CITY OF CHARLOTTESVILLE AFFORDABLE HOUSING PLAN City Council Presentation February 16, 2021 The final plan includes revisions to the initial draft based on comments received by City staff, leadership, the public, and other groups. Draft Plan Plan Revisions Final Plan Engagement Revised Plan Presented to Planning and Public Commission (2/9) & City Council (2/16) Input Council Vote for Endorsement (3/1) Nov. 3, 2020 through Dec. 2020 through Feb.-Mar. 2021 Dec. 2, 2020 Jan. 2021 HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 2 Summary of Changes to Final Draft HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 3 Most revisions were minor. Larger changes include clarifying & strengthening the draft to better align the plan’s contents with its intended outcomes. Expanded Clarified Homeownership Language Tools Additional Detail about Vulnerable Implementation Populations and Summary Energy HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 4 The final draft clarifies language around the City’s funding commitments and the relationship between recommendations and guiding principles. • Link between racial equity and homeownership Clarified Language • Opportunities for regional collaboration • Funding commitment from the City • Developments receiving City assistance HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 5 New page (25) highlights critical Guiding Principles | Racial Equity strategies to advance racial equity To fully support racial equity and reverse the impacts of discrimination and segregation, racial equity has to be considered as a part of the design of each recommendation, not as an afterthought or a separate plan. The City can meet this challenge by creating programs that directly address disparities and mitigate barriers to accessing quality affordable housing, and by establishing governance structures and processes that actively include Black, Indigenous, and People of Color (BIPOC) households, particularly households impacted by disparities, in the decision-making process. Critical Strategies to Advance Racial Equity • Homeownership | Homeownership is a critical asset building opportunity for most households, and persistent disparities in homeownership rates by race illustrate the extent to which BIPOC households continue to face barriers in homeownership. Charlottesville should reduce the racial wealth gap through homeownership programs including down payment assistance (pages 135 – 139), Section 8 voucher to homeownership programs (page 140 – 141), new approaches to mortgage financing (page 142 – 144), and single-family and soft density infill development (page 145 – 146). In addition, to stem the decline in Black homeownership, the City should fund programs that reduce costs for existing homeowners such as owner-occupied rehabilitation assistance (pages 147 – 148) and property tax relief (pages 149 – 150). • Governance | To reflect the needs and priorities of its community, the City’s governance structures need a diversity of perspectives, not just from housing professionals but inclusive of community voices and beneficiaries of housing programs. Charlottesville can take concrete steps to bring diverse voices into its decision-making processes, and to build inclusivity throughout its affordable housing infrastructure, including the Housing Advisory Committee (pages 64 – 65), Charlottesville Affordable Housing Fund (CAHF) Committee (pages 66 – 68), City Staff (pages 70 – 71), and nonprofits that receive city funding through a standardized and competitive process (pages 73 – 75). This includes both BIPOC housing professionals and community members, as well as people who benefit from affordable housing assistance. • Metrics | Key to the successful implementation of the plan will be ensuring that affordable housing programs are designed and implemented to be accessible and utilized by all residents including BIPOC. To ensure that programs operated by the City and its partners support racial equity, City Staff (pages 70 – 71) should track metrics related to program participants, residents, and impacts, and disaggregate impact data by race. The City’s competitive funding process (pages 73 – 75) should set targets for inclusive participation and access and prioritize funding for partners that have demonstrated successes in promoting racial equity and inclusiveness. The Charlottesville Affordable Housing Plan outlines recommendations to advance each of these critical strategies and to ensure that other recommendations are implemented in ways that reduce racial disparities, promote equity, and mitigate negative impacts to BIPOC in Charlottesville. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 6 New page (27) highlights opportunities Guiding Principles | Regional Collaboration for regional collaboration To maximize the impacts of Charlottesville’s activities in supporting housing affordability, the City needs to seek commitments and develop deeper partnerships to replicate changes throughout the city and the urban ring. Collaboration with Albemarle County | The County and City are each Collaboration with the University of Virginia (UVA) | UVA is the City’s others’ most important partners for improving housing affordability. Each largest employer and the anchor institution of Charlottesville. It has the largest controls land use and public funding policies that are far more effective obligation to address housing affordability after the City itself. Recognizing that when used in coordination. Implementing recommendations jointly is obligation, the University recently made the important commitment to develop central to regional collaboration. 1,000 to 1,500 affordable homes over the next decade. As the University moves forward to meet this commitment, it should do so in a manner that is consistent • Establishing an affordable housing funding agreement (page with this Plan’s principles and recommendations. 