HomeMy WebLinkAboutItem 02 SDC Waiver to Encourage Affordable HomeownershipAGENDA ITEM SUMMARY
SPRINGFIELD
CITY COUNCIL
Meeting Date:
Meeting Type:
Staff Contact/Dept.:
Staff Phone No:
Estimated Time:
Council Goals:
9/12/2022
Work Session
Katie Carroll/DPW
541-726-3660
15 Minutes
Promote and Enhance
our Hometown Feel
while Focusing on
Livability and
Environmental Quality
ITEM TITLE: SDC WAIVER TO ENCOURAGE AFFORDABLE HOMEOWNERSHIP
ACTION Provide direction on the design of a program to waive system development charges
REQUESTED: (SDCs) for housing units sold affordably to income -qualified households.
ISSUE Although the City has experienced significant residential construction in the last
STATEMENT: few years, there remains a shortage of housing available that is accessible to
households seeking affordable homeownership opportunities.
ATTACHMENTS: Attachment 1: Council Briefing Memo — SDC Waiver for Homeownership
Attachment 2: Draft Program Guidelines — SDC Waiver for Homeownership
Attachment 3: Presentation slides — SDC Waiver for Homeownership
DISCUSSION/
FINANCIAL System Development Charges (SDCs) are charges imposed on development to
IMPACT: accumulate capital needed to provide sufficient capacity in infrastructure systems to
accommodate the development. A waiver of City of Springfield SDCs reduces the
funds available for capital projects for transportation, stormwater, and wastewater
systems. The result is that the City will not be able to build as many infrastructure
projects, or for wastewater and stormwater, ratepayers will bear more of the
construction costs for future projects.
Offering a waiver for SDCs reduces the cost of development and may incentivize
types of development that would not otherwise happen. The City currently waives
SDCs for Accessory Dwelling Units (ADUs) and has seen an increase in the
number of ADUs permitted annually since the waiver was put in place. Waiving
SDCs for affordable homeownership housing units reduces the cost of
development, which can assist a developer to offer those units at a price that is
affordable to income -qualified households. A program to waive City SDCs for
affordable homeownership units could increase the number of housing units
available to income -qualified buyers in Springfield.
The potential fiscal impact of a SDC waiver will depend on how broadly available
the program is. Habitat for Humanity's Fischer Village may apply for SDC waivers
for up to ten affordable homeownership units in the next year, with an estimated
impact of approximately $100,000 in waived SDC fees. Increasing the program's
income threshold and allowing for-profit developers to access the waiver as
recommended could increase the potential fiscal impact.
MEMORANDUM City of Springfield
Date: 9/12/2022
To: Nancy Newton COUNCIL
From: Katie Carroll, Housing Analyst BRIEFING
Sandy Belson, Interim Planning Section Manager
Subject: SDC Waiver to Encourage Affordable MEMORANDUM
Homeownership
ISSUE:
Although the City has experienced significant residential construction in the last few years, there
remains a shortage of housing available that is accessible to households seeking affordable
homeownership opportunities.
COUNCIL GOALS/MANDATE:
Promote and Enhance our Hometown Feel While Focusing on Livability and Environmental
Quality
BACKGROUND:
At its May 9, 2022 work session, Council directed staff to design a program to waive System
Development Charges (SDCs) for income -qualified housing units that are sold affordably to
low-income households. SDCs are charges imposed on development to accumulate capital
needed to provide sufficient capacity in infrastructure systems to accommodate the development.
A waiver of City of Springfield SDCs reduces the funds available for capital projects for
transportation, stormwater, and local wastewater systems. A City waiver of SDCs would not
apply to those fees collected by or on behalf of the Willamalane Park and Recreation District,
the Springfield Utility Board, and the Metropolitan Wastewater Management Commission.
Offering a waiver for SDCs can incentivize types of development that might not otherwise
happen. By waiving SDCs, the City could help increase the number of affordable
homeownership units in Springfield by assisting developers to make projects pencil at a more
affordable sales price, reduce developers' need for other subsidies, and help projects develop
more quickly.
At the May 9, 2022, work session, Staff recommended the following criteria for a program to
waive SDCs for affordable homeownership units:
• Require an affordability period of five (5) years
• Limit availability to houses being sold affordably to households making 80% or less of
the area median income (AMI)
• Make the waiver available to non-profit organizations that target low-income
homebuyers
• Provide the waiver as a forgivable loan which must be repaid if the home is not resold
affordably to a buyer making 80% or less of the AMI
Attachment 1 Page 1 of 5
As federal HOME funds are available to pay for SDCs for income -qualified affordable rental
housing, staff recommended limiting the waiver to homeownership units.
