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Home My WebLink About01/10/2018 Special MeetingApple VaIIey NOTICE: The Apple Valley Planning Commission will hold a special informal meeting at the Municipal Center, on Wednesday, January 10, 2018, at 7:00 PM to consider the items listed in the following agenda: Meeting Location: Municipal Center 7100 147th Street West Apple Valley, Minnesota 55124 January 10, 2018 SPECIAL INFORMAL PLANNING COMMISSION TENTATIVE AGENDA 7:00 PM 1. Call to Order 2. Discussion Items A. Review of the Housing Chapter of the 2040 Comprehensive Plan 3. Adjourn Regular meetings are broadcast, live, on Charter Communications Cable Channel 180 and on the City's website at www.cilyofapplevalley.org Apple„ ITEM: PLANNING COMMISSION MEETING DATE: SECTION: 2.A. January 10, 2018 Discussion Items Description: Review of the Housing Chapter of the 2040 Comprehensive Plan Staff Contact: Thomas Lovelace, City Planner Department / Division: Community Development Department Applicant: City of Apple Valley Applicant Date: ACTION REQUESTED: N/A 60 Days: Project Number: PCI7-06-P 120 Days: SUMMARY: Attached for your review is the first draft of the Housing chapter of the 2040 Comprehensive Plan update. The Metropolitan Council requires that the 2040 Comprehensive Plan have a housing chapter and that chapter shall include at a minimum an analysis of the existing and projected housing needs, and an implementation plan. The Community Context chapter provides an existing housing assessment that identifies the total number and types of housing units as well as the number of units that are owner -occupied or rental and the draft Housing chapter identifies the number of publicly subsidized housing units, existing housing cost burden, and existing housing needs. The chapter also lays out the projected housing needs for the City in the Goals and Policies section and an implementation plan that identifies tools that the City can use to achieve its goals. Staff has also included some background information that can be used as part of the Housing chapter review. This includes the following: • An article on naturally occurring affordable housing (NOAH), which is defined as housing that is affordable without being supported by public subsidies such as low- income owincome housing tax credits. NOAH's market -rate affordability derives mainly from its age—most units were built 40 to 50 years ago—and lack of amenities: it is no-frills, functional housing that is nonetheless safe, secure, and inhabitable. Community Development Director Nordquist will discuss what impact NOAH has on meeting the City's affordable housing goals. • A copy of the Summary of Findings – Apple Valley Housing Needs and Recommendations from the Dakota County CDA's 2014 Comprehensive Housing Needs Assessment report, which provides another look at the City's existing housing assessment (as of 2013), future housing demand, and recommendations. This assessment addresses demand out to 2030 and recommended housing demand by housing type out to 2020. Although, the report's timelines do not coincide with the Comprehensive Plan update, it does present a snapshot of the demand in the next 12 years. • A copy of the Existing Housing Assessment, AMI and Housing Affordability, and Housing Implementation documents from the Metropolitan Council's Local Planning Handbook. Please review the proposed draft chapter and accompanying documents and provide your thoughts on the 10th on the chapter's thoroughness with meeting the proposed keys in the Plan's Vision chapter. Again, those proposed keys are: 1. Service 2. A Great Place to Live 3. Business Oriented and Employment Focused 4. Safe 5. Parks to Experience 6. Healthy and Active 7. Sustainable 8. Accessible 9. Successful Downtown 10. Exceptional Learning 11. A Community for a Lifetime BACKGROUND: N/A BUDGET IMPACT: N/A ATTACHMENTS: 3,,kc round Material E: ,:* round Material B ac k iiia a uiurid Material Back round inured to r'iii a . E3 ac k: roL„Jr1 Material Housing and Neighborhoods The purpose of this chapter is to is to identify housing needs and to provide a foundation for local decision-making to guide residential development and redevelopment efforts in Apple Valley. Livable housing is a necessity for all. Apple Valley strives to provide a balanced stock of high-quality housing to meet the diverse needs of existing and future residents. Sufficient, desirable housing is the building block for strong, healthy neighborhoods. Housing is the largest use of land in the City; the character of residential neighborhoods plays a significant role in shaping the every -day experience of Apple Valley residents and helps create a sense of place and belonging. Apple Valley residents are proud of their neighborhoods and the quality of life they afford. Within the last 10-20 years, targeted development has increased the overall diversity of the housing stock. As various demographics grow and change, the City will continue to expand housing choice to meet the needs of different residents. Likewise, the City is committed to providing its regional share of affordable housing. The lack of affordable housing is a national issue. The City will continue to encourage affordable housing construction through its land use plan and the application of additional market incentives, and will endeavor to maintain the quality and price of existing affordable units. The Housing Chapter focuses on Apple Valley's housing goals and strategies. These goals and strategies respond to public feedback, to the housing and household data that was summarized in the Community Context Chapter, and to documented housing requirements and housing needs, such as Metropolitan Council's affordable housing requirement and the County Community Development Agency's report, Comprehensive Housing Needs Assessment for Dakota County, Minnesota (September 2013). Statutory Requirements State Law requires that the Comprehensive Plan contains a housing element that includes "standards, plans, and programs for providing adequate housing opportunities to meet existing and projected local and regional housing needs, including but not limited to the use of official controls and land use planning to promote the availability of land for the development of low and moderate income housing." (Minnesota Statutes, Section 473.859, Subd.2c) The Comprehensive Plan must also include a housing implementation program that describes "official controls to implement the housing element of the land use plan, which will provide sufficient existing and new housing to meet the local unit's share of the metropolitan area need for low and moderate income housing." (Minnesota Statutes Section 473.859, Subd. 4) Imagine Apple Valley 2040 Housing Plaril Livable Communities Act The Minnesota State Legislature passed the Livable Communities Act (LCA) in 1995 to address regional issues of housing balance, affordability, and development. The legislation established funding to promote efficient development and redevelopment, affordable housing construction, and economic development. Grants are awarded on a competitive basis to communities which demonstrate a commitment to providing high-quality development, affordable housing, and life- cycle housing. There are 95 participating metropolitan communities, including Apple Valley. Existing Conditions Apple Valley is a mature, suburban metropolitan community. Many neighborhoods are comprised of single-family homes built during the 1960s and1970s. The character of suburban development reflected desires for large properties, good schools, safety, and other amenities — the same qualities that many Apple Valley residents value today. Established neighborhoods are integral to Apple Valley's identify and sense of place, but also create challenges for new development opportunities, infill, and connectivity. The oldest neighborhoods are located within a mile of the regional highway system, including TH 77 (Cedar Avenue) and County Road 42 (150th Street). These routes effectively divide the City's neighborhoods. As the south metro has grown, the increase in traffic volumes on these two arterials has introduced negative impacts for adjacent neighborhoods and posed connectivity challenges for the City as a whole. Imagine Apple Valley 2040 Apple 1, 1,ta I I ey Housing PIanl2 Imagine Apple Valley 2040 Apple, Valley Housing PlanI3 In the 1980s, 1990s and 2000s, the development focus shifted toward attached townhomes and multifamily apartments, in response to changing market demand and local efforts to balance the housing supply. This period saw a rise in the number of homeowner associations (1-10As) and the application of the Planned Unit Development concepts (PUDs) to facilitate alternative housing styles and build cohesive neighborhoods from the ground up. The Cobblestone Lake neighborhood, which includes a variety of single-family styles, multifamily, and mixed commercial, is a prime example of successful PUD application. Mid -density and high-density neighborhoods, including attached single-family and apartments, are distributed throughout the city, but tend to be located within and surrounding the Downtown area. Following a surge in construction of town homes from 2000-2009, the market for new development has shifted towards multifamily. Between 2000-2014, 571 single-family detached units were constructed, compared to 756 townhomes and 671 apartment units. Data provided by the City for 2015-2017 indicates that 160 single-family units were constructed during that period, compared to 37 townhomes and 224 apartment units. Growth in apartments outpaces growth of single-family homes. This trend is likely to continue, given the need to increase total housing stock relative to the city's population forecasts and the limited supply of developable land to do so. The Community Context chapter further summarizes the character of Apple Valley's neighborhoods and housing stock. Manufactured Housing Apple Valley contains two manufactured housing parks, both located within the Cedar Avenue corridor in the north end of the City. Manufactured housing provides viable affordable housing for low-income residents, but may face development pressure over the course of this plan. The City intends to maintain these areas for manufactured housing and has designated them as such on the Future Land Use Plan. 1.4 To provide additional protection for the residents of manufactured housing parks, the City can enact an ordinance that establishes the right of first refusal for manufactured housing residents in the event of a proposed land transaction, which would grant residents the opportunity to purchase the land and establish a collective. Additionally, the City could require the landowner/developer to pay relocation costs for residents, which incentivizes against a decision to sell and provides fair compensation if a sale occurs. Imagine Apple Valley 2040 Apple Valley Housing PlanI4 Housing Needs and Opportunities Housing Growth Projections Metropolitan Council forecasted that 24,900 households for 2040. (See Chapter 3, Community Context.) In 2016, the Council estimated that the City's existing housing stock consisted of 20,703 units, with 19,917 households — this implies that 96.2 percent of homes were occupied and 3.8 percent were vacant. Since 2016 considerable development has occurred, with 1,042 units constructed or planned. Therefore, it is estimated that current number of units is 21,745. At a minimum, the City will plan for 3,155 new dwelling units (24,900 households — 21,745 units). Realistically, slightly more household may be constructed to maintain a vacancy buffer of 3-4 percent. Infill Opportunities Even with limited land, Apple Valley can accommodate its forecasted housing growth through infill and redevelopment. Under minimum density assumptions, Apple Valley can accommodate nearly 40 percent of its forecasted housing growth in Orchard Place and other designated infill sites. Note that Apple Valley's recent apartment developments are closer to 40 units per acre. Under maximum density assumptions, there is sufficient acreage to accommodate the entirety of forecasted housing growth on these sites. Actual development will likely fall in between these two extremes. Table 5.1 summarizes residential infill potential for Orchard Place and other parcels. The calculations assume 10 percent and 60 percent residential fraction for the Mixed Business Campus and Mixed Use categories, respectively. Imagine Apple Valley 2040 Apple Valley Housing PlanI5 Table 5.1 - Residential !nth! Potential NET DEVELOPABLE ACRES Orchard Place LD 34 HD 21 Mixed Business Campus 