City Council

HOPKINS CITY COUNCIL SPECIAL WORK SESSION AGENDA Tuesday, September 13, 2022 5:30 pm Hopkins City Hall – Council Chambers 5:30 p.m. Dow Towers Tour*; Elverum 6:30 p.m. Affordable Housing Discussion; Elverum Adjournment *The Dow Towers tour will be on-site at 22 5th Avenue South, Hopkins. Following the tour, the meeting will continue at Hopkins City Hall in the Council Chambers at 1010 1st St. S., Hopkins.  Planning and Economic Development Department CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Jan Youngquist, AICP, Community Development Coordinator Muse Mohamed, Public Housing Manager Date: September 13, 2022 Subject: Affordable Housing Discussion _____________________________________________________________________ PURPOSE Following a tour of Dow Towers, staff will provide an overview of affordable housing in Hopkins. The presentation will ground the Council in definitions and types of affordable housing, look at existing affordable housing in Hopkins (including HRA owned public housing), Hopkins’ affordable housing need and include a discussion of affordable housing production tools and methods, with a focus on inclusionary housing. The presentation will also include a high level overview of preservation and tenant protection tools and policies that are being evaluated and implemented in the Twin Cities. Staff will be looking for direction from the Council on its interest in pursuing an inclusionary housing policy and for initial thoughts on preservation and protection tools that the Council would be interested in exploring at a future work session. INFORMATION Affordable housing is a complex, but important issue for all cities to address. It is often centered around production, preservation, and protection, and more recently, through the lens of equity. The way in which cities identify the need and develop initiatives to meet their need vary. Inclusionary housing is a topic that has been elevated by some Council Members and residents. Additionally, through the Zoning Code Update process, a recommendation was made by the Zoning Equity Working Group that the “City Council should explore the risks and benefits of having an Inclusionary Housing Policy that is tailored to the City of Hopkins.” Members of the group were especially curious about how market conditions, such as the appreciation of land values, increase in population due the pending developments, and Southwest LRT have changed in the last few years and how these changes might create market conditions which are conducive to such a policy. Staff has prepared the following background information to guide the discussion.  Affordable Housing Overview What is considered affordable housing? The federal government defines housing as affordable when it consumes no more than 30% of a household’s income, so people can pay for other necessities such as food, clothing and transportation. Housing affordability is often measured against the Area Median Income (AMI). Income thresholds relative to AMI identify households that are eligible to live in income-restricted housing. Each year, the U.S. Department of Housing and Urban Development (HUD) defines and calculates levels of AMI by household size for every region in the country. What is the Area Median Income (AMI) for our region? HUD’s AMI for a family of four in the Twin Cities region in 2022 is $118,200. Households earning less than 80 percent of the AMI are considered low income by HUD. Those earning less than 50 percent are considered very low income, and anyone making less than 30 percent of the AMI is considered extremely low income. 2022 Level of AMI for the Minneapolis-St. Paul-Bloomington Metropolitan Statistical Area (family of 4) Area Median Income (AMI) $118,200 80% of AMI $89,400 60% of AMI $70,380 50% of AMI $58,650 30% of AMI $35,200 What is considered affordable rent? Affordable rents are calculated based on the number of bedrooms in a housing unit. The following table shows affordable rents for different income levels for our region in 2022. 2022 Affordable Rents for the Minneapolis-St. Paul-Bloomington Metropolitan Statistical Area No. of Bedrooms 30% AMI 50% AMI 60% AMI 80% AMI Studio $616 $1,027 $1,232 $1,643 1 Bedroom $660 $1,100 $1,320 $1,760 2 Bedrooms $792 $1,320 $1,584 $2,112 3 Bedrooms $915 $1,525 $1,830 $2,440 Do communities have goals for the production of affordable housing? The Metropolitan Council, the regional government for the seven county metropolitan area, has determined that between 2021 and 2030 the region will need an additional 37,900 affordable housing units: Number of New Units Affordability Level Needed in the Region between 2021-2030 Households at or below 30% of AMI 18,900 Households between 31-50% of AMI 9,450 Households between 51-80% of AMI 9,550 TOTAL 37,900 The Metropolitan Council then determines each community’s share of the regional need for affordable housing. These calculations are based on the following three factors: • Overall forecasted growth for the community • Ratio of low wage jobs to low wage workers in the community • The community’s existing amount of affordable housing The following table shows the affordable housing need for Hopkins as well as for our neighboring communities: Share of the Region’s Need for Community Affordable Housing 2021-2030 (in new housing units) Edina 1,804 Hopkins 197 Minnetonka 1,064 