AND SUBAREAS

1 Historic Downtown Maple Ave

2 Midtown Street

6th 4 3 Medical District 4 East Side 3

2 Hwy 97 Hwy Antler Ave 4

1 Evergreen Ave

Highland Ave

Street 5th

Veterans Way

Source: City of Redmond GIS, Johnson Reid LLC

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 2

 Once age-weighted, some of the factors this interested group considers most important when choosing a home are safety (98%), affordability (98%), appearance and upkeep of area (87%), and short driving time to a hospital or medical center (77%). [The numbers are comparable to the un- weighted data, other than the importance of distance to medical center, which is roughly 8% lower when younger households are weighted higher.]

 When just the 18-to-39 year old households are considered, safety (100%) and affordability (100%) remain important. They place a greater emphasis on short commute times (88%) and safe walking routes to schools, libraries and parks (92%).

 In their next home, 80% expected to own rather than rent. This is consistent across age groups and in-line with the un-weighted data. They overwhelmingly expressed a preference for a detached single family home (92%) over other housing types.

 62% have a preference for a three bedroom home, followed by 10% for two bedrooms and 26% for four bedroom units or larger. Only 1.3% expected to seek a one bedroom unit for their next home. Of the 18-to-39 year old subset, 100% indicated they expect there next home to have at least three bedrooms.

 For those likely to rent their next home, the most important amenities were in-unit washer and dryer (99%), pets allowed (90%), air conditioning (78%), and secured parking (80%).

 For those likely to own their next home, a private yard (92%), attached garage (90%), and ground- floor master bedroom (76%) were the amenities most cited as important.

Comparison to of Age-Weighted to Un-Weighted Samples In comparing the original data set (reported in previous memo) to an age-weighted data set which better matches the community’s age profile, there are differences and similarities. The following comparisons are between the samples which expressed interest in one or more of the study area submarkets, and exclude respondents who expressed no interest in the study area.

 The age-weighted set is more likely to already live downtown (13% to 5%), and more likely to consider living in the study area for their next home. This reflects that these tendencies are stronger in the 18 to 39 year old age group. However, this group is less likely to consider living in the Medical District area, which may have greater attraction for residents who are older and/or in poorer health.

 The weighted and un-weighted sets both place the most importance on sense of safety and affordability in considering a new neighborhood, with nearly 100% of respondents stating these were important factors. Younger households place a greater emphasis on walking and biking safety and short commute times, while older households were more likely emphasize distance to the hospital.

 The high number of owners (80%) and strong preference for detached single family homes (90+%) were consistent across the weighted and un-weighted samples, and across age groups.

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 3

 The age-weighted sample is more likely to currently rent (24% to 16%), because the 18-to-39 year old respondents were 37.5% renters. However, across age groups the expectation of owning their next home is the same at 80%.

 The age-weighted sample has a greater preference for more bedrooms, with 88% expressing desire for three or more bedrooms, compared to 77% in the un-weighted data. 100% of the 18-to-39 year old respondents expressed a preference for three or more bedrooms.

 The amenities reported as important for buyers and renters were consistent between the weighted and un-weighted samples (Questions 7 and 8).

 Reported income is higher among the age-weighted sample, with 23% earning $25,000 or less, compared to 30% of the un-weighted group. This is because the 18 to 39 year old sample reports higher incomes than the general sample.

Preliminary Conclusions The data collected through this survey will be combined with analysis from other tasks in the City Center Housing Strategy project to prioritize areas of focus and policy actions to encourage housing in the study area.

At this stage, the data suggest that a focus on the Downtown, Medical District Area and East Side might tap into a higher level of current interest. The Midtown area however has many potential development opportunities, but faces a somewhat steeper curve in terms of current perceptions. Younger households express more interest in the Downtown area, while older households express greater relative interest in the Medical District.

Current results point towards a potential pool of demand from households who are current Redmond residents. These potential residents prefer owning to renting and detached single family homes to other types of housing. The safety and appearance of the neighborhood are important. Three plus bedrooms and family home amenities such as private yard and garage are emphasized.

After weighting the survey sample by age, it looks as if there may be greater interest in central city living from younger households which were under-represented in the raw data. This is an important source of demand, however this group still emphasizes larger single-family homes. This being the case, encouraging housing development in the study area will require strategies to encourage new housing types and peak new interest from those who may have preconceived notions or can’t currently picture the district’s future.

Survey Response Data (Age Weighted and 18-to-39 Year Olds) The following section presents the individualized results for each survey question. These are the age- weighted results for those respondents who expressed that they are likely to consider one or more subarea within the study area. The responses of the 186 interested respondents (out of the sample of 400) were weighted to better represent the community’s age profile.. Those who reported that they are not likely to consider the study area are not included in the following results.

For each question below, results are presented for the full age-weighted sample of interested respondents, and then the results for just the 18-to-39 year old respondents.

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 4

1. Regardless of where you live now, in choosing your next home, how likely would you be to consider homes in each of the following neighborhoods?

Among the four subareas, the Historic Downtown, East Side and the Medical Center Area received a similar amount of interest, while the Midtown area has somewhat less interest. Even among this set of respondents potentially interested in the study area, likelihood of also considering housing elsewhere remains high.

QUESTION 1 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE-WEIGHTED 50% Likelihood of Considering a Home within ... 45% 40% 35% Very likely 30% Somewhat likely 25% 20% Somewhat unlikely 15% Very unlikely 10% Don't know 5% 0% Historic Midtown Medical District East Side Another part of Outside downtown Area Redmond Redmond

Historic Medical Another part Outside downtown Midtown District Area East Side of Redmond Redmond North of Glacier North of Antler North of Avenue, south of Avenue, south of Greenwood, south Antler Avenue, Greenwood, of Maple, between west of U.S. 97, between U.S. 97 U.S. 97 and 7th Residential areas east of 9th Street and 7th Street Street east of U.S. 97 Very likely 14.8% 5.2% 10.2% 13.9% 34.4% 33.5% Somewhat likely 35.4% 30.6% 31.8% 44.1% 37.4% 27.8% Somewhat unlikely 15.8% 21.7% 23.2% 13.7% 5.4% 13.4% Very unlikely 32.9% 41.6% 33.5% 25.5% 13.2% 22.4% Don't know 1.1% 0.9% 1.3% 2.7% 9.6% 2.9%

The following chart compares those likely to consider each area vs. those who are unlikely to consider. Even among the subset of respondents who expressed interest in at least one subarea, the overall interest for any one of the four areas remains between 36% and 58%. This shows that some of those expressing interest in one subarea may not be interested in some or any of the others.

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 5

QUESTION 1: LIKELY VS. UNLIKELY TO CONSIDER BY SUBAREA INTERESTED HOUSEHOLDS ONLY, AGE-WEIGHTED

Likelihood of Considering a Home within ... 80%

60%

40% Very likely

20% Somewhat 0% likely Very -20% unlikely Somewhat -40% unlikely -60%

-80% Historic Midtown Medical District East Side Another part of Outside downtown Area Redmond Redmond

QUESTION 1: LIKELY VS. UNLIKELY TO CONSIDER BY SUBAREA INTERESTED 18 – 39 YEAR OLD HOUSEHOLDS ONLY

Likelihood of Considering a Home within ... 100.0%

80.0%

60.0% Very likely 40.0% Somewhat 20.0% likely

0.0% Very unlikely -20.0% Somewhat -40.0% unlikely

-60.0%

-80.0% Historic Midtown Medical District East Side Another part of Outside downtown Area Redmond Redmond

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 6

2. Regardless of where you are likely to choose to live next, how valuable would each of the following considerations be in choosing the neighborhood of your next home?