165 (17 acres are [esidential) 3-6 12-40 Subtotal 72 Other Infill Sites 12 40 102 204 252 840 NA 204 680 558 1,724 LD 34 3-6 MD Mixed Use 19 24 (14 acres are residential) 6-12 102 204 114 228 12-40 276 920 12-40 173 576 Subtotal 100 NA Totals 172 NA 780 2.312 1,223 3,652 NET DENSITY 7.8 DU/ACRE - 23.5 DU/ACRE Note: No deductions were made for ROW or wetlands other than what is indicated on Future Land Use Map. The future land use plan for Orchard Place designates space for the internal collector network and storm water ponds. No new public ROW will be dedicated for the other infill sites. Redevelopment Opportunities Additional redevelopment opportunities will be targeted in the Downtown Focus Area and the transit corridors (See Chapter 4, Land Use Plan). One of the objectives of this plan is to increase residential density in these areas. Doing so will increase activity in the Downtown core and leverage local and regional investments in transit. As this plan is implemented, the City may adopt development targets to guide the overall number of units and residential density in the Transitways and the Downtown Focus Area. Balanced Housing Supply A balanced housing supply meets the needs of all demographics. Apple Valley strives to provide sustainable supplies of ownership and rental units to meet market demand in all segments. Table 5.2 describes the characteristics and preferences of various housing markets. Imagine Apple Valley 2040 AppleValley Housing PlanI6 Table 5.2 -Life-Cycle Housing Consumer Groups Entry-level homebuyers HOUSEHOLD CHARACTERISTICS Early 20s Often single Limited tenure duration Prefer to rent May distribute costs with other roommates Basic Apartments First-time homebuyers and move -up renters Mid-20s or 30s: Includes single and married/partnered households, some with children. Prefer to purchase modestly -priced single family homes or rent upscale apartments Traditional single-family detached Townhomes and twin homes Upscale apartments Move -up homebuyers Late 30s to 40s Many households have children Empty -nesters Younger independent seniors 50s to 60s One- or two -person households vth no children 60s to 70s One- or two -person households with no children Older seniors pically prefer to purchase fle\. er, larger, and more expensive singFe-family homes Traditional single-family detached Prefer to own Lower maintenance housing alternatives, including homeowners" associations Prefer to own but may consider renting Lower maintenance housing May be seasonal residents Smaller single-family attached and detached: townhomes and twin homes Smaller single-family attached and detached: townhomes and twin homes Mid-70s or older Generally single -person households (widow or widower) May need or choose to move out of single-family home due to health constraints or a desire to reduce maintenance responsibilities May move in with relatives or move to assisted living communities Two demographics drive housing demand. In Minnesota and the rest of the United States, the housing market is driven by young Millennials and an aging population of Baby Boomers (See Figure 3.14, Apple Valley Population Pyramid, in the Community Context chapter.) Baby Boomers have affected every housing trend as they have moved through their life cycle, including the apartment boom in the 1960s and 1970s. Millennials, too, are driving the current market and will exhibit similar influence over the course of this plan. Currently, these two groups tend to exhibit similar housing preferences. As they enter or exit the job market, they may have limited financial resources compared to those with established careers, and may seek affordable/flexible opportunities to own or rent within their means. Often this equates with the need or preference for low -maintenance housing. While most Baby Boomers will prefer to stay in their single-family homes as long as possible, a portion will downsize to maintenance -free housing. Millennials, too, are less inclined to purchase large homes on large lots. Across the United States, the rate of homeownership among Millennials has fallen faster than for any other Imagine Apple Valley 2040 Housing PlanI7 Apple,. Valley age group. Millennia's exhibit greater preference for housing flexibility, with opportunities to pursue other interests besides owning and maintaining a single-family home. These realities are reflected in the Comprehensive Dakota County Housing Needs Assessment (2013). Compared to the 2005 report, the demand for rental housing is forecasted to increase from 23 percent to 30 percent by 2030. To meet demand, the study forecasted that approximately 25,000 for -sale units and 10,000 rental units would be constructed from 2010- 2030. The senior demographic is large and growing. In 2000, 7 percent of Dakota County's population was over the age of 65. The percentage of seniors increased to 10 percent in 2010, and was projected to increase to 13 percent in 2020 and 17 percent in 2030. From 20210-2030, growth in 65 -and -over age group will be nearly equivalent to growth among all other cohorts. Meanwhile, growth in the number of senior households is anticipated to be nearly double the growth for all other households, given the increasing number of one- and two -person senior households. Thus, seniors will comprise an increasing share of demand for low maintenance homes and multifamily apartments in Dakota County, and demand for assisted living housing will also increase, particularly during the first phase of this Comprehensive Plan. (See Chapter 3, Community Context, for further discussion of housing projections for Dakota County and the City of Apple Valley.) While there is no doubt that the region's population will grow older over the life of this Comprehensive Plan, the implications for housing in Apple Valley are less clear. Some aspects of the current housing stock suggest potential barriers for the population aging in place. According to County property tax records, 31% of the housing supply is classified as two- story. Over 53% of all housing contained 2,000 square feet or more of living space. Seventeen percent (17%) contained more than 3,000 square feet. Larger, multi -story homes may not be well suited to the wants or needs of an aging population. Universal Design One way to accommodate the growing senior population is by broadening the application of universal design concepts for new residential development and redevelopment. Universal design refers to flexible design of individual units that allows housing to accommodate many occupants with various needs, such as persons with disabilities or families with young children. Nationally, most "accessible" units built on an individual basis. However, these homes tend to have a specialized, clinical look that reduces resale value. Instead, universal design advocates for supportive housing design that is more or less invisible, with the understanding that all users can benefit from simple design improvements that help people with Apple Valley is committed to providing life -cycle housing stock that meets the needs of residents of all ages. Universal design concepts can enhance the flexibility of individual units to adapt the needs Imagine Apple Valley 2040 Apple„ Valley disabilities. Housing PlanI8 Such design is accessible and barrier -free, and seeks to incorporate consumer products that are commonly available. It is not geared around assistive technology, medical equipment, or special features, but enables these features to be accommodated or removed if needed. There is no mandate for universal design, but Apple Valley could benefit by reviewing general guidelines with developers. Example guidelines might include: • Open floor plans • Multiple step less entrances are encouraged; if only one, it should not be through the garage or a patio/deck O Driveway and garage elevated to floor level so vehicles do the climbing O Wider doors and hallways • Main -floor bedroom, bathroom, and laundry • Turning space of 5 -feet diameter in all rooms • Color contrast between floors, counters, and walls/trim O At least one bathroom with a curb less shower or a tub with integral seat, waterproof floor, and drain These elements are just as supportive for a family with young children or those with disabilities as they are for aging residents. Encouraging life -cycle housing and universal design for new housing stock will enable more senior residents to "age in place" rather than forcing a move from the City. A comprehensive summary of universal design history, goals, and guidelines is available at www.humancentereddesign.org. Maintenance of Existing Housing Stock Apple valley is an established community, with most neighborhoods developing between 1960 and 1990. Approximately 50 percent of the housing stock consists of units that were constructed during this time. These units constitute the core of city's housing stock. As they continue to age, reinvestment is needed to address repairs, including major repairs to roofs, siding, wiring, plumbing, appliance, driveways, etc. Maintenance is the responsibility of the property owner — either the owner -occupant or the landlord. Homeownership encourages maintenance because owners want to mitigate depreciation costs to maximize the value of their investment. However, not all homeowners are willing or able to address maintenance needs. For example, some older residents may choose or be forced to stay in aging single-family homes with less ability to maintain these units. Rental property improvements are the responsibility of the landlord. Landlords are incentivized to maintain property in good condition to avoid the cost of vacancy and maximize rental gains. However, landlords may defer maintenance for many reasons. Maintenance of large rental Imagine Apple Valley 2040 064 Housing PlanI9 Apple, Valley properties is expensive. In addition, the regional demand for affordable rental units exceeds supply, so landlords may be able to maintain high occupancy rates even if repairs are neglected. Most of Apple Valley's apartment units were constructed after 1980 and are in fair condition, but investments will be needed to maintain their quality. When repairs are undertaken, the brunt of the cost would be passed on to renters absent additional financing incentives. Higher costs increase housing burden and may lead to displacement. Several tools are available to promote maintenance of rental properties and provide stability for tenants. in addition to multifamily rental units, there is a smaller supply of the single-family rental units. Single-family rental units increase neighborhood diversity and protect against vacancy, but pose unique challenges and risks. When a single-family home changes from owner -occupied to rental, it often creates a new landlord with limited experience and/or availability to address issues with maintenance or tenancy. Neighborhood homeowners may raise concerns about deteriorating neighborhood stability or property values. It is important to maintain the quality of these homes to preserve neighborhood character and support continued opportunities for homeownership. The failure to adequately maintain housing reduces the livability of individual units. The outward evidence of inadequate maintenance is visual disrepair. When housing is not well maintained, it depresses the values of adjacent properties, which discourages neighborhood investment and can lead to blighted conditions. Apple Valley not only benefits from a safe and attractive housing supply, but also realizes growth in the property tax base with reinvestment in existing housing. To maintain neighborhood vitality, Apple Valley encourages property reinvestment and infill of vacant parcels. The City uses GIS to monitor vacancies and general housing conditions, and communicates with local mortgage lenders to monitor foreclosures. City staff also maintain contact with landlords, developers, and homeowner associations. Property inspection and code enforcement are the City's primary means of addressing maintenance. Inspectors notify property owners of compliance issues and the steps needed to address them. They are the first point of contact to provide information about funding programs and other resources that can assist property owners with repair. Moving forward, the City may need to modify strategies to encourage maintenance, and could consider revisions to financing policy or local ordinance. The City will proactively inventory neighborhood housing conditions to identify signs of deterioration and prioritize areas for rehabilitation if the need arises. Property inspectors are the first point of contact to provide