bae Housing Trends Median home sale prices increased 118 percent from 2000 to 2006 Driven by falling mortgage interest rates, rapid escalation in land building material costs, and constraints on new development Median household incomes increased only 16 percent Supply of existing affordable housing reduced Conversion of more than 4,400 apartments to condominiums Redevelopment of mobile home parks New construction has concentrated on beachfront condominiums and larger single-family homes Housing turnover inhibited by Save Our Homes real estate tax legislation Massive increases in property insurance rates
bae Housing Affordability HUD defines affordability as paying 30 percent or less of household income for gross housing costs (including utilities, insurance and taxes) Housing affordability depends on household income, often measured as a percent of area median income (AMI) One-third of county households paid more than 30 percent of their income for housing in 2005 – even higher now Eighteen percent of county households paid more than half of their income for housing in 2005
bae Housing Needs Among single-family houses sold last year in Pinellas County Median price of $199,900 Only 26 percent of county households can afford that price With rising development costs, newly built houses and condos are much more expensive Among apartments in larger rental complexes Median rent of $960 for a two-bedroom unit Only 52 percent of county households can afford that rent Wages are not rising as rapidly as house prices, rents or insurance rates.
bae Economic Implications Employee recruitment and retention problems Businesses that depend on lower-wage employees – tourism, retail, services Teachers, nurses, firefighters and other public servants Even businesses with good-paying jobs competing with companies in other areas with lower housing costs Business recruitment and retention High transportation costs and long commutes for employees seeking more affordable housing in nearby counties Overcrowding when multiple wage-earners are needed to pay the rent or mortgage
bae Housing Programs Housing Trust Fund Community Land Trust Incentives for voluntary inclusion of workforce housing units Bonus density – more units allowed on the same parcel of land Expedited processing – saving time in development approvals Impact and review fee waivers – County forgiving or paying fees on new development Zoning regulation modifications – relaxing some of the development requirements under the zoning code Reduced parking requirements – reducing the number of parking spaces required to be built with new developments Contribution of publicly-owned land
bae Inclusionary Housing Requires that new housing developments include a minimum number of housing units guaranteed to be affordable for the long term Key mandated elements include: The percent of affordable units The level of affordability provided (i.e., rents/prices set to be affordable to households at what income levels) Threshold number of units that triggers this mandate Whether units must be built on-site as part of the new development, or whether they can be built elsewhere in less expensive locations How many years of affordability How affordability is maintained in homeownership options
bae Inclusionary Housing Legislation typically provides incentives designed to reduce/offset the financial burden to the developer Developers are motivated to generate profits; lenders and investors require a return on their dollars Housing that doesnt meet at least the minimum required financial return (hurdle rate) doesnt get built
bae Inclusionary Housing Feasibility BAE tested the potential returns from developing Single-family detached houses Townhouses Low- and high-rise condominiums Low- and high-rise apartments Current market conditions coupled with high construction and land costs do not support construction of new market-rate apartments or low-rise condominiums away from the beaches (with or without workforce housing) These conditions change periodically with shifts in demand and economic conditions
bae Inclusionary Housing Feasibility Compared returns with and without affordable housing – 20 percent of units affordable to households making 50, 80 and 100 percent of the area median income Tested the effects of alternative incentives Bonus density – 50 percent additional units in exchange for 20 percent affordability Reduced-price or free land Impact fees paid by the County
bae Inclusionary Housing Feasibility Results Workforce housing units require per-unit prices that are $245,000 to $375,000 below market prices Fifty-percent bonus densities begin to fill that gap but are not enough alone Bonus density is only attractive if assured without additional development approval delays Land write-downs through direct subsidy or a community land trust are effective incentives Fee waivers and expedited approvals can help as well Compensating developers for including 20 percent affordable units will require a blend of all the incentives available from the County
bae Nexus Analysis Nexus analysis documents the link between new development creation of new jobs attraction of new residents to fill those jobs new residents need for affordable housing cost of providing affordable housing Estimated the associated subsidy needs generated by new office, industrial, retail, hotel and residential development
bae Linkage Fees Justified by Nexus Analysis Justifiable fees far exceed what the market could bear
bae Recommended Linkage Fees Residential linkage fees would apply to developments not subject to inclusionary housing requirements
bae Potential New Workforce Units If development pace from 2002 to 2006 continued, an inclusionary housing requirement of 20 percent workforce units would generate 500 to 600 units annually However, the countys dwindling supply of land for development will greatly constrain that production rate into the future Redevelopment will offer some opportunities, but its scale and pace are difficult to predict
bae Potential Linkage Fee Revenues Commercial development from 2002 to 2006 averaged 664,000 square feet annually Applying the recommended linkage fees to these activity levels would generate up to $1.5 million in annual revenues for workforce housing Potential revenues need to be balanced against the impact of the fee on the local economy and the countys ability to attract and retain businesses
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