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03/09/2021 04 Affordable Housing Follow Up Discussion to\'4\lyy tbxk ik 1 PP1-:4P PPP g. A P p PPi ittYlltYlt.\ta. BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 4. For Meeting of: March 9, 2021 ITEM TITLE: Affordable housing follow up discussion SUBMITTED BY: Joan Davenport,AI CP, Community Development Director Joseph Calhoun, Planning Manager Glenn Denman, Code Administration Manager SUMMARY EXPLANATION: At the February 23, 2021 City Council Study Session on the Housing Action Plan (HAP) and Accessory Dwelling Units (ADU), a number of themes emerged that provided focus on topics the Council requested more information or targeted recommendations. Three community experts have been invited to participate in this discussion, including: Lowel Krueger, Executive Director of the Yakima Housing Authority Byron Borton, Chief Visionary Officer of Borton Fruit and Yakima Lodges developer Jake Mayson, Government Affairs Director of Central Washington Homebuilders A separate memo is included to address some of the fee questions raised at the February 23, 2021 Study Session. ITEM BUDGETED: STRATEGIC PRIORITY: Neighborhood and Community Building APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: Provide direction, as desired on items summarized in memo. ATTACHMENTS: Description Upload Date Type Folio up on rdable Flow in Issues 3/4/20 1 backup Material D ousel Permetin F urr7ma /3/ 021 backup Material 2 Memorandum To: Honorable Mayor and Yakima City Council From: Joan Davenport, Community Development Director Joseph Calhoun, Planning Manager Date: City Council meeting of March 9, 2021 Subject: Follow-up on Affordable Housing Discussion Items from Feb 23, 2021 Council Study Session At the February 23, 2021 City Council Study Session on Housing Action Plan (HAP) and Accessory Dwelling Units (ADU), a number of themes emerged that provided focus on several topics requested for more information or targeted recommendations. To assist in the conversation, we have invited three industry experts to participate in the Council discussion regarding affordable housing construction, local market conditions and identification of potential incentives or obstacles to new development. Lowe! Krueger, Executive Director of Yakima Housing Authority Byron Borton, Chief Visionary Officer, Borton Fruit Company and Yakima Lodges developer Jake Mayson, Central Washington Homebuilders Government Affairs Director Key topics discussed during the previous study session that this panel may address include: 1. Questions about the market conditions in Yakima and land supply. 2. Encourage affordable, small detached single family housing units. There is a strong community preference for small homes. We need specific strategies to encourage construction of smaller homes. 3. Encourage construction of all housing types. Examples of incentives mentioned at the Council Study Session include: a. Reduction of minimum lot size; b. Reduction in building setbacks, zero lot lines, lot coverage and other zoning requirements; c. Techniques to reduce building costs of affordable housing units; d. Potential waivers of fees or reduction in permit costs; i. See separate memorandum from Glenn Denman related to building permit and sewer connection fees. e. Infrastructure incentives; f. Encouragement of condo- type development where homeowner does not own the land; g. Incentives for first time home buyers. 4. Encourage Accessory Dwelling Units (ADU's). A variety of topics were discussed. It was noted that one of the main obstacles which often discouraged construction of ADU's included utility connections as well as extensions of water and sewer lines. 5. Adequacy of the Technical Advisory Committee of the Housing Action Plan and community survey validity. 3 Memorandum DATE: March 3, 2021 TO: City Council COPY: Joan Davenport, Community Development Director Joseph Calhoun, Planning Manager FROM: Glenn Denman, Code Administration Manager RE: 3/9/21 Study Session/ADU Permit Fee Structure This memorandum shows how permit fees are structured, valuations are determined, and other factors that drive fees related to the creation of ADU's. The building permit fee for renovating an existing structure into an ADU is based on materials and labor (bid prices); construction of new structures is based on a per square foot charge. The basis for these differences is that renovations to an existing structure only involves the interior features (the permit fee will typically reflect a lesser amount accordingly), since the main structure is already in place. For a new structure, the permit fee is based on what the assumed overall value of the structure will be once the structure receives a Certificate of