information about code enforcement issues, corrective measures that should be taken, and helpful resources. They can also be used as resource to streamline data collection for geographic information systems (GIS). Imagine Apple Valley 2040 433. Apple Valley Housing PlanI10 Homeowner Associations Many newer developments in Apple Valley involve homeowner associations. Homeowner associations are a common arrangement large Planned Unit Developments, since they help protect the developer's significant investment against the cost of depreciation. Homeowner associations provide a benefit to Apple Valley in that they reduce operational costs for local government. Homeowner associations are typically responsible for snow removal, repair and replacement of roads, maintenance of common external features such as roofs, siding, and windows, as well as any parks, pools, and other parts of common property. Their primary purposes are to provide safe, secure housing, maintain common property, and improve property values. However, HOAs are often challenged to provide these services efficiently and effectively. Not all HOAs have the training they need to provide these services. Some lack volunteer resources, as Board members typically have a full-time job outside of the HOA. Some HOAs in Apple Valley may be underfunded. Under -funded associations must defer maintenance or increase dues. Aging HOAs may struggle to increase dues commensurate to increasing property maintenance needs, especially if the dues were set artificially low at the time of development to encourage membership. At some point, the physical manifestation of deferred maintenance affects the value and sale of homes. Like the City, HOAs should have a strategic long-term investment plan. Part of the monthly dues should be set aside to build the reserves needed to make future improvements to common property. Creation of a home improvement area (HIA) can assist HOAs if needed. The most important financial factor for homeowner's associations is the creation of reserves needed for capital investment. The financial status of HOAs is tied to the health of the housing market. With slower growth, an association realizes lower revenues without a comparable reduction in operating expense. An early draw on reserves could leave an association in a weaker long-term financial condition. This scenario played out during the national recession and housing crisis. If homeowner associations cannot increase dues when the market is poor, there will be lower capital reserves to make needed future improvements. The existing financial condition of homeowner's associations is not known. There is no statutory or local requirement for financial reporting, and limited oversight of HOA operations. Information on the financial condition of homeowner associations is important to understanding current issues and working with the associations to prevent future problems. Apple Valley encourages regular contact with HOAs serving the community. Affordable Housing Lack of affordable housing is a national issue. Housing is the largest expense for American households. High housing cost is an acute problem for low-income households, which spend Imagine Apple Valley 2040 VAMP AppleVal„ ey Housing Plan111 proportionally more income on housing costs and have relatively less remaining income to purchase other necessities. Affordable housing goals seek to ensure that housing options exist at a wide range of prices. The Comprehensive Plan seeks a housing supply that offers a variety of styles and ownership options. Ideally, this objective is achieved by guiding residential development at different densities — low, medium, and high — promoting PUDs, and encouraging mixed-use development. However, there are substantial barriers to providing affordable housing from the developer's perspective. Developers in Dakota County have expressed concern that it is not always financially viable to construct units at rent levels needed to support affordable housing, let along market -rate housing, given limited availability of land and high development costs. To make the numbers work, developers may decrease dwelling unit sizes. Although smaller units are generally less desirable, they can be marketed to renters as part of an amenity package that includes on-site and/or offsite assets, such as a fitness center, park, or proximity to transit or activities. Affordable Housing Definitions Housing affordability is determined by household income relative to Area Median Income (AMI) and by the percentage of household income that is spent on housing. The Department of Housing and Urban Development (HUD) defines three thresholds for low- income, very low-income, and extremely low-income households relative to AMI: • At or below 30% AMI (extremely low income) • Between 31% and 50% AMI (very low income) • Between 51% and 80% AMI (low income) Households with income in these thresholds are eligible for certain housing assistance programs. For example, households earning 50% AMI or less are eligible for a Housing Choice Voucher. For an owner -occupant or thresholds, housing is "affordable" if less than 30 percent of income is spent toward gross housing costs, including utilities. A household is cost -burdened if it spends more than 30 percent of income on housing, and "extremely" or "severely" cost -burdened if it spends more than 50 percent of income on housing. Table 5.3 describes the incidence of housing cost -burden in Apple Valley. Nearly 20 percent of renting households earning less than $20,000 are cost burdened. The 2015 ACS estimated there were 844 such households. For renter households earning between $20,000 and $34,999, 14 percent were cost -burdened. For owner households, the incidence of cost -burden is less in the lower income ranges, but higher for households earning $50,000-$74,999, indicating that there is a limited supply of lower-priced for -sale homes. Households which spend more than 30 percent of their income on housing are defined as cost - burdened. Cost burden affects owners and rents alike, but is particularly acute for low-income renter household in any of these Imagine Apple Valley 2040 Apple Valley Housing PlanI12 Imagine Apple Valley 2040 Apple II Valley Housing Plan I 1 Table 5.3 - Apple Valley Cost Burden INCOME RANGE OWNERS RENTERS Number of Households Spending 30% or More on Selected Owner Costs Percent Owner Households Spending 30% or More Number of Households Spending 30% or More on Selected Costs Percent Renter Households Spending 30% or More Less than $20,000 422 2.870 844 19.9% 320,000-$34,999 646 $35,000-$49,999 616 4.3% $50,000-$74.999 All households earning less than $75,000 Soutce: 2011-2015 AOS 921 2,605 4.1% 6.0% 615 14.5% 347 8.2% 131 17,2% 1,937 3.1% 45.7% In addition to housing costs, it must be remembered that only 11 percent of Apple Valley residents work in Apple Valley. Commuting places additional costs (time + vehicle) on households. Often housing advocates use a cost -of -living index that includes commuting costs. Apple Valley's Comprehensive Plan aims to reduce the impacts of commuting by linking more households to transit and increasing the local jobs -housing balance. These are the primary objectives for Orchard Place and Downtown redevelopment. In practice, assumptions about AMI and poverty depend on household size. A two -person household with one wage earner may be low-income, while a five -person household that earns equivalent income may be very low-income. Therefore, determinations of affordability vary depending on household size and, consequently, on the size of the housing unit. Table 5.4 summarizes affordable rent thresholds for different -sized units for the three income levels defined by HUD. Table 5.4 - Affordability thresholds for rental units NUMBER OF BEDROOMS AFFORDABLE RENT AT 30% AMI AFFORDABLE RENT AT AFFORDABLE RENT AT 50% AMI 80% ANN Studio 1 Bedroom 2 Bedroom $450 $483 $579 3 -Bedroom 4 -Bedroom $669 $747 Imagine Apple Valley 2040 $751 $805 $966 $1,201 $1,288 Valley $1,115 $1,245 $1,545 $1,784 $1,992 Housing PlanI14 For owner -occupied units, "affordability" depends on generalized assumptions about down payments, interest rates, and tax credits. For the 2040 Plan, Metropolitan Council has provided affordability thresholds for ownership. At 30%, 50%, and 80% AM1, the affordable purchase price is $73,500, $132,000, and $211,500. Above these thresholds, a household that earned 30%, 50%, or 80% AMI would spend more than 30 percent of income on housing costs. Figure 5.1 maps owner -occupied housing units by value relative to $211,500. Figure 5.1 illustrates data for all owner -occupied single-family residential, town homes, and twin homes. (Manufactured housing is not included since there is limited data regarding land lease or the value of manufactured homes. However, the average cost of a new, two-bedroom mobile home is $37,100. It is assumed that most manufactured housing units are affordable, even for households at 30% AMI.) IN 2016, there were 4,079 owner -occupied homes valued under $211,500 and 10,648 homes that were at $211,500 or more. Generally, lower-cost housing is located consists of older single- family units or medium -density townhomes that were constructed more recently. Imagine Apple Valley 2040 sem Apple Valley Housing PlanI15 Figure 5.1. - Owner -Occupied Housing Value Above or Below $211,500 ADOIH 3MVO ANNHOr Housing Plan116 Imagine Apple Valley 2040 Apple Valley Affordable Housing Requirement Given HUD's guidance, the Metropolitan Council has determined the regional affordable housing need for 2021-2030 and allocated a share to each community in the metro. Table 5.5 summarizes the affordable housing objectives for Apple Valley, Table 5.5 - Affordable Housing Needs Allocation INCOME RANGE UNITS SHARE At or below 30 AMI 221 31-50 AMI 118 51 80 AMI 129 Total 468 Affordable Units Since 1996 In 1995, the Livable Communities Act became state law. The Act guides a regional approach to lifecycle and affordable housing development. Originally the horizon period was 1996 to 2010. The period has been extended from 2011 to 2020 for the purposes of establishing goats for the 2030 Comprehensive Plan Update. The guiding benchmarks for Apple Valley that lead over time to a livable community encourage 75 percent ownership housing and 25 percent rental housing with a portion being affordable. Through 2006, the private market and partnerships with the Dakota County CDA developed 763 new affordable ownership and 246 new affordable rental (a total of 1,009 affordable units). Using this performance as a guide, it appears that the Metropolitan Council Allocation of Affordable Housing Need, 2021 to 2030, of 468 units for Apple Valley, can be achieved by both private market and CDA development initiatives. New Affordable Housing The City of Apple Valley is committed to meeting its fair share of the region's need for low- and moderate -income housing. The 2040 Land Use Plan designates 19 acres for new housing at medium density, 44 acres for housing at high density, and 24 acres for housing in mixed use. (See Table 5.1.) At the minimum density for medium density (6 units/acre), high density (12 units/acre), and mixed use (12 units/acre) these areas will create at least 810 new housing units. Opportunities may arise to provide additional affordable housing through redevelopment. The Metropolitan Council criteria for evaluating the Comprehensive Plan is based on the assumption that higher -density housing (medium density, high density, and mixed use) provide the minimum density thresholds needed to create the "opportunity" for affordable housing. It is true that higher densities are needed overcome development costs and produce viable Imagine Appie Valley 2040 Housing PlanI17 Apple„ Valley developments at market rates or affordable levels. However, simply making land available does not lead to affordable housing. A more active approach is needed to produce and maintain affordable housing. The City pursues outside funding sources, grants and loans, and partnerships with the Dakota County Community Development Agency (CDA) to support local affordable housing initiatives. Local agencies will need to leverage a mixture of deep -subsidy and shallow -subsidy tools to produce the desired number of affordable units within a competitive marketplace. Because rental sites are at a premium, the City promotes mixed -income rental buildings as a way to develop affordable units. Affordable units can also be incorporated through a Planned Unit Development (PD), as will be used for Orchard Place, since large, mixed-use projects may afford opportunities to indirectly subsidize affordable units. Goals and Policies Housing Goals The City of Apple Valley seeks to achieve the following goals through the implementation of the Comprehensive Plan: 1. Work with the Metropolitan Council, the Dakota County Community Development Agency, builders and other involved parties to provide a fair share of the region's affordable housing. 