Following the work session, staff conducted research, spoke with local developers, and further
developed draft guidelines. The draft guidelines (attached) reflect staff s current
recommendations for a potential program to waive SDCs for affordable homeownership units.
Staff requests direction from Council on three questions related to program design.
WAIVER PROGRAM OVERVIEW:
Pilot Program
Staff recommends offering the waiver as a three-year pilot program with a Council check-in at
two years. The City must complete a State -mandated Housing Production Strategy by December
2026 detailing measures and policies the City will undertake to promote development and meet
housing needs. A pilot would allow the City to evaluate the waiver prior to determining its
inclusion in the upcoming Housing Production Strategy.
Area Median Income (AMI) Level
Staff recommends waiving SDCs for housing units that will be sold to households making no
more than 100% of the area median income (AMI). Staff originally proposed setting the
threshold at 80% AMI in alignment with the requirements of the City's federal CDBG funds.
Based on feedback from local non-profit and for-profit developers, staff s recommendation is to
increase the AMI threshold.
Construction costs have gone up significantly, making it more difficult for developers to make
affordable housing projects pencil. Some affordable housing developers are developing mixed -
income projects with units offered at a range of AMI levels to help offset the cost of affordable
units. Offering a SDC waiver at the 100% AMI level would allow developers increased access
and thereby reduce development costs for a greater number of affordable homeownership units.
Some developers will continue to add units at or below the 80% AMI level based on
requirements from other subsidy sources and/or organizational mission.
Making the waiver available at the 100% AMI level would also encourage the development of
more workforce housing. Many federal and state subsidies for affordable housing limit AMI to
80%, leaving fewer resources available for the creation of below -market -rate housing available
to households with incomes who have earnings less than the area median income but above the
80% AMI threshold.
Household Income Limit Comparison
Household Size
100% AMI Income Limits'
80% AMI Income Limits
1
$55,800
$44,600
2
$63,700
$51,000
3
$71,700
$57,350
4
$79,600
$63,700
5
$86,000
$68,800
1 Based on Department of Housing and Urban Development (HUD) annual CDBG limits. Calculated by City of
Springfield by doubling the 50% AMI income limits.
Attachment 1 Page 2 of 5
6
$92,400
$73,900
7
$98,800
$79,000
8
$105,100
$84,100
Source: HUD CDBG Income Limits for Eugene -Springfield, OR MSA FY2022
Question for Council: Should the City waive SDCs for affordable homeownership
units offered to households whose income does not exceed 100% of the area median
income (AMI)?
Developer Eli ibg ility
Staff recommends allowing both non-profit and for-profit organizations developing
affordable housing to be eligible for the SDC waiver. Local non-profit developers building
affordable housing for income -qualified homebuyers include DevNW, Habitat for Humanity of
Central Lane, and SquareOne Villages. Of those, only Habitat is currently in development for
affordable homeownership units in Springfield. Habitat's project, Fischer Village, will add
twelve new homes when complete.
Cultivate, Inc., a for-profit developer which developed the C Street Co-op in conjunction with
SquareOne Villages, has expressed interest in submitting an application to the City for a below-
market ownership development within the next year. There are very few developers locally
building this type of housing. Allowing for-profit developers to access an SDC waiver will
provide an incentivize to those interested in building needed housing in Springfield.
Staff have designed the draft guidelines to require that developers satisfy additional
requirements if they do not have other legally binding documentation in place that secures the
affordability of a housing unit (such as a deed restriction or funding contract). Under the draft
guidelines, if an applicant does not provide sufficient documentation to ensure the unit will be
sold only to income -qualified households for five years, they will be required to submit the
buyer's income and housing unit cost information for the City's review. This information would
allow the City to ensure that the home is being sold to an income -qualified buyer at an
affordable price.
Question for Council: Should the City allow for profit developers in addition to non-
profit developers to receive SDC waivers for affordable homeownership housing
units?
Compliance Pathways
To minimize administration for an SDC waiver program, staff proposes that the waiver be
offered under the following two compliance pathways:
Option A. Housing Units with an Approved Affordability Requirement: For housing units
with legally binding documentation in place guaranteeing affordable homeownership (such as a
deed restriction or compliance agreement), the City would review that documentation to ensure
it meets the program's household income qualifications and five-year affordability period. The
documentation would also need to restrict resale of the housing unit within the affordability
period to only income -qualified buyers. If the documentation met these requirements, the City
would rely on it to enforce the program guidelines and would provide the SDC waiver as a grant.
