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HomeMy WebLinkAboutStaff Memo and Exhibits MEMORANDUM TO: City of Aspen Planning and Zoning Commission FROM: Ben Anderson, Principal Long-Range Planner THROUGH: Amy Simon, Planning Director MEMO DATE: February 10, 2022 MEETING DATE: February 15, 2022 RE: P&Z Recommendation related to FIL requests to City Council REQUEST OF THE PLANNING AND ZONING COMMISSION: The Planning and Zoning Commission is asked to review, consider and send a recommendation to City Council related to Affordable Housing Mitigation requirements and the ability for four properties currently in the building permit review process to pay Fee-in-Lieu (FIL) to meet mitigation requirements. This recommendation and the eventual review by Council is a response to a current shortage of available Affordable Housing Certificates in the market. Staff recommends P&Z approve the Resolution – providing P&Z support for the identified properties/projects to pay FIL. SUMMARY AND BACKGROUND: The Affordable Housing Certificates Program – now in effect for over a decade – has been successful in providing incentive for the private sector to produce affordable housing units. Since the inception of the program, housing for more than 100 FTEs has been produced – without any public dollars being expended. The program is dependent on two things: 1) the willingness of the private sector to successfully complete affordable housing projects, and 2) the demand for AH credits by free-market commercial and residential development to meet their mitigation requirements. The City, to encourage the program, established AH Certificates as the preferred means to provide affordable housing mitigation for single-family and duplex development. Primarily, this was accomplished by disallowing the payment of FIL for mitigation requirements above 0.1 FTEs. A property owner pursuing a permit may pay the first 0.1 FTEs due for a given project in cash, but to the extent that additional mitigation is due above this threshold, AH Certificates must be provided to meet the mitigation calculated for the project. (Please note that there are other alternatives, such as voluntarily deed restricting the subject unit to Resident Occupied, or buying another free- market residential unit in town and deed restricting it as mitigation, however these have been unpopular and likely cost prohibitive options.) Staff Memo, P&Z Recommendation Page 2 of 4 The Land Use Code has long offered a process for paying FIL over 0.1 FTEs with cash for larger mitigation requirements, but it requires a request and approval by Council, following a recommendation from P&Z. No applicant has pursued that option due to a perception that approval would be unlikely. Following is the code language that describes this process: 26.470.110. C. Provision of required affordable housing via a fee-in-lieu payment. The provision of affordable housing in excess of 0.10 Full-Time Equivalents (FTEs) via a fee-in-lieu payment, upon a recommendation from the Planning and Zoning Commission shall be approved, approved with conditions or denied by the City Council based on the following criteria: 1) The provision of affordable housing on site (on the same site as the project requiring such affordable housing) is impractical given the physical or legal parameters of the development or site or would be inconsistent with the character of the neighborhood in which the project is being developed. 2) The applicant has made a reasonable, good-faith effort in pursuit of providing the required affordable housing off site through construction of new dwelling units, the deed restriction of existing dwelling units to affordable housing status, or through the purchase of affordable housing certificates. 3) The applicant has made a reasonable, good-faith effort in pursuit of providing the required affordable housing through the purchase and extinguishment of Certificates of Affordable Housing Credit. 4) The proposal furthers affordable housing goals, and the fee-in-lieu payment will result in the near-term production of affordable housing units. The City Council may accept any percentage of a project's total affordable housing mitigation to be provided through a fee-in-lieu payment, including all or none. At present, there are not AH Certificates available in the marketplace. There are a number of Certificates unextinguished (40+ FTEs), but they are unavailable for purchase as they are held by entities that have already dedicated their use to commercial and residential projects in the pipeline. Staff has confirmed this condition through analysis of the spreadsheet that we use to track the Certificates program and correspondence with individuals that are seeking Certificates to meet mitigation requirements associated with building permits and previous projects that have AH Deferral Agreements for working locals. Staff has also had conversations with the entities that are holding unextinguished Certificates to understand their intentions. It is clear that there is a problem in the market. As noted above, in the 10+ year history of the Certificates Program, this is the first time that we have had requests to pay FIL above the 0.1 FTE threshold. Looking at potential AH Certificates projects that are in the development pipeline, this is a condition in the market that is going to take some time to resolve. Staff Memo, P&Z Recommendation Page 3 of 4 In response, staff has established a policy and a process to facilitate these requests in a “batched” review. At this meeting, P&Z is asked to consider requests from five property owners to pay FIL for their full mitigation. These are all projects that require 1.0 FTE or less in meeting mitigation requirements and are for building permits that are in their final stages prior to issuance, or are previously completed projects that were granted mitigation deferrals for local, working residents. It is important to note that the projects that are a part of this request to pay FIL have mitigation requirements that are just a fraction of an FTE over the 0.1 mitigation that can be paid in cash by right. It is not reasonable to expect the property owners to pursue the other mitigation options offered by the code for the relatively small employee generation related to their homes. It is intended that until the shortage conditions in the market improve, that this process will occur quarterly. STAFF DISCUSSION: With staff’s confirmation of the conditions in the Certificates market, it was clear that a solution needed to be identified to allow otherwise compliant development projects to proceed through the permit issuance process. It is hoped that this process will accomplish the following: 1) provide some predictability for projects that are in the development pipeline and are nearing building permit issuance. 