2. Use the Comprehensive Plan and other resources to address community -housing needs. 3. Encourage a supply of housing styles and sizes that lets people of all ages continue to live in Apple Valley; the supply should adapt to future changes in demographics and meet local labor force needs. 4. Continue to encourage a high standard of property maintenance. 5. Promote quality housing developments that respect the natural environment and resident health. 6. Promote a high level of safety and security for people living in all types of housing. Housing Policies The City will use the following policies to achieve these goals: Residential Development and Land Use The Planning Commission and City will continue to review all site plans for multiple residential development, preliminary plats, conditional use permits, and rezonings. Imagine Apple Valley 2040 .0 40 Apple Valley Housing Plan118 The City will emphasize proper landscaping, maintenance of landscaped areas, development of compatible architecture and similar amenities that are necessary for a quality living environment. Promotion of housing for low and moderate income residents should not be interpreted to mean that the City is relaxing landscaping or proper architectural treatment of residential developments that could have an adverse effect upon adjacent property values. The City will provide an opportunity to develop a variety of housing types within each neighborhood of the City. The City will continue to review drainage, grading, utility, and similar plans to ensure that the existing environment is properly protected and preserved with the development of each residential subdivision. When appropriate, the City will continue to encourage Planned Unit Development to provide for a variety of housing types and flexibility in zoning standards. The City will promote residential development that includes amenities such as lakes, parks, vegetation, and similar features. The City will only permit residential development in residentially zoned areas where sanitary sewer, water, and public streets are available. The City supports high density residential housing along transit corridors where convenient access to transportation is available. Maintenance, Rehabilitation, and Redevelopment The City will use GIS and other data sources to monitor conditions and trends in the housing stock, including ownership status, values, sales, and improvements. The City will explore ways to protect neighborhoods from the negative impacts of foreclosure, including the creation and maintenance of a foreclosure list and maintaining contact with owners, mortgage companies, builders, or other key parties. The City will explore ways to monitor and tract the condition of homeowner associations. Housing Affordability The City of Apple Valley will continue to work with the Dakota County CDA in order to provide additional "rental assistance" and "scattered site" dwelling units within the community to secure additional housing for low and moderate income persons as qualified by the Dakota County CDA. The City will continue to work with Federal and State agencies in order to provide new multiple dwelling units that will serve low and moderate income persons. The City will continue to follow the goals outlined in the Livable Communities Act, and to update its goals annually. imagine Apple Valley 2040 Housing PlanI19 Apple Valley The City supports development that is not more than 20% subsidized. Apple Valley also supports developments that promote on-site or nearby day care, recreation, transit facilities, and similar services needed to support subsidized housing. Apple Valley promotes the idea that development projects should contain an economic mix within the development itself, as well as be integrated in an economically mixed neighborhood. The City will continue to encourage the development of multiple family dwellings. These developments will be scattered throughout the City to avoid clustering of low and moderate - income housing. Implementation A challenge for implementing the Comprehensive Plan will be monitoring the housing supply and finding appropriate City roles in filling gaps not filled by the market. The Metropolitan Council policies encourage that a lifecycle housing supply in a livable community will support 75 percent ownership and 25 percent rental housing. From 2000 to 2015, the share of rental units has increased from 13 percent to 22 percent, indicating significant progress toward achieving regional guidelines. The Dakota County housing report forecasts that demand for rental housing will continue to increase from 2021-2030. Land Use Controls The Land Use Chapter is an essential tool for meeting Apple Valley's housing needs. The City has successfully used the Land Use Plan with the related policies and official controls to produce livable, desirable neighborhoods, diversify the housing supply, and create affordable housing units. As housing needs change, these approaches can be adapted to help meet community objectives. Other Regulations Pursuant to Apple Valley City Ordinance 122, "Residential Rental Property", either a residential rental property owner or rental manager shall register all residential rental properties with the City of Apple Valley. In the case of a transfer of ownership, change in rental manager, change in the number of rental units, or change in dwelling occupancy from owner occupancy to rental tenant occupancy, the residential rental property owner or rental property manager shall complete and submit a registration form for every residential rental property affected by the transfer. The City will continue to use appropriate regulatory controls to address local housing needs. Collaborative Solutions City government cannot and should not have sole responsibility for meeting local housing needs. The past efforts of the City show that collaborative solutions make the best use of all Imagine Apple Valley 2040 Apple Valley Housing PlanI20 available resources. The City of Apple Valley will continue to work with all stakeholders to create and implement solutions to the needs of Apple Valley residents. Key stakeholders include: • Dakota County CDA. • Non-profit organizations • Lending institutions • Providers of senior housing • Area homebuilders Apple Valley will actively seek and engage other parties with a stake in addressing local housing issues. Housing Information Systems A common theme in the Housing Chapter is the evolving nature of housing issues in Apple Valley. A key success factor will be the ability of the City of monitor changes in the housing stock. The City will continue to use geographic information systems (GIS) software for compiling and analyzing data about parcels of property in Apple Valley. Some data that could be in a housing database are: o Potential change in ownership when the tax classification becomes "non -homestead" Changes (particularly declines) in estimated market value. • Sale of property. Condominiums and homeowner's associations. • Foreclosures. • Building permit data on home improvements. • Assessor's data. Compiling this data and monitoring housing conditions would provide important guidance to staff and policy makers. New GIS applications make it easier to collect, process, and analyze data. For example, the Collector application facilitates collection of field data and interfaces with standard GIS desktop software. By adopting this mobile app or another like it and training inspectors to enter data directly in the field would streamline data management and improve analytical capacity. Efficient data management usually involves coordination between multiple jurisdictions, such as the City and Dakota County. The City will explore ways to protect neighborhoods from the negative impacts of foreclosure, including maintaining a foreclosure list. The City will maintain contact with owners, mortgage Imagine Apple Valley 2040 ••••••• Apple Valley Housing PlanI21 companies, builders, and other responsible parties about security and maintenance issues., and will explore ways to monitor and track the condition of homeowner's associations. Finance Tools There are a variety of regional, state, and federal housing finance programs. The number and focus of these programs changes over time. It is useful for the City to understand the types of programs available, but such information becomes outdated in the Comprehensive Plan. State law authorizes several municipal housing finance tools that the City may wish to consider using in the future: HRA Levy State Law allows a housing and redevelopment authority (HRA) to levy a property tax, with City Council approval, to fund its operations and programs. The levy may not exceed 0.0144% of the total market value of property in Apple Valley. Historically, the Dakota County CDA uses this levy to fund the administration of housing assistance programs. Tax Increment Financing Tax increment financing (TIF) is the primary development finance tool available to Minnesota cities (Minnesota Statutes, Sections 469.174 through 469.179). Through TIF, property taxes are frozen before development occurs. The anticipated increment in taxes due to development gains are captured and used to finance the development. TIF is a powerful tool and its use is often debated. On one hand, the creation of a TIF district can be an essential tool to stimulate economic development or redevelopment in instances where the marketplace cannot do so alone. TIF can be specifically used to develop housing for low and moderate incomes. Housing is often part of a redevelopment project because of the density required for a financially feasible project. On the other hand, TIF involves a direct public subsidy to private development. Creation of a TIF district may stimulate growth without increasing local revenue needed to support the increased demand for public services. Because the tax rate is frozen, local governments may miss a chance to capitalize on financially successful projects, with potential ramifications for local taxpayers. Therefore, Apple Valley will be judicious in its review and application of TIF. Tax Abatement Tax abatement acts like a simpler and less powerful version of tax increment financing. With TIF, the city controls the entire property tax revenue from new development. Under the abatement statute (Minnesota Statutes, Sections 469.1812 through 469.1815), the city, county, and school district have independent authority to grant an abatement. Acting alone, the City cannot use tax abatement to create the same financial leverage as TIF. Nonetheless, tax abatement provides a valuable tool for housing initiatives. The City can use tax abatement as an Imagine Apple Valley 2040 Housing P1anj22 Apple11 Valley incentive to meet local housing objectives to new housing not provided by the market or reinvestment in the existing housing stock. Housing Improvement Areas The City has the power to establish a special taxing district to make improvements in areas of owner -occupied housing (Minnesota Statutes, Sections 428A.11 through 428A.21). The housing improvement area (HIA) is a special taxing district that can be used to finance a variety of improvements. A housing improvement area is a collection of parcels defined by ordinance. The HIA may encompass new development or redevelopment. This tool may be a resource to aid homeowner's associations in need of assistance. The City has the power to levy a -fee" on the housing units in the area. This fee may work like a property tax or may be spread using another approach determined by the City. The fee can be collected through the property fax system. The statute also authorizes the City to levy special assessments to pay for housing improvements. The statute allows Apple Valley to define the nature of housing fliprovements. This tool can be used to finance any form of public improvement, including streetscape, parking, and trails. The City does not have the unilateral power to establish a housing improvement area. The process must be initiated through petition by a simple majority of property owners in the proposed HIA. The City has the ability to assign the procedures for imposing 'fees- and administering the area to another "authority,' such as an HRA, economic development authority (EDA), or the Dakota County CDA, Other Tools To maintain neighborhood vitality, the City encourages homeowner reinvestment and infill of vacant parcels. Home improvements and rehabilitation should reflect the architectural style and scale of surrounding residential. Often home renovations occur at the point of sale. Various homebuyer incentives facilitate renovations as well as general financing. The State of authorizes finance lending for some first-time homebuyers, which can be rolled into the home mortgage. Federal programs, such as FHA203k, can be used to facilitate the acquisition of property and/or finance improvements to homes requiring significant rehabilitation or comprehensive repair. The Fannie Mae Homestyle Renovation Loan provides a similar program. Imagine Apple Valley 2040 Apple Valley Housing PlanI23 New CoStar Data Reveal a Vast National Inventory of Naturally Occurring Affordable Housing—and an Untapped Opportunity By Archana Pyati October 24, 2016 At least 5.5 million units of naturally occurring affordable rental housing exist in cities across the United States, according to ne,,\ ly i-cleased data from CoStar, a leading provider of data and analytics for the commercial real estate industry. Naturally occurring affordable housing (NOAH) is housing that is affordable without being supported by public subsidies such as low-income housing tax credits. NOAH's market -rate affordability derives mainly from its age—most units were built 40 to 50 years ago—and lack of amenities: it is no-frills, functional housing that is nonetheless safe, secure, and inhabitable. 