KC Gearing Up to Adopt First Affordable Housing Plan

2018-09-11 | Kansas City Star

Sept. 11 --A $50 million housing trust fund and new zoning laws to require low-cost housing as part of all new residential construction are among the ideas Kansas City is considering to address its affordable housing shortage.

City officials are scheduled Wednesday to introduce a first-ever long-range housing plan, intended to expand ownership opportunities for low-income residents and spur more of a social and economic mix in a city with a long and deplorable history of residential segregation.

"We need to set a lofty goal," said John Wood , assistant city manager and director of housing and neighborhood services.

The plan, commissioned by the City Council last November, lands at a moment of peak anxiety about affordability -- long considered Kansas City's strong suit as a place to live and work. But stagnant wages, rising rents and a housing industry largely focused on the luxury market are eroding that advantage.

Home prices continue to rise while the inventory of houses for sale -- especially for first-time buyers -- remains tight.

Nearly half of the city's renters and a quarter of homeowners meet HUD's definition of "cost burdened," meaning they are spending more than 30 percent of their annual household income on mortgage or rent.

Officials estimate that the city needs 7,000 additional affordable units for families making less than $15,000 a year. Households in the $50,000 to $75,000 range face a deficit of more than 10,000 affordable units.

It's an urgent issue in virtually every community.

An estimated 38 million rental and owner-occupied households are cost-burdened, according to the Harvard Joint Center for Housing Studies . The National Low-Income Housing Coalition recently reported that there is no state, metropolitan area or county where a worker earning federal minimum wage can afford a two-bedroom rental home at fair market rent by working a standard 40-hour week.

"This is a national failing we're experiencing at the community level," said Brent Schondelmeyer , deputy director for community outreach at the Local Investment Commission (LINC), a Kansas City nonprofit that supports children and families.

Trust fund for housing

If there was a single moment that underscored Kansas City's affordable housing shortage, it came Feb. 28 at a city council hearing on Three Light, the latest luxury apartment tower planned for downtown.

One and Two Light, the first two high-rises built by Cordish Companies with tax abatements and other publicly financed incentives, were successes. Given the scarcity of low- and moderately priced housing across the city, a couple of council members asked, why should they continue subsidizing high-end downtown apartments?

Cordish executive Nick Benjamin said the buildings were indeed affordable. His evidence: one-bedroom apartments available for $1,600 per month.

The council, concluding that it was bound by a 2004 agreement, grudgingly agreed to extend the incentives to Three Light. But not without extracting a commitment from Cordish to create 100 low-priced apartments at the historic Midland office building.

The proposed housing blueprint would give the city more tools to require developers to include such apartments. It's a plan long employed elsewhere but yet to be used in Kansas City .

A housing trust fund of as much as $50 million would issue loans and grants to support rehabilitation and preservation of existing affordable homes while stimulating construction of new units.

A principal goal is to help low-income residents restore the urban core's huge stock of vacant homes, lifting them into ownership where banks have been unwilling to extend financing.

"One of the messages people need to get out of all this is, 'Why pay rent?'" said Wood.

In the last two years, trust funds have been created in Denver , Baltimore and Pittsburgh to preserve and promote affordable housing. In Charlotte, voters will be asked on the November ballot to approve a $50 million bond issue to bolster the city's housing trust.

Wood said a mix of public, private and philanthropic dollars will be essential.

"It's a fantasy to think we can do this alone," he said. "We have to make a bold case for funding to support this."

Options for public funding include bonds and revenue from the 1/8-cent sales tax for Central City Economic Development , approved by voters last year.

Inclusionary zoning explained

It's been around for many years -- in Washington D.C. , New York , Massachusetts , suburban Maryland and hundreds of other localities.

The particulars vary, but the basic idea is that residential developers are required to set aside anywhere from 10 percent to 20 percent of new construction for low- and moderate-income households. The units must be within reach of families making anywhere from 60 percent to 100 percent of an area's median annual household income. In Kansas City that is currently $47,480 .

In exchange, developers receive the right to build beyond what would normally be allowed under conventional zoning.

