Loading...
HomeMy WebLinkAbout09-09-2024 - Special Study Session Agenda Packet SPECIAL STUDY SESSION AGENDA CITY COUNCIL CITY OF WHEAT RIDGE, COLORADO 7500 W. 29th Ave. Wheat Ridge CO September 9, 2024 Meeting will start at the conclusion of the Regular City Council Meeting This meeting will be conducted as a virtual meeting, and in person, at 7500 West 29th Avenue, Municipal Building. City Council members and City staff members will be physically present at the Municipal building for this meeting. The public may participate in these ways: 1.Attend the meeting in person at City Hall. Use the appropriate roster to sign up to speakupon arrival. 2.Provide comment in advance at www.wheatridgespeaks.org (comment by noon on September 9, 2024) 3.Virtually attend and participate in the meeting through a device or phone: •Click here to pre-register and provide public comment by Zoom (You must preregister before 6:00 p.m. on September 9, 2024) 4.View the meeting live or later at www.wheatridgespeaks.org, Channel 8, or YouTubeLive at https://www.ci.wheatridge.co.us/view Individuals with disabilities are encouraged to participate in all public meetings sponsored by the City of Wheat Ridge. Contact the Public Information Officer at 303-235-2877 or wrpio@ci.wheatridge.co.us with as much notice as possible if you are interested in participating in a meeting and need inclusion assistance. Public Comment on Agenda Items 1.Naturally Occurring Affordable Housing (NOAH) Program Update 2.Tobacco Product Retailer Locations 3.Staff Report(s) 4.Elected Officials’ Report(s) Item No. 1 Memorandum TO: Mayor and City Council FROM: Terrance Ware, Housing Program Administrator THROUGH: Patrick Goff, City Manager Lauren Mikulak, Community Development Director Jana Easley, Planning Manager DATE: August 30, 2024 (For September 9, 2024 Study Session) SUBJECT: Naturally Occurring Affordable Housing (NOAH) Program ISSUE: The purpose of this memo and the September 9 study session is to discuss the use of the $2 million Community Project Funding (CPF) grant the City was awarded from the Department of Housing and Urban Development (HUD). The stated purpose of the grant request was to use the funds for implementation of the NOAH (Naturally Occurring Affordable Housing) program to preserve existing affordable rental housing in Wheat Ridge. The City expects to receive a grant agreement shortly from HUD, and the City must provide a ‘Scope of Work’ providing specifics on the use of funds including outcomes, criteria for distribution, monitoring and compliance, etc. The recommendations in this memorandum will serve that purpose assuming Council concurs with its content. BACKGROUND The CPF grant is a one-time congressionally legislated Economic Development Initiative (EDI), that directs specific approved funds to be awarded to a particular entity for a specific amount and to be spent on the project or purpose identified in the authorizing legislation. The CPF grants are subject to several Federal requirements including: The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in 2 CFR Part 200. Build America, Buy America (BABA) program. Environmental Review Requirements - all projects funded by HUD are subject torequirements under the National Environmental Policy Act (NEPA) and all appropriate federal environmental and historic preservation laws, regulations, and Executive Orders. Funds must be obligated within six years of the execution of the grant agreement. The NOAH program was one of several actions recommended in the Affordable Housing Strategy and Action Plan (AHS), adopted by City Council in January 2023. Study Session Memo – NOAH Program Update September 9, 2024 Page 2 2 The goal of the NOAH program is to preserve rental housing units in Wheat Ridge which are naturally affordable, meaning they aren’t deed-restricted as affordable units. A NOAH program preserves the affordability of these existing units by developing policies and actions which encourage the owners of ‘affordable’ housing units to maintain rents at levels of affordability for populations at or below 120 percent of area median income. Alternatively, a NOAH program can preserve units by financially contributing to the purchase of NOAH units by an affordable housing operator. The AHS recognizes the opportunity for a NOAH program in Wheat Ridge because of the nature of the City’s housing stock, but the AHS does not provide specific detail on what a NOAH program should look like. This memo outlines a recommended approach. RESEARCH AND ANALYSIS Naturally Occurring Affordable Housing refers to unsubsidized rental housing that is affordable because of low market values. According to Harvard’s Joint Center for Housing Studies, 75% of affordable rental units across the country do not receive any government subsidy. These unassisted rental buildings generally have lower rents because they are located in lower cost markets. NOAH properties typically have a lower basis owing to the fact they have been held by one owner for a long period of time and may not have an active mortgage. Generally, these properties do not receive significant capital reinvestment from their owners. The units may not be adequately maintained, or fully modernized or updated to reflect current trends and building codes. Some owners can be induced to preserve their properties through tax incentives or through special financing that enables them to improve their property while keeping rents affordable. In other cases, the only way to preserve the affordability of the property is through purchase by a nonprofit or mission-driven for-profit