1 & 2 Star Represents A Major Portion Of The Market Number Of Units By Star Rating I &. 2 Star 3 Star •4 & Stu CoStar (u. f() identified 5.5 million uni/,s. 0/ naturally occurring alfbalable housing —or 36 percent within the multifamily rental markei. Shaw Lupton, managing consultant with CoStar, presenting at a Pilas h ing ion, IJC., symposium jointly sponsored by the Liu Terwilliger Center (br Housing and the National Association of Afftwdable Housing Lender,s.. "The CoStar data provides probably the most detailed look yet at an underappreciated but critically important real estate asset class—the existing supply of naturally occurring affordable market -rate apartments," said Stockton Williams, executive director of the U LI Tem 111guy Center for Housing, which commissioned the CoStar report. In addition to the number of NOAH units that exist in the marketplace, what is most striking is their ubiquity: they make up 36 percent of all the rental units CoStar tracks and exist in nearly every metropolitan area. Using its proprietary five-star rating system for buildings, CoStar determined that one- and two -star properties—defined as utilitarian apartment buildings with minimal architectural finishes, amenities, and certifications—account for nearly 76 percent of all multifamily properties in its database of nearly 335,000 properties. CoStar's one- and two -star properties are considered equivalent to Class B and C buildings. The CoStar database constitutes one of few attempts to quantify what housing leaders view as a critical supply of housing for middle-class workers in a wide range of professions that enable local economies to function. The firm presented its data earlier this month at a Washington, D.C., symposium jointly sponsored by the UL1 Terwilliger Center for Housing and the National Association of Affordable Housing Lenders (NAAHL). The Vast Majority Of Multifamily Properties Are 1 & 2 Star COStar Number Of Properties By Star Rating • 1 & 2 Star 3 Star • 4 & Star Ct313,60 214 additiwi. CoStar determined that one- and two -star properties constitutc 75.4 percent qfinultifitmily properties /1trackA. -Anyone who spends time around the real estate market probably intuitively understands that there are a lot of these one- and two -star buildings out there," said presenter Shaw Lupton, managing consultant with CoStar and cochair of the UL I Boston Real Estate Technology Council. "When you look at this at the building level, about three-quarters are one- and two -star properties, so we see a vast opportunity in this segment of the market." Attended by more than 60 housing development and finance leaders—fund managers, lenders, developers, advocates, and public officials among them the symposium took up the question of what new capital structures and strategies must be mobilized to maintain the nation's inventory of NOAH units, which many consider a vital national asset as well as a significant business opportunity for equity investors. In an age of dwindling public subsidies for affordable housing, NOAH is gaining currency as affordability pressures escalate across the United States and commuting times and costs rise for a growing percentage of Americans who cannot afford to live near where they work. Nationwide, NOAH stock is under tremendous market pressure as the demand for market -rate multifamily housing continues and investors in search of value -add opportunities convert NOAH to market -rate or luxury product. The influx of foreign capital, while targeting mostly four- and five-star properties, is also adding pressure to NOAH's affordability. While modest, NOAH still has ongoing maintenance and capital needs to ensure that properties do not fall into disrepair. These improvements must be funded by rent growth that is less aggressive than that for other segments of the market. -The investable segment of the one- and two -star housing stock is significant in size, exists in many markets, and constitutes a generational double -bottom-line opportunity,- said Williams. one of the symposium's discussion leaders. "There are substantial opportunities to deliver competitive economic returns—while still preserving the current affordability—in much of this inventory.- Al left Ethan Vaisman, real estate econo1fli,s1 with CoSt(ir, speaking ta 0 Washington, 1) (•. jointly wonsored ale ULI Terwilliger Centei Pr Housing awl the National Association of .'ifibrelable Housing Lenders. A Stable, Yet Endangered Asset Class One barrier to broader institutional investment in NOAH properties has been the lack of data on and insight into a misunderstood asset class. Through granular data, CoStar researchers Lupton and Ethan Vaisrnan portrayed one- and two -star properties as both affordable across a wide range of metro areas and constituting a singular market opportunity mainly due to supply constraints and very low vacancy rates. "Thirty years ago, when the low-income housing tax credit was created, nobody thought of subsidized housing as a real estate asset class, but now they do," said Buzz Roberts, president and chief executive officer of NAM -IL. "Robust institutional investment in unsubsidized one - and two -star properties is necessary for this type of housing to remain affordable. - One metric of affordability is whether a household's rent is 30 percent or less of its monthly income. In major metros across the United States, middle- and lower-income households are increasingly cost burdened, meaning they exceed that threshold. On average, the rents on one - and two -star properties constituted just 16.5 percent of average median incomes in metro areas nationwide as of August 2016, according to CoStar. Rents in four- and five-star properties, on the other hand, constituted 26.4 percent of average median incomes. Affordability of one- and two -star properties is relative, of course, and highly location dependent. In high-cost markets such as San Francisco, New York City, and Los Angeles, rents for one- and two -star properties take up more than 20 percent of median income, whereas across the Sun Belt and Midwest, rents take up a smaller percentage of incomes—less than 15 percent in some markets. "One- and two -star rents differ vastly by metro," said Vaisman. -In San Francisco, they can be as high as $2.500 per month"; in dozens of other markets away from the coast, they can be less than $1,000 per month. For private and institutional investors, investable NOAH stock in one- and two -star properties represents a stable, income-producing asset with decent rental growth, according to Lupton and Vaisrnan. Vacancy rates in these properties have hovered between 3 and 4 percent over the past year due to constrained supply. "Nobody builds one-, two-, and three -star properties," Lupton said. -So today, the vacancy rate is about half of what it is in four- and five-star properiies." Rent growth, while not as aggressive as for market -rate properties, is not insignificant, particularly when coupled with consistent occupancy rates. CoStar reports an average of 5 percent rent growth in one- and two -star properties since 2013 and a 6.4 percent growth among four- and five-star properties. Yet, looking at results year after year, one- and two -star properties outperform their four- and five-star counterparts on average rent growth -4.3 percent versus 3 percent. -Overall, the combination of very low vacancies, solid rent growth, and not a lot of volatility . leads to very strong fundamentals," Vaisman said. David Smith, chief executive officer of the Affordable Housing Institute, likened investing in one- and two -star properties to "scuba diving in bad weather: on the boat it can be rocky, but if you go 15 feet below the surface, it is a lot smoother. This stock is insulated from a whole lot of market volatility. It is a durable asset that is essential. - Preserving NOAH: Challenges and Solutions The discussion following CoStar's presentation made one thing clear: while possessing reliable data on NOAH as an asset class is a positive first step, determining how the stock's affordability and quality can be maintained to serve middle-income, working households remains a significant challenge for policy makers and advocates. A key insight shared by CoStar was the sheer number of local and regional owners of NOAH properties. It is not an asset class that has experienced a major influx of institutional capital—yet. Thus far, these properties have been owned and managed by smaller, private players that may or may not have received incentives to keep rents affordable. One strategy for preserving affordability is for these properties to be acquired by nonprofit, mission -oriented developers and asset managers, such as Mercy 1 lousing, a Colorado -based affordable housing organization that manages 17,400 units in 290 properties across the country. Cindy Holler, Mercy's senior vice president of real estate development, said the smaller owners of NOAH units "are the people we are competing with" and wondered what incentives would motivate them to sell their properties, particularly when they are seeing healthy net operating income from them. NOAH "exists and it needs to be preserved as national infrastructure," Smith said. "Absent action, the market will systematically take it away, and we're not replacing it. My pitch is if you think that quality affordable housing is invaluable, then somebody needs to figure out how to purchase, reposition, and preserve it." The good news is that several firms in the marketplace are doing just that: preserving the nation's NOAH stock through innovative capital strategies with a specific focus on workforce housing for middle-income families that are poorly served by the housing market. Three approaches were shared by symposium participants who are on the front lines of preserving NOAH stock: • Enterprise Community Investment recently closed on a $35 million conventional equity fund that has preserved 13 properties across the United States that serve a range of incomes. Enterprise acts as a limited partner, jointly investing in properties expected to generate returns of 9 percent at the end of the fund's life—typically eight to ten years, according to Chris Herrmann, vice president, syndication. While banks are a major source of capital, Enterprise is seeking out more high -net -worth individuals and social impact investors to diversify the fund. "Growing that tent of investors is the most pressing issue," Herrmann said. • Jonathan Rose Companies, a New York City–based development and investment firm, launched its $51.6 million Rose Affordable Housing Preservation Fund to preserve affordable and mixed -income properties with expiring subsidies and income restrictions. The company takes an aggressive approach to energy efficiency and green retrofits. The fund concentrates on developing successful pilot projects in high -opportunity, transit - oriented neighborhoods to educate investors and correct misperceptions about workforce housing, said Nathan Taft, director of acquisitions. • The Irvine, California–based