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HPSTF 6 02-16-24 Presentation COMMUNITY OtiA EQ , DEVELOPMENT CR) ° REGO� Housing Production Strategy Task Force Meeting #6 February 16, 2024, 1 : 00pm . Agenda iL, , r-- ..,. .,_. , , , i., ii.,.' i -,7'±*::. ''.7-i. 1. Greetings & Announcements k 2. Minutes — HPS Task Force Meeting #5, 12/8/2023 — V (Sarah Walker, Chair) ,Y— _ _ Two. -- a ww■A.■ 3. Summaryof Public Comments on the HPS to Date 1 , �- �_N� in 4 LA 1 R (Erik Olson, City of Lake Oswego) - - I _ J ti: s 4. Recommended Strategies (Kate Rogers, MIG/group discussion) / ,„ , _. ---; 5. Strategies Needing Further Discussion z. ;. - ', ot \, - — 1 k t (Kate Rogers, MIG/group discussion) 1 ipil '� g 6. Next Steps (Erik Olson) 2 Summary of Public Comments on the HPS to Date Public Comments on the HPS Tax Exemptions General Comments • Comment letter from Mercy • Two letters received from Housing NW proposing to work members of the community together with the City to interested in "substantial zoning implementand code reform to enable a property tax greater housing production" exemption for affordable housing • Concerned about high cost of housing; family members unable • Mercy Housing NW is currently to move to Lake Oswego, developing a 100-unit affordable residents unable to stay due to housing complex at the former increase in housing cost Marylhurst University campus • Desire for higher-density, more • Tax exemptions can ensure the livable neighborhoods - safe transportation options, more long-term stability of mission- neighborhood commercial driven affordable housing options 4 Recommended Strategies Reminder of Housing Needs Affordability Choices and Options • Need for new housing units at • Options to meet all income levels needs/preferences of the whole community • Particular need for housing affordable to lowest income • Variety of housing types and levels sizes • <50% MFI and often <80% MFI • Deficit of residential land for requires government subsidy all density levels • Moderate-income housing • Majority of new units (80-120% MFI) also needs projected to be attached additional support housing 6 Reminder of Housing Needs Key Gaps in the Market • Middle housing (e.g., townhomes, duplexes, cottage Lake Oswego also needs clusters) more housing supply • Opportunities for aging in place overall to slow rising • Options for more attainable housing costs and meet homeownership overall community need • Apartments with family-size units (2-3 bedrooms) • Multi-family housing outside the Town Center Recommended Strategies NEAR TERM (1-3 YEARS) Strategy 4=1 Housing Need Addressed 1.1 Code Audit and Amendments Increased housing production and housing choices Remove or Reduce Minimum Parking Increased housing production; especially 1.2 Requirements multi-family and affordable housing Nonprofit Low-Income Housing 1.3 Government-subsidized low-income housing Exemption Low-Income Rental Housing Tax 1.4 Government-subsidized low-income housing Exemption Public-private partnerships for 1.5 Government-subsidized low-income housing affordable housing Doesn't directly address needs; helps prevent 1.6 Fair Housing Policy and Education housing discrimination & supports related strategies 8 MEDIUM TERM (3-5 YEARS) Recommended Strategies LONGER TERM (>5 YEARS) Strategy Housing Need Addressed 1.7 Rezone Land Increased housing production; multi-family housing Evaluate accessible design incentives or Housing opportunities for seniors, people 1.8 mandates with disabilities Use Tax Increment Financing (TIF) to 1.9 Government-subsidized low-income housing support affordable housing development Affordable Housing Preservation Preservation of housing for low-income 1.10 Inventory residents Modify System Development Charge Smaller housing units; moderate-income and 1.11 (SDC) fee schedule smaller households 1.12 Pre-Approved Plan Sets for ADUs Housing choices in existing neighborhoods; multigenerational living; aging in place 9 Discussion • Do you agree that these strategies should be recommended for inclusion in the HPS? • Do agree with the recommendations for timing of implementation for the strategies ( Near-, Medium-, and Longer-Term ) ? • Do you have any questions, concerns, or suggestions about how these strategies are implemented ? 10 Strategies Needing Further Discussion Strategies Needing Further Discussion Strategy Housing Need Addressed Zoning Incentives for Affordable 2.1 Government-subsidized low-income housing Housing 2.2 Construction Excise Tax (CET) Government-subsidized low-income housing Vertical Housing Development Zone High-density housing in targeted areas; typically 2.3 Tax Abatement moderate- to higher-income Multiple Unit Property Tax Exemption Multi-family or middle housing; can also be 2.4 structured to target certain needs, e.g., family- (MUPTE) size units or accessible units Pre-Approved Plan Sets for Middle Increased housing choices, including 2.5 Housing Typologies homeownership options 12 2. 1 - Zoning Incentives for Affordable Housing Description • Additional height, density, bonus floor area ratio (FAR), or relaxing other zoning standards for affordable housing. • Allows affordable developers to make more efficient use of land and potentially better compete for land with market-rate developers. Considerations • Senate Bill 8 already allows height/density bonuses for affordable housing that's developed by a nonprofit. • Could consider other types of bonuses — e.g., reduced open space. Magnitude of Low to Moderate Impact Might lead to a small percent increase in the number of units that are possible for affordable housing developments. Unlikely to initiate new projects on its own. 13 2. 2 - Construction Excise Tax (CET) Description One-time tax on construction projects; potential funding source for affordable housing. Tax Rate: • Residential construction: Up to 1% of permit value. • Commercial and industrial construction: No cap on the tax rate; typical rate is 1-3%. Uses of CET Funds (defined by state statute): Residential: • 50% for developer incentives (e.g., permit fee and SDC reductions, tax abatements) • 35% flexible for affordable housing programs • 15% to Oregon Housing and Community Services (OHCS) for homeownership programs (typically spent in cities where paid) Commercial/Industrial: • 50% for housing-related programs (not necessarily limited to affordable housing) • 50% is unrestricted 14 2. 