Attachment 1 Page 3 of 5
Most housing built by non -profits and other developers creating units intended for long-term
affordability would likely fall under this pathway. These units generally have compliance and
monitoring requirements they must meet for other subsidies and/or other mechanisms in place
(such as a land trust) which secure affordability. Failure to meet affordability requirements can
put a developer in jeopardy for future subsidy from both the City and other sources. Relying on
the legal mechanisms already in place and providing the waiver as a grant reduces the City's
administrative burden in these circumstances with relatively low risk.
Option B. Other Housing Units: For housing units without affordability documentation
meeting program guidelines, the City would grant the waiver as a forgivable loan with 20%
forgiven per year of affordability. The City would require the applicant sign a promissory note
and would record a lien against the property receiving the waiver to secure the City's interest.
The applicant would need to submit the buyer's household income and housing unit cost
information to the City before closing so it could verify that the housing unit receiving the
waiver is being sold to an income -qualified household at an affordable price.
The City would monitor that the housing unit receiving the waiver remains occupied by the
qualified buyer for five years. If the buyer resells the house or no longer occupies it, the City
would require repayment of the waived SDCs at a reduced amount based on time remaining in
the affordability period.
Staff originally proposed requiring repayment of waived SDCs if a housing unit did not remain
the residence of a qualified home buyer. Structuring the program to require a homeowner to sell
to another qualified buyer if selling within the five-year affordability period would add
administrative effort, requiring more frequent monitoring and review of buyer information. This
requirement may also pose additional complexity for homeowners trying to resell to find
qualified buyers and meet program requirements.
Conclusion: Providing the waiver as a grant in circumstances where other documentation
secures affordability for five years (Option A) and requiring reduced repayment under resale or
non -occupancy circumstance when there are not other affordability restrictions (Option B)
simplifies the program and still provides meaningful opportunities to assist more income -
qualified households to become homeowners.
Question for Council: To minimize administration for this program, should the City
offer the waiver as a grant in some circumstances (Option A), and a forgivable loan in
other circumstances (Option B)?
Fiscal Impact
SDCs are charged at the time of issuance of a building permit. Habitat for Humanity has paid
SDCs of approximately $10,000 each for unit already permitted in its Fischer Village
development. Habitat could potentially submit SDC waiver applications for up to ten additional
dwellings within the next year. The estimated fiscal impact of this project is approximately
$100,000.
Additionally, Cultivate Inc. is interested in developing approximately 8-16 homeownership units
in Springfield and may be ready to apply for an SDC waiver within the next 6-12 months. This
Attachment 1 Page 4 of 5
project would increase the expected fiscal impact of the waiver over the next year, but the
project is still in early development so a dollar estimate is unavailable.
Generally, staff estimates that a more broadly available program will have a higher fiscal impact
as more developments for affordable homeownership would be potentially eligible for waivers
of SDC charges. If implemented, staff can provide data on the actual fiscal impact of the
program to Council.
NEXT STEPS:
Staff will return to Council with a draft resolution and updated draft guidelines based on Council
direction for consideration and adoption.
RECOMMENDED ACTION: Provide direction to staff in response to three questions:
- Should the City waive SDCs for affordable homeownership units offered to households
whose income does not exceed 100% of the area median income (AMI)?
- Should the City allow for profit developers in addition to non-profit developers to receive
SDC waivers for affordable homeownership housing units?
- To minimize administration for this program, should the City offer the waiver as a grant in
some circumstances (Option A), and a forgivable loan in other circumstances (Option B)?
Attachment 1 Page 5 of 5
SDC Waiver for Affordable Homeownership Units
Program Guidelines
September 1, 2022 Draft
Pumose of SDC Waiver
To address the need for more affordable homeownership opportunities in Springfield, the City is
waiving System Development Charges (SDCs) to encourage the development and sale of
housing units affordable to homebuyers with household incomes of no more than 100% of the
area median income (AMI). The City will waive transportation, stormwater, and local
wastewater SDCs assessed during the permitting process. Metropolitan Wastewater Management
Commission and Willamalane Park and Recreation District SDCs are still in effect.