corporation. A number of state and local housing agencies have established special loan products for unsubsidized affordable properties with expiring use restrictions to encourage owners to keep those properties affordable. Financing is often conditioned on a promise of ongoing affordability. Affordable financing, including low-cost loans, grants or tax incentives provided by government agencies, are inevitably required to make preservation transactions possible. The funds are needed for the purchase of the properties and/or for physical improvements that ensure they will provide quality housing opportunities over the long run. Wheat Ridge historically has been among the more affordable rental locations in the Denver Metro area, specifically on the west-side of the region. Subsidized housing (both in directly subsidized units and through the use of housing vouchers) and a large supply of older rental units, which tend to have lower rents than newer units, have contributed to these lower prices. Many of these units are in need of investment, but if left to private initiative, investments will result in an increase in rents to cover the costs. Also, given rising land costs and the aging of these structures, there will be an incentive to demolish and redevelop them. Study Session Memo – NOAH Program Update September 9, 2024 Page 3 3 Most NOAH units are owned by individuals, many who are retired and receive most of their income from the revenues of their property(ies), which is the primary reason for their ownership. Approximately half of rental units in this environment are rented at below market rents. Increases in the cost of maintenance, financing, taxes and market demand make these properties particularly susceptible to loss, increased rents and/or acquisition. In Wheat Ridge, average and median rents have risen as regional demand and overall real estate values have increased. Renter incomes have increased more slowly than rents in recent years. Depending on the data source, an income of approximately $60,000 is required to afford the average unit ($1553/month), but the median renter household income was about $50,000 as of 2022, with half of renter households having incomes below that figure. The City has about 15,000 dwelling units, and approximately half are renter-occupied. Most rental units in the City are within multi-unit structures, as shown in the table below. Distribution of Renter-Occupied Housing Units by Structure Type Type of Structure # of Renter-Occupied Housing Units % of Renter-Occupied Housing Units Single-unit, detached 1,230 17.6 % Single-unit, attached 1,314 18.8 % Duplex 353 5.0 % 3- or 4-unit structure 618 8.8 % 5- to 9-unit structure 623 8.9 % 10 or more unit structure 2,861 40.8 % Source: American Community Survey 2022 5-Year Estimates As mentioned above, the activities of NOAH type programs either seek to acquire and rehabilitate properties or provide financial assistance in some form to the existing property owners to rehabilitate the structures, while maintaining affordable rents. The source of funding is often funneled through and administered by a public entity. Loan programs, marketing/solicitation of applications, underwriting, collections, inspections, monitoring, and compliance require significant staff and expertise. The reason that private lenders typically don’t participate is that the costs are greater than the returns. Program Structure Staff examined the structure and implementation of NOAH programs across the US as well as locally to identify the opportunities and challenges encountered in various communities. The programs we examined include both financial assistance and/or policies designed to preserve affordable developments. Most Federal affordable housing programs target populations at or below 60% AMI, with subsidized project-based, Section 8 housing, and/or voucher programs implemented by cities, housing authorities or non-profits. As an example, Foothills Regional Housing focuses most of their efforts on low-income projects, (60% AMI and below) because it primarily relies upon federal funds. Study Session Memo – NOAH Program Update September 9, 2024 Page 4 4 The State of Colorado, in an effort to decrease the loss of affordable housing and increase tenant rights, passed HB24-1175. The act creates a right of first refusal and a right of first offer for local governments to purchase certain types of multi-unit rental properties. For multi-unit rental properties that are existing affordable housing consisting of five or more units, a local government has a right of first refusal to make a matched offer for the purchase of such property, subject to the local government's commitment to using the property as long-term affordable housing. Denver City and County have approached the problem by creating a ‘landlord licensing program’ to:  Ensure the minimum housing standards of rental units are maintained for the welfare, safety, and health of those residing in them.  Accurately track the city’s housing stock and rentals, including single-unit homes, duplexes, townhomes, and condos being rented.  