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HomeMy WebLinkAboutDraft - permanent affordable housingATTACHMENT 2 — STRATEGY FOR PERMANENT AFFORDABLE HOUSING JEFFERSON COUNTY STRATEGY FOR PERMANENT AFFORDABLE HOrUStNO Iinlocking the potential of House Bill 1590 1. PURPOSE & SUMMARY This Strategy for Permanent Affordable Housing in Jefferson County represents the consensus of five independent organizations in Jefferson County with the expertise and a mission to create affordable housing and supportive services to serve local residents. This Strategy for Permanent Affordable Housing is a blueprint for how approximately $600,000 per year in new revenue for affordable housing could be used to create permanent affordable rental and resident-owned housing in the initial years, and how this revenue could be managed effectively in the longer term to create affordable housing in Jefferson County. Jefferson County has an affordable housing crisis. High cost and limited inventory of both owned and rental units is resulting in substandard living situations and homelessness. It is forcing local workers to find housing in neighboring counties and commute here, and local businesses are facing a labor shortage which is stifling local economic development. A number of our schools are seeing declining enrollment, because families with children can no longer afford to live here. If this trend continues without intervention, it threatens the very identity and fabric of our community. The lack of entry-level permanent affordable housing leaves vulnerable people stuck in shelter and transitional housing, unable to move forward with their lives. At the same time, it denies other homeless and vulnerable people who are even worse off from having access to those existing shelter and transitional services, because there is no room. Rather than create a larger parking lot for people stuck at the very bottom of the housing continuum, revenue from a HB 1590 sales tax for affordable housing can be targeted at creating first-level entry into permanent affordable housing. Over the course of two months of weekly meetings, five organizations— Peninsula Housing Authority, Olympic Community Action Programs (OlyCAP), Bayside Housing Services, DOVE House, and Habitat for Humanity for East Jefferson County—worked with staff from the City of Port Townsend and Jefferson County (including Juvenile Services)to consider the feasibility of using revenue from a potential new sales and use tax under House Bill 1590, to rapidly provide affordable housing in Jefferson County. Together with City and County staff, these organizations collaborated on strategies for maximizing the new revenue's effectiveness. Approximately$600,000 per year would be generated under HB 1590, and could be used to create an average of between six to ten affordable rental or owned affordable residences for individuals and families in Jefferson County each and every year. This is based on looking at an initial suite of six affordable housing projects that are currently in local development (see Section 4 of this Strategy). With reliable funding, housing organizations and developers are prepared to develop additional affordable housing projects. "If you fund it, they will build!" Over the next ten years, Jefferson County could see as many as 100 permanent affordable houses and apartment units added to our local housing inventory. lotler,un L aunty Strdtegy tor Pc rmdnr..nt Attordsible Hou.ing 2. HOUSE BILL 1590 & FUNDING FOR AFFORDABLE HOUSING Background On HB 1590: House Bill 1590 (HB 1590) was enacted by the Washington State Legislature in 2020. It amends RCW 82.14.530, and authorizes cities and counties to impose a sales and use tax up to 1/10th of 1% for affordable housing. The tax equals just $1 on a $1,000 purchase. Sales and use taxes apply to most retail sales of"tangible personal property" within Washington, as well as purchases delivered here by Internet or mail-order retailers. Services to individuals and businesses—things like haircuts, medical bills, consultant fees, etc. —are not "personal property," and most are not subject to sales tax. The 1/10th of 1% sales and use tax for affordable housing originally required voter approval, but under HB 1590, this revenue source may now also be approved by the local legislative body with a simple majority vote. At least 60%of the revenue generated by the 1/10th of 1%sales and use tax must be used for: d) constructing affordable housing and facilities providing housing-related services, solely for eligible households (as defined below); or e) constructing mental and behavioral health-related facilities; or f) funding the operations and maintenance costs of new units of affordable housing and facilities where housing-related programs are provided, or newly constructed evaluation and treatment centers. The affordable housing and housing-related services in a) above must serve only persons whose income is at or below sixty percent of median