Respondents report that the following considerations are most important: safety (98%); Affordability (98%); Appearance and upkeep of neighboring homes (87%); short distance to hospital (77%). Safe walking routes (80%), a short commute (66%), and ability to walk to services and shopping (65%) were also important.

QUESTION 2 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE-WEIGHTED

90% 80% Age-Weighted 70% 60% 50% Very important 40% Somewhat important 30% Somewhat unimportant 20% 10% Not at all important 0% Don't know Safe walking or Ability to walk Short driving Short commute Appearance and Sense of Affordability of biking routes to to destinations distance to to work level of upkeep safety homes schools, such as grocery hospital or of surrounding libraries, or stores, shops, medical center. homes. parks. and restaurants.

Safe walking or Ability to walk biking routes to to destinations Short driving Appearance and schools, such as grocery distance to level of upkeep libraries, or stores, shops, hospital or Short commute of surrounding Affordability of parks. and restaurants. medical center. to work homes. Sense of safety homes Very important 52.0% 34.5% 36.5% 34.4% 63.7% 80.2% 73.5% Somewhat important 28.4% 30.0% 40.8% 31.7% 23.1% 17.9% 24.1% Somewhat unimportant 9.1% 16.6% 13.5% 4.5% 7.3% 0.2% 1.5% Not at all important 9.8% 18.1% 8.7% 23.2% 6.0% 1.7% 0.2% Don't know 0.8% 0.8% 0.6% 6.2% 0.0% 0.0% 0.8%

As the following chart shows, all of these considerations are relatively important to the subset of interested respondents.

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 7

QUESTION 2: IMPORTANT VS. UNIMPORTANT FACTORS INTERESTED HOUSEHOLDS ONLY, AGE-WEIGHTED

The Importance of ... 120.0%

100.0%

80.0%

60.0% Very important 40.0% Somewhat 20.0% important

0.0% Not at all Important -20.0% Somewhat -40.0% unimportant -60.0% Safe walking or Ability to walk Short driving Short commute Appearance Sense of Affordability of biking routes to to destinations distance to to work and level of safety homes schools, such as grocery hospital or upkeep of libraries, or stores, shops, medical center. surrounding parks. and homes. restaurants.

QUESTION 2: IMPORTANT VS. UNIMPORTANT FACTORS INTERESTED 18 – 39 YEAR OLD HOUSEHOLDS ONLY

The Importance of ... 120.0% 100.0% 80.0% Very important 60.0% 40.0% Somewhat important 20.0% Not at all 0.0% important -20.0% Somewhat -40.0% unimportant -60.0% Safe walking or Ability to walk Short driving Short Appearance Sense of Affordability of biking routes to destinations distance to commute to and level of safety homes to schools, such as grocery hospital or work upkeep of libraries, or stores, shops, medical surrounding parks. and center. homes. restaurants.

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 8

3. In considering one of the neighborhoods in the Central portions of Redmond, to what extent would each of the following be important to you?

QUESTION 3 RESPONSES, INTERESTED HOUSEHOLDS ONLY 70% Age-Weighted 60% Very important 50%

40% Somewhat important 30% Somewhat unimportant 20% Not at all important

10% Don't know

0% More sidewalks and bike More parks and More homes meeting my Increased shopping/ Improved public safety Improved appearance of paths recreation options preferences/price point entertainment/restaurant neighborhoods options

More sidewalks More parks and More homes Increased Improved public Improved and bike paths recreation meeting my shopping/ safety appearance of options preferences/pric entertainment/r neighborhoods e point estaurant options Very important 25.8% 23.8% 37.9% 24.1% 60.5% 44.6% Somewhat important 51.7% 48.7% 39.2% 44.0% 35.5% 46.7% Somewhat unimportant 4.5% 10.1% 9.7% 14.1% 1.3% 4.8% Not at all important 16.2% 16.8% 10.9% 17.6% 2.3% 3.3% Don't know 1.8% 0.6% 2.3% 0.2% 0.4% 0.6%

In keeping with the results of Question 2, respondents report improved safety (96%) and appearance (91%) to be the most important factors in considering the study area. However, a majority report the remaining factors as important as well (ranging from 68% to 78%).

QUESTION 3: IMPORTANT VS. UNIMPORTANT FACTORS INTERESTED HOUSEHOLDS ONLY, AGE-WEIGHTED The Importance of ... 120%

100%

80% Very important

60% Somewhat important 40% Not at all Important 20% Somewhat 0% unimportant

-20%

-40% More sidewalks and bike More parks and More homes meeting my Increased shopping/ Improved public safety Improved appearance of paths recreation options preferences/price point entertainment/restaurant neighborhoods options

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 9

QUESTION 3: IMPORTANT VS. UNIMPORTANT FACTORS INTERESTED 18 – 39 YEAR OLD HOUSEHOLDS ONLY

The Importance of ... 120.0%

100.0%

80.0% Very important 60.0% Somewhat 40.0% important

20.0% Not at all Important 0.0% Somewhat -20.0% unimportant

-40.0%

-60.0% More sidewalks and bike More parks and More homes meeting my Increased shopping/ Improved public safety Improved appearance of paths recreation options preferences/price point entertainment/restaurant neighborhoods options

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 10

4. Taking into consideration cost, how many bedrooms would you expect to seek in a new home?

Three bedroom units are the greatest preference (62%), with 10% seeking two bedroom units, and 26% seeking four or more bedrooms. Demand for one bedroom units is very limited (1.3%).

QUESTION 4 RESPONSES, INTERESTED HOUSEHOLDS ONLY

AGE-WEIGHTED

Desired Bedrooms 70%

60%

50% One 40% Two Study Area 30% Three One bedroom 1.3% Four + 20% Two bedrooms 10.2% 10% Three bedrooms 61.5% Four or more bedrooms 26.3% 0% Don't know 0.8%

AGE 18-39 ONLY

Desired Bedrooms 60%

50%

40% One Two 30% Three STUDY AREA 20% Four + One bedroom 0.0% Two bedrooms 0.0% 10% Three bedrooms 54.2% Four or more bedrooms 45.8% 0% Don't know 0.0%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 11

5. Given your budget and household needs, what type of home would you consider purchasing or renting?

Single-family detached home is the overwhelming preference (92%). Interest in other housing types may require example designs or physical developments to demonstrate the benefits of other unit types.