The waiver is available under two compliance pathways. For applicants with sufficient legal
documentation in place to secure the housing unit's affordability per program guidelines, the
SDC waiver will be a grant. For applicants without sufficient documentation to secure the
housing unit's affordability, the waiver is structured as a forgivable loan with 20% forgiven after
each year of the five (5) year affordability period.
ProgramObjectives
• Reduce up -front construction costs for developers who will sell homes at an affordable
price to households with incomes of no more than 100% of the AMI.
• Encourage the creation of homes that will provide for affordable homeownership for at
least five years for income -qualified households (earning no more than 100% of AMI) by
providing the waiver as a grant to qualifying applicants.
• Facilitate housing stabilization and home equity for more income -qualified households by
offering the waiver as a 5 -year forgivable loan for housing units that are initially sold
affordably to a qualifying buyer, subject to owners' ongoing occupancy of home.
Definitions
For the purposes of this program, the following terms mean:
Affordable Price: For purposes of this program, an affordable price means that at the time of
sale, the qualified homebuyer will spend no more than 35% of their gross household monthly
income on housing costs. Housing costs include all payments made toward the principal and
interest of any mortgages on the unit, real property taxes, insurance, and any condominium
association, homeowners' association, or housing cooperative payments (utilities are excluded).
Approved Affordability Requirement: For purposes of this program, an approved affordability
requirement is legally binding documentation (such as a deed restriction or compliance
agreement) which requires that the housing unit be sold exclusively to income -qualified
households for a period of at least five (5) years (the compliance period). The documentation
Attachment 2 Page 1 of 4
must ensure that if the housing unit is resold within the compliance period, that it will only be
sold to another qualified buyer belonging to an income -qualified household. The City will review
documentation submitted by the applicant to determine if it meets program requirements and
qualifies as an approved affordability requirement.
Compliance Period: The compliance period is five (5) years. The period begins when the
certificate of occupancy is issued or when a qualified homebuyer closes on the property,
whichever is later; it ends five years from the date it began.
Income -Qualified Household: For the purposes of this program, income -qualified households
are those whose income does not exceed 100% of the area median income (AMI) for the Eugene
Springfield Metropolitan Statistical Area, based on the Federal Department of Housing and
Urban Development annual Community Development Block Grant Income Limits, adjusted for
household size.' Income eligibility is determined by household adjusted gross income from the
prior year, as well as income anticipated to be received during the coming twelve (12) month
period. The gross income of all adults eighteen (18) and over who will be living in the housing
unit is used to determine household income. The household's income may rise while they live in
the property so long as the household was income -eligible when they first occupied the unit.
Qualified Homebuyer: For the purposes of this program, qualified homebuyers are individuals
who will be on the title and occupy the housing unit as their primary residence.
Eli ibili
• The housing unit for which the waiver is requested must be located within the City of
Springfield city limits.
• The applicant must have site control of the property.
• The housing unit must meet all other development and code requirements.
• The housing unit must be a legal dwelling unit. It may be part of a community land trust
and/or cooperative ownership housing.
• The housing unit for which the SDC waiver is requested may be part of a mixed -income
development, however only units that meet program guidelines qualify for the waiver.
• The applicant must verify with the City that the housing unit is being sold to a qualified
buyer belonging to an income -qualified household at an affordable price; OR the housing
unit must have an approved affordability requirement in place.
• During the compliance period, the housing unit must remain occupied by a qualified
homebuyer. The qualified homebuyer may rent out space in the housing unit, so long as
they continue to occupy it as their primary residence.
• Eligibility for this waiver program expires on June 30, 2025. All building permit
applications related to an application for a SDC waiver under this program must be
submitted by June 30, 2025 for the waiver to be granted.
1 100% AMI is calculated by City of Springfield by doubling the 50% AMI income limits.
Attachment 2 Page 2 of 4
Compliance
The SDC waiver may be granted under two pathways. For housing units with an approved
affordability agreement, the SDC waiver will be a grant (Option A). For housing units without an
approved affordability agreement, the waiver is structured as a forgivable loan with 20%
forgiven after each year of the five (5) year compliance period (Option B).
A housing unit for which the waiver is granted must be sold in accordance with the program
guidelines within one (1) year of the issuance of the certificate of occupancy or it will be
considered out of compliance and the full amount of waived SDCs must be paid.
To remain compliant, the housing unit granted the waiver must continue to meet its approved
affordability requirement (Option A) or be occupied by the qualified homebuyer whose income
and housing unit price information have been verified by the City (Option B).
