Affordable Housing Strategy Prepared for the City of Tempe, Arizona February 2019 bae urban economics ADOPTED RESOLUTION R2019.82 JULY 31, 2019 CONTENTS LIST OF ABBREVIATIONS .......................................................................................................... 5 EXECUTIVE SUMMARY AND IMPLEMENTATION GUIDE ............................................................. 6 Priority Recommendations .......................................................................................................... 7 Implement Affordable Housing Impact Statement (Strategy E-1) .......................................... 7 Expand Use of “Incentives” such as Fee Waivers, Reimbursements, Abatements, etc. (Strategy B-1) ............................................................................................................................. 8 Dedicate Initial Seed Funding to Affordable Housing Trust Fund (Strategy A-2) ................... 9 I. INTRODUCTION ..................................................................................................................... 10 Purpose of the Affordable Housing Strategy ........................................................................... 10 Methodology .............................................................................................................................. 11 Relationship to Other Planning Efforts .................................................................................... 12 II. HOUSING AND AFFORDABILITY IN TEMPE ........................................................................... 13 Definition of Affordable Housing .............................................................................................. 13 The Need for Affordable Housing in Tempe ............................................................................ 15 Student Population ................................................................................................................. 16 Policies and Programs to Address Affordability ....................................................................... 17 Federal Funding Sources ....................................................................................................... 17 Low-Income Housing Tax Credits ........................................................................................... 17 III. AFFORDABLE HOUSING STRATEGY .................................................................................... 19 A. Increase Resources to Support Production of Affordable Housing ................................... 21 Strategy A1: Annual Affordable Housing Production Goals ................................................. 21 Strategy A2: Annual Funding Allocations to the Affordable Housing Trust Fund ................ 24 B. Incentivize Inclusion of Affordable Units in Private Development ..................................... 28 Strategy B1: Fee Waivers ....................................................................................................... 28 Strategy B2: Inclusionary Housing Policies ........................................................................... 29 Considerations for Tempe: Voluntary Inclusionary Housing Policy ..................................... 31 C. Encourage Development of a Variety of Housing Types ..................................................... 34 Strategy C1: Accessory Dwelling Units .................................................................................. 34 Strategy C2: Micro Units ......................................................................................................... 35 Strategy C3: Tiny Houses ....................................................................................................... 37 Strategy C4: Missing Middle Housing .................................................................................... 39 Strategy C5: Co-Housing ........................................................................................................ 42 Strategy C6: Community Land Trusts .................................................................................... 43 1 D. Improve the Quality and Maintain the Current Inventory of Affordable Housing .............. 44 Strategy D1: Preserve Existing Affordable Housing Stock ................................................... 44 Strategy D2: Marketing for Section 8 Participation .............................................................. 46 Strategy D3: Single Family and Multifamily Housing Improvement Programs ................... 47 E. Be Proactive about Community Concerns, Displacement, and Gentrification .................. 48 Strategy E1: Affordable Housing Impact Statements ........................................................... 49 Strategy E2: Community Inclusion Framework ..................................................................... 50 IV. PERFORMANCE MEASURES ............................................................................................... 51 V. APPENDICES ........................................................................................................................ 52 Appendix A: Affordable Housing Impact Statement Summary Memorandum ...................... 52 Appendix B: Community Meetings and Stakeholder Interviews ............................................. 65 Appendix C: Case Studies ......................................................................................................... 66 Strategy B1: Fee Waivers ....................................................................................................... 66 Strategy C1: Accessory Dwelling Units .................................................................................. 74 Strategy C2: Micro Units ......................................................................................................... 75 Strategy C3: Tiny Houses ....................................................................................................... 78 Strategy C4: Missing Middle Housing .................................................................................... 80 Strategy C5: Co-Housing ........................................................................................................ 81 Strategy C6: Community Land Trusts .................................................................................... 83 Strategy D2: Marketing for Section 8 Participation .............................................................. 85 Strategy E2: Community Inclusion Framework ..................................................................... 87 Appendix C: Pro Forma Analysis ............................................................................................... 89 2 TABLE OF TABLES Table 1: Income Limits, Phoenix-Mesa-Scottsdale MSA, Fiscal Year 2018 ................................ 14 Table 2: Proportion of Cost-Burden Households within Income Groups ..................................... 15 Table 3: Summary of Affordable Housing Strategy Elements ...................................................... 20 Table 4: Projected Housing Demand in Tempe through 2040 by AMI Level .............................. 22 Table 5: New Affordable Housing Units by Funding Scenario ...................................................... 24 Table 6: Typical Preservation Sources of Funds at Different Levels of Rehabilitation............... 45 Table 7: Summary of AHIS Policy Elements .................................................................................. 61 Table 8: Incentive Policy for Affordable Housing Fees Eligibility List ........................................... 67 Table 9: Incentive Policy for Affordable Housing Waiver and Reimbursement Scale ................ 68 Table 10: Summary of Inclusionary Housing Requirements in the City of Detroit ..................... 70 Table 11: Summary of Voluntary Development Incentive Programs in the City of Austin ......... 71 Table 12: Austin Density Bonus Affordable Housing Outcomes (Total Units by Median Family Income Level), August 2016 .......................................................................................................... 73 Table 13: Santa Cruz ADU Development Program Components ................................................. 75 Table 14: Sample Resale Value Calculation, OPAL Community Land Trust ............................... 84 Table 15: King County Community Acceptance Framework ........................................................ 88 3 TABLE OF FIGURES Figure 1: Sample Households at Various AMI Levels ................................................................... 14 Figure 2: Proportion of Tempe Households that are Cost-Burdened (a), 2010 – 2014 Five Year Data ................................................................................................................................................. 16 Figure 3: Inclusionary Housing Programs Across the Continental U.S. ....................................... 31 Figure 4: Types of Accessory Dwelling Units ................................................................................. 34 Figure 5: University House on East Veterans Way, Tempe .......................................................... 36 Figure 6: Tiny Houses ..................................................................................................................... 38 Figure 7: Tempe Micro Estates ...................................................................................................... 39 Figure 8: Missing Middle Housing.................................................................................................