2. Affordable Housing: Reality, Law, and Opportunity The IZIP Consultancy May 30, 2008 Bedford, New Hampshire The IZIP Consultancy May 30, 2008 Bedford, New Hampshire Benjamin D. Frost, Esq., AICP Director of Public Affairs New Hampshire Housing Benjamin D. Frost, Esq., AICP Director of Public Affairs New Hampshire Housing

3. The IZIP Consultancy 3 Workforce Housing in Your Community A Play in Four Acts Whatzit? The King of Britton Just Do It Show Me the Money! With a Little Help From My Friends A Play in Four Acts Whatzit? The King of Britton Just Do It Show Me the Money! With a Little Help From My Friends

4. Act I Whatzit? Affordability Defined Whatzit? Affordability Defined

5. The IZIP Consultancy 5 What do you mean when you say “Affordable Housing”? Workforce Housing? Subsidized Housing? Low Income Housing? Public Housing?

6. The IZIP Consultancy 6 Affordability Defined (or maybe explained) Affordability Defined (or maybe explained) Affordability depends on price and the ability to pay. Income is an indicator of a household’s ability to pay. Affordability - defined in the context of who has limited access to the market. Targeting priceability to pay.

7. The IZIP Consultancy 7 Affordability Defined (or maybe explained) Income of $160,000 Buys House $478,000 Access to 92% of the Market Purchase Market

8. The IZIP Consultancy 8 State Median 80% State Median 120% State Median $10$20$30$40$50$60$70$80$90 Income in Thousands $100$120$130$140$150 Income Targeting 120% State Median $81,600 Buys House $244,000 Access to 47% of Market

9. The IZIP Consultancy 9 State Median 80% State Median 120% State Median $10$20$30$40$50$60$70$80$90 Income in Thousands $100$120$130$140$150 Income Targeting State Median $68,000 Buys House $203,000 Access to 32% of Market

10. The IZIP Consultancy 10 State Median 80% State Median 120% State Median $10$20$30$40$50$60$70$80$90 Income in Thousands $100$120$130$140$150 Income Targeting $54,400 Buys House $163,000 Access to 16% of Market 80% State Median

11. The IZIP Consultancy 11 Purchase and Rental Markets are Very Different Statewide Rental Market Renter Household of 3 Access to 87% of the rental market

12. The IZIP Consultancy 12 New Hampshire Median Household Income by Tenure

13. The IZIP Consultancy 13 Affordability Defined (or maybe explained) What is Subsidized Housing? Housing that is made affordable with a direct or indirect subsidy from a public body. Subsidized Housing = housing that is made affordable to low income households (low income housing). Most public subsidies target low income households. What is Public Housing? Subsidized Housing that is owned by a public entity.

14. The IZIP Consultancy 14 What is Workforce Housing? Housing that is affordable to households in the workforce without regard to subsidy. Typically targets households with incomes representing the local labor market (usually capped). Includes some Subsidized Housing. Does not include retirement or most age restricted housing. Includes some Subsidized Housing. Does not include retirement or most age restricted housing. Affordability Defined (or maybe explained)

15. The IZIP Consultancy 15 Housing Affordability Prices have outpaced household incomes Sources: Median Purchase Price - NHHFA Purchase Price Database, Mortgage Interest Rates - Freddie Mac Survey Income - HUD Statewide Median Family Income for NH 2006 are preliminary numbers

16. The IZIP Consultancy 16 All Homes, 1995-2007: 126% increase Statewide Housing Source: New Hampshire Housing $300K $244K

17. The IZIP Consultancy 17 Statewide Housing $946 $1,049 2 bdrm, 1995-2007: 67% increase Source: New Hampshire Housing

18. The IZIP Consultancy 18 Hillsborough $1,058 Rockingham $1,106 Cheshire $976

19. The IZIP Consultancy 19 $1,029 $946 Statewide 2.6%’06-’07 2 Bedroom 1.9%’06-’07 All Units Boston 2.78% Change in CPI Shelter 4/06 to 4/07 US 2.92%

20. The IZIP Consultancy 20 Statewide

21. The IZIP Consultancy 21 5%

22. The IZIP Consultancy 22

23. The IZIP Consultancy 23 Statewide

24. The IZIP Consultancy 24 Rental Market Issues Statewide increases in gross rental costs reflect the increase in the cost of living… growth in the past year has been relatively flat The variability of local market conditions probably influences rents more than overall economic change (for now). Renter Incomes not climbing Affordability still a problem Conversion to condominiums limit the supply (approx. 3,500 since 2000) Preservation of the assisted stock is becoming a significant issue Statewide increases in gross rental costs reflect the increase in the cost of living… growth in the past year has been relatively flat The variability of local market conditions probably influences rents more than overall economic change (for now). Renter Incomes not climbing Affordability still a problem Conversion to condominiums limit the supply (approx. 3,500 since 2000) Preservation of the assisted stock is becoming a significant issue