Compliance Pathways
Option A. Housing Units with an Approved Affordability Requirement
For housing units that have legally binding documentation in place guaranteeing affordable
homeownership (such as a deed restriction or compliance agreement), the applicant may submit
this documentation to the City for verification of conformance with program guidelines. The
documentation must ensure that the housing unit will be sold exclusively to qualified buyers
belonging to income -qualified households for the length of the compliance period. The
documentation must ensure that if the housing unit is resold within the compliance period, it will
only be sold to another qualified buyer belonging to an income -qualified household.
The City will determine if documentation submitted by the applicant qualifies as an approved
affordability requirement. The City reserves the right to approve or deny a SDC waiver under
this pathway if it determines that the documentation provided is insufficient to guarantee
affordability per program guidelines.
The City may conduct regular monitoring for compliance and reserves the right to request
documentation to verify compliance with the approved affordability requirement and these
program guidelines.
Option B. Other Housing Units
For housing units that do not have an approved affordability requirement in place, the applicant
will be required to submit documentation required by the City to secure the unit's affordability
per program guidelines. The applicant will also be required to submit income and housing unit
price information to the City to verify program compliance before closing on the property with a
buyer. The City will verify that the housing unit is being sold at an affordable price to a qualified
buyer who belongs to an income -qualified household. During the compliance period, the
qualified homebuyer must occupy the housing unit as their primary residence.
The City will monitor that the qualified homebuyer lives in the housing unit. If a homeowner
resells the property within the five (5) year compliance period or no longer occupies it as their
Attachment 2 Page 3 of 4
primary residence, a portion of the waived SDCs must be paid by the owner. Amount due will be
based on time remaining in the compliance period.
The City will conduct regular monitoring during the compliance period and reserves the right to
request documentation to verify the housing unit is occupied by a homebuyer who has been
found to be qualified for the program by the City.
Attachment 2 Page 4 of 4
Overview- System Development Charges
Waiver for Affordable Homeownership
Waives City SDCs: transportation, stormwater, local wastewater1
• Program Objectives:
• Reduce up -front construction costs for
development of homes offered for sale
at an affordable price
• Increase number of affordable
homeownership units
• Facilitate housing stabilization and
home equity for qualifying households
Attach" 1 of 7
.0
'A
Overview - Draft Program Guidelines
• 3 -year pilot program
• Require affordability for five (5) years
• Limited to units for homeownership
• Households with incomes no more than 100 %AMI
• Initial proposal- 80% AMI
• Any developer may apply
• Initial proposal- limit to non-profit
• Waiver is a grant or forgivable loan depending on housing unit's
qualifications
• Initial proposal- loan
AttachniS�� 2 of 7
Fiscal Impact
1. Would vary based on how broadly waiver is offered
• Income Level of Qualified Household
• Qualified Developers
2. Anticipated Impact
• Fischer Village: 10 units, up to $100,000
• Cultivate Inc.: Approximately 8-16 units, impact unkno
3. Pilot would allow adjustments as -needed
AttachniS�� 3 of 7
Should the City waive SDCs for affordable homeownership
units offered to households whose income does not exceed
100°0 of the area median income?
Household Size
100% AMI Income
Limits* (2022)
80% AMI Income
Limits (2022)
1
$55,800
$44,600
2
$63,700
$51,000
3
$71,700
$57,350
4
$79,600
$63,700
5
$86,000
$68,800
6
$92,400
$73,900
7
$98,800
$79,000
8
$105,100
$84,100
*Based on Department of Housing and Urban Development (HUD) annual CDBG limits. Calculated by City of Springfield by doubling the 50% AMI income limits.
Attach 4 of 7
Should the City allow for-profit developers in addition
to non-profit developers to receive SDC waivers for
affordable homeownership housing units?
AttachniS�� 5 of 7
Compliance Pathways
Option A
Approved Affordability Re '
1.
2.
City verifies affordak
documentation
• 100% AMI
• Resell affordably
• 5 years
Waiver is a grant
Option 6
Other Housing Units
1. City requires verification of
qualified buyer and affordable
price
2. City records security documents
3. Waiver is a forgivable loan
• 20% forgiven per year
• Initial buyer must occupy or
repay
AttachniS�� 6 of 7
To minimize administration for this program,, should
the City offer the waiver as a grant in some
circumstances (Option A), and as a forgivable loan in
other circumstances (Option 8)?
AttachniS�� 7 of 7