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HomeMy WebLinkAbout01/25/2022 04. Discussion about adopting an affordable housing incentive program 1 i`c*Qs 14411"i\l'A rr 11 i "i enc u nrry 1 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 4. For Meeting of: January 25, 2022 ITEM TITLE: Discussion about adopting an affordable housing incentive program SUBMITTED BY: Matthew"Selby" Selby, Interim Assistant City Manager SUMMARY EXPLANATION: Attached you will find a summary of a proposed affordable housing incentive program that is a requirement of the Connecting Housing to Infrastructure Program grants the City applied for to support the development of 100 units of affordable housing in Yakima. ITEM BUDGETED: STRATEGIC PRIORITY: APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: ATTACHMENTS: Description Upload Date Type Memo re:fee wailer program for affordable housingID 1/18/2022 Cover Memo projects D letter of intent for CHIPs grant 1/18/2022 Cover Memo D ORD. No. 2019-020 1/21/2022 Cover Memo D Draft ordinance for affordable housing incentive program 1/19/2022 Cover Memo 2 MEMORANDUM To: Bob Harrison, City Manager From: Matthew "Selby", Interim Assistant City Manager Date: January 20, 2021 RE: Fee waiver program for affordable housing projects On January 7, the City applied for three Connecting Housing to Infrastructure Program grants through the Department of Commerce to assist in the development of three 100% affordable housing projects by the Yakima Housing Authority, Catholic Charities and Rod's House. If received, these grant funds would pay for construction and system development costs for water, sewer and stormwater. System development costs include the fees typically charged for connecting housing to the City's water and sewer systems. A requirement of the CHIPs grant program is that the City adopt a fee waiver program to support affordable housing. We request that the City Council discuss the adoption of a waiver program for water and sewers connections fees for affordable housing projects at its January 25 study session. 3 !., OFFICE OF THE CITY MANAGER •7 s 129 North Second Street City Hall,Yakima Washington 98901 Phone(509)575-6040 .. ..1 1.41 January 7,2022 Lisa J. Brown, Ph,D. Director Washington State Department of Commerce 1011 Plum St SE Olympia,WA 98501 Dear Lisa, I am writing to express the City of Yakima's intent to adopt a fee waiver program that will incentivize affordable housing development. The program will waive system development fees charged at the time of development that allows connection to City utilities including water, sewer, or stormwater systems. Our intent for this program goes beyond waiving system development charges required by the Connecting Housing to Infrastructure Program (CHIP): Water, Sewer, and StormwaterforAffordable Housing grant application. In 2019,the City of Yakima adopted legislation to implement Substitute House Bill 1406. The legislation allows the city to collect and retain a portion of the existing sales tax to be used for the provision of affordable housing opportunities within the City. We plan to use the funds collected to create additional funding sources for affordable housing. The fee waiver program will alleviate system development charges, and benefit low-income households by increasing affordable housing opportunities throughout the city. In the interim, the City of Yakima is submitting three CHIP grant applications on behalf of the Yakima Housing Authority, Catholic Charities Housing Services, and Rod's House. These grant funds will cover utility improvements and system development costs for their current housing projects. Our city is facing a severe housing shortage. Vacancy rates for both apartments and single-family homes for sale are extremely low—below 1%. With vacancy rates so low, people looking for new homes have fewer options,thereby increasing competition for the limited supply of units available. This has continued to drive up both rents and housing prices. Additionally, local housing prices are rising faster than local incomes. The median home value in Yakima has risen by 33%between 2012 to 2019, while average rents increased by 26%. Over the same period, the median family income has only increased by 19%. The proposed fee waiver program will help local agencies continue providing new high-quality, affordable housing for low-income households. The fee waiver program will be presented to the Yakima City Council on January 25th during a scheduled study session. Since I Robert Harrison Yakima City Manager Yakima kiittd All- caair ''lip► 1994 4 ORDINANCE NO. 2019-020 AN ORDINANCE imposing the maximum capacity available from the City's annual taxable retail sales and use tax, as provided for in Substitute House Bill 1406 effective July 28, 2019, to be used for the provision of affordable housing opportunities within the City. WHEREAS, the residents of the City of Yakima are subject to a retail sales and use tax of 8.2%for retail goods and services purchased within the City; and WHEREAS, the City of Yakima does not impose any of the "qualifying local taxes" identified in Section 1(1)(e) of Substitute House Bill 1406; and WHEREAS, Substitute House Bill 1406 provides the opportunity to a city to legislatively authorize, fix and impose a sales and use tax in the maximum amount of up to 0.0146% of the taxable retail sales occurring in the City; the maximum amount available to the City is determined by a number of factors that include whether the City levies a "qualifying local tax"; and WHEREAS,the tax imposed under Substitute House Bill 1406 must be deducted from the amount of tax otherwise required to be collected or paid to the Department of Revenue, as authorized under RCW 82.08 and RCW 82.12, and retained by the City; and WHEREAS, the tax