Transcript bae Housing Nexus Study Pinellas County and the Cities of Clearwater, Largo and St.

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Housing Nexus Study
Pinellas County and the Cities of
Clearwater, Largo and St. Petersburg
Prepared by
Bay Area Economics
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Presentation Overview
 Housing Trends
 Housing Needs
 Inclusionary Housing
 Nexus Analysis
 Linkage Fees
 Questions
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Housing Trends
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Median home sale prices increased 118 percent from
2000 to 2006
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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
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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
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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
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Housing Needs
 Among single-family houses sold last year in
Pinellas County
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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.
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Economic Implications
 Employee recruitment and retention problems
 Businesses that depend on lower-wage employees –
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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
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Housing Programs
 Housing Trust Fund
 Community Land Trust
 Incentives for voluntary inclusion of workforce
housing units
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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
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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)
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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
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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 doesn’t meet at least the
minimum required financial return (“hurdle
rate”) doesn’t get built
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Inclusionary Housing Feasibility
 BAE tested the potential returns from
developing
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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
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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
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Reduced-price or free land
Impact fees paid by the County
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Inclusionary Housing Feasibility Results
Returns Under Alternative Inclusionary Zoning Policies
Assumptions/Unit Type
Base
For-Sale
With 20%
Affordable
50% Bonus,
20% Affordable
County Pays
Impact Fees
Target Rate of Return as
a Percent of Costs
20.0%
20.0%
20.0%
20.0%
Single-Family Houses
Projected Rate of Return
22.83%
4.43%
13.67%
5.03%
Townhouses
Projected Rate of Return
21.76%
4.55%
12.60%
5.28%
High-Rise Condominiums
Projected Rate of Return
20.81%
0.51%
5.97%
0.92%
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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
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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
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Linkage Fees Justified by Nexus Analysis
Land Use
Office
Industrial
Retail
Full-Service Hotel
Limited-Service Hotel
Maximum
Allowable Fee
per Sq. Ft.
Average Hard
Construction
Cost per Sq. Ft.
Maximum Fee
as Percent of
Hard Cost
$106.01
$59.76
$81.75
$50.53
$13.57
$84
$45
$58
$82
$84
126%
133%
141%
62%
16%
Maximum
Allowable Fee
per Unit
Typical
Development
Costs per Unit
Maximum Fee
as Percent of
Unit Costs
Ownership Housing
$19,560
$303,000
6.5%
Rental Housing
$5,985
$239,000
2.5%
Land Use
Justifiable fees far exceed what the market could bear
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Recommended Linkage Fees
Land Use
Office
Industrial
Retail
Full-Service Hotel
Limited-Service Hotel
Land Use
Ownership Housing
Rental Housing
Recommended
Fee as Percent
of Hard Cost
Recommended
Fee per
Sq. Ft.
3%
3%
5%
3%
2%
$2.50
$1.40
$2.90
$2.50
$1.70
Recommended
Fee as Percent
of Unit Costs
Recommended
Fee per
Unit
4%
2%
$12,100
$4,800
Residential linkage fees would apply to developments not
subject to inclusionary housing requirements
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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 county’s 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
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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 county’s ability to attract and
retain businesses