firm Avanath Capital Management invests in mixed -income apartments across the United States with the goal of maintaining affordability for those earning 40 to 60 percent of the area median income while also generating competitive returns. The firm's strategy is to purchase assets in high -job -growth areas where incomes are rising and to cross market tax -credit properties that are adjacent to NOAH properties the firm owns, said John Williams, president and chief investment officer. Summary of Findings Apple Valley Housing Needs and Recommendations From the Report: Comprehensive Housing Needs Assessment For Dakota County, Minnesota Prepared for: Dakota County Community Development Agency Eagan, Minnesota February 2014 Research Inc. 1221 Nicollet Avenue S. Suite 218 Minneapolis, MN 55403 612.338.0012 Apple Valley Summary of Findings —Dakota County Housing Study Introduction Maxfield Research Inc. was engaged by the Dakota County Community Development Agency (Dakota County CDA) to complete an updated comprehensive housing needs assessment for Dakota County. Based on an analysis of demographic growth trends and characteristics, the County's existing housing stock, and current housing market conditions, the needs assessment calculated housing demand in the County to 2030 and recommends housing products to meet demand between now and 2020. The following are key findings pertaining to Apple Valley from the study, which was completed in late fall 2013. Key Demographic and Market Findings Dakota County Submarkets 1. Dakota County was grouped into three sub - markets; as in 2005, Apple Valley was placed into the Growth Communities. Sites for new housing are limited in the Developed Commun- ities and the Rural Area is primarily reserved for agricultural uses. 2. Demand is projected for 49,525 new housing units in Dakota County between 2010 and 2030. This includes about 34,750 new units in the Growth Communities (70% of the total), and 7,525 new units in Apple Valley. 3. Job growth is a key creator of housing demand. Apple Valley added 3,153 new jobs from 2000 to 2010, about two-thirds of what was original- ly projected by the Metropolitan Council. Ap- ple Valley's job growth was the fourth highest after Eagan, Mendota Heights and Lakeville and accounted for 10% of the County's job growth during the 2000s. Apple Valley is pro- jected to experience strong job growth (31.7%) this decade, adding an estimated 4,840 jobs and accounting for 12% of the County's job growth through 2020. County Submarkets Developed Communities QGrowth Communities Rural Area Population, Household, and Employment Growth Apple Valley, 2000 to 2030 Change 2000 2010 2020 2030 2000-2030 Population 45,527 49,084 58,000 64,000 18,473 Households 16,344 18,875 23,000 26,400 10,056 Employment 12,106 15,259 20,100 22,000 9,894 Sources: US Census; Metropolitan Council; Maxfield Research Inc. MAXFIELD RESEARCH INC. 2 Apple Valley Summary of Findings —Dakota County Housing Study 4. As the adjacent chart shows, Apple Valley is expected to continue to ex- perience strong population and household growth over the next 20 years. Apple Valley is expected to capture 19% of the County's popula- tion and household growth between 2010 and 2030. 5. All age groups in Apple Valley will in- crease in population over the next two decades. Growth is anticipated to be greatest among those between the ages of 18 and 44 and 65 and older. This will support continued demand for single- family housing and a growing demand for maintenance -free housing to 2030. From 2010 to 2030, Apple Valley's 18 to 44 population is projected to grow by 4,884 people; the 65 and older category is projected to grow by 4,676 people. 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Projected Growth, Apple Valley, 1990 to 2030 0 1990 2000 2010 2020 2030 0 Pop uIatsor} HousehoNds EmpIloyment 6. As of 2011, 40% of renters in Apple Valley were considered "cost - burdened" or paid 35% or more of their income for rent (31% in Dakota County). Of those considered "cost - burdened," 27% were considered "severely cost -burdened," paying 50% or more of their income for rent (21% in Dakota County). Among owner households, 19% in Apple Val- ley pay 35% or more of their income for housing, with or without a mort- gage (19.8% in the County). An esti- mated 8% pay 50% or more of their income for housing (9.0% in the County). 16,000 14,000 1 2, 000 ▪ 10,000 • 8,000 E 0,000 z 4,000 2,000 0 Projected Age Distribution -Apple Valley ,I <17 18-34 35-44 45-54 55-54 65-74 75+ 2000 2010 2020 2030 7. Similar to the Metro Area and Dakota County as a whole, the market rate rental market in Apple Valley is very tight (1.3% in Apple Valley, 2.25% in Dakota County, 2.5% in the Metro). In addition, demand for rental housing targeted to low- and moderate -income households remains high. In Apple Valley, there are three affordable family rental townhome projects, with a total of 111 units, all of which are essentially fully occupied. 8. During the 2000s, there were three market rate rental properties built in Apple Valley (Hearthstone, Boulder Ridge and Palamino) with a total of 412 units. These properties leased up rapidly when they opened, all in the first half of the 2000s. A new mixed income rental property is proposed in Apple Valley, but has experienced some difficulty in starting construction. Parkside Village is proposed to have 322 units (20% affordable). Overall, Ap- MAXFIELD RESEARCH INC. 3 Apple Valley Summary of Findings —Dakota County Housing Study ple Valley's proportion of renter households (18.1%) remains lower than the County's (23.5%) and the Metro's (30.0%) (2010 Census). The update analysis supports that 29% of all housing added in Apple Valley up to 2030 should be general occupancy rental and that 36% of that rental construction be targeted to households with low/moderate incomes. 9. In 2005, the average price of new homes in Apple Valley was calcu- lated at about $319,915 for single- family homes and $192,159 for townhomes/condominiums. The average sale price of new construc- tion homes in Apple Valley was $353,453 for single-family homes and $318,900 for townhomes/ condominiums as of April 2013. New housing is primarily satisfying demand from move -up and execu- tive buyers, while older existing homes are providing housing for $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 Average Home Resale Prices -Apple Valley 2005 through 2013(March) I • • I IN :%1 SF -AV MF -AV SF -Co. -MF -Co. Source: Minnesota Association of Realtors $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50000 o entry-level and first-time buyers. The median resale price for single-family homes was $279,900 in 2005. As of April 2013, the median resale price was $231,650. Price deflation during the Recession, has resulted in existing homes becoming more affordable, creating an increase in demand for this product type. The 2005 average resale price of existing for -sale multifamily homes was $192,159. As of April 2013, the average resale price had decreased to $142,256. From 2012 through March 2013, permits were issued for 61 new single-family homes. Months of supply of single-family vacant developed lots as of April 2013 were just under two years, below the typical three year inventory. Months of supply of townhome and con- dominium vacant developed lots as of April 2013 was also low, at just over two years (25 months). The low vacant lot supplies indicate that demand for new housing is starting to increase. Developers are currently focusing on building single-family homes, but the low lot supply for townhomes in Apple Valley should also generate some interest among builders for this product type, primarily targeted to empty nesters and independent seniors. 10. Apple Valley has 72 units of age -restricted housing targeted to seniors with very low in- comes (<50% of AMI). The City also has three age -restricted CDA properties (independent living) targeted to moderate income seniors. Combined, these three properties total 170 units and are fully -occupied. Apple Valley has a total of 176 adult/few services units and 315 units of service -enriched senior housing among five properties. The service -enriched properties offer a continuum of care including independent living with optional services, as- sisted living and memory care. Occupancies at all age -restricted properties in Apple Valley remain high (average of 95% or higher). MAXFIELD RESEARCH INC. 4 Apple Valley Summary of Findings —Dakota County Housing Study Housing Demand Calculations 11. The projected demand of an average of 7,525 housing units in Apple Valley from 2010 to 2030 is shown by type below. These figures reflect the ability of Apple Valley to draw some demand from other nearby communities and from the Metro Area as a whole. • For -sale single-family homes = 2,635 units (35%) • For -sale multifamily = 1,655 units (22%) • Rental market rate = 1,295 units (17%) • Rental affordable/subsidized = 460 units (6%) • Rental senior affordable = 415 units (6%) • Rental senior market rate w/ services = 540 units (8%) • For -sale senior market rate = 525 units (7%) Total = 7,525 units 12. Apple Valley's vacant land supply is limited although plans are in place to reclaim land for residential and commercial development that is cur- rently being mined for gravel. Over the next 20 years, these areas are expected to be reclaimed for reuse and would be available for the devel- opment of single-family and multifa- mily units. Over the next 20 years, Apple Valley is anticipated to have demand for an estimated 4,290 for - sale units, 1,755 rental units and 1,480 senior units. Demand is across all income levels. Total demand for general occupancy and senior rental housing is expected to account for nearly 36% of over- all housing need. The proportion of households in Apple Valley that rent their housing is anticipated to increase modestly over the next 20 years. 1,600 1,400 Projected Housing Demand In Apple Valley by Decade 2010 - 2020 ■ 2020 - 2030 1,435 1,200 1,200 1,000 800 600 400 200 6 0 850 805 725 570 220 240 70 270 I- bi 240 250 2/5 175 ,tsp "11: OsciC Housing Recommendations The overall projected need for various housing products to satisfy demand from current and fu- ture residents in Apple Valley through 2030 is presented in the table on Page 7. Specific rec- ommendations to address the affordable housing needs of low- and moderate -income house- holds in Apple Valley (as presented in the table) over the short-term are summarized below. MAXFIELD RESEARCH INC. 5 Apple Valley Summary of Findings —Dakota County Housing Study For -Sale Housing Recommendations The Recession caused some price deflation for single-family new construction, but a greater level of price deflation occurred among existing homes. The new construction market will con- tinue to develop homes beginning at $350K and above. Existing homes are expected to satisfy most of the demand from entry-level and first move -up buyers that are looking at price points below this level. New construction multifamily product could also satisfy a portion of this de- mand, depending on the product type. Housing Rehab Recommendations Overall, most of Apple Valley's housing stock is relatively new. Where there are pockets of old- er housing, housing rehabilitation will gradually become more important to maintain the quality of the housing stock moving through the next two decades. The Dakota CDA can be instrumen- tal in assisting the City of Apple Valley's current and future residents that may need assistance with loans to improve the quality of their properties. Encouraging the use of housing rehabilita- tion and housing weatherization programs should continue to be a priority for the City. Subsidized/Affordable Rental Housing Recommendations There is demand in Apple Valley for rental housing that is affordable to low- and moderate - income households and new properties located in Apple Valley are full. Identifying appropriate high-density sites may be challenging as these sites are also likely to be in competition from pri- vate developers. In the short-term however, there is likely to be slightly less demand for mar- ket rate multifamily which would enable the CDA to take advantage of a slower multifamily market to identify and purchase sites for future development. Mixed income buildings can also help increase the amount of affordable housing in the community while also producing market rate housing. We recommend the development of one workforce townhome development in Apple Valley by 2020 and a second development by 2030. These properties, in addition to other mixed -income properties (80% market/20% affordable) should be promoted in areas where residents would have convenient access to shopping, services, and transit. Preserving the quality of the existing stock of older apartments in the community is also important as it provides affordable rental housing to low/moderate income households over the long-term. Apple Valley could also en- courage the use of rental rehabilitation programs for older rental housing units. Although three market rate rental properties were developed in Apple Valley in the 2000s, there remains demand for additional market rate rental housing in the community. Encourag- ing additional development of new multifamily rentals will increase the diversity of the housing stock and will continue to support a balanced mix of housing in Apple Valley. MAXFIELD RESEARCH INC. 6 Apple Valley Summary of Findings —Dakota County Housing Study Affordable Senior Rental Housing Recommendations The Dakota County CDA's senior housing program has been very successful in providing afford- able housing to lower- and moderate -income seniors. Apple Valley has three affordable senior properties (Cobblestone Square, Cortland Square and Orchard Square). All are full with waiting lists. We recommend the development of one affordable senior property in Apple Valley by 2020 and another by 2030. Special Needs Recommendations A portion of Dakota County's population has physical or cognitive limitations and/or has expe- rienced challenges in securing and maintaining private housing. Based on our research, several groups were identified as needing specialized housing options in Dakota County through this decade and into the next, including housing for the homeless, housing for youth who do not qualify to reside at the existing Lincoln Place, transitional and supportive housing for teenage single women with children, permanent supportive housing for those with physical and/or cog- nitive limitations. These developments may be added throughout the County. Currently, Apple Valley has two of these facilities, Haralson Apartments and Apple Grove Court. We suggest that Apple Valley consider a third location near transit opportunities to locate a property that would be affordable and offer a strong connection to transit and services for those with special needs. MAXFIELD RESEARCH INC. 7 Apple Valley Summary of Findings -Dakota County Housing Study HOUSING DEMAND SUMMARY CITY OF APPLE VALLEY 2010 - 2030 2010 to 2020 2020 to 2030 RENTAL HOUSING General Occupancy I I Senior I General Occupancy Senior Market Shallow/ Shallow/ Market Shallow/ Market Shallow/ Rate Deep Subsidy Market Rate Deep -Subsidy Rate Deep -Subsidy Rate Deep Subsidy Apple Valley 690 - 725 220 - 220 270 - 270 150 - 175 570 - 570 240 - 240 260 - 270 240 Percent of County 25% - 28% 11% - 13% 17% - 18% 13% - 18% 29% - 31% 13% - 14% 13% - 14% 6% - 240 - 7% Growth Communities 1,650 - 1,747 790 - 941 550 - 660 550 - 787 1,310 - 1,486 1,220 - 1,326 1,715 - 1,861 1,210 - 1,235 Dakota County Total 2,586 - 2,736 1,724 - 1,929 1,500 - 1,629 990 - 1,137 1,815 - 1,972 1,725 - 1,864 1,873 - 1,972 3,630 - 3,950 FOR -SALE HOUSING 2010 to 2020 2020 to 2030 Single- Multi- Age (55+)- Single- Multi- Age (55+) - Fa mi ly** Family*** Restricted Family** Family*** Restricted Apple Valley 1,000 - 1,200 825 - 850 225 - 250 1,400 - 1,435 800 - 805 250 - 275 Percent of County 14% - 17% 15% - 16% 44% - 54% 11% - 11% 11% - 11% 34% - 41% Growth Communities 5,305 - 5,471 3,295 - 3,348 270 - 300 10,640 - 11,184 4,315 - 4,393 370 - 400 Dakota County Total 7,116 - 7,379 5,261 - 5,389 460 - 511 12,637 - 13,078 7,170 - 7,342 670 - 726 **Demand is esti mated for 15% modest single-family (<$250,000), 50% move -up single-family $300K -$500K and 35% executive homes ($500K+); ***Demand is estimated for 30% modest price multifamily (<$250,000); 45% move -up multifamily ($250,000+) and 25% age -restricted multifamily (<$275,000) Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 8 Apple Valley Summary of Findings -Dakota County Housing Study MAXFIELD RESEARCH INC. 9 A-1 POPULATION HOUSEHOLD AND EMPLOYMENT GROWTH APPLE VALLEY AND DAKOTA COUNTY 2000-2030 TRENDS AND PROJECTIONS Population Change Census Projection 2000-2010 2010-2020 2020-2030 2000 2010 2020 2030 No. Pct. No. Pct. No. Pct. POPULATION Apple Valley 45,527 49,084 58,000 64,000 3,557 7.8 8,916 18.2 6,000 10.3 Dakota County Tota I 355,904 398,552 441,585 496,640 42,648 12.0 43,033 10.8 55,055 13.8 Metro Area Tota I 2,288,729 2,642,062 3,144,000 3,447,000 353,333 15.4 501,938 19.0 303,000 11.5 Households Change Census Projection 2000-2010 2010-2020 2020-2030 2000 2010 2020 2030 No. Pct. No. Pct. No. Pct. HOUSEHOLDS Apple Valley 16,344 18,875 23,000 26,400 2,531 15.5 4,125 21.9 3,400 14.8 Dakota County Tota I 131,151 152,060 172,770 201,585 20,909 15.9 20,710 13.6 28,815 18.9 Metro Area Tota I 1,021,459 1,117,749 1,293,000 1,464,000 96,290 9.4 175,251 15.7 171,000 15.3 Households Change Census Projection 2000-2010 2010-2020 2020-2030 2000 I I 2010 2020 2030 No. Pct. No. Pct. No. Pct. EMPLOYMENT Apple Valley 12,106 15,259 20,100 22,000 3,153 26.0 4,841 31.7 1,900 9.5 Dakota County Tota I 154,242 185,261 225,523 257,692 31,019 20.1 40,262 21.7 32,169 17.4 Metro Area Tota I 1,563,245 1,690,757 1,743,000 1,943,000 127,512 8.2 52,243 3.1 200,000 11.8 Sources: US Census, Metropolitan Council, Maxfield Research Inc. MAXFIELD RESEARCH INC. 9 Apple Valley Summary of Findings -Dakota County Housing Study APPENDIX -DEMOGRAPHIC TABLES A-2 AGE DISTRIBUTION APPLE VALLEY AND DAKOTA COUNTY 1990 - 2030 Age 17 & Under Age 18 - 24 Age 25-34 Persons Persons Persons 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 Apple Valley 11,984 13,529 12,481 14,414 14,473 2,719 3,289 3,620 4,554 4,464 6,352 6,351 6,579 8,328 9,064 Dakota County Total 82,146 103,862 105,060 114,127 122,933 25,290 28,186 30,691 33,808 36,253 58,786 54,030 54,279 57,519 63,322 Age 35-44 Age 45-54 Age 55-64 Persons Persons Persons 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 Apple Valley 7,367 8,723 6,911 7,745 8,466 4,050 7,413 8,331 8,546 9,220 1,229 3,716 6,443 7,939 8,648 Dakota County Total 47,304 68,194 56,912 61,541 66,657 27,819 49,249 66,343 59,645 66,278 16,407 26,137 45,451 55,691 55,365 Age 65-74 Age 75+ Total Persons Persons Persons 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 1990 2000 2010 2020 2030 Apple Valley 541 1,491 2,963 4,263 5,565 356 1,015 1,756 2,211 3,830 34,598 45,527 49,054 58,000 64,000 Dakota County Total 10,406 14,842 22,433 35,191 46,462 7,069 11,404 17,383 24,063 39,370 275,227 355,904 398,552 441,585 496,640 Sources: US Census, ESRI, Metropolitan Council, Minnesota State Planning Office; Maxfield Research Inc. MAXFIELD RESEARCH INC. 10 Apple Valley Summary of Findings —Dakota County Housing Study APPENDIX -DEMOGRAPHIC TABLES (continued) TABLE A-4 HOUSEHOLD TENURE TRENDS AND PROJECTIONS APPLE VALLEY AND DAKOTA COUNTY 1990- 2030 Tenure Change, 2000 to 2030 1990 2000 2010 2020 2030 Own Rent Own Rent Own Rent Own Rent Own Rent Own Rent No. Pct. No. Pct. Apple Valley 9,739 1,406 14,390 1,954 17,860 3,140 18,110 4,890 21,000 5,400 6,610 45.9 3,446 176.4 Dakota County Tota I 72,598 25,695 102,621 # 28,530 127,825 32,455 155,035 36,325 170,185 38,215 67,564 65.8 9,685 33.9 Sources: U.S. Census; Minnesota Demographic Center; ESRI; Maxfield Research Inc. MAXFIELD RESEARCH INC. 11 Apple Valley Summary of Findings —Dakota County Housing Study TABLE 5 COVERED EMPLOYMENT BY INDUSTRY SECTOR APPLE VALLEY 2000-2010 2000 2010 Total Avg. Weekly Total Avg. Weekly Industry Sector Employment Wage Employment Wage Employment Change 2000-2010 Construction 653 N/A 276 N/A -377 Manufacturing 618 $856 720 $1,192 102 Wholesale Trade 249 $1,086 166 $1,011 -83 Retail Trade 3,025 $396 3,407 $473 382 Transportation and Warehousing 83 $658 140 $856 57 Information 494 $861 159 $695 -335 Finance and Insurance 251 $630 710 $1,444 459 Real Estate Renta l/Leasing 126 $555 278 $549 152 Professional, Scientific, Technical 482 $857 345 $903 -137 Management of Companies and Enterprises 472 $723 31 $1,276 -441 Administrative and Support 709 N/A 475 $376 -234 Education 1,184 $723 1,735 $777 551 Health Services 1,317 $607 1,708 $753 391 Arts Entertainment &Recreation 471 $471 472 $518 1 Accommodation and Food Service 203 $197 1,771 $278 1,568 Other Services 481 $400 483 $525 2 Public Administration 971 $701 862 $1,001 -109 Self -Employed 317 N/A 1,521 N/A 1,204 Total Employment 12,106 570 15,259 $673 3,153 Sources: MN DEED; Maxfield Research Inc. MAXFIELD RESEARCH INC. 12 EXISTING HOUSING ASSESSMENT C RVER CITY OF APPLE VALLEY LOCAL PLANNING HANDBOOK An Existing Housing Assessment is the first step in identifying current housing needs for your community. This information meets the minimum data requirements for your Existing Housing Assessment. You are free to copy and paste this table directly into your Housing Element, recreate it using the same data, or incorporate it into a table with additional or alternative data using reliable sources. This table is not a comprehensive picture of your community's housing stock, but a solid starting point to identify and address your existing housing needs. Please contact Council staff if you have any questions. Total housing units := 20229 Table 1 Affordability 2 Units affordable to households with income at or below 30% of AMI Units affordable to households Units affordable to households with income 31% to 50% of AMI with income 51% to 80% of AMI 1198 Table 2 Tenure 3 3760 8488 Ownership units Rental units 15581 Table 3 Type 1 4648 Single-family units Multi -family units Manufactured homes Other housing units 15900 3870 459 0 Table 4 Publicly Subsidized Units 4 pub icly subsidized units 584 Publicly subsidized senior units 132 Table 5 Housing Cost Burdened Households Publicly subsidized units for people with disabilities 16 Publicly subsidized units: All others 436 Income at or below 30% of AMI Income 31% to 50% of AMI Income 51% to 80% of AMI 1453 1369 968 I Source: Metropolitan Council, 2015 housing stock estimates 2 Source: Metropolitan Council staff estimates for 2015 based on 2015 and 2016 MetroGIS Regional Parcel Datasets (ownership units), 2009-2013 Comprehensive Housing Affordability Strategy data from HUD (rental units and household income), and the Council's 2015 Manufactured Housing Parks Survey (manufactured homes). Source: U.S. Census Bureau,2011-2015 American Community Survey five-year estiinates; counts adjusted to better match the Council's 2015 housing stock estimates Source: HousingLink Streams data (covers projects whose financing closed by December 2014), http://www.housinglink.orq/streams Housing cost burden refers to households whose housing costs are at least 30% of their income. Source: U.S. Department of Housing and Urban Development, 2009-2013 Comprehensive Housing Affordability Strategy (CHAS) data, with counts adjusted to better match Metropolitan Council 2015 household estimates. November 2017 LOCAL PLANNING HANDBOOK Metropolitan Council 390 Robert Street North Saint Paul, MN 55101 metrocounciLorg Main: 651.602.1000 TTY: 651.291.0904 Public Informatiorc 651.602_1500 public.info@metc.state.mn_us METROPOLITAN COUNCIL LOCAL PLANNING HANDBOOK The Area Median Income (AMI) is the midpoint of a region's income distribution — half of households in a region earn more than the median and half earn less than the median. For housing policy, income thresholds set relative to the area median income—such as 50% of the area median income—identify households eligible to live in income -restricted housing units and the affordability of housing units to low-income households. Low-income households and levels of affordability Your housing element and implementation program must address affordable housing needs within three levels of affordability: O At or below 30% MAI O Between 31 and 50% AMI O Between 51 and 80% AMI The U.S. Department of Housing and Urban Development (HUD) defines and calculates different levels of AMI for geographic areas across the country by household size. For the Fwin Cities region in 2016. HUD has defined the three levels of affordability as:' Household Size: One-person Extremely Low Income (30% of AMI) Very Low Income (50% of AMI) Two -person Three-person $18,050 $30,050 $20,600 $23,200 Four -person $25,750 Five -person $28,440 Six -person Seven -person Eight -person $32,580 $36.730 $40,890 $34,350 S38,650 $42,900 $46,350 $49,800 Low Income (80% of AMI) $46,000 $52,600 $59,150 $65700 $71,000 $76,250 $53,200 $81,500 $56,650 $86,750 Thinking about specific jobs helps make this more concrete. For a four -person household with only one wage-earner, positions as