income, and who are one of the following: o Persons with mental illness o Veterans o Senior citizens o Families with children who are homeless (or at-risk of being homeless) o Unaccompanied homeless youth or young adults Persons with disabilities o Domestic violence survivors The rest of the revenue (up to 40%) can only be used for housing-related services, or the operation, delivery and evaluation of mental and behavioral health treatment programs and services, without the same restrictions of "eligible persons." The law also allows up to fifty percent of the proceeds to be used to issue and service bonds to finance the provision or construction of affordable housing, facilities where housing-related programs are provided, or evaluation and treatment centers. Presently, bonding could generate a one-time lump sum of approximately $5.25 Million of capital dollars up front. However, bonds typically are issued for 20 years, and would tie up as much as 50%of each year's revenues for all 20 years. That is a very high opportunity cost in those future years. Consequently, committing to bonds in the immediate future is not recommended. Instead, the County should only consider bonding after a long-term strategic affordable housing plan has been developed with public input, and there is broad public consensus on what project(s) would be funded. Jeff et,on County Strategy for Permanent Affordable Housing Estimated Annual Revenue From HB 1590: A future 1/10th of 1% sales and use tax for affordable housing in Jefferson County would behave the same as an existing1/10th of 1% sales and use tax for chemical dependency or mental health treatment services under RCW 82.14.460. The County has administered that sales tax since 2005. In 2019, revenue from the chemical dependency and mental health sales and use tax was $612,000. That was before the COVID-19 pandemic and its effect on the economy. In 2020, the chemical dependency/mental health sales tax is trending to generate $591,000-$598,000 by year's end. In future years, the sales tax is expected to generate around $600,000 or more per year. If a sales tax under HB 1590 for Affordable Housing is enacted in Jefferson County, the soonest the tax could go into effect is April 1" of 2021. The County would actually begin receiving its revenue in June (there is a two-month lag). During 2021 (June-December) we would expect the County to receive $350,000-$370,000 for affordable housing. In 2022 and every year thereafter, the County would receive a full 12-months of revenue for affordable housing, or about $600,000 per year, depending on the economy. Over time, this amount would likely rise, as the annual value of retail sales grows. 3. HOUSING CHALLENGES & PROGRAM OBJECTIVES In 2017,Jefferson County declared a State of Emergency regarding the Availability of Affordable Housing for Low and Very Low-Income Households. Since then housing prices in Jefferson County have continued to rise much faster than inflation, and the availability of rental units has remained at historic lows, and appears only to have gotten worse. The declaration in 2017 was based in part upon reports from HUD indicating more than half the renters in Jefferson County (1,680 of 3,425) are cost burdened, paying more than 30% of their household income for housing costs, and one in four ( 895 of 3,425) are severely cost-burdened, paying more than 50% of their income for housing costs. According to OlyCAP, there were less than 600 units of subsidized housing and the waiting list to rent one exceeded 2 years. There is a severe lack of multifamily dwellings in Jefferson County when compared to the demand. According to the US Census 12.7%of Jefferson County lives in poverty, as does 16.6 % of the City of Port Townsend compared to 11.8%for the entire United States. An Assessment by E.D. Hovee listed the median home price in Jefferson County as $311,000 in 2015. According to a current (October, 2020) posting on an on-line real estate site www.realtor.com, "Recently Sold Homes in Jefferson County, WA have a median listing price of$415,000." No new apartments have been built in Jefferson County since 2010. Additionally, 40 apartment units have been converted to condominiums since 2005. While a small number of condominium units have been built since 2010, their price has escalated sharply—a 100% price increase between 2015 and 2020, according to the County Assessor. Jefferson County Strategy for Permanent Affordable Housing 3 of 11 Despite the current resources and ongoing local efforts, there is a demonstrated need for additional funding for affordable housing as well as for facilities, services and programs benefitting vulnerable and low-income populations. Housing in Jefferson County represents a continuum, from homeless encampments, to homeless shelters, to transitional housing, subsidized apartments and affordable rentals, entry and affordable home ownership, on through the full range of market rate housing we see in real estate listings