QUESTION 5 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE-WEIGHTED 100.0%

90.0%

80.0%

70.0%

60.0% Townhouse Duplex/Triplex 50.0% Multi-unit building 40.0% Single-family detached home 30.0% Don't know 20.0%

10.0%

0.0% Study Area Historic Midtown Medical East Side Downtown District

Preferred District Historic Medical Study Area Downtown Midtown District East Side Townhouse 0.4% 1.3% 3.7% 2.7% 1.1% Duplex/Triplex 3.0% 3.9% 3.7% 5.3% 2.3% Multi-unit building 2.3% 2.6% 5.6% 5.3% 3.4% Single-family detached home 91.8% 90.9% 85.2% 85.3% 92.0% Don't know 2.6% 1.3% 1.9% 1.3% 1.1%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 12

QUESTION 5 RESPONSES, INTERESTED HOUSEHOLDS ONLY 18 – 39 YEAR OLD HOUSEHOLDS

100% 90% 80% Townhouse 70% 60% Duplex/Triplex 50% Multi-unit building 40% Study Area

30% Single-family Townhouse 0.0% 20% detached home Duplex/Triplex 4.8% Multi-unit building 0.0% 10% Single-family detached home 90.5% 0% Don't know 4.8%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 13

6. Regardless of your current home situation, do you expect to rent or buy your next home?

Of the interested respondents, 84% currently own their home. Slightly less, 80% expect to own their next home, indicating that there will be some transition to renting among this group. This shift is most evident among those who would consider the Historic Downtown or Midtown area.

QUESTION 6 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED 90.0%

80.0%

70.0%

60.0%

50.0%

40.0% Rent 30.0% Own

20.0%

10.0%

0.0% Currently Next Currently Next Currently Next Currently Next Currently Next Home Home Home Home Home Study Area Historic Downtown Midtown Medical District East Side

Preferred District

Study Area Historic Downtown Midtown Medical District East Side Next Next Next Next Next Currently Home Currently Home Currently Home Currently Home Currently Home Rent 16.1% 20.2% 15.3% 16.5% 22.6% 25.8% 21.5% 21.5% 18.1% 17.0% Own 83.9% 79.8% 84.7% 83.5% 77.4% 74.2% 78.5% 78.5% 81.9% 83.0%

QUESTION 6 RESPONSES, INTERESTED HOUSEHOLDS ONLY 18 – 39 YEAR OLD HOUSEHOLDS Rent or Own? 90.0% 79.2% 80.0% 70.0% 62.5% 60.0% 50.0% 37.5% 40.0% Rent 30.0% 20.8% Own Expectation 20.0% Currently for next home 10.0% 0.0% Currently Expectation for next Rent 37.5% 20.8% home Own 62.5% 79.2%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 14

IF BUY ONLY:

7. In choosing a home to buy, please rate the importance of the following characteristics:

For those planning to own their next home, all of the factors listed in the survey were somewhat important, with the most important being a private yard (92%), attached garage (90%), and ground floor master bedroom (76%). The remaining factors were also important to between 63% and 76% of respondents.

QUESTION 7 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED 70% 60% Study Area 50% 40% Very important 30% Somewhat important 20% Somewhat unimportant 10% Not at all important 0% Don't know New Attached garage Private fenced Deck/balcony Ground floor Mountain views construction yard master bedroom and bath

Ground floor New Private fenced master bedroom construction Attached garage yard Deck/balcony and bath Mountain views Very important 15.4% 51.3% 56.2% 14.0% 57.3% 13.5% Somewhat important 47.1% 38.8% 36.1% 50.3% 19.0% 53.4% Somewhat unimportant 13.2% 1.9% 1.9% 18.7% 11.7% 13.7% Not at all important 22.1% 8.1% 5.8% 16.2% 11.3% 19.2% Don't know 2.3% 0.0% 0.0% 0.7% 0.7% 0.2%

QUESTION 7: IMPORTANT VS. UNIMPORTANT FACTORS AGE WEIGHTED The Importance of ... 100%

80%

60% Very important 40% Somewhat important 20% Not at all Important 0% Somewhat unimportant -20%

-40%

-60% New construction Attached garage Private fenced yard Deck/balcony Ground floor master Mountain views bedroom and bath

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 15

QUESTION 7: IMPORTANT VS. UNIMPORTANT FACTORS 18-TO-39 YEAR OLD HOUSEHOLDS

The Importance of ... 120%

100%

80% Very 60% important Somewhat 40% important Not at all 20% Important 0% Somewhat unimportant -20%

-40%

-60% New construction Attached garage Private fenced yard Deck/balcony Ground floor master Mountain views bedroom and bath

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 16

IF RENT ONLY:

8. Please rate the importance of the follow building amenities when choosing a place to rent.

For those planning to rent their next home, the most important factors were an in-unit washer and dryer (99%), allowing pets (89%), secure parking (80%), and air conditioning (78%). A fitness center and/or swimming pool were unimportant to a majority of respondents.

QUESTION 8 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED 80% Study Area 70%

60%

50% Very important 40% Somewhat important 30% Somewhat unimportant

20% Not at all important Don't know 10%

0% New/high end Air On site fitness In unit Mountain Pets allowed On site Secured appliances conditioning center washer/dryer views swimming Parking pool/hot tub

New/high end Air On site In unit Mountain Pets allowed On site Secured appliances conditioning fitness center washer/dryer views swimming Parking pool/hot tub Very important 9.3% 40.8% 0.9% 59.1% 23.0% 76.1% 3.7% 56.8% Somewhat important 47.0% 37.6% 18.7% 40.0% 25.8% 13.6% 18.3% 23.0% Somewhat unimportant 24.5% 9.9% 4.7% 0.0% 9.3% 0.0% 16.4% 2.8% Not at all important 19.2% 11.7% 75.7% 0.9% 41.8% 10.3% 61.5% 17.4% Don't know 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

QUESTION 8: IMPORTANT VS. UNIMPORTANT FACTORS AGE WEIGHTED

120% The Importance of ... 100% 80% 60% Very 40% important 20% Somewhat important 0% Not at all -20% Important -40% Somewhat unimportant -60% -80% -100% New/high end Air On site fitness In unit Mountain Pets allowed On site Secured appliances conditioning center washer/dryer views swimming Parking pool/hot tub

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 17

QUESTION 8: IMPORTANT VS. UNIMPORTANT FACTORS 18-TO-39 YEAR OLD HOUSEHOLDS

120% The Importance of ... 100% 80% 60% 40% Very important 20% Somewhat 0% important -20% Not at all Important -40% Somewhat -60% unimportant -80% -100% -120% New/high end Air On site fitness In unit Mountain Pets allowed On site Secured appliances conditioning center washer/dryer views swimming Parking pool/hot tub

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 18

Finally, we have a few questions about your household:

9. Where do currently live?

Roughly 73% of interested respondents currently live within Redmond, while 27% live outside the city boundary. Unfortunately, the term “downtown” was poorly defined in this question, but roughly 8% of respondents self-identify as living in “downtown”. 18% identify as living north of downtown, 21% south, 22% west and 3% east. It seems clear that most currently self-identify as living outside Redmond’s central city.