25. The IZIP Consultancy 25 Primary Home Purchase Price Frequency Statewide New Hampshire,2000200120022003200420052006 19% 3.4% Median Renter Income = $33,500 Can Buy a $93,000 Home Estimated Median Renter Income = $34,300 Can Buy a $102,000 Home Median Price in 2000 $143,000 Median Price in 2006 $250,000

26. The IZIP Consultancy 26 Residential real estate sales are down in each of the past two years Based on information from the Northern New England Real Estate Network for towns in New Hampshire

27. The IZIP Consultancy 27 NH Real Estate Sales were down by 19% in 2006 and another 11% in 2007 Based on information from the Northern New England Real Estate Network for towns in New Hampshire

28. The IZIP Consultancy 28 Last summer residential listings reached an all time high Increase of 100% Based on information from the Northern New England Real Estate Network for towns in New Hampshire

29. The IZIP Consultancy 29 A declining pace of sales and an increase in listings means an increase in available inventory Based on information from the Northern New England Real Estate Network for towns in New Hampshire Seller’s Market Buyer’s Market Increased Pressure to Reduce Prices

30. The IZIP Consultancy 30 Has the increase in inventory resulted in a decline in median price ? Based on information from the Northern New England Real Estate Network for towns in New Hampshire Highpoints $255,000 2005 Median $248,000 2006 Median $245,500 2007 Median $245,000

31. The IZIP Consultancy 31 The year over year percent change in median monthly MLS Sale Price is down in 9 of the past 12 months Based on information from the Northern New England Real Estate Network for towns in New Hampshire Market Transition Appreciating Market Market Decline

32. The IZIP Consultancy 32 Prices may not be declining yet, but declining home price appreciation has been apparent for a while. Source: NHHFA Purchase Price Market Data

33. The IZIP Consultancy 33 Housing Affordability Prices have outpaced household incomes Sources: Median Purchase Price - NHHFA Purchase Price Database, Mortgage Interest Rates - Freddie Mac Survey Income - HUD Statewide Median Family Income for NH 2006 are preliminary numbers

34. The IZIP Consultancy 34 Source: Mortgage Bankers Association, National Delinquency Survey Prepared By: New Hampshire Housing Finance Authority, Office of Policy, Planning and Communication

35. The IZIP Consultancy 35 Subprime mortgages make up 63% of conventional loan foreclosures NH. Source: Mortgage Bankers Association, National Delinquency Survey Prepared By: New Hampshire Housing Finance Authority, Office of Policy, Planning and Communication

36. The IZIP Consultancy 36 What’s the Big Deal? Why should we care about affordability if the market is available for high end construction? Why should we care about affordability if the new houses will only be filled with kids (and our taxes will go up!)? Why should we care about affordability if the market is available for high end construction? Why should we care about affordability if the new houses will only be filled with kids (and our taxes will go up!)? Perhaps it’s time to “reappraise” the conventional wisdom of the impact of housing development on our schools.

37. The IZIP Consultancy 37 The Backdrop for Housing Growth Concerns… Education typically represents 2/3 of local spending. Conventional wisdom suggests that housing growth leads to school overcrowding Education typically represents 2/3 of local spending. Conventional wisdom suggests that housing growth leads to school overcrowdingThe All-American All-American FamilyFamily

38. The IZIP Consultancy 38 …and Their Costly Results Growth Control Measures  Can prohibit projects by delaying completion and increasing the cost of capital Zoning and Planning Requirements / Impact Fees  Can increase the “all in” cost of each lot Regulatory Process Delays  Increase the cost of development capital NIMBY (concern about “affordable” housing)  Can block a project by use of process Growth Control Measures  Can prohibit projects by delaying completion and increasing the cost of capital Zoning and Planning Requirements / Impact Fees  Can increase the “all in” cost of each lot Regulatory Process Delays  Increase the cost of development capital NIMBY (concern about “affordable” housing)  Can block a project by use of process