today. Market rate Market rate ownership Affordable rental Affordable ownership Supportive rental Transitional housing Emergency housing shelter Increasing support Decreasing support Housing options at the bottom of the continuum require full support subsidies by non-profits and government programs, which decreases as you move up through the continuum. Typically, you like to see people move through and up the continuum stepwise, as people's financial stability and well-being improves. A major problem in Jefferson County today, is the staircase is broken. While upper end market rate housing is being built, mostly, that is all that's being built. It tends to be homeowners hiring contractors to build their dream, or developers building speculation homes targeted to the upper end listing market rather than creating inventory that is open to all levels of potential home buyers. Hence, there is a shortage of entry- and mid-range homes, and home price increases are reflecting the shortage.Median nome price in v'iashingcor,, The table to the right shows median home prices for Washington State. The Jefferson County Assessor states it also accurately reflects home price trends in Jefferson 535C County.3:Y 525^ As previously noted, no apartments have been built in 52LC 515E Jefferson County in the past decade. Additionally, rental 510p housing is being converted into owner-occupied 1111111111111111111 condominiums, and Air B&Bs. 1445 1447 1499 2L01 1003 m15 2LC7 2004 2L11 2Cl2 MS 2017 1014 Washington Office of Finance Management Jefferson County Strategy for Permanent Affordable Housing 4 of 11 Housing options in Jefferson County are scarce and costly. We see families who are trying to live here, needing to resort to actively marketing themselves on bulletin boards and on-line, trying to encourage a potential landlord or seller to pick them over others, to rent or buy. The broken housing continuum has its greatest impact on vulnerable populations. In 2017, OlyCAP changed its homeless shelter model from a Winter Shelter model to a Year-Round Shelter, using the summer months to do case management to move people out of homelessness, into transitional or permanent housing. The first summer was very successful, and they were able to move eight individuals out of homelessness. As the inventory of affordable housing has gotten worse, there is no housing into which to move Shelter residents out of homelessness. Consequently, the Shelter is full, and continues to serve the same individuals year over year, and there is very little opportunity for new people to come in out of the cold. Bayside Housing Services provides transitional housing for people who have been homeless or are facing homelessness. Of the last 100 people Bayside transitioned from its facility in Hadlock to permanent housing, all but 5 had to be placed outside Jefferson County. In addition, there is a backlog of vulnerable people waiting to get into Bayside's facility, but can't, because Bayside cannot find homes for their current clients to move to. 4. INITIAL FOCUS: BREAKING THE IMPASS BY CREATING ENTRY-LEVEL PERMANENT HOUSING The lack of entry-level permanent affordable housing leaves vulnerable people stuck in shelter and transitional housing, unable to move forward with their lives. At the same time, it denies other homeless and vulnerable people who are even worse off from having access to those existing shelter and transitional services, because there is no room. Rather than create a larger parking lot for people stuck at the very bottom of the housing continuum, revenue from a HB 1590 sales tax for affordable housing can be targeted at creating first-level entry into permanent affordable housing, which hopefully will enable people to continue to move up from there. This borrows from the insight gained through the housing first model: if people have stable secure permanent housing, they function better, are better able to take care of themselves, pursue employment and advance themselves through training and education, plant a garden, and better, more fully integrate with society. The picture below, a graphic borrowed from another jurisdiction, illustrates the concept of this Strategy. Key Area of Focus for Rental and Affordable Housing Non-Market Housing Emergency Supportive Soci, a t try Level Market Shelters& Housing and C, 'p r,, arket Rental arket Home Transitional Hous; 1 ntat Housing ership Ownership Housing s,„ Low to Moderate Income Households up to 60%of Median Household Income Jefferson County Strategy for Permanent Affordable Housing 5 of 11 Some Examples of Candidate Projects: County and City staff asked local public and non-profit housing providers as a group to identify projects that would fit and implement this Strategy, and that were projects of a scale that revenue from a HB 1590 affordable sales tax could conceivably fund. The purpose was.tkwo-fold: to test whether a sales tax could actually resr" in meaningful affordable housing projects, and also to begin to prime the pump with these organizations to develop additional affordable housing projects in Jefferson County. Together, the organizations quickly found consensus on a list of six examples of the kinds of permanent housing projects that a HB 1590 sales tax could fund. These six examples are displayed in TABLE 1 on the next page, and summarized in more detail in ATTACHMENT 1. The projects were already in different stages of development. The examples feature a variety of housing types: a rental boarding house with 6 rental units, supported apartments for young adults 17-24, with 5 one and two bedroom units, affordable home ownership for individuals and families, either through a community land trust, or through down payment assistance and title covenants, and finally, supported crisis dormitory housing to stabilize at-risk 12-17 year olds in preparation for rapid return to permanent housing. Populations served would include: Low income people at or below 60%of area median income (AMI), including low wage workers; Individuals and families; Veterans; Senior Citizens Domestic Violence Survivors Persons with Behavioral Health or Other Disabilities Families with children at risk of homelessness; Young Adults 17-24 years old, who are homeless or at risk becoming homeless; At-risk Youth 12-17 years old, who are homeless or at risk becoming homeless. Please see TABLE 1 on the next page for more information about these initial examples of projects that could quickly use and leverage revenues from HB 1590 to create permanent affordable housing. Jefferson County Strategy for Permanent Affordable Housing d Su r c ,i c 'E T. 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The local five-year plan (the Plan) includes an assessment of the housing affordability crisis in Jefferson County similar to that described here, and describes the extent of homelessness and existing available services. The Plan lays out six objectives and actions to meet them, to help reduce homelessness in Jefferson County. This Strategy for Permanent Affordable Housing was developed in reference to the Five-Year Plan as a fundamental touchstone. This Strategy helps carry out a number of the Plan's objectives and implementing actions. One key objective in the Five-Year Plan is "Objective #6: Supportive Efforts Aimed at Ending Homelessness." The Plan lists 15 actions geared to meet that objective. This Strategy for Permanent Affordable Housing, and the project examples it lists at up to 60%AMI, are aligned to carry out 6 of those 15 actions: Increase funding for affordable housing for those under the 50% of the AMI," Increase work force housing units for those between 50-80% of the AMI," Increase market rate rental units," Increase youth hostel/boarding rooms for ages 18-24," Create a Host family network for Youth," and Build houses for those earning between 30-80%of the AMI." Implementing this Strategy would also target carrying out key provisions of the Five-Year Homeless Housing Plan. 5. PROCESS, AWARDS, POLICY DIRECTION, MANAGEMENT & ACCOUNTABILITY How should $600,000 per year of funding from an affordable housing sales and use tax under HB 1590 be managed and awarded to benefit the community? Revenue would be received by the Jefferson County Treasurer and deposited in a County dedicated affordable housing fund. All expenditures from the fund would be for affordable housing, and subject to direction by, and prior approval of, the County Commissioners, who would retain oversight and ultimate accountability for the use of the funds. For administrative efficiency and maximum transparency, it is recommended that the County Commissioners harness the existing Housing Task Force and Joint Oversight Board, both of who meet in open public meetings, to help with vetting as affordable housing projects are recommended through an annual Request For Proposals (RFP) cycle, described below. Jefferson County Strategy for Permanent Affordable Housing To support the Housing Task Force and Joint Oversight Board and provide technical expertise in the RFP process, the County Commissioners should appoint a separate Technical Evaluation Committee. It would be composed of individuals with technical expertise in affordable housing, development, finance, and related fields, and who are independent of any local housing organizations and projects. The Technical Evaluation Committee would help county staff draft an RFP that would get vetted through the Housing Task Force and Joint Oversight Board. They would also conduct the technical evaluation and scoring of all proposals, which would carry forward throughout the same vetting process, up to the Commissioners. To guide the RFP process, and prior to the first round, the County Commissioners should adopt a Resolution establishing clear strategic guidelines for the intended use of the funds, such as what niches of the housing continuum to focus on, the kinds of projects or uses that they'd like to be eligible, and targeted