QUESTION 9 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED

Where Do You Currently Live? 30%

25% Downtown Redmond 20% West of downtown North of downtown Study Area 15% Downtown Redmond 7.9% East of downtown West of downtown 21.9% 10% South of downtown North of downtown 18.2% Outside of the city limits East of downtown 2.6% 5% South of downtown 21.3% Outside of the city limits 26.6% 0% Don't know 1.5%

QUESTION 9 RESPONSES, INTERESTED HOUSEHOLDS ONLY 18-TO-39 YEAR OLD HOUSEHOLDS

Where Do You Currently Live? 35%

30% Downtown Redmond 25% West of downtown 20% North of downtown Study Area Downtown Redmond 12.5% East of downtown 15% West of downtown 29.2% South of downtown North of downtown 16.7% 10% Outside of the city limits East of downtown 0.0% 5% South of downtown 29.2% Outside of the city limits 12.5% 0% Don't know 0.0%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 19

10. Do you rent or own your home?

QUESTION 10 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED 90.0%

80.0%

70.0%

60.0%

50.0% Rent 40.0% Own 30.0%

20.0%

10.0%

0.0% Study Area Historic Downtown Midtown Medical District East Side

Historic Preferred DistrictMedical Study Area Downtown Midtown District East Side Rent 24.4% 15.3% 22.6% 21.5% 18.1% Own 75.6% 84.7% 77.4% 78.5% 81.9%

QUESTION 10 RESPONSES, INTERESTED HOUSEHOLDS ONLY 18-TO-39 YEAR OLD HOUSEHOLDS

Do You Rent or Own? 80%

70%

60%

50% Rent 40% Own 30%

20% Study Area 10% Rent 37.5% 0% Own 62.5%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 20

11. How many family members currently live in your residence by age group, including yourself?

49% of interested respondent households were 2 person households. 25% were singles, and 26% had three or more persons. 18 to 39 year old respondents were more likely to have larger households, with only 21% being of two people, and the most common size being four people at 42%. None of the younger respondents lived in single-person households, though such households certainly exist, so this likely represents a sampling bias of this survey.

HOUSEHOLD SIZES, INTERESTED HOUSEHOLDS VS. 18 TO 39 YEAR OLDS

60% Age-Weighted Sample 49% 50% 18 to 39 Year Olds 42% 40%

30% 25% 21% 20% 17% 17%

9% 9% 10% 4% 4% 2% 0% 1% 0% 0% 1 person 2 people 3 people 4 people 5 people 6 people 7 people

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 21

12. Can you tell me in what range your household income falls?

The incomes of the age weighted group skewed higher than the unweighted sample, with 23% of interested respondents earning less than $25,000 per year vs. 30% of unweighted respondents. Similarly, 20% of interested respondents earned more than $75,000 per year vs. 15% of the unweighted sample.

This is due to the fact that the 18 to 39 year old group, which received greater weighting in the age- weighted data, has higher incomes than older cohorts. This group reported 21% earning less than $25,000, and 29% earning $75,000 or more.

QUESTION 12 RESPONSES, INTERESTED HOUSEHOLDS ONLY AGE WEIGHTED Household Income 25%

20% Study Area 15% Under $14,999 8.5% 10% $15,000 to $24,999 14.5% $25,000 to $34,999 11.9% 5% $35,000 to $49,999 15.1% 0% $50,000 to $74,999 15.1% $75,000 to $99,999 13.4% $100,000 to $149,999 2.9% Over $150,000 3.5% Refused 15.0%

QUESTION 12 RESPONSES, INTERESTED HOUSEHOLDS ONLY 18-TO-39 YEAR OLD HOUSEHOLDS Household Income 25.0%

20.0% Study Area 15.0% Under $14,999 8.3% 10.0% $15,000 to $24,999 12.5% $25,000 to $34,999 16.7% 5.0% $35,000 to $49,999 12.5% 0.0% $50,000 to $74,999 8.3% $75,000 to $99,999 20.8% $100,000 to $149,999 4.2% Over $150,000 4.2% Refused 12.5%

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 22

13. Is there anything else you would like to tell us about your present or future housing needs and housing support service needs?

Most frequent viewpoints (32 comments out of 186 respondents considering next home within study area):

Improve Better private maintenance of property Opposing high roads, sidewalks, More options for Keep Redmond Improve maintenance density landscaping seniors small, buildings low neighborhood safety 5 3 3 3 2 2

REDMOND DOWNTOWN HOUSING STRATEGY – PHONE SURVEY SUMMARY PAGE 23

MEMORANDUM DATE: May 21, 2013

TO: Jon Williams City of Redmond

FROM: JOHNSON REID LLC

SUBJECT: Focus Groups - Summary

The following is a summary of three separate focus groups conducted for the Redmond City Center Housing Strategy project. Two groups of local residents were convened on March 6, 2013 and one group of developers and real estate professionals was convened on May 2, 2013. Summaries of the discussions are presented below:

RESIDENT FOCUS GROUP #1 3/6/13 10:00 AM

Attendees

 Rozy Arno  Shirlee Evans  Dean Lanouette  Brian Lloyd Christiansen  Shelly Jesser  Bill Jesser

SUMMARY OF DISCUSSION

 The group began with discussing Redmond’s historic downtown. The group expressed fondness for the area and said it was still busy. “We need change and can’t be afraid of change. The bypass has changed things for the better.”

 Would be nice to have more housing around downtown core, with housing above businesses, and in the old hotel property.

 There are some issues downtown, including parking. Downtown residents and employees use the available parking with no time limits, sometimes for days. Parking is not available

319 SW WASHINGTON STREET, SUITE 1020 PORTLAND, OR 97204503/295-7832 503/295-1107 (FAX) 1

for customers, who expect to be able to park quite close to their destination. Current street construction will be another challenge for downtown businesses.

 Eventually a parking garage should be considered. Time-limited meters or customer-only parking should be considered.

 There is a perception of poor walkability downtown due to lack of sidewalks and connections. Once a person gets it their car, they can go anywhere and do not need to stay in the downtown core. The area could use a trail, or “yellow brick road” leading people to the city center. There are examples from other towns of closed-off streets for pedestrian and bike use.

 One participate discussed experience in adding infill units in the “midtown” area on large lots. She tends to add accessory dwelling units to existing lots because partitioning lots into multiple lots is prohibitively expensive. Reducing the cost of partitioning may encourage more infill.

 ADUs can add infill but also have expensive SDCs. A reduction in SDCs and reduction of the requirement for two parking spaces per ADU could encourage more. Also, new water and sewer line should be optional if the ADU can be connected through the main dwelling. In this participant’s opinion the large lots in midtown are not big enough for townhomes or apartments.

 There was disagreement over reduced parking requirements. Some felt that residents would clog the available street parking. One participant expressed his need for a large garage and plenty of parking around his property. “People in Redmond like their cars and toys.” Others pointed out that there is a lot of unused street parking and any perceived shortage is a misperception.

 The consultant expressed that there may be too much commercial land along 5th and 6th since the bypass moved in. Without the traffic and visibility, it may be more than Redmond can support along with new retail centers in other parts of town. Perhaps a zone change should be considered. This spurred a discussion of business climate in the central Redmond.

 Certain kinds of businesses are leaving the core, with banks moving to the periphery and big box retailers already on the fringes. These areas are auto-centric. Many go straight to Bend for many kinds of shopping beyond the basics.

 Downtown Redmond needs to “raise the bar” with quality and variety of businesses. The core needs activities and more business to draw people in. Also Redmond needs more employment and industry to keep people in town throughout the day. Attracting a local

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 2

technical school was also mentioned. It needs to be less of a bedroom community. There need to be amenities for residents after they come home.