39. The IZIP Consultancy 39 Reality Check: Students in New Houses The Thibeault Study Case Studies  Bedford, suburban in metropolitan setting  Hudson, southern NH bedroom community  Lebanon, small city not in metro area  Rochester, larger city with diversity of new housing types Identify new units built in those communities (between 1998 – 2004) Count the public school enrollees living in those units (match enrollment addresses) The Thibeault Study Case Studies  Bedford, suburban in metropolitan setting  Hudson, southern NH bedroom community  Lebanon, small city not in metro area  Rochester, larger city with diversity of new housing types Identify new units built in those communities (between 1998 – 2004) Count the public school enrollees living in those units (match enrollment addresses)

40. The IZIP Consultancy 40 Survey of 3,400 New Units

41. The IZIP Consultancy 41 The Shapiro Study Indicator Range (million $ 2004) Personal Income Gross State Product Residential Investment Other Investment Sales State and Local Tax Revenues $57 - $121 $110 - $253 $27 - $128 $14 - $43 $158 - $412 $21 - $33 The Bottom Line: Jobs Lost 1,300 – 2,800 annually The Bottom Line: Jobs Lost 1,300 – 2,800 annually Economic Impact of a Constrained Housing Supply

42. The IZIP Consultancy 42 Human and Social Impacts of a Constrained Housing Supply Less housing choice Overpayment for shelter Doubling up / Substandard units More demand on public subsidies Displacement Shift in the character of the homeless (more working families) Longer commutes / Child care costs Less community participation Less housing choice Overpayment for shelter Doubling up / Substandard units More demand on public subsidies Displacement Shift in the character of the homeless (more working families) Longer commutes / Child care costs Less community participation

43. The IZIP Consultancy 43 Employer Impacts of a Constrained Housing Supply Higher Absenteeism Difficulty in Recruiting Lower Retention Rate  Increased Training Costs Upward Pressure on Wages Reduced morale and productivity Higher Absenteeism Difficulty in Recruiting Lower Retention Rate  Increased Training Costs Upward Pressure on Wages Reduced morale and productivity

44. Act II The King of Britton The Legal Obligation of Municipalities The King of Britton The Legal Obligation of Municipalities

45. The IZIP Consultancy 45

46. The IZIP Consultancy 46 The Purpose of Regulation RSA 672:1, III-e (1990). All citizens of the state benefit from a balanced supply of housing which is affordable to persons and families of low and moderate income. Establishment of housing which is decent, safe, sanitary and affordable to low and moderate income persons and families is in the best interests of each community and the state of New Hampshire, and serves a vital public need. Opportunity for development of such housing, including so-called cluster development and the development of multi-family structures, should not be prohibited or discouraged by use of municipal planning and zoning powers or by unreasonable interpretation of such powers…

47. The IZIP Consultancy 47 The Purpose of Zoning RSA 674:16, I. For the purpose of promoting the health, safety, or the general welfare of the community, the local legislative body of any city, town, or county in which there are located unincorporated towns or unorganized places is authorized to adopt or amend a zoning ordinance

48. The IZIP Consultancy 48 Britton v. Town of Chester (1991) Zoning: Multi-family strucures allowed in PRDs PRDs allowed in R-2 districts After deducing wetlands and steep slopes, only 1.73% of the town’s land area remained zoned and suitable Planning board’s review criteria were “without reference to any objective criteria.”  Including the ability to hire an independent consultant (but see RSA 673:16 and 676:4,I(g)) Zoning: Multi-family strucures allowed in PRDs PRDs allowed in R-2 districts After deducing wetlands and steep slopes, only 1.73% of the town’s land area remained zoned and suitable Planning board’s review criteria were “without reference to any objective criteria.”  Including the ability to hire an independent consultant (but see RSA 673:16 and 676:4,I(g)) 134 N.H. 434

49. The IZIP Consultancy 49 Britton (cont’d) Action brought by a series of low- and moderate income families who lived in Chester, or who wanted to live in Chester; also brought by a builder committed to the construction of affordable housing.

50. The IZIP Consultancy 50 Britton (cont’d) What is “Community”? The Court said this: “Municipalities are not isolated enclaves, far removed from the concerns of the area in which they are situated. As subdivisions of the State, they do not exist solely to serve their own residents, and their regulations should promote the general welfare, both within and without their boundaries. Therefore, we interpret the general welfare provision of the zoning enabling statute, RSA 674:14, to include the welfare of the ‘community,’ as defined in this case, in which a municipality is located and of which it is part.” What is “Community”? The Court said this: “Municipalities are not isolated enclaves, far removed from the concerns of the area in which they are situated. As subdivisions of the State, they do not exist solely to serve their own residents, and their regulations should promote the general welfare, both within and without their boundaries. Therefore, we interpret the general welfare provision of the zoning enabling statute, RSA 674:14, to include the welfare of the ‘community,’ as defined in this case, in which a municipality is located and of which it is part.”