Utilize contact information to share city resources with rental property owners and tenants and help strengthen landlord and tenant education and outreach. The program serves an additional purpose of providing better data on the location, condition, ownership and characteristics of housing within the city. They also provide Temporary Rental Assistance and Utility Assistance (TRUA) to qualifying individuals and families. Outside of Colorado, notable examples of nonprofit lending institutions with a specific focus on rental home preservation are the following: New York, N.Y., Community Preservation Corporation (CPC) is a nonprofit organization sponsored by prominent banks and insurance companies that provides loans to support the construction and rehabilitation of multifamily homes — both for rent and for sale. CPC functions as a one-stop shop for owners and developers seeking to build or rehabilitate properties, providing both technical assistance and attractively priced financing. Chicago, Ill., Community Investment Corporation (CIC) is a nonprofit mortgage lender sponsored by more than 45 banks as well as Fannie Mae, the United Methodist Pension Fund and Peoples Energy. CIC uses a revolving loan pool to fund reasonably priced loans to support the rehabilitation of older multifamily and other homes. CIC also administers: • A property management training program to provide landlords with the knowledge to better market, manage and maintain residential property. • The Troubled Buildings Initiative, which targets the worst buildings in a neighborhood for transfer to a new owner who will rehabilitate them with CIC funds. • Technical assistance to support rehabilitation activity by borrowers; and • A variety of other grant and loan programs. Study Session Memo – NOAH Program Update September 9, 2024 Page 5 5 CIC works closely with the city on many aspects of its operations, including the Troubled Buildings Initiative and a subsidy program that CIC administers in targeted areas. Some cities and states have adopted similar programs themselves, without partnering with an outside lending institution. Examples include North Dakota’s Rural Housing Rehabilitation Loan program (provides low-cost financing for rehab in small communities), West Virginia’s Mini-Mod Rehabilitation Program (a “no-nonsense” lending program that provides low- interest loans with streamlined access to funds) and Wyoming’s Small Project Opportunities Program (which uses a set-aside of HOME funds for rehabilitation of existing small properties). Financial assistance is the cornerstone of most of the programs cited above. These programs make efficient use of public funds because preserving housing can be far more cost-effective than building new units. That said, NOAH programs are inherently complex because of they are time-intensive, it can be challenging to identify or incentivize property owners to participate, and they can be challenging to underwrite. For these reasons, NOAH programs are not prevalent in all states or communities, and each program is designed slightly differently depending on the housing market, available funding and incentives, and staff resources. These considerations have shaped the recommendation for Wheat Ridge presented below. DISCUSSION While there are a number of programmatic elements required to implement the NOAH program using the CPF grant there are three main considerations: a) Administration of a NOAH loan program requires skills in real estate finance and underwriting that do not currently exist within the City. Regardless of its use, administration and monitoring of the CPF grant cannot be outsourced and will be an on-going responsibility of the City for the life of the grant. The City could use the CPF grant to hire staff or consultants or minimize its role and rely upon an outside entity to invest the funds in projects. b) Funding - The AHS analysis estimated that investment in rehabilitation activities could run as much as $100,000 per unit and acquisition costs would be much higher. The Affordable Housing Fund, which prior to the receipt of the HUD grant was the primary source of possible program funds, receives approximately $400,000 per year allocated from short-term rental fees and has a current balance of approximately $600,000. The receipt and flexibility of the HUD grant provides a unique one-time infusion of funds which should be leveraged to the greatest extent possible to provide for immediate investment but also to create a source for future investment. Leveraging the funds with other sources from other entities or partners to increase the impact and efficiency of the investment should be a major goal. c) Process - To ensure transparency in administration of the grant and alignment with public objectives, periodic updates to City Council should be required. Partnership with outside entities with expertise in affordable housing and whose goals align with those of the City is an option which addresses the concerns above but may result in less control or input from the Study Session Memo – NOAH Program Update September 9, 2024 Page 6 6 City depending on the structure of the partnership. RECOMMENDATIONS Recognizing the absence of underwriting skills within the City administration, staff recommends seeking partners via the solicitation of proposals from entities that invest in, rehabilitate and/or operate income and/or deed restricted affordable rental housing developments. The ColoradoGives Foundation’s ‘Bring It Home Fund: Affordable Housing’ program, is one example, providing below market-rate debt and equity investments in funds and projects to preserve or increase the supply of housing that is affordable for individuals and families at 60- 120% AMI residing in Jefferson County. Other entities acquire, rehabilitate and build affordable housing developments. For example, Foothills Regional Housing, which the City has partnered with on numerous projects, recently acquired 24 NOAH units at the Mar La Manor apartments located on West 38th, to preserve their affordability. Other metro-area non-profit