Occupancy. The cost of a permit for a new structure is typically more, since it includes the entire structure with its interior features. Building plan review fees are 65% of the permit fee. The following construction details may drive permit fees: • Renovating an existing detached structure (such as converting a garage or storage building) • Renovating an existing attached structure (garage or storage area conversion) • A new ADU addition onto an existing single-family structure • The creation of an ADU within an existing single-family structure • A new detached structure from the ground up Other variables that drive permit fees are: • If the existing building already has an approved waste water connection • A new detached structure is required to have a separate side sewer connection • An addition onto an existing structure may connect water and sewer to the existing system • Conversion of a single-family dwelling to include an ADU, or an ADU addition may cause the structure to become a duplex, so additional fire ratings may drive permit valuations • If the owner desires to install a separate water meter for the ADU, vs. connecting to an existing meter (if the existing meter will be utilized for 2 units, the owner is responsible for the utility bill) • The number of fixtures desired (additional restrooms, whether or not laundry facilities are provided, etc.) • Porches, garages, carports or storage buildings are based on a lesser valuation due to occupancy type • Actual costs (labor and materials for a renovation from garage to ADU) 4 o A builder may utilize lower bids and/or less expensive materials o Higher end features vs. basic necessities • The type of utility (appliances served by gas require a gas piping permit) • Waste water connection fees are $50 less than an original structure's connection fee that is located on the same lot • The size of the unit Permit fees related to Accessory Dwelling Units (ADU's) are as follows: • An existing structure that is renovated into an ADU (garage or other existing structure to ADU) o Building permit fees are based on cost of renovation (materials and labor) • For example, if the renovation cost is $20,000 the permit fee would be: • Building permit: $296.11 • Plan review: $192.47 • Total: $488.58 o Additional permits are: • Plumbing (based on a per fixture fee) • A basic unit may contain one toilet, one shower/tub, 2 sinks, washing machine, water heater = $99.20 (total) • Mechanical (based on a per appliance fee) • A basic unit may contain a heat source, 3 exhaust fans, clothes dryer = $90.85 • Waste water connection fee: $3016.55 • Domestic water fees: (%" meter) $3265.00 • The overall finished valuation of this renovated structure is based on cost of materials and labor, plus the original value of the existing structure o In comparison, a permit fee based on a renovation valuation of $10,000 would be much less: • Building permit: $167.51 • Plan review: $108.88 • Total: $276.39 • Adding an ADU onto an existing structure would be structured as follows: o The addition fees are based on square footage, and the permit for modifications to the existing structure are based on materials and labor (removing siding and other modifications necessary to accommodate the new addition) • A newly constructed ADU o Building permit fees are based on square footage • For example, for a 1000 square foot ADU, the building permit would be: • Building permit: $869.98 • Plan review: $565.49 • Total: $1435.47 • Plumbing, mechanical, waste water and domestic water fees are same as above o The overall finished assumed valuation of this structure would be: $92,250.00 5 • Compared to a 2070 square foot 3 bedroom single family structure: o Building permit fee: $1392.63 o Plan review $905.21 o State Surcharge fee: $6.50 o Mechanical permit $142.00 o Plumbing permit $242.40 o Waste water connection fee (and permit) $3066.55 Total $2772.11 • Overall finished valuation: $288,860.82 Distributed at the Meeting 34,7(qi BORTON & SONS, INC. - FRUIT & COLD STO March Wh, 2021 To: Honorable Mayor and City Council From: Byron Borton, Eastern Washington Residential Developer (The Lodges, Castle Creek, University Parkway Apartments, Powerhouse Flats) Subject: Affordable Housing Discussion for Yakima Facts: -Vacancy Rates remain below 2% in most housing Rental offerings, across nearly all Unit types -Local Developers are trying to Satisfy that Demand in Yakima, by Building both rental and permanent housing units across all sectors. These projects typically take 24-30 months to get fully entitled, and then constructed. Several hundred Units are in the current Pipeline. -Building Costs have risen Substantially in just the past 6-months, and steadily over the past 3-5 years. Lumber is up over 3X, and