51. The IZIP Consultancy 51 Britton in Context Beck v. Town of Raymond, 118 N.H. 793 (1978) “…each municipality [should] bear its fair share of the burden of increased growth.” “Towns may not refuse to confront the future by building a moat around themselves and pulling up the drawbridge.” Britton: “The town of Chester appears willing to lower that bridge only for people who can afford a single-family home on a two-acre lot or a duplex on a three acre lot. Others are realistically prohibited from crossing.” Upshot of Britton: Beck v. Town of Raymond, 118 N.H. 793 (1978) “…each municipality [should] bear its fair share of the burden of increased growth.” “Towns may not refuse to confront the future by building a moat around themselves and pulling up the drawbridge.” Britton: “The town of Chester appears willing to lower that bridge only for people who can afford a single-family home on a two-acre lot or a duplex on a three acre lot. Others are realistically prohibited from crossing.” Upshot of Britton: The Builder’s Remedy!

52. The IZIP Consultancy 52 Britton’s Family Tree Great Bridge Properties v. Town of Ossipee, (Strafford County 04-E-110) (2005) Zoning: multi-family uses only in existing structures, and limited to four units per structure; only one principal structure per parcel; requires sewer hookup Site: 3.5 of 9 acres to be developed; ready highway access, no wetlands Development: six 4-unit structures Great Bridge Properties v. Town of Ossipee, (Strafford County 04-E-110) (2005) Zoning: multi-family uses only in existing structures, and limited to four units per structure; only one principal structure per parcel; requires sewer hookup Site: 3.5 of 9 acres to be developed; ready highway access, no wetlands Development: six 4-unit structures

53. The IZIP Consultancy 53 Britton’s Family Tree Great Bridge Properties v. Ossipee ZBA Chairman at Hearing on Variances: “…when this ordinance was written it was known at the time that it was exclusionary. It was written exactly for that reason. … I believe the spirit of this ordinance was to deny the opportunity for multi-family housing to go forward in this town. I believe that’s the intent of the ordinance whether it’s right or wrong.” Great Bridge Properties v. Ossipee ZBA Chairman at Hearing on Variances: “…when this ordinance was written it was known at the time that it was exclusionary. It was written exactly for that reason. … I believe the spirit of this ordinance was to deny the opportunity for multi-family housing to go forward in this town. I believe that’s the intent of the ordinance whether it’s right or wrong.”

54. The IZIP Consultancy 54 …and this is what they look like.

55. The IZIP Consultancy 55 But wait, there’s more! In the past year, the NH Supreme Court has rewritten constitutional law Boulders at Strafford v. Town of Strafford, 153 N.H. 633 (2006) Community Resources for Justice, Inc. v. City of Manchester, 2006-609 (January 24, 2007) In the past year, the NH Supreme Court has rewritten constitutional law Boulders at Strafford v. Town of Strafford, 153 N.H. 633 (2006) Community Resources for Justice, Inc. v. City of Manchester, 2006-609 (January 24, 2007)

56. The IZIP Consultancy 56 Substantive Due Process Boulders: apply the new rational basis test, which “requires that legislation be only rationally related to a legitimate governmental interest” and that there is “no inquiry into whether legislation unduly restricts individual rights.” The impact on the individual is unimportant The government need offer no evidence in support of the reasons it has used—they only need to be reasonable and to support the legitimate interest of the government Court invites future litigants to help it spell out other constitutional tests Boulders: apply the new rational basis test, which “requires that legislation be only rationally related to a legitimate governmental interest” and that there is “no inquiry into whether legislation unduly restricts individual rights.” The impact on the individual is unimportant The government need offer no evidence in support of the reasons it has used—they only need to be reasonable and to support the legitimate interest of the government Court invites future litigants to help it spell out other constitutional tests

57. The IZIP Consultancy 57 Equal Protection Community Resources for Justice Fundamental rights or suspect classes (e.g., race), then strict scrutiny Important substantive rights (federal inquiry limited to gender; NH is broader, and includes use and enjoyment of property), then intermediate scrutiny All others, rational basis Community Resources for Justice Fundamental rights or suspect classes (e.g., race), then strict scrutiny Important substantive rights (federal inquiry limited to gender; NH is broader, and includes use and enjoyment of property), then intermediate scrutiny All others, rational basis