organizations, such as Mercy Housing and Brothers Redevelopment, operate in this arena and may also be potential partners. Regardless of the partner, staff recommends a program that contracts with experienced affordable housing operators. This approach honors the City’s limited staff resources and minimizes long-term administrative burden while still achieving the goal of preserving naturally affordable units. The City will still have responsibility for compliance and monitoring the partners use of the federal funds for the term of the grant (six years). Staff suggests the use of the following criteria to review solicitations in seeking a partner. All or a portion of the $2 million CPF grant could be invested in one or more of these activities/entities. With Council’s support, these criteria will be included in the scope for the HUD CPF grant and will be used in the evaluation of potential partners: 1. Projects must be located in Wheat Ridge. 2. Projects must preserve existing affordable units. 3. Projects with higher proportions of affordable units and affordability will be prioritized. 4. Rehabilitation, renovation (including structural, system, energy, efficiency and exterior improvements), and acquisition are eligible activities. 5. Units must remain affordable for a period of 5-10 years depending upon the level of funding. 6. Administrative costs of the entity are limited to 5% of the project or fund administration costs. NEXT STEPS If Council concurs with this staff recommendation, next steps include the following: • Submit scope of work and complete contracting with HUD in order to receive the funds; • Begin drafting a request for letters of interest to gauge the market interest; • Evaluate the proposals; Study Session Memo – NOAH Program Update September 9, 2024 Page 7 7 • Negotiate with respondents; and • Provide periodic updates to Council on our progress. Regarding other affordable housing activity:  Staff has engaged a consultant to analyze and verify the in-lieu fee option discussed in the inclusionary housing zoning ordinance, and a study session will be scheduled in the future to advance the ordinance; and  Staff will evaluate other uses of the Affordable Housing Fund and the role of the Wheat Ridge Housing Authority in an advisory capacity. Item No. 2 Memorandum TO: Mayor and City Council THRU: Patrick Goff, City Manager Allison Scheck, Deputy City Manager FROM: Gerald Dahl, City Attorney DATE: August 30, 2024 (for Special Study Session September 9, 2024) SUBJECT: Tobacco Product Retailer Locations ISSUE: The Code prohibits tobacco product retailers from operating within 1000 feet of a youth-oriented facility (such as schools, parks, recreation facilities, etc.). The “grandfathering" clause of Code section 11-534(d) nevertheless exempts those retailers who were in place on the effective date of Ordinance 1710 Series 2021, which created the thousand-foot limit. However, if that retailer sells the business, the buyer of the business is not eligible for the grandfathering protection of that Code section. Councilmember Hoppe, supported by Councilors Dozeman and Hultin, requested that Council consider an ordinance expanding the grandfathering scope of Code 11-534(d) to include purchasers of a protected location. PRIOR ACTION: Council approved Ordinance 1710 on April 12, 2021, enacting tobacco licensing requirements. FINANCIAL IMPACT: Tobacco and vaping license fees cost $300 for new and $250 for renewal licenses. In total, the license fees generate approximately $15,000 per year. DISCUSSION: A potential Code amendment to allow a current tobacco license retailer in this situation to be able to convey his or her business to another person would be to amend Code section 11-534(d) to read as follows: (d) A tobacco product retailer operating lawfully on effective date. A tobacco productretailer operating lawfully on the effective date of this article, as adopted by Ordinance1710, Series 2021, which retailer OR WHICH SUCCESSOR IN INTEREST TO SUCH RETAILER BY PURCHASE OF THE TOBACCO RETAIL BUSINESS AT THAT SAME Staff Report: Tobacco Licensing Code Amendment September 9, 2024 Page 2 LOCATION is ineligible to receive or renew a tobacco product retail license for a location pursuant to subsection (c) of this section and any licensee operating lawfully who becomes ineligible to receive or renew a license due to the creation of a new school, may apply for a license for the location pursuant to the standard license application procedure described in section 11-535. This exception to applicability of the one thousand (1,000) feet restriction is lost in the event the affected tobacco product retailer is not open for business for one (1) year or more. In recognition that this Code language is convoluted, it may not be readily apparent how the amendment solves the problem. Notice, however, that the amendment adds a “successor in interest”, (a purchaser of the business), to the list of persons who, despite being otherwise ineligible to operate in a location because of the 1000 ft limit, may nevertheless apply for a license at the location. Any such purchaser will still have to make application for a business license, pay the required fee, etc. If this change is made, the fact that the new owner is applying for a license to continue to sell tobacco products within 1000 feet of a school is waived and the person is eligible to apply for and receive the license. NEXT STEPS: The City Attorney requests direction from Council in the form of a consensus to move forward with the proposed code amendment should Council support this change.