revenue that the City is authorized to retain under the operation of Substitute House Bill 1406 may only be used for acquiring, rehabilitating or constructing affordable housing, including new units of affordable housing within existing structures or facilities providing supportive housing services, or for providing rental assistance to tenants; and WHEREAS, the housing and services provided pursuant to the use of the taxes retained under the operation of Substitute House Bill 1406 may only be provided to persons with incomes at or below 60% of the median income of the City; and WHEREAS, the Yakima City Council is keenly aware of the need in the community for opportunities to provide affordable housing assistance to the residents of the City who are experiencing low income, as well as the fact that there is a shortage of good quality affordable housing within the community; and WHEREAS, the City Council finds that it is in the best interests of the City to take advantage of this opportunity to retain the maximum amount of the sales and use tax revenue collected within the City to enhance the affordable housing opportunities to low income residents of the City; Now, Therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: Section 1. Section 3.78.065 entitled "Imposition of sales and use tax for affordable and supportive housing" is added as a new Section to the Yakima Municipal Code and reads as follows: 3.78.065 Imposition of sales and use tax for affordable and supportive housing. A. There is imposed a sales and use tax, as the case may be, as authorized by Chapter 338, Laws of 2019, which shall be codified in chapter 82.14 RCW, upon every taxable event, as 1 5 defined in chapter 82.14 RCW, occurring within the City of Yakima. The tax shall be imposed upon and collected from those persons from whom the state sales tax or use tax is collected pursuant to chapter 82.08 and 82.12 RCW. B. The rate of the tax imposed by this Section 3.78.065 shall be the maximum rate authorized under Chapter 338, Laws of 2019, which shall be 0.0073 percent, except that in the event the City of Yakima levies a "qualifying local tax" as defined by and before the deadline imposed by Chapter 338, Laws of 2019, the rate shall be 0.0146 percent. C. The tax imposed under this Section 3.78.065 shall be deducted from the amount of tax otherwise required to be collected or paid to the Department of Revenue under chapter 82.08 or 82.12 RCW. Under subsection 1(3) of Chapter 338, Laws of 2019, the Department of Revenue will perform the collection of such taxes on behalf of The City of Yakima at no cost to the City. D. Under subsections 1(4) and 1(5) of Chapter 338, Laws of 2019, the Department of Revenue will calculate the maximum amount of tax distributions for The City of Yakima based on the taxable retail sales in the City in state fiscal year 2019, and the tax imposed under this Section 3.78.065 will cease to be distributed to the City of Yakima for the remainder of any state fiscal year in which the amount of tax exceeds the maximum amount of tax distributions for the City as properly calculated by the Department of Revenue. Distributions to The City of Yakima that have ceased during a state fiscal year shall resume at the beginning of the next state fiscal year. Section 2. Section 3.78.067 entitled "Purposes of tax" is added as a new Section to the Yakima Municipal Code and reads as follows: 3.78.067 Purposes of tax. A. The City may use the funds collected by the tax imposed under section 3.78.065 or bonds issued under subsection 1(9)of Chapter 338, Laws of 2019 only for the following purposes and in accordance with Chapter 338, Laws of 2019: 1. Acquiring, rehabilitating, or constructing affordable housing, which may include new units of affordable housing within an existing structure or facilities providing supportive housing services under RCW 71.24.385; or 2. Funding the operations and maintenance costs of new units of affordable or supportive housing; or 3. Providing rental assistance to tenants, unless and until the population of the city of Yakima should exceed 100,000, upon which event the funds collected shall only be used in accordance with 3.78.067(A)(1) and (2). B. The housing and services provided under this Section 3.78.067 may only be provided to persons whose income is at or below 60 percent of the median income of the City. C. In determining the use of funds under this Section 3.78.067,the City must consider the income of the individuals and families to be served, the leveraging of the resources made available under Section 3.78.065, and the housing needs within the City. 2 6 D. The City of Yakima must report annually to the Washington State Department of Commerce, in accordance with the Department's rules, on the collection and use of the revenue from the tax imposed under Section 3.78.065. E. Under subsection 1(12)of Chapter 338, Laws of 2019, the tax imposed by the City under Section 3.78.065,will expire 20 years after the date on which the tax is first imposed. The Finance Director shall provide notice to the City Council and the City Manager of the expiration date of the tax each year beginning three years before the expiration date, and shall also promptly notify the City Council and City Manager of any changes to the expiration date. Section 3. Section 3.78.080 of the Yakima Municipal Code is hereby amended to read as follows: 3.78.080 Administration and collection of tax. The administration and collection of the tax imposed by Sections 3.78.060 through 3.78.100 of this chapter shall be in accordance with the provisions of RCW 82.14.050 and Chapter 338, Laws of 2019. Section 4. The Finance Director is authorized to provide any necessary notice to the Department of Revenue to effectuate the tax enacted by this ordinance and to execute, for