 The best amenities for Redmond are the mountain views and affordable housing. Housing should take advantage of views. Perhaps protected views and sunlight corridors should be considered.

 People are downsizing and needing less space. Participants think that townhomes or smaller units could be successful. However there is a perception that residents still need garages, decks and outside space. The local landlord cited strong demand and 100% occupancy for her smaller two-bed, one-bath rentals.

RESIDENT FOCUS GROUP #2 3/6/13 11:00 AM

Attendees

 Kris Rees  Trish Pinkerton  John Williams

SUMMARY OF DISCUSSION

 One participant discussed her recent search for a new home in the Downtown core area. She is a retiree, living along and looking to maintain a relatively small home. Her ideal was a roughly 800 s.f. 2 bedroom unit with some outdoor space. She would prefer a flat, but a townhouse might be okay, and would need parking for a single car, garage preferred. A condo ownership structure would be ideal so that the HOA would be responsible for outside maintenance.

 She didn’t identify any units like this in her target area which was preferably between 7th and 9th, and south of Deschutes. Walkable distance to Fred Meyer and medical services in that complex were important, as well as a coffee shop, occasional entertainment, and the post office. She stated that there should be more housing variety in the Downtown core, and there is already a market of people like her who would consider buying or renting it.

 She stated that the Midtown area seemed like a “desert”, particularly due to a lack of walkable grocery. She perceives the Medical District as not pedestrian friendly, and Maple as a barrier to walking.

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 3

 When asked if improved transit would encourage her to consider a broader area, she stated that she prefers to walk.

 Another participant shared his experiences developing a mixed-use building in the Downtown. It has living space which he occupies, over office space on the ground floor. The mixed use building fit the current C2 zoning and he attempted to match the neighborhood style. He stated that SDC’s were $6,000 to $8,000 for this project.

 He felt that there were extra expenses involved and regulatory barriers to doing mixed use, and that he “had to throw money at it” to make it happen. He would like to see it easier and less expensive to convert residential uses to commercial uses in the city core.

 He would like to convert other residential buildings in the area, but finds it cost prohibitive due to commercial conversion requirements. He found it would cost $20k to $25k to convert a house, including paving an alley.

 One issue encountered with his current building is that commercial construction requirements applied to the whole building, including a sprinkler system and electrical work that was over-adequate for the residential portion.

 Another participant said that live/work examples in Bend suggest that there must be better ways to accomplish it. Perhaps a rules and fees are prohibitive.

 The consultant asked about the specific subareas identified. The resident stated that Downtown was the prime location for her, but she had a hard time finding the housing product she wants.

 Sidewalk development is inconsistent, creating gaps in the walkability. Connectivity is important to liveability and drawing people to the Downtown.

 A local broker says that the entire area between Downtown to the dry canyon should be a good candidate for residential development and redevelopment. She sees retiree interest in active living for those 55+.

 The current development focus is in Southwest Redmond, towards the new high school. There needs to be a marketing effort of the Central City to developers.

 There would be interest if the right housing types were available. Note everyone wants to remodel older homes. New homes and lower maintenance units like condos might be attractive for some. Live/work may have appeal to younger people or boomers who want to run a small business.

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 4

 Parking is important to Redmond. A single-car garage should be considered the minimum. However participants didn’t perceive a real parking problem Downtown.

 More density and people will help public safety perceptions. More owners relative to renters may also help. Participants seemed to dismiss that Downtown had a real public safety problem and pointed to sparsely developed areas like the Medical District as providing a lower sense of security.

 It is a tough market to convert current rentals in to apartments. But perhaps updates and refreshing of current rentals would help.

 One participant stated that Redmond has had some good successes with a mix of businesses downtown, but the city needs to attract a volume of people with discretionary incomes, including young professionals and retirees. Families are less likely.

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 5

DEVELOPER AND REAL ESTATE PROFESSIONAL FOCUS GROUP 5/2/13 12:30 PM

Attendees

 Kris Rees (KR)  Tom Taylor (TT)  Rod Tomcho (RT)  John Gilbert (JG)

1) Introductions

2) Presentation by Consultants on Analysis and Deliverables Thus Far

SUMMARY OF DISCUSSION

KR (prior to meeting): Things are changing in Redmond. In some ways it is like the old Bend. People are making the choice to move here beyond just price point.

JG: He is surprised by the size of the study area. It seems large. The City should cut the focus to a smaller area if resources are limited. Some things won’t need help from the City, such as apartment buildings in the north of the study area. Downtown core housing is what may need help.

KR: It is important to identify the larger area, but resources may be more focused.

TT: Is there an assumption that new housing will meet demand from the Redmond area, or draw people from outside? It can be a mistake to assume that people from a more urban area are moving to a place like Redmond to find urban housing types. They may be moving here for the space, big vehicles and toys.

The experience with the Bond Street development was that he planned to sell an urban-type product in Bend for $400 to $425 per square foot, but achieved $300 per square foot or less. This was due to the timing of the development and the economy as well. But buyers will compare the “urban” unit to what else they can get for the same money.

Residents in a mixed use environment really want amenities such as dining and higher activity level. You need the variety to attract people, otherwise what is the selling point over other housing types/locations? Mixed use needs a good tailwind from public incentives to achieve.

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 6

JG: The price point can be a problem if it is too high over other options. Renters usually pioneer into new areas first and gentrify. Redmond could start with their existing Downtown buildings with rental units over the storefronts.

[Staff pointed out that these buildings do have some rental units, but in poor condition. Many cater to Section 8 tenants and have made little reinvestment back into the housing stock. The consultant stated that rehabbing such buildings can be costly due to required seismic upgrades.]

JG: Redmond should start with its existing stock. Live/work is a very small niche. The City should consider subsidized affordable housing to get a more urban form, and more residents into the area. This could be a catalyst for other projects. An affordable building could be for workforce housing or seniors. Seniors are an identified market in the city.

KR: Eagle Crest and other outlying areas have an aging population which might want to downsize, look for new housing types, and be closer to services as they age. There are also longtime residents of the area moving off of ranches and farms. This seems like a good target market.

TT: His company has looked at buildings in Downtown Redmond to rehabilitate but found the costs were too high. The cost to purchase and complete the rehab was more than doing a teardown and rebuild, due to the amount of work the buildings needed, as well as the high property costs at the time. He questions how deep the market is for vertical mixed housing in Downtown? He was more intrigued by the ideas of cottage clusters or smaller detached move-down units for the senior market. There are some examples of this type in the region, including Summer Creek in Redmond.

JG: He warns against using prime spots downtown for lower density like cottage development. Don’t lose big sites in the core which may attract vertical uses in the future. Look a few blocks away for cottage type development.

TT: He asked about demographic data contained in the project materials. He would like to see data on the relative income of the incoming vs. outgoing commuters. He was curious if the older residents were coming for the lifestyle, or perhaps more due to affordability/necessity.

Staff: What would the market respond to in terms of interventions?

TT: He thinks the City needs to ensure that zoning allows what it wants to occur. He recommends leaving the market to the private developers for a while. Most of the subareas outside of the Downtown may be a tough sell for new housing development. The Medical District has better prospects, but the Medical Center may be downsizing their services soon. He says that the City controls good opportunity sites in the high school and city hall properties which will be an asset. Also, Redmond is seen as open to development.