58. The IZIP Consultancy 58 Equal Protection Community Resources for Justice (cont’d) Intermediate scrutiny’s new clothes: “…we now hold that intermediate scrutiny under the State Constitution requires that the challenged legislation be substantially related to an important governmental objective. Burden of proof is on the government Cannot rely on “invented post hoc” responses or “overbroad generalizations” Community Resources for Justice (cont’d) Intermediate scrutiny’s new clothes: “…we now hold that intermediate scrutiny under the State Constitution requires that the challenged legislation be substantially related to an important governmental objective. Burden of proof is on the government Cannot rely on “invented post hoc” responses or “overbroad generalizations”

59. Act III Just Do It Tools You Can Use to Help Make Affordable Housing Happen Just Do It Tools You Can Use to Help Make Affordable Housing Happen

60. The IZIP Consultancy 60 Accessory Dwelling Units RSA 674:21,I Innovative Land Uses Need not be restricted to “blood relatives.”  Difficult to enforce May be attached or detached (e.g., room above a garage, or backyard “servants’ quarters”) Can be virtually undetectable Permitted by right or by special exception  Some level of control may be beneficial RSA 674:21,I Innovative Land Uses Need not be restricted to “blood relatives.”  Difficult to enforce May be attached or detached (e.g., room above a garage, or backyard “servants’ quarters”) Can be virtually undetectable Permitted by right or by special exception  Some level of control may be beneficial

61. The IZIP Consultancy 61 Mixed Uses Contrary to “Euclidean” zoning RSA 674:21,I(h) “performance standards” RSA 9-B:3 State’s definition of “smart growth” specifically identifies mixed use development Combine with neighborhood planning as part of master plan (RSA 672:2(j) Contrary to “Euclidean” zoning RSA 674:21,I(h) “performance standards” RSA 9-B:3 State’s definition of “smart growth” specifically identifies mixed use development Combine with neighborhood planning as part of master plan (RSA 672:2(j)

62. The IZIP Consultancy 62 Community Revitalization Tax Relief Incentive RSA 79-E (2006) Allows for limited time relief from increases to taxes attributable to rehabilitation Potential for additional relief for creation of affordable housing units Requires initial town meeting action RSA 79-E (2006) Allows for limited time relief from increases to taxes attributable to rehabilitation Potential for additional relief for creation of affordable housing units Requires initial town meeting action

63. The IZIP Consultancy 63 Inclusionary Zoning RSA 674:21,IV(a): "Inclusionary zoning" means land use control regulations which provide  a voluntary incentive or benefit to a property owner  to induce the property owner  to produce housing units  which are affordable to persons or families of low and moderate income RSA 674:21,IV(a): "Inclusionary zoning" means land use control regulations which provide  a voluntary incentive or benefit to a property owner  to induce the property owner  to produce housing units  which are affordable to persons or families of low and moderate income

64. The IZIP Consultancy 64 Inclusionary Applicability Require Conditional Use Permit (RSA 674:21,I) Permitted Location  Specified Zones,  All Residential Zones, or  Town-wide Permitted Uses Planning Board decision appealed to Superior Court (RSA 676:5,III)—this applies to all “innovative land use controls” Require Conditional Use Permit (RSA 674:21,I) Permitted Location  Specified Zones,  All Residential Zones, or  Town-wide Permitted Uses Planning Board decision appealed to Superior Court (RSA 676:5,III)—this applies to all “innovative land use controls”

65. The IZIP Consultancy 65 Important Inclusionary Definitions Income and Assets  Those on fixed incomes are not necessarily “poor” Income  Low < 50% AMI  Moderate 50-80% AMI  Moderate to Median 80-100% AMI  REMEMBER: There is no single, formal definition of “affordable housing”! Housing Cost Burden – 30% Income and Assets  Those on fixed incomes are not necessarily “poor” Income  Low < 50% AMI  Moderate 50-80% AMI  Moderate to Median 80-100% AMI  REMEMBER: There is no single, formal definition of “affordable housing”! Housing Cost Burden – 30%

66. The IZIP Consultancy 66 Developer Incentives Possibilities include: Density Bonuses Reduced lot sizes and other dimensions Expedited Permit / Application Review Financial Assistance Exemption from Fees Exemption from Phasing or Growth Management Ordinance Possibilities include: Density Bonuses Reduced lot sizes and other dimensions Expedited Permit / Application Review Financial Assistance Exemption from Fees Exemption from Phasing or Growth Management Ordinance

67. The IZIP Consultancy 67 Developer Incentives Affordable Housing Categories & Incentives These are just examples—you have to figure out what works in your community. What will induce the developers to do this? Follow the money!