Other incentives include relaxation of parking requirements, expedited permitting and reduced fees. In some communities, developers can opt out of the affordability requirement by making payments the city can use for housing.

Local proponents see it as a crucial hedge against gentrification as development begins to move along the Troost corridor and neighborhoods to the east.

"I think we're at a critical point," said Dianne Cleaver , executive director of the Urban Neighborhood Initiative, a nonprofit active in revitalizing the city's east side. "There is a window of opportunity and it's coming down for some areas."

Inclusionary zoning has drawn opposition from the housing industry in other cities as an assault on property rights and more government regulation. It is likely to trigger push back here as well.

"I understand the intent and the need for affordability," said Bob Mayer , president of MR Capital Advisers, a consultant who works with developers. "But when you start regulating it's a lot easier to do business outside of Kansas City than inside Kansas City ."

Wood said a careful study will need to be conducted first, looking at the potential impact of the zoning change on the local housing market.

"We don't think it should be just laid on the table and say 'This is it,'" said Wood. "We don't want to drive developers away."

What do mayoral candidates say?

The affordability debate is landing in the midst of the 2019 mayoral race.

Councilman Quinton Lucas , chair of the council's housing committee and one of nine candidates, said there's no reason it has to be a campaign issue, and that the council has ample time before next spring to adopt a comprehensive new policy.

Lucas is also expected to introduce his own package of proposals this week.

One would revise a measure he successfully sponsored last year, increasing from 10 percent to 15 percent the proportion of affordable units in projects where developers have accepted tax abatements or other incentives. They must be within reach of households making up to 80 percent of median income.

He will also propose a housing trust fund financed, at least in the short term, with public money. He would expect $10 million to come from an increase in the business use tax for out-of-state purchases of more than $2,000 . Another $5 million would be drawn over the next several years from the Central City sales tax.

On inclusionary zoning, Lucas said he is not persuaded that a study is needed before the council can act.

"I think what the council and our community are looking for are ambitious proposals, not simply directions for more study," he said.

Lucas said he will introduce a resolution requiring City Manager Troy Schulte to return in 30 days with a plan for implementation.

If the resolution is approved, Schulte will likely still recommend a "nexus study," a detailed analysis of the local housing market and demographics designed to see what level of mandated affordability is possible.

Here are the other candidates' housing ideas:

-- Councilman Scott Taylor is proposing a $10 million home improvement fund -- source of the money to be determined -- as part of a broader plan for revitalizing the city's east side. He favors an affordable housing fund financed by refunds or surpluses from old Tax Increment Financing (TIF) projects.

-- Councilwoman Alissia Canady said she wants to see low-interest, forgivable home rehabilitation loans in lieu of new construction to address one of the greatest housing needs -- three-bedroom homes for under $1,000 a month.

"There's more opportunity to rehab existing housing stock and keep property affordable in the (urban) core," Canady said.

-- Crossroads businessman Phil Glynn's company, Travois, builds housing in Native American communities using the Federal Low Income Housing Tax Credit to leverage other capital. He said he supports inclusionary zoning and creation of a local trust fund. He said the fund could be financed by fees from developers who opt out of building affordable units.

He also supports freezing the property taxes of long-term low-income residents to protect against gentrification.

-- Attorney Stephen Miller said it was important that downtown, River Market and Crossroads have housing for a variety of income levels. "Young people, teachers, nurses, emergency responders and others should have options," he said.

-- Former Missouri Secretary of State Jason Kander said he was "open to a lot of topics that are on the table." He also said Kansas City is in the fortunate position of being able to address affordability issues without seeing housing costs spiral out of control as they have in other cities.

"We are not past the point of no return," he said.

-- Councilman Jermaine Reed he favored local legislation that will "create a diversity of housing options at price points that fill in the gaps that have resulted from the status quo."

-- Community activist Rita Berry said she favored low-interest loans to buyers willing to fix up vacant homes and easing property code enforcement for five years to allow them leeway to finish.

-- Mayor Pro Tem Scott Wagner did not respond to a query.

Wednesday

The council's housing committee is scheduled to discuss affordability proposals Wednesday, Sept. 12 , at 11:15 a.m. in the council chambers on the 26th floor.

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