JG: The housing development market is picking back up. The public has a role to play in making public improvements and infrastructure. A City contribution to an affordable housing project might help create a catalyst development. He would look at development a few blocks off of 5th and 6th avenues. Right now, Redmond doesn’t have a large enough creative or vanguard population to

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 7

lead with that type of main street mixed use housing. Only urban areas, in which he doesn’t include Bend, have the mixture of young singles with high incomes. For higher density housing, Redmond is probably talking about empty nesters and retirees right now.

RT: The City should consider housing for seniors, and focus on a small area or a single project. Don’t spread resources too thin across the study area.

KR: It might be valuable to convene a group of seniors to find out about their preferences. She could put such a group together.

TT: Redmond needs to keep working for the right mix of amenities Downtown to attract both businesses and people. The timing of new amenities vs. new residents can be a “chicken or egg” scenario.

REDMOND CITY CENTER – FOCUS GROUP SUMMARIES 8

MEMORANDUM DATE: June 24, 2013

TO: Jon Williams CITY OF REDMOND

FROM: Jerry Johnson JOHNSON REID LLC

SUBJECT: Opportunities and Barriers

This memorandum summarizes and collects into one document the Opportunities and Barriers for new housing development identified within the study area and subareas, over the course of the project thus far. The opportunities and barriers identified in the matrix below reflect the outcomes of the major preceding Tasks: Market Analysis, Financial Analysis, Site Analysis and Prioritization, Public Surveys and Focus Groups.

The findings are organized as followed:

 General Opportunities and Barriers  Public Sentiments  Developer and Professional Feedback  Subarea Opportunities and Barriers

The accompanying Housing Development Strategy presents recommendations in response to the Opportunities and Barriers discussed below.

GENERAL OPPORTUNITIES AND BARRIERS

GENERAL OPPORTUNITIES Robust Growth As with much of Deschutes County, Redmond has grown quickly in recent decades (5.3% per year since 2000), and is projected to continue rapid growth. While the county population grew 37% between 2000 and 2010, Redmond’s grew 95%.

Robust growth means an on-going need for new housing. Even at a slower average growth rate of 3.1% per year, the Market Analysis projects a need for nearly 8,500 new housing units over the next 20 years.

Affordability In comparison to Bend and some other parts of Deschutes County, Redmond offers an affordable alternative to many families, members of the working class and retirees. This provides Redmond with a competitive niche that will help ensure future demand, but also presents challenges (see below). Redmond and the surrounding areas do offer a range of higher price points as well.

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 1

Families Redmond households are 68% family households, roughly equivalent to the rest of the county, but higher than the statewide figure of 63% family households. The average household size grew between 2000 and 2010 from 2.54 to 2.61, reflecting the addition of more and larger family households. Families help ensure that community growth includes the full spectrum of ages from birth to seniors.

In-Migration Related to the overall population growth is the fact that much of it was result of in- migration to the area, rather than local birthrate. Local growth through births represented an estimated 4% of new residents between 2000 and 2010, while new residents from outside Redmond accounted for an estimated 96% of the growth. These new residents came from everywhere from the surrounding county lands to other states. Growth of new population though in-migration reinforces the need for new housing development, as these residents are not living with existing households.

Both families and older residents are well represented among in-migrants. A full third of new arrivals are estimated to be under the age of 20, meaning that many families with children were represented. The population of those 55 and older represented 22% of the new population, and grew at an above average rate during this time. The population of those aged 55 to 64, representing empty-nesters, pre- retirees, and early retirees grew at an annual rate of 10% between 2000 and 2010, compared to an average annual growth rate of 7% for all age groups. The population of those 65 and older grew at an annual rate of 8%.

Target Markets The Market Analysis, as well as feedback from the public and real estate professionals, identified two potential target markets for new housing in the Study Area. One is young families, who are more likely to consider living in the Study Area compared to the general population. Those in the “full nest” ages of 25 to 55, and those under 18 represented a major share of Redmond’s net population change since 2000.

The other potential target market is the broad age spectrum including empty nesters, retirees and senior citizens. Given general demographic trends of the Baby Boom generation, this group will make up an increasing share of population growth over the next 20 years. Many may seek to downsize, simplify their housing and locate near services. The central city, with its mix of uses and walkable distances, can seek to meet these needs.

(These target markets are further touched on in the following sections.)

Urban Renewal The Study Area features the sizable benefit of an established Urban Renewal District Program which provides a conduit and resources for implementing housing strategy in the Study Area. Urban Renewal can be used to complete a wide range of public improvements which improve connectivity, beautify the area, attract private services and investment. The Urban Renewal Program can also directly incentivize private development projects which meet public goals.

(See Housing Development Strategy memo for more details.)

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 2

Traditional Town Downtown Redmond is the historic and traditional center of the town and Center community. It provides a main street environment, with local businesses, civic uses and public parks. Of all parts of Redmond, it presents the best opportunity to create a mixed-use environment with concentrated amenities.

This mixed-use, town center environment will be a key part in attracting housing development to this area. It is the key value of this location that new residential subdivisions on the edges of town cannot offer.

GENERAL BARRIERS Modest Income Redmond features fairly modest income levels in comparison with the county and Levels state. The median income in 2010 was $37,000, which is roughly 25% lower than the countywide median ($50,400) and 20% lower than the statewide median ($46,800).

Lower income levels reflect lower ability to pay for new housing and more expensive housing types such as taller and denser buildings. Developers will take these demographic challenges into account, whether real or perceived, in deciding to invest in central Redmond.

Affordability/ While affordability is a positive in terms of providing Redmond a market niche and Low Achievable maintaining demand, it can also present challenges. For instance, new housing will Pricing compete with older low-rent or low-cost housing. Unless new housing is built very basically and efficiently, it must cost more than this older housing in order to justify the expense of development. However, new housing can offer better quality and access to amenities to justify the higher pricing.

Low achievable pricing also presents a barrier to achieving new types of housing forms in the Study Area. In general, as buildings become taller and denser, the costs of development per square foot increase, and therefore the necessary pricing which must be achieved to make them feasible also increases. Therefore a mid-rise building will be more expensive than a low-rise building, etc. If the current housing market cannot support the pricing needed for a mid-rise building, then it will not be feasible to build one. Over time, as pricing levels increase, new housing forms become viable.

Currently, it is estimated that detached single-family homes and townhomes would be feasible ownership housing types for development. Condominium flats may be viable in a five to ten year timeframe. For rental housing, garden-style walk-up apartments are currently viable, while denser forms such as mid-rise with structured parking may not be viable before the end of the planning period without public incentives.

Low Housing Currently, the Redmond housing stock is heavily weighted towards detached single- Diversity/ family homes, which represents 70% of housing according to the Census. 92% of Preferences age-weighted survey respondents reported a preference for a detached home.

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 3

The prevalence and preference for detached homes creates a challenge in that there is limited room in the Study Area to add more housing of this type. With the exception of some dispersed vacant lots, the Study Area is largely built out. Infill housing can provide some detached accessory dwellings, but the increase in density will be modest compared to what can be achieved with higher-density housing forms.