St. Louis Park 593 Inclusionary Housing Overview What is inclusionary housing? Inclusionary housing is a tool used by local jurisdictions to increase their amount of affordable housing. Inclusionary housing programs create a framework within which developers of new market rate housing are either required or encouraged to develop a certain number or percentage of housing units that are affordable to households that otherwise would not be able to afford to rent or purchase the housing being developed. This brief video includes a basic overview of inclusionary housing: Inclusionary Housing Explained . How do inclusionary housing programs provide affordable housing? Typically inclusionary program requirements are triggered by new market rate developments of a specific size that require a land use decision such as a rezoning or Planned Unit Development (PUD) or include a request for city financial assistance. These programs often require a certain number or percentage of units to be affordable for households at various levels of AMI. For example, a program may require that a project with 20 units or more that is seeking city financial assistance to include 15% of the units affordable at 50% AMI, based on the unit size and rents shown in the preceding table. In this scenario, the development would need to include at least 3 affordable units. If these were all 2 bedroom units, the rent would be $1,320 (or less) per month in 2022 and adjusted each year as HUD determines annual AMI for the region. Inclusionary housing programs require annual monitoring and oversight to ensure compliance. Some local communities have dedicated staff for this work, while others hire an outside third party. Which local communities have inclusionary housing programs? Thirteen of the 182 communities in the 7-county metro area have adopted inclusionary housing programs, nine of which are communities in Hennepin County: Bloomington, Brooklyn Park, Eden Prairie, Edina, Golden Valley, Minneapolis, Minnetonka, Richfield, and St. Louis Park. The other communities in the metro area with inclusionary housing programs are Chaska, Mounds View, North St. Paul and Shoreview. There is not a one size fits all when it comes to inclusionary housing programs. These programs vary by community in response to local market conditions. Hopkins staff prepared a summary of the inclusionary housing programs for the eight suburban Hennepin County communities as those programs relate to the development of multi- unit rental housing (Attachment A). These programs all include alternatives to the program requirements in acknowledgement that it might not be feasible to provide affordable units in every new development. How have affordable housing units recently been created in Hopkins? The City does not currently have an inclusionary housing policy, but has taken the approach of evaluating development projects on a case by case basis. Hopkins has attracted affordable housing developments built by nonprofit, mission- driven developers where 100% of the units are affordable. These developers, including Project for Pride in Living, Beacon Interfaith and Trellis, are committed to keeping these units affordable in perpetuity. These projects, including Oxford Village, Burnes Building and Vista 44, have received county, state and federal subsidies to make them feasible. The City has also considered providing financial assistance to projects on a case by case basis to provide affordable units. Tax Increment Financing will be used for the 325 Blake Road project to offset costs associated with housing affordability, parking and infrastructure. Additionally, the City has been successful in securing grant funds from the State of Minnesota, Metropolitan Council, and Hennepin County to support environmental cleanup and development of affordable housing projects to help offset development costs. The following chart shows the last 9 developments that have been approved in Hopkins and the overall percentage of affordable units included. Overall Number Affordable Percentage Development of Units Units of 325 Blake Building A 116 116 Affordability 325 Blake Building B 112 12 325 Blake Building C 389 0 325 Blake Building D 187 76 Blake Road Station Phase A 220 0 Blake Road Station Phase B 250 0 Burnes Building 43 43 Ovation Apartments (theater site) 150 0 Vista 44 50 50 TOTAL 1,517 297 20% FUTURE ACTION Based on feedback from the City Council, staff will determine the next steps. This will likely include additional discussion on inclusionary housing policy recommendations and affordable housing preservation and tenant protection tools. ATTACHMENT A SUMMARY OF SUBURBAN HENNEPIN COUNTY COMMUNITIES INCLUSIONARY HOUSING PROGRAMS FOR MULTI-UNIT RENTAL RESIDENTIAL DEVELOPMENT Community Trigger Requirements Term Incentives Alternatives Bloomington 20+ units ­ 9% of units at or 20 years ­ Density bonus ­ Construction of required units on below 60% AMI ­ Floor area ratio bonus another site. 9 % of units must be a mix ­ Height bonus of extremely low, very low and up to Opportunity (Percentage was ­ Parking reduction 60% AMI. Housing determined through ­ Enclosed parking space ­ Payment in lieu ($9.60 per square foot of Requirement— an Affordable conversion leasable space) to the City’s affordable adopted by Housing Nexus ­ Minimum unit size reductions housing trust fund ordinance Study