and on behalf of The City of Yakima, any necessary agreement with the Department of Revenue for the collection and administration of the tax enacted by this ordinance. Section 5. Any notice given or agreement executed by the Finance Director as authorized by Section 4 of this ordinance prior to the effective date of this ordinance is ratified and confirmed. Section 6. Severability. If any section, subsection, paragraph, sentence or clause of this ordinance is declared invalid or unconstitutional for any reason, such decision shall not affect the validity or constitutionality of the remaining portions of the ordinance. Section 7. Sections 1 through 3 of this ordinance shall take effect on November 1, 2019. Section 8. This ordinance shall be in full force and effect 30 days after its passage, approval, and publication as provided by law and by the City Charter. PASSED BY THE CITY COUNCIL this 3ro day of September, 2019. ATTEST: * athy C ffey, • • S n a Claar Tee ' Publication Date: September 6, 2019 • ••, Effective Date: October 6, 2019 3 7 ORDINANCE NO. 2022- AN ORDINANCE adding Section 7.92: Affordable Housing Incentive Program for multi-family low-income housing. WHEREAS, the City provides wastewater and water services to the residents of the City; and WHEREAS, connection fees for those services are based on the actual costs of connection of dwelling units to the water and wastewater services; and WHEREAS, the City Council passed Ordinance No. 2019-020 which adopted the tax retention provisions of House Bill 1406, codified as RCW 82.14.540, allowing the City to retain a portion of its sales tax to be used to support affordable housing; and WHEREAS, the City adopted its Housing Action Plan on June 15, 2021, wherein one of the adopted strategies to increase affordable housing opportunities within the City is to evaluate and address the costs of connecting affordable units to public water and sewer; and WHEREAS, the City adopted its 2040 Comprehensive Plan in 2017 wherein the analysis indicates that the City needs a minimum of 300 housing unit starts each year during the Plan period to provide housing for Yakima's growing population; and WHEREAS, housing statistics for the City of Yakima found in the Housing Action Plan show that nearly 50% of the residents renting housing pay over 30% of their income to housing, and 36% of all households pay over 30% of their income for housing, showing that there is a need for affordable housing in the City; and WHEREAS, monies retained due to adoption of the parameters of HB 1406 and RCW 82.14.540 may be used for constructing affordable housing, which includes connecting to city water and wastewater services; and WHEREAS, the incentive program adopted herein will provide those affordable housing developers the opportunity to apply for a grant to pay for water and/or wastewater connections, the funding for which will come from the 1406 money, to be paid from the 1406 money to the City for the costs of connections; and WHEREAS, the funds will help affordable housing developers reduce costs of their projects, which hopefully will increase the number of units that can be developed, as well as ensure that the City receives payment into its water and wastewater accounts for the actual costs of connecting the affordable units to the City's utility services; and WHEREAS, the City Council of the City of Yakima hereby finds and determines that it is in the best interests of the City of Yakima and its residents to add Section 7.92: Affordable Housing Incentive Program, to the Yakima Municipal Code, and such addition will promote the general health, safety and welfare; now, therefore BE IT ORDAINED BY THE CITY OF YAKIMA: 8 Section 1. Chapter 7.92: Affordable Housing Incentive Plan is hereby added to the Yakima Municipal Code to read as follows: Chapter 7.92 AFFORDABLE HOUSING INCENTIVE PROGRAM Sections: 7.92.010 Purpose of chapter 7.92.020 Applicability 7.92.030 Affordable housing requirement 7.92.040 Incentive program for water and/or wastewater connection charges 7.92.050 General requirements 7.92.060 Additional requirements for mixed-income developments 7.92.070 Report to Council 7.92.010 Purpose. There is a demonstrated need in the City for housing which is affordable to persons of low and moderate income. This chapter provides an incentive program for developers in exchange for the public benefit of providing multi-family affordable housing units within the City. 7.92.020 Applicability. The incentives listed herein for low-income households may be utilized for multi-family housing projects with a minimum of 10 units, including cottage and/or manufactured housing communities, in applicable zoning districts. The housing project must include a minimum threshold of affordable units allocated for low-income households and other criteria as specified in this chapter. Development proposals must meet all other standards for development outlined in the Yakima Municipal Code, state and federal laws. 7.92.030 Affordable housing requirement. (a) Minimum requirement. All applicants creating ten (10) or more new dwelling units shall provide at least 50% of the units as affordable housing units and comply with the provisions of this chapter as established herein if the applicant wishes to take advantage of the incentive program outlined in this chapter. (b) Rounding. The number of affordable housing units required is determined by rounding up to the next whole number of units. 