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Item E3 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: March 16. 2000 Division: Growth Management Bulk Item: Yes No X -- Department: Planning AGENDA ITEM WORDING: Consideration of staffs recommendation on setting policies for the use of ROGO credit units of affordable housing (FEMA replacement units) and affordable housing ROGO allocations and creating increased affordable housing opportunities. ITEM BACKGROUND: On December 27, 1999, the DCA signed a Memorandum of Agreement with Monroe County that makes available 90 FEMA replacement units to be added to the year 8 allocations of unincorporated Monroe County. PREVIOUS RELEVANT BOARD ACTION: At the February 17,2000, meeting of the Board of County Commissioners, the Planning Department presented possibilities for distributing these 90 units to the BOCC. At this meeting the Board requested that staff prepare additional recommendations on the distribution of the FEMA replacement units and additional background information and recommendations for affordable housing options. At the February 28, 2000 special BOCC meeting the Board approved setting aside 26 of FEMA replacement units for the Tradewinds multi-family affordable housing proposal. STAFF RECOMMENDATION: Approval of staff s recommendations. TOTAL COST: None BUDGETED: Yes _N/A_ No COST TO COUNTY: _None APPROVED BY: County Attorney _X_ OMB/Purchasing _N/A_ Risk Management _N/A_ DEPARTMENT DIRECTOR APPROVAL: DIVISION DIRECTOR APPROVAL: DOCUMENTATION: Included X To follow Not required _ DISPOSITION: Agenda Item #: 2,e~ County of Monroe Growth Management Division 2798 Overseas Highway Suite 410 Marathon, Florida 33050 Voice: (305) 289-2500 FAX: (305) 289-2536 Board of Co un tv Commissioners Mayor Shirley Freeman, Dist. 3 Mayor Pro Tern George Neugent, Dist. 2 Commissioner Wilhelmina Harvey, Dist. 1 Commissioner Nora Williams, Dist. 4 Commissioner Mary Kay Reich, Disl 5 MEMORANDUM TO: Board of County Commissioners Other Interested Parties K. Marlene Conaway j,~ / Planning Director ~~'\- FROM: DATE: March 6, 2000 RE: BACKGROUND MATERIAL FOR AFFORDABLE HOUSING DISCUSSION ............................................................................................................................... At the February 17,2000, meeting ofthe Board of County Commissioners, the Board considered a range of actions to increase the County's supply of affordable housing. At this meeting the Board directed staff to prepare additional background material for the Board's consideration at it March 16, 2000, meeting in Marathon. The issues and recommendations report prepared by the Planning Department provides the information requested by the Board. Included in the report are appendices addressing the following affordable housing considerations: I. Need Monroe County Household Incomes: 1990-2010 Spreadsheet showing the distribution of income in the County II. Supply Potential for Building New Affordable Housing Using ROGO and FEMA Allocations Spreadsheet showing the following: the number of affordable housing ROGO allocations rolled over to the market category; the number and distribution area of remaining ROGO allocations; the number and distribution area of remaining FEMA units, III. Costs Cost Estimates for a Range Affordable Housing Options Several spreadsheet showing the following: (a) multi-unit median income housing (no subsidy); (b) multi-unit median income housing ($30,000 subsidy); (c) single family home rental (no subsidy); and (d) single family home ownership. BOCC Affordable Housing Action Plan: Issues and Recommendations Issue: How to distribute existing and future FEMA replacement units. . Appendices I, II & III Discussion: · Since Marathon incorporated the Middle Keys consist of Duck Key, Long Key and Conch Key, · The Planning Department could not find any sites suitablefor accommodating four, or more units of affordable housing in the unincorporatedportion of the Middle Keys, · Due to the high costs and regulations associated with building affordable housing in the Keys, larger developments, starting at 40 units, are the most financially feasible options for providing low and very low income housing (Appendix III), Recommendation #1: Apportion the remaining 66 FEMA replacement units in the following manner: 6 to the Upper Keys and 60 to the Lower Keys, As more FEMA replacement units come available they will be directed to areas of greatest need, Planning Department Page 1 of 4 March 6, 2000 . ~BOCC Affordable Housing Action Plan: \1!!!Jl Issues and Recommendations Issue: How to move forward with the BOCC's Affordable Housing Action Plan. This issue involves the following considerations: which are the most appropriate sites; what is thejinancialjeasibility of the options for the FEMA replacement units (Le, home ownership, small scale rental and large rental developments); private/public partnership opportunities and constraints; and project management. . Appendices II & III Discussion: · The Monroe County LandAuthority has the experience and resources necessary to recommend which of the sites proposed by the Planning Department is the most appropriate to purchase for affordable housing using County funds, · The Monroe County Housing FinanceAuthority has the experience and resources necessary to recommend which affordable housing options and proposals are the most financially feasible and would be in a strong position to receive State and Federal funding assistance, Recommendation #2a: Approve the sites presented by the Planning Department as those to be considered for the ROCC's Affordable Housing Action Plan Recommendation #2b: Direct the Land Authority to work with the Monroe County Housing Finance Authority in carrying forward the ROCC's Affordable Housing Action Plan and provide recommendations to the Board on the following: · purchasing sites; · the number and type of units to build on these sites; · state and federal funding opportunities; and · additionallocalfund raising and/or subsidies necessary for building the affordable housing action plan units, · ~La~ C~/ Planning Department Page 2 of4 March 6, 2000 , ~BOCC Affordable Housing Action Plan: ~ Issues and Recommendations Issue: How to maximize the use of ROGO allocations for affordable housing, . Appendices I, II & III Discussion: · Since the beginning of RaGa more affordable housing ROGO allocations have rolled over into market than have been used to build affordable housing (Appendix II), · The affordable housing RaGa allocations have been under utilized in the past due to the following factors: limited developer profitabilityof constructing affordable housing that meets all applicable federal, state and local requirements; misunderstandings and concerns regarding the 20-deed restriction of residential dwelling units built with affordable housing; the supply/demand imbalance of affordable housing was not as acute as it is now due to homes lost to hurricane damage, FEMA regulations and to gentrification (Appendix III), Recommendation #3: Utilize current policies for current and future affordable housing ROGO allocations (i,e, flexibility in RaGa to allow for borrowing from future RaGa allocations and the market RaGa category), This could involve the following: · matching affordable units being constructed using FEMA replacement units with those from the affordable housing RaGa category; · increase the percentage of ROGO allocationsfor affordable housing, this will help offset the loss of units from the affordable to the market RaGa category that occurred in the past due to the roll over of unused affordable housing RaGa allocations; and · directing a portion of affordable housing ROGO allocations to non-profit housing associations, ~Ac Q2,t. .# -;; 6e..s'<.I'e.-/o ..,~ ~ a//oc. Planning Department Page 3 of4 March 6, 2000 , ~BOCC Affordable Housing Action Plan: ~ Issues and Recommendations Issue: How to maximize developers' abilities to build affordable housing today, · The Planning Department's review of affordable housing costs indicates that small scale affordable housing rentals need substantial subsidies in order to be attractive to developers (Appendix III), Discussion: · Affordable housing opportunities in areas zonedMixed Use (MU) and Suburban Commercial (SC) are currently restricted by the density limits set for these areas in the Monroe County Code (County Code), · Under the County Code the maximum net density in SC areas is 6 units per buildable acre and in MU it is 12 units per acre, · Affordable housing opportunities in MU and SC areas are furtherlimited by the County Code requirement that apartments with more than four units in these zones have an associated commercial use · These two limiting factors can be effectively addressed by makinga text amendment to the County Code, · Such an amendment would not require an amendment to theMonroe County Year 2010 Plan (201 o Plan ) since the County Code is more restrictive on these two items than the 2010 Plan. · The Planning Department will be undergoing anintensive review and revision of the County Code this March and April, during which time they could make the above mentioned text amendments, Recommendation #4: Direct the Planning Department to proceed with a text amendment to allow for the following changes toSuburban Commercial and Mixed Use zoning areas regulations: · increase maximum net density up to 18 units per acre (the 2010 Plan allows up to 18 units per acre in these zoning areas); and · allow commercial-apartments without associated commercial uses (the 2010 Plan does not require a commercial use to be associated with SC and MU zoning areas), Planning Department Page 4 of 4 March 6, 2000 "C G) G) z >< :s C G) Q. 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'- 8- '0 ~ a. - 0) ::::l c: c: 0) ~ ~ = 0) ~ ,S a. c: ~.2 5 c ..... .- 0) ~ - ~ 0 ~ 1-=.2 ... <u m Multi-Unit Median Income Housing No Government Subsidy Cost of 2 affordable units, each with 2 Bedroom/2 Bath Land Cost Other ConstructionlLandscaping Costs Total Cost of Construction & Land Loan Amount (80% of Costs) Debt Service @ 9.5% 20 Years Cash Invested in project Yearly $ 180,000.00 $ 20,000.00 $ 10,000.00 $ 210,000.00 $ 168,000.00 $ 23,489.88 $ 42,000.00 Gross Rents $ 2,450.00 $ 29,400,00 Less Vacancy (5%) $ 122.50 $ 1,470.00 Net Rents $ 2,327.50 $ 27,930.00 Expenses: Principal & Interest $ 1,957.49 $ 23,489.88 Taxes $ 200.00 $ 2,400,00 Insurance $ 300.00 $ 3,600.00 Maintenance $ 100.00 $ 1,200.00 $ Total Expenses: $ 2,557.49 $ 30,689.88 Net Cash Flow $ (229,99) $ (2,759.88) Depreciation Expens $ 545.98 $ 6,551.76 Taxable Income $ (775.97) $ (9,311.64) Tax Advantage $ 3,072.84 Net Cash Flow $ (2,759.88) Net Return $ 312,96 Investment Return % 0,75% Developers would likely be unable to make an acceptable rate of return on their investment in small scale affordable housing developments at median income rents unless they receive a government subsidy. Appendix III (a): Costs Multi-Unit Low Income Housing $30,000 Subsidy Cost of 2 affordable units, each with 2 Bedroom/2 Bath Land Cost Other Construction/Landscaping Costs Total Cost of Construction & Land Local Government Subsidy Loan Amount (80% of Costs) Debt Service @ 9.5% 20 Years Cash Invested in ro'ect Yearly Monthly Yearly Gross Rents $ 1,960.00 $ 23,520.00 Less Vacancy (5%) $ 98.00 $ 1,176.00 Net Rents $ 1,862.00 $ 22,344.00 Expenses: Principal & Interest $ 1,332.00 $ 15,984.00 Taxes $ 200.00 $ 2,400.00 Insurance $ 300.00 $ 3,600.00 Maintenance $ 100.00 $ 1,200.00 $ - Total Expenses: $ 1,932.00 $ 23,184.00 $ - Net Cash Flow $ (70.00) $ (840.00) $ - Depreciation Expense $ 545.98 $ 6,551.76 $ - Taxable Income $ (615.98) $ (7,391.76) Tax Advantage $ 2,439.28 Net Cash Flow $ (840.00) Net Return $ 1,599.28 Investment Return % 4.44% Unless developers receive a governement subsidy they would likely not make an acceptable return on units rented at low income rates. $ 180,000.00 $ 20,000.00 $ 10,000.00 $ 210,000.00 $ (30,000.00) $ 144,000,00 $ 15,984.00 $ 36,000.00 Appendix III (b): Costs Appendix III (c): Costs Affordable Housing Scenerio: Single Family Home Rental No Government AssistancelSubsidy at Median Income Rents Cost of 1,152 SF 2 Bedroom/2 Bath Modular Home Land Costs Other Construction/Landscaping Costs $ 85,000.00 $ 15,000.00 $ 7,500.00 Loan Amount (80% of Costs) Debt Service @ 9.5% Cash Invested in ro'ect Yearly $ 86,000.00 $ 9,619,80 $ 21,500.00 Monthly Yearly Gross Rents $ 1,225.00 $14,700.00 Less Vacancy (5%) $ 61.25 $ 735.00 Net Rents $1,163.75 $13,965.00 Expenses: Principal & Interest $ 801.65 $ 9,619.80 Taxes $ 100,00 $ 1,200.00 Insurance $ 150.00 $ 1,800.00 Maintenance $ 50.00 $ 600.00 $ - Total Expenses: $1,101.65 $13,219,80 $ - Net Cash Flow $ 62,10 $ 745.20 $ - Depreciation Expense $ 244,25 $ 2,931.03 $ - Taxable Income $ (182.15) $ (2,185.83) Net Cash Flow $ (2,185.83) Tax Advantage $ 967.24 Net Return $ (1,218,59) Investment Return % -5,67% Developers would likely lose money on renting single family homes at the median income rent level ($1,225/mth.) unless they receive a govenement subsidy. Monroe County Planning Department and Marine Bank, 1999 Appendix III (d): Costs Affordable Housing Scenerio: Single Family Home Ownership Affordable Housing Home Ownership Cost of 1,152 SF 2 Bedroom/2 Bath Modular Home Land Costs Other Construction/Landscaping Costs $ 85,000.00 $ 15,000.00 $ 7,500,00 Year! $ 102,000.00 $ 9,458.00 Principal & Interest $ 788.15 $ 9,457.80 Taxes $ 100,00 $ 1,200,00 Insurance $ 150.00 $ 1,800.00 Maintenance $ 50.00 $ 600.00 $ Total Ex enses: $ 1,088.15 $ 13,057.80 Home owners receive a more favorable loan and debt service than developers, therefore their monthly expenses can be lower than those of a developer renting affordable units to qualified tenants This scenerio shows the value in the work of groups, such as Habitat for Humanity and Community Land Trusts, that are able to create affordable home ownership opportunities. Monroe County Planning Department and Marine Bank, 1999