HUMAN RIGHTS AND FAIR HOUSING COMMISSION AGENDA ITEM
ACTION REQUESTED:
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Provide specific feedback regarding the proposed Affordable Housing Incentive Program (AHIP)
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DEPARTMENT: Transportation, Engineering and Development
SUBMITTED BY: Allison Laff, AICP, Deputy Director
BOARD/COMMISSION REVIEW:
The Human Rights and Fair Housing Commission (HRFHC) is not required to take a vote on the proposed Affordable Housing Incentive Program (AHIP). On April 4, 2022, the HRFHC reviewed the proposed AHIP and did not recommend any changes to the proposed program and did not request additional time to review the proposed program. The AHIP is returning to the HRFHC, at the request of the Chair, so that the HRFHC can provide specific feedback to the Planning and Zoning Commission and City Council regarding the proposed program. A public hearing on the AHIP is scheduled for the July 6, 2022 PZC meeting; City Council review is anticipated in August/September 2022.
BACKGROUND:
Consultant SB Friedman was engaged by the City in fall 2019 to analyze the City’s housing market and project short- and long-term housing needs. The final plan entitled “Addressing Unmet Housing Needs” was reviewed by the HRFHC and approved by the City Council in September 2020.
The findings included in the plan were used as the basis for developing a menu of policy options to address identified housing challenges and capitalize on opportunities to create diverse housing options at various price points. One of the key recommendations included in the plan was the development of an Inclusionary Zoning Ordinance (IZO) that would link the creation of affordable housing units to market-rate residential development.
In January 2021, the City Council directed staff to begin work on an IZO. On February 16, 2021, the City Council awarded Procurement 21-054, Inclusionary Zoning Ordinance Advisory Services, to SB Friedman and Duncan Associates (subconsultant).
June 2021 Workshop
On June 21, 2021, the City Council held a workshop to discuss a potential Inclusionary Zoning Ordinance (IZO) for Naperville. During the workshop, SB Friedman provided an overview of IZO ordinances in comparable cities nationwide, key program parameters, and the feedback that they had gained through interviews with the development community.
At the conclusion of the workshop, there was City Council consensus to focus affordable housing efforts on voluntary measures which result in increasing the number of affordable units and which may include the use of incentives, such as density bonuses.
November 2, 2021 City Council Meeting
Based on feedback from Council at the June 2021 workshop, SB Friedman and Duncan Associates conducted additional research regarding voluntary affordable housing programs nationwide, including typical program components and their effectiveness and provided updates to staff and City Council.
At the November 2, 2021 City Council meeting, SB Friedman and Duncan Associates presented a proposed affordable housing program using the additional discussion and feedback gained from the City Council in August/September 2021. At the conclusion of the City Council discussion on November 2nd, the City Council reached consensus regarding the proposed voluntary affordable housing program presented and directed SB Friedman/Duncan Associates to draft an ordinance accordingly.
Work Following November 2, 2021 City Council Meeting
Following Council discussion on November 2, 2021, SB Friedman tested the financial impacts of the proposed voluntary affordable housing program to confirm its viability and refine the final menu of incentives to be offered through this program.
SB Friedman, Duncan Associates, and city staff additionally discussed the proposed program with representatives of the residential development (Pulte Development Corporation; Lincoln Properties) to gain their feedback on program components. Each representative was receptive to the proposed program and found its components to be beneficial.
April 4, 2022 HRFHC Meeting
SB Friedman and Duncan Associates provided a detailed overview of the proposed voluntary affordable housing program at the April 4, 2022 Human Rights and Fair Housing Commission (HRFHC) meeting. HRFHC feedback was sought on this program given the Commission’s prior discussions regarding affordable housing initiatives.
Following SB Friedman’s presentation, two members of the public provided testimony and the Commissioners asked several questions. At the conclusion of their discussion, the HRFHC did not recommend any changes to the proposed program and did not request additional time to review the proposed program. The HRFHC did not vote on the proposed program; however, an HRFHC vote is not required on this matter. The meeting notes from the April 4th HRFHC meeting are attached for reference.
DISCUSSION:
Following the April 4, 2022 HRFHC meeting, Chairman Miller requested that the AHIP return to the HRFHC for further discussion and feedback regarding specific program components. SB Friedman will not be in attendance at the June 6th HRFHC meeting; however, staff will be available to respond to commissioner questions.
A draft of the AHIP ordinance is attached for review. In addition, provided below is an overview of the proposed AHIP.
What is the purpose of the AHIP?
The purpose of the AHIP is to encourage the voluntary production and availability of new affordable residential units in the City by providing density bonuses and incentives to projects that set-aside a minimum number of affordable units for low- or moderate-income households for at least 30 years.
What properties will qualify to participate in the AHIP?