68. The IZIP Consultancy 68 Inclusionary Requirements Compatibility of Style (make the affordable units indistinguishable from the others) Interspersed throughout the development (don’t “stigmatize”) Project phasing (don’t allow all market-rate units to be built before the affordable ones) Purchaser income and asset certification Project affordability verification Compatibility of Style (make the affordable units indistinguishable from the others) Interspersed throughout the development (don’t “stigmatize”) Project phasing (don’t allow all market-rate units to be built before the affordable ones) Purchaser income and asset certification Project affordability verification

69. The IZIP Consultancy 69 One town’s ordinance: “Any Senior Housing development shall comply with standard definitions of affordability set forth by HUD or New Hampshire Housing Finance Authority regulations/guidelines for affordable housing in NH.” One town’s ordinance: “Any Senior Housing development shall comply with standard definitions of affordability set forth by HUD or New Hampshire Housing Finance Authority regulations/guidelines for affordable housing in NH.” Inclusionary Zoning Pitfalls Problem: there is no single “standard definition of affordability” Definitions vary depending upon funding programs and administrative agencies Problem: there is no single “standard definition of affordability” Definitions vary depending upon funding programs and administrative agencies

70. The IZIP Consultancy 70 Inclusionary Zoning Pitfalls Another town’s ordinance: “Affordable Housing shall be a residential dwelling unit (or units) available for sale or lease to a household or family whose gross annual income is one hundred percent (100%) or less of the median area income as defined by the US Census and adjusted annually.” Another town’s ordinance: “Affordable Housing shall be a residential dwelling unit (or units) available for sale or lease to a household or family whose gross annual income is one hundred percent (100%) or less of the median area income as defined by the US Census and adjusted annually.” Problem: the rental market is different from the ownership market Generally, 80% of AMI is rental market rate! Problem: the rental market is different from the ownership market Generally, 80% of AMI is rental market rate!

71. The IZIP Consultancy 71 Exeter  Mixed income development  In exchange for greater density, 20% of the units must remain affordable Targeting: 80% (4 units) and 120% (16 units) median income, plus 8 unrestricted (and more units elsewhere)  30-year renewable resale restriction Exeter  Mixed income development  In exchange for greater density, 20% of the units must remain affordable Targeting: 80% (4 units) and 120% (16 units) median income, plus 8 unrestricted (and more units elsewhere)  30-year renewable resale restriction Watson Woods 28 units in 6 multi-family townhouse buildings Some Signs of Success

72. Act IV Show Me the Money! Maintaining Affordability Show Me the Money! Maintaining Affordability

73. The IZIP Consultancy 73 Municipal Desire: Create Opportunity for Affordable Home Ownership Use incentives to create units having a lower purchase price (RSA 674:21) Match the long term effects of incentives with the term of affordability Incent the creation of units having a lower purchase price Don’t allow “cheap” units Don’t allow instant equity Impose long term affordability restrictions Use incentives to create units having a lower purchase price (RSA 674:21) Match the long term effects of incentives with the term of affordability Incent the creation of units having a lower purchase price Don’t allow “cheap” units Don’t allow instant equity Impose long term affordability restrictions

74. The IZIP Consultancy 74 Developer’s Desire: Maximize Profit and Minimize Risk Produce units to sell at a profit Maximize margin per unit  Reduce Cost per Unit Maximize the number of units Minimize restrictions on sale Have a predictable permitting and development process

75. The IZIP Consultancy 75 Assurance of Continued Affordability Binding Commitment Maximum Resale Value Maximum Rent Increase Documentation of Restrictions  Planning Board Records  Registry of Deeds Binding Commitment Maximum Resale Value Maximum Rent Increase Documentation of Restrictions  Planning Board Records  Registry of Deeds

76. The IZIP Consultancy 76 High Low Degree of Municipal/3 rd Party Control of Property Buyer’s Rights Administrative Burden Duration of Affordability Potential Wealth Building in Unit Fee Simple Public Housing Choosing a Term of Affordability Conventional Lender Participation First Buyer Only“Permanent”“Long Term” Subsidy Retention Model Land Trust Model

77. The IZIP Consultancy 77 Affordability Retention Model: Basic Principles Long-term affordability  Initial sale—80% area median income (AMI) Subsequent sales—up to 120% (market based) Fairness to all  Municipality / Developer / Buyer Little impact on conventional financing No decrease in local tax revenues Ease of administration Suitable for use with inclusionary zoning ordinances Long-term affordability  Initial sale—80% area median income (AMI) Subsequent sales—up to 120% (market based) Fairness to all  Municipality / Developer / Buyer Little impact on conventional financing No decrease in local tax revenues Ease of administration Suitable for use with inclusionary zoning ordinances