and ­ Alternative exterior materials ­ Dedication of land lieu amending the Feasibility Analysis) ­ Storage space reduction ­ Purchase and rehabilitation of naturally City Code ­ Landscape fee in lieu reduction occurring affordable housing units ­ Development fee deferment or ­ Acquisition and rehabilitation of existing Affordable waivers market rate units to convert to Housing Need ­ Expedited review of plans affordable units 2021-2030: ­ Land write down for ­ Partnership with an affordable housing 842 units development on City owned developer land ­ Tax Increment Financing (TIF) ­ Project based housing choice vouchers Brooklyn Park ­ 10+ units AND ­ 15% of units at 20 years ­ Minimum of 10% density Alternatives that provides or enables the ­ Comp Plan Amendment, or 60% AMI, or bonus provision of affordable housing units in the Mixed Income ­ Zoning Code or Map ­ 10% of units at city, subject to City Council approval. Housing Policy Amendment, or 50% AMI, or ­ Planned Unit Development ­ 5% of units at 30% Affordable (PUD), or AMI Housing Need ­ City financial assistance 2021-2030: ­ All residential or mixed use 710 units projects located in a Transit Oriented Development area  SUMMARY OF SUBURBAN HENNEPIN COUNTY COMMUNITIES INCLUSIONARY HOUSING PROGRAMS FOR MULTI-UNIT RENTAL RESIDENTIAL DEVELOPMENT Community Trigger Requirements Term Incentives Alternatives Eden Prairie ­ 15+ units AND ­ 15% of units at or Perpetuity None specified Exemptions are at the sole discretion of ­ Rezoning, or below 60% AMI, the City Council. Inclusionary ­ Comp Plan Amendment, or or Housing Policy ­ PUD, or ­ 10% of units at or ­ Site plan review, or below 50% AMI, Affordable ­ City financial assistance or Housing Need ­ 5% of units at or 2021-2030: below 30% AMI 1,408 units Edina ­ 20 + units AND ­ 20% of units at 20 years ­ Density bonus ­ Dedication of existing units within the ­ Rezoning, or 60% affordable ­ Parking reduction city (110% of units) New Multi- ­ Comp Plan Amendment, or rental rates, OR ­ Tax increment financing (TIF) ­ Construction of required units on Family ­ City financial assistance, or ­ 10% of units at ­ Deferred low-interest loans another site Affordable ­ Development on land 50% affordable from HRA ­ Payment in lieu ($125,000 per unit) into Housing Policy purchased from the City rental rates ­ Tax abatement City's Affordable Housing Trust Fund Affordable Housing Need 2021-2030: 1,804 units Golden Valley ­ 10+ units AND ­ 15% of units at 20 years ­ Minimum of 33% reduction in ­ Dedication of existing units within the ­ Conditional Use Permit, or 60% AMI, or required parking city Mixed-Income ­ Zoning Map Amendment, or ­ 10% of units at ­ Minimum of 10% density ­ Alternative that provides or enables the Housing Policy ­ Comp Plan Amendment, or 50% AMI, bonus provision of affordable units, as ­ PUD, or approved by the City Council Affordable ­ City financial assistance Housing Need 2021-2030: 222 units  SUMMARY OF SUBURBAN HENNEPIN COUNTY COMMUNITIES INCLUSIONARY HOUSING PROGRAMS FOR MULTI-UNIT RENTAL RESIDENTIAL DEVELOPMENT Community Trigger Requirements Term Incentives Alternatives Minnetonka ­ 10+ units ­ 5% of units at 50% 30 years None specified City may waive the requirement based on AMI a case by case basis review. Affordable ­ If project has Housing Policy zoning change or Comp Plan Affordable Amendment Housing Need without City 2021-2030: financial 1,064 units assistance: 10% at 60%, with at least 5% at 50% AMI ­ If project receives City financial assistance: 20% of units at 50% AMI OR 40% of units at 60% AMI Richfield ­ 5+ units AND ­ 20% of units at 15 years or ­ Building permit fee reduction ­ Exceptions for projects between 5 and ­ City financial assistance 60% AMI, or term of ­ 4d property tax reduction 19 units may be granted by the Inclusionary ­ 15% of units at subsidy ­ Code flexibility in PUDs Community Development Director Affordable 50% AMI, or (whichever is ­ Density bonus of 5-15% ­ If developer identifies alternative Housing Policy ­ 10% of units at greater) means of addressing the intent of the 30% AMI policy, the City Council, HRA Board, or Affordable Economic Development Authority Housing Need Board may vary the application of the 2021-2030: policy 150 units  SUMMARY OF SUBURBAN HENNEPIN COUNTY COMMUNITIES INCLUSIONARY HOUSING PROGRAMS FOR MULTI-UNIT RENTAL RESIDENTIAL DEVELOPMENT Community Trigger Requirements Term Incentives Alternatives St. Louis Park ­ 10+ units AND ­ 20% of units at 25 years None specified. Subject to approval by the City Council. ­ Comp Plan Amendment, or 60% AMI, or ­ Dedication of existing units within the Inclusionary ­ PUD, or ­ 10% of units at city Housing Policy ­ City financial assistance 50% AMI, or ­ Off-site construction of affordable units ­ 5% of units at 30% ­ Partner with affordable housing Affordable (also applies to renovation of AMI developer in construction of units on Housing Need an existing building that another site 2021-2030: includes 10+ units) Developments with ­ Alternative that provides or enables the 593 units 50+ units must provision of affordable units in the city include a minimum number of 3 or 4 bedroom units NOTE: This is a summary level review of these policies as they relate to new multi-unit rental development. Each policy is unique and may include additional requirements that are not depicted in this table.