2 - Construction Excise Tax (CET) Considerations • One of the few available locally-controlled funding streams for affordable housing. • Without a new funding stream, the City could not participate meaningfully in "Contingent Strategies" • Housing Trust Funds • Low-Interest Loans/Revolving Loan Fund • Community Land Trusts • Preserving Low-Cost Rental Housing to Mitigate Displacement • Raises costs for construction of commercial, industrial, and/or market-rate residential housing. • Regulated affordable housing, public buildings, hospitals, and certain other types of facilities are exempted. • City can also choose to exempt other types of development. Magnitude of High Impact Annual revenue estimate for 1% CET: $750k for residential, $850k for commercial/industrial 15 CET: Implementation in Other Cities When Adopted Tax Rate Exemptions Tigard 2019 1% both residential • ADUs of 1,000 SF or less and commercial/ • Projects valued under $50k industrial • Residence destroyed unintentionally • Cottage clusters, courtyard units, quadplexes exempted from 75% of CET Bend 2006 (res) Res: 0.33% • As required by state law 2021 (com/ind) com/ind: 0.67% Newport 2017 1% both res and • As required by state law com/ind Eugene 2019 0.5% both res and • Residential units sold for $250k or less com/ind • Projects granted MUPTE tax exemption Milwaukie 2017 1% both res and • Projects valued $100k or less com/ind • Initially exempted ADUs (for 5 years) Other Cities: Grants Pass, Medford, Corvallis, Cannon Beach, Hood River, and Portland (and likely others) 16 2.3 - Vertical Housing Development Zone Tax Abatement Description • Incentivizes multi-story mixed-use development and affordable housing in targeted areas. • City designates one or more "Vertical Housing Development Zones." • 10-year partial property tax exemption (up to 80% total) for the improvement value (not the land) • Including affordable housing allows additional partial exemption of the land value Considerations • Pilot VHDZ project recently approved for the North Anchor development site. • VHDZ has the potential to displace residents by encouraging redevelopment in certain areas. Magnitude of Low to Moderate Impact Less likely to incentivize affordable housing than low-income housing abatements. Could be beneficial in key districts where the City wants to incentivize more vertical buildings and mixed-use. 17 2.4 - Multiple Unit Property Tax Exemption (MUPTE) Description • Incentivizes multi-family or middle housing with particular features or at particular price points. • Partial property tax exemption for 10 years (or longer, with affordability agreements). • City has broad discretion in structuring the program. Eligibility criteria could include requirements for affordability, accessibility/universal design, unit size, or other desirable features. Considerations • Could outcompete affordable housing tax incentives with for- profit developers who would rather build market-rate housing. Magnitude of Moderate Impact Could encourage production of more multi-family / middle housing units that meet needs not currently being met by the private market. 18 Tax Abatement Program Comparison Multiple Unit Nonprofit Low- Low-Income Rental Vertical Housing Income Housing Housing Development Zone Property Tax Exemption Eligible Nonprofits only Any developer Any developer Any developer Developers Market rate Market rate Income Levels Up to 60% AMI Up to 60% AMI (80% AMI for (or as defined affordable units) locally) Tenure For rent or for sale For rent only For rent or for sale For rent or for sale Housing Type Any type Rental housing Mixed-use Multi-family or middle housing New vs. Acquired New construction or New construction New construction or New construction or Housing rehabilitation only rehabilitation rehabilitation Annual Renewal Yes No No No Required? 10 years (or longer Time Limit No limit 20 years 10 years with affordability agreements) 19 2.5 - Pre-approved plan sets for middle housing typologies Description • Provide permit-ready plan sets for middle housing that have been reviewed in advance for conformance with zoning and building codes. • Can reduce development costs by: ✓ Streamlining permit processes ✓ Reducing permit fees ✓ Reducing design fees Considerations • Could help attract developers that typically develop only single- family housing to get involved. • Template plans won't work on all sites. Lake Oswego has significant topography and often requires customized designs. Magnitude of Moderate Impact Cost savings to builders wouldn't necessarily translate to reduced sale prices or rents, but would have the potential to deliver more middle housing. 20 Discussion For each strategy: • Given the breadth of housing needs identified in the HNA, should this strategy be considered for inclusion in the HPS? Is this an effective strategy to meet the housing need it's intended to address? • Would you recommend that this strategy be included in the HPS? Should it be removed? Is there any additional information needed in order to determine whether to include or remove this strategy? Overarching Question: How successful would the City's HPS be without a new funding source? 21 rStrategies Othe Contingent Strategies Strategy Housing Need Addressed 3.1 Housing Trust Funds Government-subsidized low-income housing Low-Interest Loans/Revolving Loan New or rehabilitated housing for low-income 3.2 Fund households 3.3 Community Land Trusts Homeownership opportunities for low-income households Preserving Low-Cost Rental Housing 3.4 Government-subsidized low-income housing to Mitigate Displacement Not Recommended Homebuyer Opportunity Limited Tax Homeownership options for moderate-income 4.1 Exemption Program (HOLTE) households 22 N ext Steps • HPS Task Force meeting #7 (March 1) • Community Forum / Public Workshop Event (March 14) • City Council and Planning Commission joint work session (April 2) • Draft Housing Production Strategy (June) • HPS Task Force meeting #8 (June 21) 23