home health aides or funeral attendants would provide an income at 30% of AMI; positions as interior designers or bus drivers would provide an income at 50% of AMI; and positions as accountants or police officers would provide an income at 80% of AMI. For a more in depth look at how full-time jobs do not always mean there are affordable housing choices, visit the Family Housing Fund's website. Having an income below these thresholds makes households eligible for certain housing programs (other social programs use thresholds relative to the federal poverty guidelines). For example, to be eligible for a Housing Choice Voucher, household income must be at or below 50% of AMI; a three-person household with an income up to $38,650 would be eligible for a voucher as would a five -person household with an income up to $46,350. Translating incomes into affordable housing costs These income levels are also a way to assess housing affordability. We say that a housing unit is "affordable at 80% of AMI" if a household whose income is at or below 80% of AMI can live there without spending more than 30% of their income on housing costs. What this means in practice differs for rental and ownership units. Affordable rents for housing units vary by the number of bedrooms in the housing unit. This is because the income limits vary by household size, and the number of bedrooms affects how many people a unit can comfortably house.7 Here are affordable monthly rents at the different income levels for 2016: Continue to next page —00 Number of bedrooms: Affordable rent (including Affordable rent (including Affordable rent (including utilities) at 30% of AMI utilities) at 50% of AMI utilities) at 80% of AMI Studio $450 $751 $1,201 1 -BR $483 $805 $1,288 2 -BR $579 $966 $1,545 3 -BR $669 $1,115 $1,784 4 -BR $747 $1,245 $1,992 Calculations of affordability for ownership units are more complicated because there are more variables in monthly housing costs - such as generalized assumptions" about down -payments and mortgage interest rates - and each homeowner will have a different experience. Each year, the Council develops affordability limits based on forecasting what those annual assumptions will be; these are used to inform development funded through the Livable Communities Act programs. While we cant predict what future home prices will be, we can look backward at the estimated market values for 2014; these are the basis of the Council -provided maps showing ownership units that are affordable to households at 80% of AM!. Affordable purchase prices are provided for both 2014 and 2015 below. If your community chooses to develop a map with a different data source to satisfy this equirement, please contact Council staff to find out which affordability limit you should use. Affordable purchase price (2016) Affordable purchase price (2015) Affordable purchase price (2014) 30% of AMI $82,500 $84,500 $73,500 50% of AMI $148,000 80% of AMI $235,000 $151,500 $132,000 $238,500 $211,500 1. For a full explanation of how these amounts were calculated, see HUD's website. Mese rents assume that a household should pay no more than 30% of its monthly income no rent (including utilities), and (in keeping with IRS regulations) that a housing unit can comfortably hold 1.5 times as many people as the number of bedrooms it has. 3. For all years, in addition to te 294 housing debt to household income ratio, we assumed s 30 -year tixed-interest mortgage, a 3.5% down -payment, a property tax rate of 1.25% of property sales price, and $100 / month for hazard insurance. For 2016, we assumed a 4.00% interest rate and mortgage insurance premiums at 0,85% of unpaid principal. For 2015, we assumed a 3.84% interest rate (the average rate in the Midwest in 2015) and mortgage insurance premiums at 0.85% of unpaid principal. For 2014, we assumed a 4.17% interest rate (the average rate in the Midwest in 2014) and mortgage insurance premiums at 1.35% of unpaid principal. LOCAL PLANNING HANDBOOK Metropolitan Council 390 Robert Street North Saint Paul, MN 55101 metrocouncilorg Main: 651.602.1000 TTY: 651.291.0904 Public Information: 651.602.1500 public.infoemetc.state.mn.us September 201 5 M ET ROPOLITAN COUNCIL ZONING AND SUBDIVISION ORDINANCES LOCAL PLANNING HANDBOOK Zoning ordinances are one of the most powerful ways local governments regulate development, and they should work to implement the policies in your Comprehensive Plan Update. Minnesota Statutes § 478.858. subd. 1 directs communities to remove conflicts between their comprehensive plans and their zoning ordinances. When creating the Housing Element of your 2040 Comprehensive Plan Update, we recommend that you review your zoning code to ensure your community's policies and ordinances arworking together to address housing needs: especially the housing needs of households earning 80% of the Area Median Income or less. Some of the common content within zoning ordinances that can inhbit housing affordability includes: Minimum lot sizes Minimum lot sizes, or similar ordinances requiring minirnum lot widths, |engths, or even minimum dwelling unit sizes for (usually single-famiPy) residentia land. can significantly limit your abiNty to provide a full range of housing choices. If your community is home to many low- and moderate -wage ]obo.itmaybeimpmrtonttounseteopportunityforaffordab|e homeownership options. If your zoning code contains minimum residential lot or unit eizes, consider whether this requirement is necessary. to achieve community goals. Often design standards, form -based zoning ordinances, and other tools cari equally well address issues of neighborhood character. You should also consider whether your zonings existing minimum lot sizes allows for the allowable density range for the corresponding land use guidance in your ccmprehensive plan. Density Local governments can reduce the cost of building affordable housing through their density policies. While increasing allowable densities does not guarantee the development of affordable housing, particularly in markets with strong demand for multifamily housing, higher densities do allow for the possibility of significant cost savings per unit and provide room for conversations about mixed -income development. The Land Use Policies in Thr/ve MSP 2040 contain minimum density requirements related to your community's Community Designation and consistency with the 2040 Housing Policy Plan. However, we strongry encourage you to consider planning for greaer densities, and a range of densities, wherever appropriate. Density increases not only the possibility of addressing affordable housing needs, but also your potential for tax base, commercial development, and amenities such as transit service. Density bonuses, or allowing increased density for certain types of proposals such as affordable or mixed-inccme housing, also provide a way to encourage a full range of housing options. Many resources are available to address concerns about property values, crime, traffic and an increased need for local resources. Properly opp|ied, increased residential densities can have a positive impact on your community's goals. Missing Middle "Missing middle" housing types — more dense than a single family home but Iess dense than a 4 to 5 story mid -rise building are welt represented in the urbari core, where four-plexes and small buiIdings with 6-1 0 units were built frequently in the early 20th century and again in the 1880o. These types of buildings are rarely built today, with the exception of unique infiil development in urban areas. One of the reasons these housing types are rar|ybuilttodeyimbeoeusezoningoften|imits)o/ge areas with only one kind Continue to next page —00, in certain areas, and keep singFe-family neghborhoodsiso|oiedfromotharhouoing1ypea.Tho>ogioisreasonable: multifamily housing should be concentrated around amenities, jobs, and transportation options. And single family homeowners often want to live next to other single family homes. But there are many ways to subtly increase density that can have a real impact without altering the character of the neighborhood. This suburban subdivision in is full of large lot single family homes. But look closely at the property in the upper left corner - the two driveways reveal atwm'unit zero lot line structure, also known as a side-by-side duplex. Corner lots such as this provide a unique opportunity to build higher density housing that blends in seamlessly with the character of the neighborhood. As you plan residential densities for your 2040 Comprehensive Plan Update, consider flexible guidance that allows some subtle mixing of densities and housing types that have similar form. Strong single family neighborhoods will maintain their desirability even if some slightly higher density developrnents arealowed within them. Where in your comrunity might 4-6 units per acre help create more housing options and more inclusive communities? Parking minimums The cosof providing parking, especially structured or underground paring.forareaidentiaddevekopmenioonbe significant. Developers pass these costs to future residents, inhibiting affordability. Many communities across the nation, including Minneapolis, have reviewed their parking requirements and made adjustmentsthat reduce or even eliminate parking minimums or introduce parking maximums. Planning parking is tricky. Changing demographics, new transit opportunities, and funding requirements can all influence parking needs. The Housing Element of your 2040 Comprehensive Plan Update is an important opportunity to explore ways to tie parking requirements to actual need and increase your community's ability to provide a full range of housing options. Mixed -income housing policies Mixed -income housing policies, also known as inclusionary housing policies, have recently gained traction in our region to address the desire for healthy, economically competitive communities. Mixed -income housing policies, whether voluntary or mandatory, address market -rate and publicly subsidized housing proposals, and relate to both rental and ownership opportunities. The Metropolitan Council has partnered with Urban Land Institute Minnesota (ULI MN) and Family Housing Fund to support the growing interest in mixed -income housing opportunities. You can find policy recommendations and a Mixed Income Feasibility Calculator on the Housing Counts website. Continue to next page —* Distance minimums for certain types of housing Some communities adopt zoning ordinances that limit how close certain types of housing can be to one another, For example, some cities restrict housing for individuals recently released from prison. transitional housing for households experiencing homelessness, or other types of supportive housing to locations that are at least 350 feet from similar housing, Communities may wish to consider the impacts of concentrating high -need residents in one neighborhood. Important questions to consider include: • What support services are located nearby and may benefit more residents if additional supportive housing is created? • What are the impacts of existing supportive housing and what is the evidence that additional supportive housing would increase real or perceived negative impacts? • What is the current health and resiliency of the neighborhood in question? Is it relatively stable with a mix of uses and incomes? Is there strong community capital? Research shows that strong, balanced communities are less likely to experience negative impact from affordable or supportive housing nearby. ,,,.. :1 I lig ail I : I 1 1 .. Accessory dwelling units Accessory dwelling units, also referred to as "granny flats' or "mother-in-law apartments," can add modest density housing choices in a community without having a noticeable impact on the visual character of the community. Accessory dwelling units are contained within single-family home properties, and can be within the existing dwelling unit, connected to the existing dwelling unit or a detached garage, or detached entirely. In 2014, the city of Minneapolis adopted a zoning ordinance permitting accessory dwelling units in some circumstances. As you update your Comprehensive Plan, consider whether accessory dwelling units are a reasonable strategy for your community to expand housing choices. and Want to learn more? Contact your sector representative for additional technical assistance. LOCAL PLANNING HANDBOOK Metropolitan Council 390 Robert Street North Saint Paul, MN 55101 metrocouncilforg Main: 651.602.1000 TTY: 651.291.0904 Public Information: 651.602.1500 public.info@metc.state.mn.us M ETROPOL [TAN COUNCIL Aphl 2017