2) prevent the clogging up of P&Z and Council agendas with these requests. 3) maintain important components of the AH Certificates Program, so that the essentials of the program are not undermined. 4) Allow for a seamless and simple transition back to AH Certificates as the primary mechanism for mitigation once the market conditions improve. In staff’s view, if the process is not facilitated in this way, it would likely lead to suboptimal outcomes for Community Development customers that have projects that have mitigation requirements and additionally, could potentially undermine important aspects of Aspen’s AH mitigation system. Below are the projects that are requesting to pay FIL in this round of review. In the information provided for each, the FTE and dollar amounts of the FIL are estimates that will be confirmed and finalized as the last step of the building permit process. The land use code establishes that FIL for most residential mitigation is to be calculated at the Category 2 level, which is currently $376,475 per FTE. These numbers will typically not change, unless a small technicality emerges in the final reviews. • 1195 Black Birch Drive – .45 FTE / $169,414 (Building Permit) Staff Memo, P&Z Recommendation Page 4 of 4 • 1245 Mountain View Drive - .29 FTE / $109,178 (AH Deferral Agreement) • 1315 Sage Court - .27 FTE / $101,648 (Building Permit) • 543 and 549 Walnut St. (Duplex) - .73 FTE / $274,827 (Building Permit) CONCLUSION AND NEXT STEPS: On March 8, 2022, Council will consider this issue with P&Z’s recommendation and will decide whether to authorize FIL for the identified projects. With this approval, each of the projects would pay the finalized FIL amount as part of the permit issuance process. It is likely that this process will be replicated in Quarter 2 of 2022 – sometime in early June. RECOMMENDATIONS: Staff recommends the Planning and Zoning Commission approve Resolution XX, providing support for payment of FIL for the subject properties. EXHIBITS: A – Letters from the applicants that were included as part of the application to request to pay FIL To: Community Devolopment We have exhausted all options with regards to acquiring the necessary .45 FTEs for the development of a single family home at 1195 Black Birch. The owner of the property has been involved in the development of several residential projects in Aspen, and is unable to acquire any FTEs as they are no longer available. We are requesting the ability to acquire the approval to use the Fee-in-lieu process as this is the only option available to move forward with the project. Thank you, Ryan Doremus Thunderbowl Architects Michael & Cathy Tierney 1245 Mountain View Drive Aspen, CO 81611 970-309-5388 Parcel ID # 273501309018 January 26, 2022 Dear City of Aspen, I am writing you concerning my intention to pay off my Affordable Housing mitigation fee. After several conversations with Ben Anderson from Community Development, I understand the best option to pay my fee is to purchase Affordable Housing Certificates from a local developer. I currently need to purchase .29 FTE, Category 2. I have contacted many people in the real estate and development business in town to determine who might hold certificates. It has become clear that the only developer with Certificates is Mark Hunt. Mr. Hunt has been my landlord so we have a professional relationship and I have contacted his office. After an initial conversation with Linda Manning from M Development, I was hopeful Mr. Hunt would be willing to sell me the certificate. However, weeks have passed and they seem unwilling to help me by selling the certificate I require. I am currently unable to find a market for the Affordable Housing certificate to pay off my mitigation fee. My hope is that I will be allowed to pay the fee to the City of Aspen rather than wait to find certificates at some undetermined time in the distant future. Thank you for your consideration. Regards, Michael Tierney ZONE 4 ARCHITECTS PO BOX 2508 ASPEN COLORADO 81612 February 1, 2022 To whom it may concern, The project team at Zone 4 Architects was notified and the end of the permit process that FTE’s where no longer available for our project at 1315 Sage Court. The required FTE’s for this project is .27. The project team, GC and owner have tried contacted all potential FTE owners and have had no success in retaining the required FTE’s for the project. The owner would like to pursue the fee-in-lieu payment to mitigate employee housing obligations. We would like to be on the P and Z schedule for February 15, 2022 and City Council schedule for March 3, 2022. Thank you for your attention to this matter. Regards, Tim Andrulaitis A R C H I T E C T S Z O N E L L C . February 08, 2022 Jeffrey Barnhill Planner I Community Development – Planning and Zoning 427 Rio Grande Place Aspen, CO 81611 Re: 543 and 549 Walnut St (Fee-in-lieu for Affordable Housing Credits) Dear Mr. Barnhill, CCA is writing you on behalf of our clients, the owners of 543 and 549 Walnut Street - Randy and Michele DeWitt, to request approval to pay a fee-in-lieu of 0.73 Cat 2 FTEs for their duplex project. We are requesting approval to make a fee-in-lieu payment after exhausting all options to meet the affordable housing needs advised by the code: on-site housing, off-site house, and purchasing FTEs in the free market. Developing affordable housing on-site for this duplex project was impractical due to the size of the approved lot, the required setbacks, easements, and off-street parking requirements mandated by the HOA. Developing affordable housing off-site for this project was also impractical based on the current inventory of free market housing that could be changed to deed restricted housing. In regard to acquiring FTEs, we have contacted all current FTE holders in the city and have found that none of them are willing to sell their available credits. Our efforts to acquire FTEs have included using the City’s Affordable Housing Credits tracking spreadsheet to locate available Cat 2 FTEs and contacting all potential sellers. We have also used the City’s FTE formula to convert Cat 2 FTEs to Cat 4 and contacted all potential sellers for 0.91 Cat 4 FTEs. Our research has found that a few local developers are holding the majority of available FTEs for their future development projects in the city and are not willing to sell their credits. We kindly request your approval to make a fee-in-lieu payment for 0.73 Cat 2 FTEs. Best regards, Noah Czech, AIA Architect