New housing types may need to lure Redmond residents who aren’t accustomed to them or haven’t considered alternatives to detached housing in the past. These must offer some value proposition which can compete with available detached housing and larger lots. Better local amenities and a walkable mixed-use environment are two potential advantages to new housing types (such as townhomes) in the central city.

Competitive The Study Area must differentiate itself from other available housing choices and Environment development sites in the community in order to attract new residents and housing development. Currently, the community has available land, lots, and housing elsewhere in the city.

The Study Area will need to build on its strengths to differentiate itself, including proximity to the mixed-use town center, walkable and bikeable scale, and availability of Urban Renewal incentives for development.

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 4

PUBLIC SENTIMENT - OPPORTUNITIES AND BARRIERS

The following summarizes opportunities and barriers which arose from the phone survey of 400 respondents and focus groups of local residents.

PUBLIC SENTIMENT - OPPORTUNITIES Likely to The telephone survey (age-weighted) revealed that many area residents are likely to Consider the consider housing in the Study Area if it meets their needs. 47% of respondents Study Area expressed some interest in the area, demonstrating that it is seen as a viable living alternative for many prospective residents.

The most interest was expressed in the Historic Downtown and Medical District subareas, with younger people stating greater preference for the former, and older respondents for the latter. Young adult respondents (aged 18 to 39) were more likely to self-identify as already living in “downtown Redmond” (12.5% compared to 8% of general respondents.)

Members of focus groups also expressed willingness to consider housing options in the Study Area. They expressed a fondness and support for the Historic Downtown as the local town center. They had a general openness and willingness to see more and different types of housing in the downtown area. They perceived the downtown in particular as offering nearby access to a range of shopping and services, while other parts of the Study Area had fewer of these amenities.

Preferences - The survey revealed strong preferences for safety, affordability, and neighborhood positives appearance in selecting their next homes. Safe walking routes and short distance to the medical center also scored highly. The mountain views and affordable housing were identified as two of Redmond’s greatest assets for residents.

For those expecting to buy their next home, a private yard, attached garage and ground-floor master bedroom were rated the most important. For renters, an in- unit washer and dryer, allowing pets, secure parking and air conditioning were rated the most important.

To the extent that new housing in the Study Area can meet these needs, it has the opportunity to compete for these residents.

Street Parking Opinions on parking were mixed, with some concerned about a short supply, while other felt that there was an ample supply of parking downtown at most times. Most focus group members expressed a need for parking, both for their housing unit, and the neighborhood.

Retiree Market One outcome of the focus groups with residents and real estate professionals was reinforcement of the idea that retirees could be a good target market for Study Area housing. New housing in the Downtown area could meet the desire to downsize, and be near to shops and services. Housing in the Medical District would offer access to health care for older seniors and potential for assisted living facilities.

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 5

The retiree market may have a preference for smaller units, as well as attached types, such as condos, which place lower maintenance expectations on the residents themselves.

PUBLIC SENTIMENT - BARRIERS Preferences - As noted above, the survey respondents voiced a strong preference for detached negatives housing types (92%) which offer limited ability to add net new housing units to the Study Area. On a related note, they expressed preference for three or more bedrooms (85%), private yards (92%) and attached garages (90%). Some focus group members expressed the need for plenty of garage space and parking for cars and outdoor machines.

More compact housing types in the central city may feature fewer bedrooms, less parking and yard space. These units will need to cater to those who place less importance on the above factors, or convince them of the benefits of location and a different housing type.

At the same time, other focus group residents (one in particular) voiced interest in new housing types and cited a lack of supply and choices. So it may be that latent demand would reveal itself if more options were available. Sidewalks/ Focus group participants reported that some parts of the central city lack sidewalks, Connectivity which limits connectivity. Completion of area infrastructure would encourage a walkable, mixed-use environment as an amenity for residents.

The focus group perceived that the Historic Downtown area had potential for walkability, but other parts of the Study Area were not seen this way, due to distances to services or lack of certain services or shopping altogether. Business Climate Focus group participants from the public and real estate community expressed concerns over the health of Historic Downtown businesses. Competition from Bend and newer retail centers on the edges of Redmond were cited. The perception is that more businesses and activities are needed to attract residents. This can present a “chicken and egg” problem as a critical mass of residents is needed to support the businesses as well. Employment Mix An estimated 31% of employed locals work in Redmond, while 69% commute out of Redmond. This can be a challenge in that those commuting outside of the area on a regular basis have the opportunity to shop, dine, and seek entertainment outside of Redmond. If more residents both lived and worked in the city, many of these activities would remain local and support central city businesses. To some extent, Central Oregon features one large employment market. While Redmond has significant employment in some sectors, it is under-represented in the types of professional, finance and real estate jobs which tend to locate in central cities.

This impacts housing in that the health of the central business climate, particularly Downtown is important in differentiating this area as a desirable neighborhood to live in, as opposed to other Redmond neighborhoods.

REDMOND DOWNTOWN HOUSING STRATEGY – OPPORTUNITIES AND BARRIERS PAGE 6

DEVELOPER AND PROFESSIONAL FEEDBACK - OPPORTUNITIES AND BARRIERS

The following summarizes opportunities and barriers identified through the feedback of real estate professionals in the focus group. Some of their comments have been integrated with the public sentiment comments above where they overlapped.

DEVELOPER FEEDBACK - OPPORTUNITIES Perceptions of One realtor remarked that in some ways Redmond is like “Old Bend” and that Market Climate increasingly people choose to move to Redmond for reasons other than just affordability. Longtime county residents seeking this environment as opposed to Bend’s rapid changes may be one source of demand for housing in Redmond.

Developers remarked that Redmond is seen as open and welcoming of development. As the housing market picks back up, development and pricing power should return to Redmond over the next few years.

Housing Types Developers expressed interest in the “cottage cluster” development concept, particularly to serve a retiree or move-down market. Participants seemed intrigued by that potential segment with few negatives expressed, though one participant warned against using large prime catalyst sites for such low density development.

Participants noted that garden apartments should be feasible in areas where they make sense (such as the Medical District) and the public should offer limited incentives for such development.

Catalyst Sites/ The city controls two large potential development sites downtown (the City Hall and Projects former Elementary School) which could provide good sites for “catalyst” development. Controlling the sites gives the City ultimate control over what happens there, as well as the ability to pass on some portion of land value to a prospective developer in order to achieve public goals such as increased density or design features. Thus the building can become an example of the City’s vision for the district as well as a catalyst for other development in the area.

One potential catalyst development could be in partner in the development of an affordable housing building. This could be eligible for other subsidies such as tax credits. A large affordable housing property would bring an influx of residents while creating an example of the desired development form.

DEVELOPER FEEDBACK - BARRIERS Size of Study Participants expressed that the Study Area is too large to effect change with limited Area resources. They recommended focusing resources on smaller areas within the study area. Participants focused much discussion on the Historic Downtown area as a place to focus, though the feasibility of rental apartment development in the

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Medical District was also acknowledged.

A general housing strategy for the entire Study Area might be considered along with more focus efforts and greater expenditures in certain target areas.

Redmond’s Participants stated that many people move to a place like Redmond looking for a Market Niche less urban environment, including large lots and homes. This may form a natural headwind against central city housing. If denser, attached housing types are developed they will need to compete with detached homes on price, quality and available amenities.