52) for the urban ring. Both the City and the County must invest local public funds to improve housing affordability. Given the shared • Racial Equity and Governance. UVA can acknowledge historic and authority and tax relationship between the City and County, present racial discrimination in housing and seek to address it in the design investments within the urban ring should be shared. The County and of its housing programs. The University can develop an inclusive planning City should establish an agreement to coordinate affordable housing and decision-making process (page 63) for housing investments by investments to maximize impacts in the urban ring. meaningfully including BIPOC and beneficiaries of its housing programs. • Aligning changes to multifamily (page 80 – 81) and single-family • Deep Affordability. Recognizing that UVA has raised its wages so that no zoning (page 94 – 96) within the urban ring. The urban ring is an employees should be below 30% AMI, the University should commit to important part of Charlottesville’s housing market and has significant affordability targets for new housing (page 55 – 56) including making at opportunity to support new housing development. A misalignment of least 80% of homes affordable to households with incomes up to 60% AMI, zoning could harm affordability, while aligning zoning within the and the remainder affordable to households up to 80% AMI. urban ring would enhance the impacts of recommended zoning changes by further expanding opportunities for housing • Homeownership. UVA should commit to supporting homeownership as development and creating a comparable development environment. well as rental development, by pursuing single-family and soft density • Including regional representatives in the City’s governance, infill development (page 145 – 146) and offering down payment particularly as voting members of the Housing Advisory Committee assistance (page 138 – 139) to employees. (HAC) (page 64), will recognize the County as a critical partner and • Tenants’ Rights. Similar to the City, UVA has the opportunity to ensure help to ensure that regional partners continue to be engaged and that housing developments it supports provide enhanced tenants’ rights aligned on affordable housing needs and opportunities for (page 100), such as just cause eviction requirements, mediation collaboration. agreements, and the right to organize, in University-funded housing developments. Charlottesville Affordable Housing Plan | 7 HR&A Advisors, Inc. FINAL DRAFT New page (49) clarifies the types of funding within the Funding | Scale and Consistency recommended $10M annual allocation of funding The City of Charlottesville should dedicate $10 million per year to invest in housing affordability over the next ten years. This proposed figure of $10M represents total—not additional—spending, and it represents local spending, not including additional funding provided through state or federal sources. As appropriate, direct subsidy should be centralized and allocated through the Charlottesville Affordable Housing Fund. $2M $7M $1M Tax Relief Direct Subsidy Admin RECOMMENDED CHANGES The City has historically “spent” close to $2M per year on household tax As part of its $10M annual commitment, the City relief, provided to low-income households through the Charlottesville Housing should set aside $1M in funding each year for Affordability Program and to elderly and disabled households through the Real administrative costs and capacity building. This is a Estate Tax Relief program. This allocation, which supports housing stability for standard practice for housing departments, programs, low-income homeowners, should be highlighted within the City’s housing budget. and funds. These funds would pay for the personnel required for a variety of tasks: to run a competitive The majority of the $10M should be allocated to direct subsidy. These process to award funds; monitor and evaluate impact; expenditures include both “capital” subsidies used to build and preserve enforce compliance; design and develop new housing affordable homes, such as financing for public housing redevelopment and single- policies; provide technical assistance for funding family infill development, and “operating” subsidies provided on an ongoing recipients to improve their expertise and effectiveness; basis, such as emergency rental assistance and property tax relief. This funding and provide training for new board members of the HAC, includes the City’s current commitments to affordable housing programs including especially those who are community representatives and CSRAP and planned new subsidized housing developments. As appropriate, the might not work on housing professionally. allocation of these funds should be made through the Charlottesville Affordable Housing Fund (CAHF) with input from the CAHF committee. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 8 New page (50) outlines existing commitments the City Funding | Scale and Consistency has made to fund affordable housing in the near term The City has already recently made significant commitments for future spending on housing. These commitments effectively fulfill the recommended $10M commitment through 2025. $40M Capital Improvement Program funding commitment, 2020-2025 Some of these commitments have been detailed in the City’s Capital Improvement Program (CIP), which allocates about $40M between 2020 and 2025 towards a number of housing programs. $5.25M $15M $17M $3.125M Rental vouchers through the Public housing redevelopment Friendship Court project Housing rehabilitation and Charlottesville Supplemental Rental residential energy conservation Assistance Program (CSRAP) CONTEXT Other annual housing expenditures, average of historical and projected spending 2020-2025 In addition to these commitments made in the CIP, the City has historically supported other housing programs through tax relief and through other direct subsidies allocated through the City’s operating fund. $1.7M ~$500K Average annual property tax Vibrant Communities Fund, relief for low-income, disabled, or competitively allocated to various veteran homeowners housing nonprofits HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 9 New page (51) compares funding commitment Funding | Scale and Consistency from the City of Charlottesville to other cities Charlottesville has committed a significant amount of funding for a city of its size. A commitment of $100M over ten years would put Charlottesville in the top tier of cities making strong and lasting commitments to affordable housing. For the sake of comparison, the table below focuses on only funding used for direct subsidy, excluding property tax relief and administrative costs. Therefore, Charlottesville’s commitment shows $70M, excluding an estimate of $10M for administrative costs and $20M for tax relief over ten years. Raleigh, NC Durham, NC Richmond, VA Washington, D.C. Charlottesville, VA Funding $80M bond $95M bond (in addition $80M from dedicating $100M+ through $70M Commitment to $65M of existing tax revenues from housing trust fund, in direct subsidy Size and Sources expenditures, part of properties phasing out from transfer taxes funding $160M housing plan) of partial tax and general fund exemption CONTEXT Time Period 5 years 5 years 10 years annual 10 years Population 470,000 275,000 230,000 685,000 50,000 $ Per Capita Per Year $34 $116 $35 $146+ $140 HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 10 Revised page (52) discusses the need to identify Funding | Scale and Consistency stable and equitable sources of funding for housing Charlottesville needs to identify one or more dedicated funding sources to sustain its commitment to affordable housing beyond 2025. Increased spending on housing will require either reallocating funding from other programs within the existing budget, or creating new fees or taxes that expand revenue sources. If funds cannot be reallocated from other priorities to support ongoing housing programs, the City will need to more closely evaluate potential funding sources. This analysis will need to consider several key factors: Legality Revenue potential Revenue stability Equity Is this form of tax or fee How much revenue is this Does the tax or fee Does the fee’s impact on legal in Virginia? tax or fee estimated to provide a reliable and the tax base meet the RECOMMENDED CHANGES yield on an annual basis? stable source of funding? City’s equity goals? Is the tax regressive? Examples of revenue sources used for housing trust funds elsewhere in Virginia include: Property tax increase Meals tax Developer contributions Additional property tax Additional tax on Impact fee on new market- dedicated to housing restaurant food and rate residential beverage sales development Example: Richmond, VA Example: Alexandria, VA Examples: Alexandria, VA; Fairfax, VA Charlottesville currently funds its housing programs through general fund and capital fund contributions. Charlottesville already uses these and other revenue sources to fund a variety of programs. To sustain a $10M annual commitment over time, the City will need to evaluate potential revenue sources as well as its other policy and funding priorities, such as schools and Main Street improvements, to balance available resources with the City’s goals. This evaluation of opportunity and need should consider the near-term fiscal impacts of COVID-19, which has impacted some City revenues and intensified funding needs across a spectrum of priorities. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 11 Highlighted text added to clarify Tenants’ Rights | Recommendations recommendation (page 99) Charlottesville should change local policy and advocate at the state level to expand the City’s ability to support tenants’ rights. State law limits the actions that Charlottesville can take to advance tenants’ rights, but the City can provide enhanced protections for renters for programs in which it provides funding, and advocate at the state level for legislative changes. In particular, the City should implement the following recommended actions and policy changes: Require housing developments that receive City funding (directly as subsidy, or indirectly Developments Receiving City Assistance through infrastructure improvements) to provide enhanced tenants’ rights. Dedicate funding for the provision of legal services for tenants facing eviction and establish a Right to Counsel citywide right to counsel in eviction cases. Advocate for enabling legislation to support just cause evictions and to make other Just Cause Eviction changes to the state’s eviction process. Rent Control Advocate for enabling legislation to enact rent control in Charlottesville. The remainder of this chapter provides additional detail on recommended policy changes, as well as the implementation needs and anticipated impacts of these changes, and examples of how other communities have used similar tools to support housing affordability. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 12 Minor changes were made to existing tools, and several new homeownership tools were added to the final draft. • Employer-Assisted Down Payment Assistance Expanded Homeownership • Section 8 Voucher to Homeownership Tools • Local Mortgage Pool with Individual Development Accounts HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 13 Highlighted recommendations were added to Subsidy | Recommendations expand homeownership tools (page 113) Affordable Homeownership Subsidy | Increase and preserve access to affordable homeownership. These programs serve to build wealth for low-income families and are crucial to support racial equity by mitigating the racial wealth gap. Revise Charlottesville’s existing down payment assistance program to provide a Down Payment Assistance greater level of assistance and serve a larger number of households. Encourage and work with major regional employers, like UVA, to develop employer- Employer-Assisted Down Payment Assistance funded Down Payment Assistance programs as a benefit for employees. Encourage the Charlottesville Redevelopment and Housing Authority (CRHA) to create Section 8 Voucher to Homeownership the option of and access to homeownership for Section 8 Voucher users. Partner with lenders and nonprofits to help homeowners succeed at Local Mortgage Pool with Individual Development Accounts homeownership. Partner with developers to build and renovate affordable single-family and “soft Single-Family and Soft Density Infill Development density” housing in existing neighborhoods. Support and preserve homeownership by providing assistance to income-qualified Owner-Occupied Rehabilitation Assistance owners to make necessary home repairs. Continue the provision of property tax relief to low- and moderate-income Property Tax Relief homeowners. The remainder of this chapter provides additional detail on recommended policy changes, as well as the implementation needs and anticipated impacts of these changes, and examples of how other communities have used similar tools to support housing affordability. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 14 Page (138) added for Subsidy | Employer-Assisted Down Payment Assistance new tool Encourage and work with major regional employers, like UVA, to develop employer- Case Study | Yale Homebuyer Program funded Down Payment Assistance programs as a benefit for employees. The Yale Homebuyer Program was Large employers—such as universities, hospitals, and private corporations—have an interest in established in 1994 to support Yale CONTEXT helping their employees live in safe and affordable housing close to work. The City’s largest employees, including faculty and employers include the University of Virginia, UVA Medical Center, Sentara Healthcare, State Farm permanent staff, with $30,000 to $35,000 Insurance, Wal-Mart, and Food Lion, among others. in (pre-tax) benefits over ten years, to be used towards a home purchase. The City of Charlottesville should encourage major employers to create employer-assisted down payment assistance programs. The City should identify large employers with the capacity and Participants must commit to owning and CHANGES REC’D. interest to support a down payment assistance program for employees, educate leaders about the costs residing in the home for at least two and benefits of such a program—for example, improved worker retention and community relations—and years from the date of closing, and the encourage major employers to provide down payment assistance to employees. benefit ends when occupancy ends. Therefore, to receive the full $30,000 to An employer-assisted down payment assistance program would expand wealth-building and IMPACTS $35,000, participants must reside in the housing stability through homeownership for more Charlottesville residents. The program could home for ten years. potentially match public and private funding, both amplifying the impact of public dollars by leveraging private contributions and help employers better attract and retain workers. Between 1994 and 2015, the Homebuyer Program supported 1,134 new Racial Equity An expanded down payment assistance program can further mitigate a racial wealth gap. homeowners. Employer-led programs should seek to proactively serve households to address inequitable access to PRINCIPLES GUIDING homeownership resulting from cost barriers and racial inequities. Regional Collaboration Employers across the region should participate in securing new employee homeownership, including in the urban ring. Comprehensive Approach Down payment assistance complements renter-focused subsidy programs. Source: Yale University HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 15 Page (139) added for Subsidy | Employer-Assisted Down Payment Assistance new tool Lead and Partners Housing Staff Large employers IMPLEMENTATION Action Steps 1. The City will work with local employers to encourage the development of employer-assisted down payment assistance programs. Timeframe Near Term (within 18 months) Funding Needs No local funding HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 16 Page (140) added for Subsidy | Section 8 Voucher to Homeownership new tool Encourage CRHA to create the option of and access to homeownership for Section 8 Voucher users. The Charlottesville Redevelopment and Housing Authority (CRHA) has considered adopting a Section 8 Voucher to Homeownership Program, which is authorized by HUD. A Voucher to Homeownership program allows for Section 8 housing vouchers to be used towards monthly mortgage CONTEXT payments instead of monthly rent, while requiring that participants pay a minimum 3% down payment. This type of program not only allows low-income voucher holders to access the benefits of homeownership such as wealth-building and housing stability, but also increases voucher holders’ affordable purchase price by effectively increasing their income. As of 2017, 10 housing authorities in Virginia offer the program. The City should encourage the CRHA to create a Section 8 Voucher to Homeownership Program. In addition to establishing a program per HUD’s HCV Homeownership Regulations, CRHA should: RECOMMENDED CHANGES • Identify collaborating lenders to support a mortgage product that uses vouchers; • Publicize program eligibility and benefits to households using vouchers, and providing participant households with mandatory homeownership counseling; • Layer program with complementary programs such as city-provided down payment assistance; A Voucher to Homeownership program would increase access to homeownership for the lowest- income households. By increasing the monthly amount that an assisted homebuyer can pay, such a IMPACTS program would increase the value of home they can afford. The program would also extend the impact of complementary homeownership programs such as down payment assistance and single-family infill programs. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 17 Page (141) added for Subsidy | Section 8 Voucher to Homeownership new tool Racial Equity A Voucher to Homeownership program could help bridge the racial wealth gap for residents at the lowest income levels. PRINCIPLES GUIDING Regional Collaboration Vouchers should be used for home purchases in Charlottesville and within the urban ring. Comprehensive Approach This program provides residents with the flexibility to user a renter-focused subsidy program to support homeownership goals. Lead and Partners CRHA Housing Staff IMPLEMENTATION Action Steps 1. CRHA will establish a local Section 8 Voucher to Homeownership Program in line with HUD and Virginia regulations. 2. The City will encourage participants to also apply for down payment assistance, to further impact of voucher subsidy. Timeframe Near Term (within 18 months) Funding Needs No local funding HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 18 Page (142) added for new tool Subsidy | Local Mortgage Pool with Individual Development Accounts Develop specialty mortgage products and provide supporting services that help low- income homeowners succeed at homeownership. A mortgage loan pool allows participating financial institutions and funders to jointly Mortgage underwriting standards and practices have greatly restricted access to mortgage fund a program that originates mortgages financing since the Financial Crisis, particularly among BIPOC and moderate-income with favorable terms to help low-income CONTEXT households. Many of these adjustments to underwriting practices are viewed as an appropriate first-time homeowners access response to excessively loose underwriting that contributed to historic foreclosure rates. Unfortunately, homeownership. Such a program both in many instances there has been an overcorrection that reinforces racial disparity in homeownership. expands options and access for these homeowners, and helps to minimize risk to The City of Charlottesville should work with lenders and nonprofits to develop specialty banks who participate in offering mortgage products and provide supporting services that better fit the circumstances of BIPOC nonconforming mortgages, such as those as well as moderate- and low-income homeowners. Towards this end, a local loan pool drawing with lower down payment requirements and from motivated banks, credit unions, major employers, philanthropies, and public funding that other flexible guidelines. originates mortgages that are designed to fit the needs of households who cannot access mortgage financing currently. An individual development account (IDA) RECOMMENDED CHANGES • Allow for greater flexibility on credit scores, relying on non-traditional demonstrations of credit is a type of savings account designed to help ability such as on-time rent payment. low-income individuals build assets and achieve financial stability and long-term self- • Eliminate mortgage insurance, an expensive and ongoing cost that penalizes households with sufficiency. People use IDAs to save money less family wealth. to start a business, pay for education, or buy • Lower down payment requirements to a nominal requirement of $3,000 and apply down a home. The JP Morgan Chase Institute payment to an individual development account. This approach increases a homebuyer’s post- found that reducing the amount of down closing liquidity, which significantly reduces risk of foreclosure and is a “win-win” for both buyers payment while increasing the amount of and lenders. reserves a household held in the bank to • Provide post-purchase ownership housing counseling, such that if a household needs assistance three months greatly reduced the risk of (either requests assistance or misses a mortgage payment), a qualified housing counselor is foreclosure. available to provide advice, and the housing counselor has access to an emergency loan program Source: https://www.jpmorganchase.com/institute/news- or similar to help a household stabilize their finances. events/institute-prevent-mortgage-default HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 19 Page (143) added for new tool Subsidy | Local Mortgage Pool with Individual Development Accounts Expanding access to homeownership through a local mortgage pool and individual development Mortgage Pool Case Study | IMPACTS account will increase homeownership among BIPOC and moderate-income households. A well- designed program should be able to revolve the majority of funds invested, leveraging public and private Self Help Secondary Mortgage funding to increase impact. Market Program Racial Equity This program target and address racial inequities in mortgage lending that have persisted as Self-Help is a community development a form of financial redlining. financial institution that has assisted PRINCIPLES people traditionally underserved by GUIDING Regional Collaboration This program should be implemented at a regional scale, ideally through a broad for-profit lenders. One of its programs partnership of lenders and funders. is an innovative secondary market Comprehensive Approach This program expands and supports homeownership by targeting root sources program formed through a of high costs and inequity. partnership between philanthropy, private for-profit lenders, and Fannie Lead and Partners Mae. Under this program, commercial Housing Staff banks provide mortgages with low Nonprofit partners down payments and flexible Local lenders, employers, and regulators guidelines to low-income prospective IMPLEMENTATION Action Steps homebuyers who otherwise cannot 1. Add enhanced services requirement to affordable homeownership loan terms. access conventional financing. Self- 2. Establish an action plan (with explicit reporting protocol and detailed services) for mortgage lenders, City Help then purchases these mortgages staff, and non-profit partners. from banks and sells them directly to Timeframe Fannie Mae, with the promise it will Longer Term (within 3 to 5 years) cover the cost of most defaulted loans, with the help of philanthropic funding. Funding Needs In return, banks will commit to Approximately $300 – 500 per household served continuing to relend this money to an equivalent number of low-income homebuyers. Source: Self-Help Credit Union HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 20 Page (144) added for new tool Subsidy | Local Mortgage Pool with Individual Development Accounts Enhanced Servicing Financial literacy and counseling services often end after homebuyers receive their mortgages. Counseling is particularly limited for “credit-ready clients” who are only required to take HUD’s eight-hour workshop and do not receive personalized, continuous services through a tailored program. This poses a challenge for many first-time homebuyers, who may not be aware of the heightened maintenance obligations they have as homeowners. These new homeowners would likely benefit from long-term help as their properties age and the hidden costs of homeownership become challenging. The City of Charlottesville should work to offer enhanced servicing for its Down Payment Assistance program. If a buyer falls behind on their payments, their mortgage lender would be allowed to notify the City. The City would then notify the vendor administering DPA, so the vendor could contact the homeowner to identify issues, provide homeowner support services, and help to prevent foreclosure. Throughout the country, similar programs have been utilized to help new homeowners navigate the full cycle of the lending process. Successful strategies include first year follow-up requirements that provide a designated time for households to meet with housing counselors to proactively discuss any challenges they’ve encountered. This follow-up session is a chance for counselors to advise residents on alternatives to high-risk forms of credit that are newly available to them as homeowners. Enhanced In the case of a City responds The housing partner DPA recipients servicing is missing or late by notifying its reaches out to the give permission written in as a payment, the current non- DPA recipient and for their lender condition of the mortgage lender profit housing provides foreclosure to contact City. DPA loan. alerts City. partner. prevention services. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 21 The final plan clarifies, strengthens, and adds language about how recommendations relate to vulnerable populations and energy costs • Programs that serve seniors & adults with Additional Detail disabilities about Vulnerable • The link between housing costs and energy Populations and costs & programs to support energy efficiency Energy HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 22 Highlighted text added to acknowledge that some topics tied to Housing Challenges housing affordability may be addressed through other plans (page 36) Charlottesville is experiencing a growing housing crisis as residents are increasingly unable to afford living within the city. To evaluate the city’s affordable housing need, a multi-part analysis of the existing affordable housing landscape in Charlottesville was conducted. This effort involved a series of stakeholder interviews, an evaluation of demographic and market conditions, a thorough review of current housing programs and policies, and builds on the Housing Needs Assessment conducted by the City. Through this process we identified key housing challenges that informed the recommendations within this plan. These key challenges are: Zoning and Land Use | The City’s current land use policies constrain the supply of housing. In addition, the predominance of single-family zoning is a legacy of exclusionary zoning practices. Housing Supply | Driven in part by zoning and land use, the City’s housing supply has lagged population growth, resulting in rising home prices. Limited opportunities for greenfield development further constrain the supply of housing. Rental Affordability | Over 2,700 renter households in Charlottesville currently pay more than 50% of their income on rent and utilities. The majority of these households earn less than $35,000 a year. Displacement | Rising prices and limited affordable housing options appear to be displacing low-income residents from Charlottesville. Housing Instability and Homelessness | Housing instability creates challenges for all members of a household, and continued housing instability can lead to homelessness. Racial Inequity | Black residents disproportionately face housing affordability challenges, including disparities in homeownership, even when accounting for disparities in income. Low and Stagnant Wages | Despite growing median incomes, the median renter still cannot afford the median rental unit. Impacts of COVID-19 | The economic impact of COVID-19 has exacerbated housing affordability challenges across the country, including in Charlottesville. Transportation costs, income, energy costs, environmental quality, and other factors are also closely tied to housing affordability, however the Affordable Housing Plan does not make recommendations to address these challenges directly. These items will be assessed further in the Comprehensive Plan as well as in the Climate Action Plan. Sources: City of Charlottesville Open Data; U.S. Census 2010 - 2018 American Community Survey 5-Year Estimates; Federal Reserve Economic Data; 2014-2018 Public Use Micro-Survey (PUMS) 5-Year Data for the Public Use Microdata Area containing Charlottesville HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 23 Highlighted text added to strengthen link to Subsidy | Acquisition Fund energy efficiency (page 120) Dedicate funding to support the preservation of existing affordable housing in Charlottesville. Crucial to maintaining an affordable housing inventory is preserving the affordability of Acquisition funds replace the equity of profit- existing unregulated low-rent housing, often referred to as naturally occurring motivated ownership with public and CONTEXT affordable housing (NOAH). Particularly in markets with constrained supply, low-rent market- mission-based capital that does not require rate housing often sees the highest rates of rent growth. In Charlottesville, there are an estimated the same rate of rent growth. These funds 2,260 homes of low-rent homes (renting for below $1250), and the city is at risk of losing 644 LIHTC help to achieve the following: homes in the following decade as they reach the end of their compliance periods. Lower relative costs: Acquisition costs for The City should support the development of an acquisition fund to provide permanent, NOAH homes is typically 25-30% less than new long-term financing for older, market-rate properties to make modest repairs and RECOMMENDED construction. maintain their affordability. The success of a preservation program depends on attracting low- Optimize location: Acquisition of existing CHANGES cost private financing to leverage public funding, and identifying development partners who are interested and capable of executing a preservation development model, such as the CRHA. Most buildings allows administrators to site affordable housing near major transit lines and developers, both for-profit and nonprofit, are dependent on developer fees or the sale of a employment centers where land is scarce. property to generate revenue. Preservation projects generally are not sold and come with small or Prevent displacement: This approach no developer fees making them unworkable for many developers. maintains residential stability and does not Preserving affordable homes is a cost-effective and necessary means of preventing require any demolition of homes for new displacement and ensuring the long-term housing stability of low-income renters. The construction. cost to preserve an existing affordable home is far lower than the cost to develop new affordable Target workers: Administrators can stabilize IMPACTS housing. Moreover, opportunities for new development in Charlottesville are limited, making housing for middle-income residents which are preservation more important. not often served by affordable housing Using the acquisition fund to make investments into building energy retrofits, such as developers. weatherization and appliance efficiency, can further improve affordability by also reducing energy Speed: Acquiring a multifamily building and and utility costs. ensuring its affordability is much faster than building new homes, but it does not increase housing supply. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 24 Highlighted text added to strengthen link to energy efficiency and vulnerable populations (page 147) Subsidy | Owner-Occupied Rehabilitation Assistance Support and preserve homeownership by providing assistance to income-qualified Preserving Affordability owners to make necessary home repairs. To support the preservation of affordability, the City should Nonprofit partners including Albemarle Housing Improvement Program (AHIP) and the Local Energy record a lien against a property Alliance Program (LEAP) administer housing rehabilitations for low-income homeowners in receiving OOR if the value of Charlottesville and Albemarle County. AHIP’s program assembles public and philanthropic capital to make repairs exceeds $20,000. The CONTEXT home repairs for low-income households. Older homes occupied by lower-income households can reach a state lien should be equal to 90% of of disrepair that would risk occupant safety, and major upgrades such as roofing and insulation can significantly the cost of the repairs, with a benefit owner safety, comfort, and utility costs. AHIP currently targets an average of 20 significant rehabs a year, 10% forgiveness to make sure at $40K each; 10 energy retrofits, at $5 to 10K each; and 15 emergency repairs, at $3,500 each. LEAP’s program that the lien does not exceed the focuses on weatherization retrofits for low-income households and seniors. value of the repairs. The lien The City should continue to provide funding for owner-occupied rehabilitation (OOR) for low-income should be at 0% interest with no households. payments. At the sale of the RECOMMENDED • To allow for improved program capital planning, the City should commit a stable stream of funding on a 3- to 5- house, income-qualifying CHANGES year schedule, and allocate funds through a competitive, transparent process. households earning less than 80% should have the right to • Support the long-term affordability of properties that receive significant public funding (see right). first offer for the property. If the • The owner-occupied rehab program should be aligned and paired with the down payment assistance and house is sold to them, then the shared equity homeownership program. lien transfers; if the house is sold to a higher-income owner, it is Continued support for owner-occupied rehab will improve housing quality and safety for homeowners, due in full through the sale while also preventing displacement from homes due to an inability to pay for maintenance or repair. Energy proceeds. This program feature retrofits can further support affordability by lowering household utility costs, which can be a substantial cost will encourage the sale of IMPACTS burden for lower-income households. Committing consistent funding to this program and coordinating its properties that have received implementation with other homeownership support programs will increase the impacts of the City’s overall public funding to lower-income efforts to create and support affordable homeownership. homebuyers. Owner-occupied rehab is particularly important to address the needs of elderly residents seeking to age in place in their homes, and of people living with disabilities who require special accommodations. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 25 Highlighted text added to strengthen link to energy efficiency (page 148) Subsidy | Owner-Occupied Rehabilitation Assistance Racial Equity This project should be structured to ensure that BIPOC homeowners do not have barriers to access. This could include working with GUIDING PRINCIPLES community groups in neighborhoods with high BIPOC homeownership to market the program. Regional Collaboration To support regional collaboration, nonprofit providers should continue to also rehab homes outside of Charlottesville, especially where doing so is cost-effective. Comprehensive Approach Helping low- and moderate-income homeowners maintain the quality and safety of their homes is an important complement to more renter-focused subsidy programs and will help to mitigate displacement pressures that may be created by land use policy changes. Rehabilitations that involve energy retrofits will further support owner comfort and save on utility costs, while advancing the City’s climate action goals. Lead and Partners Housing Staff Nonprofit providers CAHF Committee IMPLEMENTATION Action Steps 1. Pending CAHF Committee recommendation, the City will dedicate funding for OOR. 2. The City will select a nonprofit partner through a competitive process to administer the OOR program. Timeframe Near Term (within 18 months) Funding Needs Approximately $25K of local funding per retrofit, layered with $10 to 15K of philanthropic funding, for a price of $35 to 40K per retrofit HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 26 To clarify the key implementation steps for recommendations throughout the plan, the final draft includes a summary of implementation • Snapshot of implementation steps and timing Implementation for recommended actions Summary • Summary of anticipated impacts HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 27 New page (18) summarizes Executive Summary | Snapshot of Implementation implementation over time The following snapshot provides a summary of the recommended timeframe of implementation for the Governance, Funding, and Housing Tool recommendations, beginning with the adoption of the Charlottesville Affordable Housing Plan. Overall, this timeline emphasizes immediate governance changes within 6 months, in tandem with the completion of the Cville Plans Together process including anticipated changes to the City’s zoning code. Over the following year, the City would then undertake recommended changes to existing tools and initiate the implementation of new tools, guided by its new governance structure and with steady, committed, competitively allocated funding. Over the following several years, the City would continue to improve the impact of existing tools, fully implement new programs, and explore additional ways to pursue regional collaboration. Within 6 months Within 18 months Within 3 to 5 years Governance • Reform structure of Housing Advisory Committee • Ramp up CAHF Committee capacity to establish • Explore ways for HAC, or similar entity, to (HAC) to broaden representation and focus mission and implement clear, transparent and become a regional body that serves and • Establish a representative Charlottesville Affordable competitive process of awarding grants represents the City and County Housing Fund (CAHF) Committee to oversee funding • Adopt a conflict-of-interest policy for CAHF allocations and priorities Committee members • Increase City staff capacity and identify development liaison(s) Funding • Identify sustainable and reliable source(s) of • Target funding to additional subsidy tools funding to sustain $10M annual commitment • Build out mechanisms to collect, interpret, and over 10 years, including an evaluation of the communicate data on housing spending and legality, potential scale, stability, and equity the impacts thereof impacts of different revenue sources • Explore establishing a regional affordable • Target funding to high-priority subsidy tools housing funding agreement to pool City and County funding sources HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 28 New page (19) summarizes Executive Summary | Snapshot of Implementation implementation over time The City of Charlottesville should take the following actions to implement housing tools over the near and long term: Within 6 months Within 18 months Within 3 to 5 Years Land Use • Through the Cville Plans Together process, Adopt zoning code revisions as recommended by Cville Plans Together: work with Charlottesville community to • Enact zoning changes within Charlottesville and the urban ring, understand the impacts of and identify aligning subdivision ordinances as needed suitable areas for zoning changes, such as • Revise the accessory dwelling unit ordinance to support for multifamily by-right, soft density by- affordable ADUs right, and inclusionary zoning • Adjust City development review and approvals processes to align • Develop and deploy education campaign on with recommendations zoning recommendations in preparation for the zoning code rewrite. Tenants’ • Require guarantee of tenants’ rights for developments receiving • Continue to strengthen tenants’ rights Rights City assistance (directly as subsidy, or indirectly through policies as is legally feasible, including infrastructure improvements) through ongoing advocacy at the state • Design, fund, and implement a legal services program for residents level facing eviction • Advocate for enabling legislation at the state level to support just cause eviction and rent control Subsidy • Continue provision of tenant-based Per CAHF Committee recommendations, formalize, allocate funding to, Implement new tools: vouchers and competitively select nonprofit partners for existing programs: • Establish land bank • Continue provision of property tax relief • Formalize funding process for LIHTC development gap loans • Form local mortgage pool with • Establish goals and funding commitments • Formalize program for emergency rental assistance, in individual development accounts for CRHA public housing redevelopment continuation of COVID-19 efforts • Create an acquisition fund to preserve • Increase impact of existing homeownership programs, including market-rate housing and subsidized down payment assistance, single-family infill development, housing with expiring affordability owner-occupied rehab Work with local employers and CRHA to fully Begin conversations with partners to create additional homeownership establish employer-assisted down payment programs, including employer-assisted down payment assistance assistance programs and a Section 8 and a CRHA-led Section 8 Voucher-to-Homeownership program Voucher-to-Homeownership program, respectively HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 29 Revised funding page (20) Executive Summary | Snapshot of Impact summarizes impacts of recommendations, included in What could be achieved with $100M in investments over 10 years? executive summary With $10M in average annual spending over ten years, Charlottesville could grow its existing stock of subsidized homes by nearly 70 percent, preserve nearly 40 percent of existing subsidized housing at risk of becoming unaffordable or obsolete, and provide direct assistance annually to up to 2,000 households facing housing instability. The resulting level of production shown is only possible if funds are used efficiently and leverage private investment as well as state and federal resources— and, to this end, it will be essential to thoroughly underwrite all funding awards. Combining the subsidy tools represented here with land use reform and tenants’ rights tools will potentially decrease costs and expand program benefits, further increasing the impact of public dollars. Of the other tools, inclusionary zoning would directly contribute to the production of additional homes, which are not included in the estimate below. Estimated impact of $100M in Change in Subsidized Homes Households Stabilized Annually spending over 10 years Through programs such as LIHTC gap financing, Through programs such as property tax relief, These impact figures assume the following public housing redevelopment, single-family infill emergency rental assistance costs: • For newly subsidized homes, between $35K to $50K per home for new Newly construction, up to $50K for down payment assistance, and approximately 1,100 subsidized $25K for owner-occupied repairs homes • • For preserved homes, up to $20K through an acquisition fund, and between $45 to $50K per public housing home For stabilized households, annual costs of 600 Preserved homes + 1,600 – 2,000 Households up to $1,500 for property tax relief, $5K for emergency relief, and $9K for vouchers 1,630 These numbers represent one potential 1,000 Existing distribution of funding—the actual impact will homes depend on City Council’s final funding allocations, informed by recommendations Current With $100M by the CAHF Committee. HR&A Advisors, Inc. FINAL DRAFT Charlottesville Affordable Housing Plan | 30 Overview of Planning Commission Feedback (from February 9) HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 31 Overview of Next Steps HR&A Advisors, Inc. Charlottesville Affordable Housing Plan | 32 CITY OF CHARLOTTESVILLE AFFORDABLE HOUSING PLAN City Council Presentation February 16, 2021