OSB is nearly 5X over past pricing from just 12-months ago. (In 2015 my cost to Build Apartment Units was around $95, 000. Today that Unit cost is approaching $140, 000.) - Pacific Power is holding up the Construction of Several Housing Developments, along with the Jobs and Dwelling units those Projects will provide the Yakima Market. (ex. Stealth investments & .I&C properties on Powerhouse Rd, and Aspen Tree on Washington & 64th) - The Housing Crisis and lack of available units in not unique to Yakima. Nearly all non -urban areas in Washington state, Oregon, and Idaho are experiencing the same Demand, and lack of Inventory. -The Lodges project began in 2017, and is now just finishing Completion (4-years). Providing substantial volumes of new dwelling units will not happen in just one or two seasons. -66% of the Units at The Lodges Qualify as Affordable Housing per the Federal Fannie Mae Guidelines. These units are priced below market rents, as my Strategy is to offer Quality, as affordably as possible. Market rents would be $100-$200 more monthly, per dwelling unit. 2550 BORTON ROAD • YAKIMA, WA 98903 • PHONE 509-966-3905 • FAX 509-966-3994 • SALES FAX 509-966-5131 GE BORTON & SONS, INC. - FRUIT & COLD STORAGE Solutions and Ideas: 1. New Housing of ALL types will ultimately help soften the Housing Crisis and open -up more places to live. For example, in our Complexes, many people are looking to move to Single Family Dwellings, but that inventory is extremely light, therefore they don't move. Any lack of product type creates vacancy compression. Yakima needs more of ALL Types of Homes and Dwellings. Developers will Build what they deem is in Demand, when allowed to do so. 2. Revisit the City UGA, and desired growth Annexation Area. Identify large area such as Terrace Heights where most of the Valley's Growth will occur in Coming Years. 3. If the city council were willing to Draft a letter to Pacific power on behalf of Developers in the Valley, it would speak volumes to understanding our Challenges, and show support for new projects and dwellings being constructed. This problem is nearly Universal in Yakima. This "Unforeseen" bottleneck is real, and slowing down several project by 8-16 months. In Cooperation with the County Commissioners, perhaps a formal plea for help to Pacific Power; focused on Jobs being delayed (or lost), and the unpredictably Delayed timelines on new development projects. This Letter or Communication would speak volumes to Developers trying to Satisfy demand in our valley. 4. Higher Building costs = Higher Housing Prices & Higher Renal rates. Any ideas to Mitigate these costs would be positive. a. Changing the sewer hookup fees to match with Square Footage, or other metrics would be positive. 500 Square foot Studio apartments should not be paying the same fee at 5,500 SF 4-bathroom Houses. b. Amortizing the Connection fees over the First 5-10 years of Billing would also save the developer the Up -front costs of Hook-up fees. Assign a reasonable Rate of return on top of the proposed hook-up fee, and then bill the user that cost over an extended period of time. c. A cohesive ADU plan will help create more Dwellings. ADU typically cost less than Stand-alone units, and provide income for the homeowner investing in the ADU. Also, ADU owners are commonly supplementing their incomes, and therefore do not always command the Highest Rental Rates that professional Rental companies expect. Omitting the Hookup fees and or additional permit fees for ADU's would also incentivize their Construction. 2550 BORTON ROAD • YAKIMA, WA 98903 • PHONE 509-966-3905 • FAX 509-966-3994 • SALES FAX 509-966-5131 BORTON & SONS, INC. - FRUIT & COLD STORAGE d. Infrastructure Investment. East and West. Identify the areas will large amounts of Developable ground, but which are not adequately served by Utilities. Terrace Heights, Wide Hollow, and West Summitview, all come to mind. Builders will Fulfill this demand if there are feasible ways to Build new units. In many cases, without City Help on infrastructure, it is just not financially feasible. 5. Be partners and "Value -Add" for developers and those People trying to bring growth and NEW Dwellings to the Yakima Valley. The attitude of "We want this to Work" speaks volumes with the investors, builders, and leaders in Yakima. The City has been excellent in recent years, of Communicating and Advancing projects that Benefit the housing in the Yakima Valley. If we continue to Embrace that methodology, Yakima will Continue to flourish, and there will be a steady stream of wonderful new places built for Everyone to Enjoy and Live. Kind Regards Byron Borton 2550 BORTON ROAD • YAKIMA, WA 98903 • PHONE 509-966-3905 • FAX 509-966-3994 • SALES FAX 509-966-5131