6th Street Participants had reservations on concentrating resources on rehabilitation or Building Rehab redevelopment of historic 6th Street. The main reason cited was the expense, with one developer stating that he had looked into rehabilitation of some historic buildings and found it cost prohibitive.

Another participant noted that the Redmond market may not be ready for true vertical mixed use building due to the general cost of housing units in such buildings. He recommended an approach of achieving more modest development types within a few blocks of 6th Street, which nonetheless would increase housing density.

Therefore, larger projects on 6th may not be the best use of limited resources for a “catalyst” project because it may be difficult for the private market to follow suit. Significant reinvestment and development may need to be proceeded by housing growth elsewhere and more organic rejuvenation of main street businesses, before it becomes viable.

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SUBAREAS - OPPORTUNITIES AND BARRIERS

The Study Area was divided into six subareas for closer analysis. Subareas 1 and 6 were found largely unsuitable for new housing development, for reasons cited below. Subareas 2 through 5 were found to offer differing levels of opportunity as well as some barriers. This section discusses the subareas and their potential for future housing development.

FIGURE 1: POTENTIAL HOUSING SUBMARKETS, STUDY AREA Maple Ave

Street 1 2 6th

3 Hwy 97 Hwy Antler Ave 5 4 Evergreen Ave

Highland Ave Street

1 Northeast R5 Area 5th 2 Medical District 6 SFR and 3MFR permittedMidtown 4 Downtown Core Veterans Way MFR permitted 5 Eastside No Housing6 PermittedSouth Commercial

Source: City of Redmond, Johnson Reid LLC

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SUBAREA 1 – NORTHEAST R5 AREA

OPPORTUNITIES

This submarket consists of a single-family subdivision. While this is an attractive location for new housing development, there are few remaining buildable lots.

BARRIERS

With all lots developed recently, the potential of this area for redevelopment or infill in the coming decades is low. Due to the size of the lots, fragmented ownership, and distance from the city core, this neighborhood is likely to remain single-family detached for the foreseeable future.

Development Potential: Low

SUBAREA 2 – MEDICAL DISTRICT

OPPORTUNITIES

. This subarea features large, relatively low costs parcels which may be appropriate for multi- family development. . The area is adjacent to the Medical Center, which was identified as a plus by some survey respondents. . The southern part of the area features high-density residential zoning. . The area has recently been master planned as a Business/Medical District. The plan calls for multi-family use in the south portion. . Garden-style apartments should be feasible in this area.

BARRIERS

. The area is distant from many urban amenities. While some commercial amenities exist in the immediate area, many other types of shopping and services would require use of a car or transit. . The commercial zones which cover most of this subarea allow residential uses only conditionally. Furthermore, the Business/Medical District Master Plan does not call for housing in most of the area. This is likely to limit residential development in much of this area. . The R5 high density residential zone which covers the southern portion of the area allows low density residential uses, which may lead to the area being built out with less housing than is permissible. For instance, Subarea 1 discussed above is zoned R5 and has built out with single- family homes (though some are very compact.)

Development Potential: Medium-to-High

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SUBAREA 3 – MIDTOWN

OPPORTUNITIES

. The east side of this subarea features many older, relatively low-valued homes on large lots, which may be good candidates for redevelopment and/or infill. . This area features R5 high-density zoning which would allow the infill of more units on most lots. . The southern portion of this area is within walking distance to Downtown. . The west side of this subarea is zoned C2 CBD Commercial, which allows residential development of three or more units. . East side should be suitable for denser single-family, townhome or multi-family development if large enough parcels are available, or can be aggregated.

BARRIERS

. The C2 zoned area to the west runs along 5th and 6th Streets and is highly commercial in nature. According to assessor records, these parcels tend to have a higher market value which makes them poorer candidates for redevelopment than low-value parcels. . The public and real estate professional input during this process suggested that the residential east side of this subarea may have low visibility and public awareness. . The R5 high density residential zone which covers the east portion of the area allows low density residential uses, which may lead to the area being built out with less housing than is permissible.

Development Potential: Medium-to-High

SUBAREA 4 – DOWNTOWN CORE

OPPORTUNITIES

. This area features the framework of a traditional town center including walkability, a mix of shops and services, main street atmosphere, civic uses, public open spaces, and housing. This subarea provides the most natural “bones” on which to create new housing types, and the greatest potential to differentiate itself from other housing options in Redmond. . Public investment in the area is supported by extensive planning efforts including a multi-faceted Downtown Action Plan and the Urban Renewal Plan. . The City owns two potential development sites in this area, the City Hall site and the former Elementary School site. While one of these will continue to be used for City Hall functions, the other represents a prime redevelopment opportunity in the central city. Ownership of these properties gives the City control over what happens on them, and the ability to partner with developers to ensure that what development does occur meets public objectives.

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. This area should be suitable for attached housing such as townhomes, live/work units, or multi- family housing.

BARRIERS

. This area is categorized by smaller lots with fragmented ownership. This limits the scope of infill while few opportunities for large-lot development exist. . According to assessor records, the properties in this area tend to have a higher market value which makes them poorer candidates for redevelopment than low-value parcels. . The large parcels available in this area are generally parking lots. Redevelopment of these lots may be controversial as some perceive a parking problem in the Downtown. . Due to the combination of factors listed above, housing this subarea may require more incentives to increase the feasibility of new housing development.

Development Potential: Medium

SUBAREA 5 – EASTSIDE LIVE/WORK

OPPORTUNITIES

. This area includes industrial uses to the west, along the highway, and residential areas to the east. The industrial portion is zoned to allows live/work units. The residential area features many older, low value properties which may be suitable for redevelopment. . The residential area may be suitable for infill development or redevelopment. . Areas on the east edge of the industrial area (near the residential area) may be suitable for live/work or multi-family development.

BARRIERS

. One barrier to housing development in this subarea is the industrial uses which can create smoke, dust, noise, fumes and truck traffic. Due to the proximity to transportation infrastructure, this area is likely to remain industrial in nature. . This subarea lacks its own amenities and feels separated from the Downtown Core by the industrial area and the highway. . Live/work units are an untried and therefore unproven development type in Redmond. Typical live/work users may be a better fit for the Downtown Core, though some hands-on users such as craftsmen or artists who do fabrication in studio space may utilize live/work space in this area.

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. The residential area is most likely to redevelop over time either with new higher-quality single- family homes, or small attached projects like duplexes. The R4 zoning here only allows denser forms of housing on a conditional basis.

Development Potential: Low-to-Medium

SUBAREA 6 – SOUTH COMMERCIAL

OPPORTUNITIES

. Some vacant and partially vacant lots are interspersed through this area, presenting development opportunities.

BARRIERS

. This subarea is highly commercial in nature and is not a strong candidate for residential development. It is dominated by large retailers Fred Meyer and Lowes and the smaller commercial users which tend to locate near these large stores. . While some residential uses persist between Highland Avenue and Glacier Avenue, this strip will increasingly attract commercial users due to traffic volumes and auto-orientation. Overall this submarket is not a strong candidate for residential development and likely not the best target for policy initiatives to encourage it.

Development Potential: Low

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