Shooting Blind: City needs more economical analysis of density bonus programs – News


Mayor Pro Tem Kathie Tovo launched a review of the city’s density bonus programs last August. (Photo by John Anderson)

Last week the Town planning and neighborhood committee took a first look at a city review density bonus programs, which together form one of the city’s key policies for the creation of affordable housing in Austin. Mayor Pro Tem Kathie toovo launched the evaluation last August to explore best practices and determine the impact the pay-in-lieu option, a controversial feature of the programs, has had on solving the city’s affordable housing deficit. Tovo has witnessed the debate around this policy from behind the stage longer than any of her fellow council members, and she is eager to take action on the reforms she considers long overdue. “It’s a constant concern for me,” she said. “My interest is to move away from payment in lieu and towards on-site construction.

Jessi koch, urban planner in the Real Estate and Development Division of the Neighborhood housing and community development (NHCD), shared with the committee the draft recommendations that municipal staff produced after analyzing the new data collection. Chief among these was the need for a full economic analysis by an independent consultant to calibrate the in lieu fee prices and onsite affordability requirements in proportion to the value of the bonus rights earned by the participating developer.

In other words, the staff want to have a better idea of ​​what they can ask for when negotiating with the developers. After the presentation, Tovo remarked: “We can do an economic analysis and adjust as needed, but I think there is a need to define that expectation, where we have the capacity to do it, by having these units. on the spot.”

The city currently operates 10 density bonus programs, six of which offer a paid alternative to meet the program’s affordability requirement (for most programs 10% of units must be affordable) giving developers the option to pay a single amount of time based on the area of ​​the project that will be used to create future affordable projects. The logic behind the in lieu fee is that they incent developers to participate in one of these programs when they otherwise wouldn’t, like those building in the expensive downtown environment. Even if they don’t build affordable units in their project, it is argued that developers who pay in lieu fees still contribute to the city’s long-term affordability goals.

This logic has certainly appealed to some developers. Indeed, since its creation, the participants in Downtown Density Bonus Program have all chosen the option of fees in lieu. Meanwhile, so far, only two affordable housing projects have been funded by payments in lieu of fees, with both co-ops being part of University Neighborhood Overlay (UNO).

This asymmetry between entry and exit has led some to wonder if these programs are doing what they are supposed to do, but Regina Copic, director of NHCD’s Real Estate and Development Division, said that for the most part they are. “It’s a misconception that there is this huge pot of money that we don’t spend,” she said. “Most of the developments include affordable units on site.” Although more exact figures are available with the next report, the city’s open data portal reveals that as of August 2015, 38 affordable units had been built on site through the transit-focused development program and 461 had were built thanks to the UN. density bonus program (other program numbers were not indicated).

The confusion may be due to the piecemeal nature of the programs. Each started at a different time, each follows different rules and settings, and the funds generated by the offset charge option end up in different places depending on the program. This diversity has made it difficult for municipal staff to know how effective the programs are. “Due to the variety of programs,” Koch said, “it’s hard to compare apples to apples.”

Jim robertson, program manager NEXT Code and head of the urban design division of the planning and zoning department, said standardizing programs would allow the city to get the most out of them. “While there are always naturally variations with density bonus programs,” he said, “the application process and wording of requirements and fees should be similar”.

Currently, the Downtown Program is the only one to hire an external economic consultant to adjust the in lieu and affordability fee requirements based on pro forma hypothetical models – which essentially take into account the different costs associated with an area like land and rent, and then estimate how much different types of projects would cost. Then, the model theoretically calculates how many affordable units a developer could build while making a profit, and how much they would be willing to pay for in lieu of fees. The other density programs, with a few exceptions, have had to rely on municipal staff to make these same projections using the Consumer Price Index as a guide.

Jeff Jack, chairman of the CodeNEXT committee of the Zilker Neighborhood Association, criticized the city’s lack of economic knowledge regarding density bonus programs and developer relationships. “We don’t have a real and strategic business model that we are working with,” he said. “Without it, we are shooting blind.”

Tovo believes that an economic perspective would help the effectiveness of these programs. “If we had someone on staff in town with the expertise to give us better estimates on how much royalties developers would get, that would help us move forward,” she said. .

Member of the board leslie pool agrees with Tovo that there must be a way to see more affordable units of these programs, at higher levels of affordability. “Right now we have a carrot,” she said, “but we don’t have a stick.”

Robertson, on the other hand, doesn’t think it’s feasible or necessary to have a full-time economic advisor on the city’s payroll, although he does believe all programs would benefit from a consultation on on a semi-regular basis. “We wouldn’t need this expertise all the time,” he said. “The hypothetical models are quite predictable.”

The next report will be presented again to the Planning and Neighborhood Commission on June 20, then the final version will be presented to the mayor and city council shortly thereafter. As Council deliberates on the balance between on-site and in-place charges, Copic believes that both options would be improved by a full economic analysis. “If we don’t, we might have situations right now where we leave money on the table,” she said. “We may ask for 15-20% accessibility in some areas. “

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