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Affordable Housing: By Whom?

City struggles with how to afford affordable housing.

A recent report developed by the Alexandria Office of Housing calling for proposed changes in contributions to the City's Housing Trust Fund met with stiff opposition during a July 27 meeting with developers and attorneys. That resulted in postponement of its presentation to City Council until December.

As one developer in attendance summarized the situation, "The City of Alexandria has to determine if they really want to support affordable housing. If they do, let everyone pay, not just developers. Let the citizens of Alexandria step forward and have a percentage of their taxes go to affordable housing."

Tim Roberts, IBI Group, said, "The real question is what group of persons do you really want to hurt. With this report and approach you’re attacking a certain segment of the market." Mildrilyn Stephens Davis, director, Office of Housing, who chaired the City Hall meeting, said, "We want to get to a policy everyone can buy into. We are more interested in getting the units built in new developments than money to the Trust Fund. But how do we get that done?"

Since June 2002, the City's Affordable Housing Policy has called for a voluntary contribution of $1 per gross square foot to the Housing Trust Fund, or providing actual affordable housing units on site of a new residential development. Prior to that date the contribution had been 50 cents per gross square foot since 1993.

However, as the staff report stated, "Given the sales prices and rents of recent new development in Alexandria, the $1 ... contribution level does not translate into substantial numbers of affordable housing units. In many instances, the dollar amount is insufficient to subsidize even one sales unit down to the City's current maximum affordable sales price of $225,000."

TO HIGHLIGHT that conclusion, the report cited the 24-unit West Glebe Road Townhouse project. It has a total of 65,544 gross square feet with an anticipated sale price starting at "above $400,000" per unit. Under the present formula a developer would have to contribute only $65,544 against a total sale of $9.6 million if all units sold for only the projected minimum.

Under that formula, "The minimum required subsidy for a single townhouse unit would have to be over $175,000, more than twice the $1 per foot formula," according to the report. Based on the $1 formula, "By 2001 we were getting only money and no units dedicated to affordable housing," Davis said.

Based on a study by Bay Area Economics (BAE), a research and analysis firm commissioned by the Office of Housing to test the financial implications of revised formulas for new developments, the staff report proposed four categories for assessing contribution to the Trust Fund.

1. Projects not seeking a Special Use Permit (SUP) and authorized by base zoning such as by-right projects

2. Projects seeking an SUP for benefits other than additional density, floor area ratio (FAR) or height such as reduced parking, authorization of certain uses

3. Projects seeking an SUP for density, FAR or height that is greater than the level allowed in base zoning, but does not exceed the level allowed by the Zoning Ordinance with an SUP

4. Projects seeking additional density, FAR or height through rezoning, a zoning text amendment, the 20 percent affordable housing bonus provision or, possibly, the vacation of a public right-of-way

THE STAFF REPORT characterized the four proposals as representing "Increasing levels of economic benefit provided by the City. Using the new authority the City obtained this year from the General Assembly, the Zoning Ordinance would be amended to provide for the provision of affordable housing as a condition of projects in categories three and four."

It proclaimed, "For each category, and for different types of projects in each category the proposed policy changes establish a level of affordable housing contributions to be provided by the developer, either in the form of cash payment ... or ... rental housing units ...."

If adopted, the new categories would increase both financial and percentage amounts to the Trust Fund and on site affordable housing units. Financial contributions would range from $2 to $5 per square foot of gross floor area. Percentage contributions would range from three percent for projects in category 1 to 12.5 percent for those in category four.

Both developers and attorneys, most of whom represent developers before the Alexandria Planning Commission on a regular basis, saw the report proposal quite differently. Their primary objections center on two points:

1. The report was drafted without any input from the developer community or any consideration of the economic realities they face in their endeavors.

2. There was no communitywide consensus on how to address the problem of affordable housing.

A SPOKESMAN for the Mark Winkler Company, said, "The economic assumptions are flawed in many cases. You’re not giving us anything of value. I'm surprised the City is willing to support such a scheme. There needs to be an economic benefit to developers."

After more than an hour of back-and-forth debate in which most of those present stated they supported affordable housing but differed on the financial formula to bring it about, Davis admitted that the report presentation to Council should be postponed.

"We need to postpone this. In fact we will postpone this to get more input. But, I don't want it delayed for a long time," she said.

At that point Alexandria City Manager Philip Sunderland stepped into the debate. "What would be helpful is to come away with something positive. What is the articulated goal? What are Alexandria's goals?" he asked the group.

"The Council and the Planning Commission have made it clear they don't want just money or housing units. They want a mix," he said.

"Policy makers are saying we want both preservation and new units."

At the present time there is approximately $4 million unencumbered in the Trust Fund, according to Sunderland. "I don't think the developers should be contributing in a disproportionate percentage," Sunderland said.

"There is support for a joint effort for affordable housing if the burden is spread equally," he said. When asked if the citizens of Alexandria, as a whole, support affordable housing, Sunderland said, "Affordable housing was ahead of open space as the number one desire."

However, there is a question as to whether or not the investment in preservation of existing housing and renovating existing units is a better expenditure that creating new units, according to Sunderland. "What is the best investment of the money to benefit those that can't now afford to live here such as many of our police and fire personnel?" he said.

It was finally agreed that a work group would be formed from those present, as well as those with "a strong interest in housing development issues," to structure a plan for contributions that would incorporate suggestions from the development and legal communities.

According to the Office of Housing, "It is anticipated that meetings (of the work group) will occur during September and October, with a goal of concluding by the end of October." The result will be released to Council in November in order to schedule public hearings in December.

The work group will be composed of representatives from the following: For-profit residential builders/developers; non-profit housing developers; commercial builder/developers; development attorneys; an appraiser; a development lender; Development industry group representatives; Alexandria Chamber of Commerce; and two housing advocates.