78. The IZIP Consultancy 78 Incentives: Inclusionary Zoning  Density bonus and others The Regulatory Crux: Developer must receive something of value, which in turn allows the purchase price to be lower—a quid pro quo Subsidy: There must be a measurable subsidy to future buyers that can stay with the property and be passed to the next buyer Converting the incentive to the subsidy is the municipality’s role Incentives: Inclusionary Zoning  Density bonus and others The Regulatory Crux: Developer must receive something of value, which in turn allows the purchase price to be lower—a quid pro quo Subsidy: There must be a measurable subsidy to future buyers that can stay with the property and be passed to the next buyer Converting the incentive to the subsidy is the municipality’s role Converting Incentives to Subsidies

79. The IZIP Consultancy 79 Model Municipal Ordinance Inclusionary zoning provides a density bonus in exchange for some affordable units Base value of all units must be similar in construction, appearance, and value to others Affordable units must be sold at less than base value (creating the subsidy) Lien: When affordable units are sold, a lien to the municipality is recorded (value of subsidy accrues to municipality)  Lien value = FMV – affordable sale price Restrictive covenant is filed, controlling future sale price and limiting future buyer’s income Inclusionary zoning provides a density bonus in exchange for some affordable units Base value of all units must be similar in construction, appearance, and value to others Affordable units must be sold at less than base value (creating the subsidy) Lien: When affordable units are sold, a lien to the municipality is recorded (value of subsidy accrues to municipality)  Lien value = FMV – affordable sale price Restrictive covenant is filed, controlling future sale price and limiting future buyer’s income

80. The IZIP Consultancy 80 Fair Market Value Limited Selling Price Subsidy Initial Sale 1 st Re-Sale HOUSING COST Sales Under the Subsidy Retention Model Appreciation Admin Fee Seller’s Equity Downpayment 1 st Mortgage 2 nd Mortgage + CPI Paid Principal and Downpayment 2 nd Mortgage Based on Income

81. The IZIP Consultancy 81 1 st Re-Sale Subsidy Fair Market Value HOUSING COST 2 nd Re-Sale Subsidy Downpayment 1 st Mortgage 2 nd Mortgage Paid Principal and Downpayment Appreciation Admin Fee Seller’s Equity 2 nd Mortgage + CPI Limited Selling Price Based on Subsidy Sales Under the Subsidy Retention Model

82. The IZIP Consultancy 82 Appraised Value of Unit = $152,400 Targeted Sales Price = - $132,000 Initial Subsidy with the Property = $20,400 Initial 2 nd Mortgage Example: Year 2000

83. The IZIP Consultancy 83 First Re-sale Target Income (Initial 5 Years) Beginning of:20012002200320042005 Appreciation Rate (prior Year) 13%17%13%10%3% Re-Sale Price $151,200$179,846$205,390$227,489$234,314 Required Income $49,459$57,054$61,891$68,600$69,937 Buyer’s Income Cap (Percent of Median) 86%97%94%101%103%  Subsidy increased by $2,560 to $22,960  If the income cap exceeds 120%, the lien can be paid off (recaptured) and the funds can be reinvested in another affordable housing project.

84. The IZIP Consultancy 84 Income Testing Calculations of Price and Income Caps Verification of Home Buyer Training Municipally Required Buyer Priorities Procurement of Appraisals Second Mortgage Issuance Participation at Closings Subordination Requests Pay-offs, foreclosures Reporting Income Testing Calculations of Price and Income Caps Verification of Home Buyer Training Municipally Required Buyer Priorities Procurement of Appraisals Second Mortgage Issuance Participation at Closings Subordination Requests Pay-offs, foreclosures Reporting Administrative Tasks Most occur at the time of property transfer

85. The IZIP Consultancy 85 Considerations Most municipalities don’t want to administer the long term covenants or qualify buyers Other local or regional entities may lack the capacity, credibility, longevity, or desire to administer the requirements The model is suitable for use with an inclusionary zoning ordinance If local or regional entities are not available to administer the re-sales, New Hampshire Housing will do it (if you adopt our model unamended!) Most municipalities don’t want to administer the long term covenants or qualify buyers Other local or regional entities may lack the capacity, credibility, longevity, or desire to administer the requirements The model is suitable for use with an inclusionary zoning ordinance If local or regional entities are not available to administer the re-sales, New Hampshire Housing will do it (if you adopt our model unamended!)