populations. The Resolution would be developed with input from the Technical Evaluation Committee, Housing Task Force, and Joint Oversight Board, and would be updated periodically in future years, as changing conditions warrant. The Joint Oversight Board and Housing Task Force were created through a 2018 Interlocal Agreement (ILA) between the County and the City of Port Townsend to facilitate County/City coordination on solutions to our shared housing problems. The Joint Oversight Board (JOB) includes one elected representative of the City Council and one elected representative of the County Commissioners. The two elected officials select three members of a Local Homeless Housing Task Force to join them on the JOB. The JOB recommends to the County Commissioners the budgets and expenditures out of Fund 148 (Affordable Housing) and out of Fund 149 (Homeless Housing), as well as affordable housing goals. In January of 2020, Amendment No. 1 to the ILA was executed by the County and City to include revenues for affordable housing authorized by Substitute House Bill 1406. It is recommended that the County work with the City to propose an Amendment No. 2 to the ILA, so that the County can utilize the existing JOB and Housing Task Force structure for HB 1590 as described above. It is recommended that projects utilizing HB 1590 revenues be vetted and recommended through an RFP process that is separate from that for the existing recording fees. This is to recognize the different requirements for use of the two funding sources under State law, the unique nature of capital projects to build affordable housing, and to allow the HB 1590 revenue to be utilized in a separate strategic fashion, pursuant to an affordable housing strategy Resolution adopted by the County Commissioners as described above. We are confident in this model, after two rounds of successful RFPs administered by County staff, using the Housing Task Force and Joint Oversight Board. They successfully gave input on the RFP itself, and helped vet and rank the resulting proposals. Funding recommendations were made by vote of the full Housing Task Force and then the Joint Oversight Board, prior to consideration and final award by the Board of County Commissioners. Jefferson County Strategy for Permanent affordable Housing 9 of 11 Under the existing model, after Commissioner approval of award recommendations, County staff prepares contracts with project sponsors, and presents the contracts for subsequent approval by the County Commissioners. County staff administers the contracts, and reviews, approves, and processes all invoices to ensure they are consistent with each contract, prior to payment, which also gets approved by the County Commissioners. 6. CONCLUSION This Strategy for Permanent Affordable Housing in Jefferson County represents the consensus of five independent organizations in Jefferson County who provide affordable housing and supportive services to serve local residents, along with County and City executive staff. In examining existing gaps in the housing continuum in Jefferson County, the group determined that revenue from a HB 1590 sales tax for affordable housing should be targeted at creating entry-level permanent affordable housing. This is the core principal of this Strategy. Further, the group determined that the community is well prepared to effectively use the approximately $600,000 per year in new revenue generated under HB 1590 to create permanent affordable rental and resident-owned housing in Jefferson County. We found consensus on six sample projects that are currently in development as worthy prospects for putting the funding to immediate use. We sincerely hope the community will submit additional affordable housing projects by the time an actual Request For Proposals is issued. In the initial years of funding, we recommend the funding be strategically used to break the logjam at the entry steps to affordable rental and owned housing, so that low-income and vulnerable people currently stuck in shelter and transitional housing can move into permanent housing, and so lower wage workers can afford to live and work in Jefferson County. Jefferson County already successfully administers Fund 148 (Affordable Housing) and Fund 149 Homeless Housing) using the Joint Oversight Board and Housing Task Force under a County- City Interlocal Agreement. This existing structure can be harnessed and adjusted to administer revenues and expenditures for affordable housing under HB 1590, by amending the ILA, appointing a Technical Evaluation Committee, and periodically adopting strategic guidelines to ensure the HB 1590 funds and projects are best targeted to meet current community affordable housing needs. ATTACHMENT 1: Examples Of Local Projects That Could Be Funded To Create Permanent Affordable Housing In Jefferson County Jefferson County Strategy for Permanent Affordable Housing lU of 11 1 . L . g c F H; . 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