A property must be able to be improved with 5 or more new residential units in order to participate in the AHIP. Owners of participating projects must agree to set-aside the minimum number of required affordable units for a 30-year period in order to receive the density bonuses and incentives offered by the AHIP. Such projects are referred to as “Qualified Projects” in the proposed ordinance.
If a development project is proposed to have multiple phases, will each phase be required to have an affordable component?
No, the Owner can choose whether they will include the required affordable residential units in each of the phases of a development project, or only in a certain phase(s). However, the density bonuses and incentives provided in the AHIP will only be applied to those phases which include the required affordable components.
Will the AHIP allow new multi-family units to be built on a property zoned for single-family uses?
No, a Qualified Project can only include residential unit types that are permitted by the property’s underlying zoning. For example, a Qualified Project located on R1A zoned property would be permitted to build additional single-family units as a result of the density bonuses offered but would not be permitted to build any apartment units, since apartments are not permitted in the R1A zoning district.
What density bonuses are offered through the AHIP?
A Qualified Multi-Family Project, which provides at least 10% of its units as affordable, is automatically eligible to receive a density bonus of up to 200%. A Qualified Single-Family and Two-Family Project which provides at least 10% of its units as affordable is automatically eligible to receive a density bonus of up to 100%. As noted above, a development may be comprised of several phases of which only one or more phases will be a Qualified Project.
It should be noted that in order to implement the density bonus, the ordinance provides for automatic reductions from certain zoning district requirements, such as minimum lot size, minimum lot width, minimum lot area per unit, and the 90% rule, as applicable. Absent these waivers, the density bonus would not be achievable unless additional variances were requested.
Finally, it is important to note that it may not always be feasible or realistic for a Qualified Project to build as many units as would be permitted through the density bonus formula. In those cases, the percent of affordable units required to be set-aside will be based on the actual number of units proposed.
What other incentives are being offered through the AHIP?
In addition to the density bonus, a Qualified Project will be able to choose from a menu of by-right incentives. The number of incentives that each Qualified Project will be eligible to receive is directly related to the affordability levels of the proposed units as well as the percentage of units which will be set-aside as affordable. Owners who target lower-income households and set aside more affordable units will be offered more incentives as detailed in Table 6-2 in the proposed ordinance.
For example, if a Qualified Project proposes to set-aside 10% of its units as affordable for residents at 60% of the Local Median Household Income (i.e., Naperville household income), it will be eligible to receive 2 by-right incentives. In contrast, a Qualified Project which proposes to set-aside 20% of its units as affordable for residents at 60% of the Regional Median Income (i.e., greater Chicago-area household income) will be eligible to receive 4 by-right incentives.
The incentives offered through the AHIP are detailed in Table 6-1 of the proposed ordinance. These incentives include items such as automatic decreases in setbacks, parking, or PUD open space requirements; automatic increases in lot coverage or building height; or an automatic waiver of the City’s brick requirements or park impact fees.
How were the density bonuses and incentives determined?
SB Friedman reviewed multiple market-rate developments that have been approved in Naperville over the last several years to develop a market baseline. Many of those developments, particularly those including multi-family units, were granted significant variances to increase density and height, and reduce required parking.
Because the inclusion of affordable units has a direct impact on the financial feasibility of a proposed residential project, SB Friedman then determined what type and number of incentives would be needed to make a Qualified Project financially feasible. In addition, SB Friedman recommended that these incentives be provided by-right, in order to provide a level of certainty to the Owners of a Qualified Project. Because the proposed program is voluntary, financial feasibility and process certainty are critical to encourage owner participation.
How will the AHIP ensure that the affordable units are built in a timely and quality manner?
The proposed AHIP includes provisions regarding the timing of construction of the market rate vs. affordable units; the location of the affordable units within the overall development; requirements regarding unit size; and requirements regarding features and amenities which are intended to ensure that the affordable units are built in a timely and quality manner.
Will Qualified Projects require review by the Planning and Zoning Commission and City Council?
A Qualified Project that requires no additional variances, and no additional entitlements, can be administratively approved by City staff provided that all Municipal Code requirements have been met (i.e., Engineering Design Manual, Citywide Design Guidelines, Building Code, etc.). Any Qualified Project requiring annexation, rezoning, conditional use, additional variances/deviations, or PUD approval will be processed through the standard PZC and City Council review process; however, the automatic density bonus and incentives applicable to a Qualified Project will not be subject to review or approval.
Are there any additional AHIP provisions proposed?
Yes, when the proposed ordinance is presented to the City Council for review, it will also include provisions related to Affordable For-Sale and Rental Dwelling Unit Occupancy and Rental Restrictions; Affordable Housing Agreements; and Enforcement.
Next Steps
Following completion of the HRFHC’s review, the AHIP will be presented to the PZC for a public hearing on July 6, 2022.