86. The IZIP Consultancy 86 Another Possibility Community Land Trusts Separation of the value of the structure and the value of the land Effective in certain circumstances Strong local support (read: $$) High administrative burden—view as a broad-based social service delivery organization Community Land Trusts Separation of the value of the structure and the value of the land Effective in certain circumstances Strong local support (read: $$) High administrative burden—view as a broad-based social service delivery organization

87. Act V Legislative Pushes and Boosts Obligations and Opportunities Legislative Pushes and Boosts Obligations and Opportunities

88. The IZIP Consultancy 88 SB 217 (Chapter 348, Laws of 2007) Incentive-based approach Technical support for municipalities Treats housing development, economic planning, and conservation as part of a unified “growth and development” strategy Separate budget appropriation of $400,000 for upcoming bienniem SB 217 (Chapter 348, Laws of 2007) Incentive-based approach Technical support for municipalities Treats housing development, economic planning, and conservation as part of a unified “growth and development” strategy Separate budget appropriation of $400,000 for upcoming bienniem Housing and Conservation Planning Program (HCPP)

89. The IZIP Consultancy 89 Four stages of matching funds 1.Housing and natural resource data collection 2.Creation of a municipal Growth and Development Strategy 3.Amendment of local master plan 4.Audit and amendment of local land use ordinances and regulations Four stages of matching funds 1.Housing and natural resource data collection 2.Creation of a municipal Growth and Development Strategy 3.Amendment of local master plan 4.Audit and amendment of local land use ordinances and regulations Housing and Conservation Planning Program (HCPP)

90. The IZIP Consultancy 90 Underlying principles (10 in all): Consider housing and conservation together Affordable housing, compact development Natural and historic resources Multi-scale planning (site, community, region)—but done locally Community input Underlying principles (10 in all): Consider housing and conservation together Affordable housing, compact development Natural and historic resources Multi-scale planning (site, community, region)—but done locally Community input Housing and Conservation Planning Program (HCPP)

91. The IZIP Consultancy 91 Administered by NH Office of Energy and Planning (OEP) First grant round deadline complete, applications under review (i.e., funding under review) www.nh.gov/oep/programs/hcpp Administered by NH Office of Energy and Planning (OEP) First grant round deadline complete, applications under review (i.e., funding under review) www.nh.gov/oep/programs/hcpp Housing and Conservation Planning Program (HCPP)

92. The IZIP Consultancy 92 Innovative Land Use Techniques: A Handbook for Sustainable Development Concept – Provide guidance on using 674:21 Handbook & Reference Tool Collaborative Effort Concept – Provide guidance on using 674:21 Handbook & Reference Tool Collaborative Effort

93. The IZIP Consultancy 93 ILU Guide Contents 22 Topics Each Chapter Includes: 22 Topics Each Chapter Includes:  Background and Purpose  Appropriate Circumstances and Context for Use  Legal Basis and Considerations  Examples  Model Ordinance (chapter on Inclusionary Zoning) www.des.state.nh.us//repp  Background and Purpose  Appropriate Circumstances and Context for Use  Legal Basis and Considerations  Examples  Model Ordinance (chapter on Inclusionary Zoning) www.des.state.nh.us//repp

94. The IZIP Consultancy 94 www.workforcehousingnh.com

95. The IZIP Consultancy 95 Regional Workforce Housing Coalitions 2001 Seacoast, Upper Valley 2004 Monadnock 2005 Nashua, Eastern Lakes 2007 Manchester, Concord, Mt. Washington Valley Regional Workforce Housing Coalitions 2001 Seacoast, Upper Valley 2004 Monadnock 2005 Nashua, Eastern Lakes 2007 Manchester, Concord, Mt. Washington Valley        

96. The IZIP Consultancy 96 Pushes SB 342—Workforce Housing HB 1260—Growth Management Ordinances SB 342—Workforce Housing HB 1260—Growth Management Ordinances Boosts HB 1259—Municipal Housing Commissions

97. The IZIP Consultancy 97 Questions? ¿Preguntas? Spørsmål? Fragen? Domande? Vragen? Вы имеете вопросы? Questions? ¿Preguntas? Spørsmål? Fragen? Domande? Vragen? Вы имеете вопросы?

98. The IZIP Consultancy 98 Finis Ben Frost (603) 310-9361 bfrost@nhhfa.org Finis Ben Frost (603) 310-9361 bfrost@nhhfa.org