7.92.040 Incentive program for water and/or wastewater connection charges. (a) There is created an incentive program for applicants meeting the affordable housing requirement in section 7.92.030 wherein applicants may apply for a grant from the incentive program fund to pay for some or all of the connection fees for water and/or wastewater utilities. (b) Applicants may apply for a grant for the entire water and/or wastewater connection fees if the development is 100% affordable housing, as defined herein. (c) If the development is less than 100% affordable, the applicant may apply for a grant for a percentage of the water and/or wastewater connection fees which is the same or less than the percentage of units in the development that are affordable, as defined herein. For example, if 50% of the units are affordable, then the applicant may apply for a grant to pay for up to 50% of the water and/or wastewater connection fees. (d) The incentive program is funded in part by sales and use tax retained pursuant to Yakima Municipal Code section 3.78.065. The City Council may place additional funds into the incentive program when it deems appropriate. There is no guarantee that there will be funds available in any given year for the incentive program and applicants are not entitled to participate in the incentive program. 9 (e) The incentive program is available on a first-come, first-serve basis. There will be no opportunity to put a project on a "wait list" or otherwise try to save funds for certain projects. 7.92.050 General requirements. (a) Affordable Housing. For purposes of this chapter, "affordable housing" or"low income housing" means housing wherein the households earn 50% or less than the Yakima County median household income, adjusted for family size. Further, the monthly rent for an affordable unit may not exceed 30% of the income limit for the affordable housing unit. (b) Duration of Affordability. Applicants taking advantage of the incentive program must ensure that the affordable housing units remain affordable for fifty (50) years. (c) Lien and Covenant to be Recorded. To ensure affordability is maintained, the property owner shall sign a recorded lien and covenant running with the land, binding all the assigns, heirs and successors that the units will meet the affordability requirements for the fifty- year period. The recorded lien and covenant must provide that if the property is converted to a use other than for affordable housing as defined in this Chapter within the required affordability duration, the property owner must pay the applicable water and/or wastewater connection fees in effect at the time of the conversion. The recorded lien and covenant may also include other requirements associated with the project, including, but not limited to, reporting requirements regarding affordable units and/or other methods to ensure the units remain affordable and allow for enforcement of the covenant by the City. The affordable housing units shall be rented, sold, or resold to income-qualified households or a non-profit housing provider through the end of the required affordability duration. (d) Monitoring Continued Affordability. The City of Yakima Community Development Department shall be the responsible party to monitor the continued affordability of the affordable housing units. The Department, with the City Manager's consent, may contract this work out to a third party. (e) Annual Report. The applicant shall submit an annual report on or before November 30'h of each year to the Community Development Director which outlines the number of affordable units (itemized by type of unit) and the rent that will be charged for each type of unit in the upcoming calendar year. 7.92.060 Additional requirements for mixed-income developments. The following requirements apply to mixed-income developments, in addition to the requirements outlined in other sections of this chapter. (a) Construction of Affordable Housing Units. For mixed-income developments constructed in phases exceeding 12 months, a proportional amount of affordable housing units must be completed at or prior to the completion of related market rate housing units. (b) Location/Appearance of Affordable Housing Units. When affordable housing units constructed under the provisions of this Chapter are intermixed with market rate housing, the general exterior design and appearance of the affordable housing units shall be compatible with the market rate housing units within the project. (c) The affordable housing units shall consist of a range of number of bedrooms that are comparable to units in the overall development. (d) Size of the Units. The size of the affordable housing units should be the same as the units in the overall development. If the size of the affordable housing units is smaller than the other units with the same number of bedrooms in the development, the housing units must be approved by the Community Development Director or their designee. In no case shall the affordable housing units be more than 10 percent smaller than the comparable dwelling units in the development, based on number of bedrooms. 10 7.92.070 Report to City Council. An annual report shall be forwarded to the Yakima City Council as part of the budgeting process that provides details on all the projects that utilized the provisions of this chapter. The report should include, but is not limited to, the total number of housing units constructed, an itemization of type of unit (by bedroom number) and the number of those units which are affordable. Section 2. SeverabilityNalidity. If any section, subsection, paragraph, sentence, clause or phrase of this ordinance is declared invalid or unconstitutional for any reason, such decision shall not affect the validity of the remaining portions of this ordinance. Section 3. Effective Date. This ordinance shall be in full force and effect 30 days after its passage, approval, and publication as provided by law and by the City Charter. PASSED BY THE CITY COUNCIL, signed and approved this day of , 2022. Janice Deccio, Mayor ATTEST: Sonya Clear Tee, City Clerk Publication Date: Effective Date: