Public Land & Affordable Housing in the Washington DC Region: BEST PRACTICES AND RECOMMENDATIONS By Robert Hickey and Lisa Sturtevant, PhD Center for Housing Policy and the National Housing Conference Prepared for ULI Washington February 2015 Executive Summary A decent, safe, and affordable home is an important foundation for success for all families and individuals, and an important building block for a healthy regional economy. But in areas like the Washington, DC region, high land costs, high construction costs, and limited development opportunities can make it challenging to create an adequate supply of homes for the local workforce, seniors, and other local residents. A policy of allocating public land for mixed-income or 100 percent affordable housing can be an especially valuable way to reduce development costs, increase development opportunities for affordable housing, and meet the housing needs of lowerincome residents, with less need for direct public subsidy. Through a review of development costs, local public goods on many different types of sites, exploring the land policies, and three recent public-land projects in potential of not just vacant publicly held lots but also the DC region—Arlington Mill Residences, The Bonifant under-utilized sites, parcels where existing public at Silver Spring, and 1115 H Street in Washington, DC— facilities are no longer needed, and as part of the this report provides recommendations to developers, development of new public facilities such as community advocates, and local governments for effectively using centers, libraries, fire stations, and police stations. public land to expand affordable housing opportunities. FINDINGS Both communities and developers accrue multiple benefits when they form partnerships to provide Across the country and in the Washington, DC region, affordable and mixed-income housing on public land. local jurisdictions have identified opportunities for using Discounted public land provides a valuable subsidy public land for affordable housing and other public that can enable deeper levels of affordability in higher- cover photo credit: Anice Hoachlander cost development areas and in higher-cost building public land, it is important to understand the types than otherwise financially feasible. Public land relationship between the value of discounting land development opportunities can also facilitate the at the chosen location and the difference between development of affordable housing in transit-accessible, revenue and development costs for below- amenity-rich locations. And the joint development of market-rate housing, as this relationship clarifies public facilities and housing properties can lead to the potential for cross-subsidizing the affordable infrastructure cost savings, better design, and more housing component. accessible public services. The strongest local public land policies are developed INVEST PUBLIC RESOURCES IN PREPARING PUBLIC SITES FOR DEVELOPMENT. Public with significant community engagement and are crafted activities that reduce hard and soft development with an understanding of the relationship between costs—such as clearance and decontamination total development costs, local housing needs, and of a site, infrastructure provision, or advanced neighborhood-level market dynamics. These policies completion of area land-use planning and seek to maximize opportunities for housing affordable entitlements—can further enable free or discounted to lower-income households but also recognize that public land to support a significant share of while free or discounted public land can close some of affordable housing. These activities reduce the the affordability gap, in many cases additional subsidies hard costs of development as well as the risk and and investments will be needed, particularly if the public time involved in mixed-income or fully affordable land is provided in exchange for community benefits development, which further reduces the need for beyond affordable housing. additional public subsidy and can attract better 3. development proposals. RECOMMENDATIONS 1. IDENTIFY PUBLICLY OWNED SITES IN ACCESSIBLE, HIGH-VALUE AREAS. Discounting with few neighborhood dis-amenities or site ADOPT A POLICY THAT PROTECTS SUITABLE PUBLIC LAND SITES AND ENABLES THEIR DEVELOPMENT WITH AFFORDABLE HOUSING. A local public land policy should set limitations has the best potential for supporting minimum affordability expectations for residential mixed-income housing without the need for development on public land, ensure that all capital significant additional public subsidy. These sites improvement project proposals are reviewed for offer the greatest potential for subsidizing more their potential to include housing, and permit the affordable homes through greater returns on the sale of public land for affordable housing at prices market-rate units. lower than appraised prices. 4. public land in highly accessible, high-value locations 2. BASE AFFORDABILITY EXPECTATIONS FOR INDIVIDUAL SITES IN AN UNDERSTANDING OF THE RELATIONSHIP BETWEEN LAND VALUES AND THE AFFORDABILITY GAP. 5. EMPOWER A LOCAL AGENCY TO LEAD A REGULAR, CROSS-AGENCY ASSESSMENT OF OPPORTUNITIES FOR DEVELOPING AFFORDABLE HOUSING ON PUBLIC LAND. When examining just how much affordable housing It may be helpful also to authorize a single agency can be built with the support of free or discounted to consolidate public holdings to streamline the 1 meaningful incentive to do so, many municipal CO-LOCATE AFFORDABLE HOUSING DEVELOPMENTS WITH NEW PUBLIC FACILITIES. In addition to repurposing surplus agencies not focused on housing are unlikely sites and obsolete public buildings, localities to take a hard look at their property holdings to should consider co-locating affordable housing determine if some could be used to support the with new public facilities such as libraries, fire development of affordable homes. stations, community centers, police stations, and process of both inventorying and disposing of 7. public land. Without an express mandate or parking garages. For sufficiently large sites, it may 6. LOOK FOR OPPORTUNITIES FOR CITIZEN EDUCATION AND ENGAGEMENT DURING THE PROCESS OF IDENTIFYING PUBLICLY OWNED SITES SUITED FOR AFFORDABLE HOUSING DEVELOPMENT, AND ESTABLISH CLEAR CRITERIA TO DRIVE THIS PROCESS. be advantageous to separate the housing property While it is important to limit site inventories and sharing infrastructure. from the public facility and to develop the site as “horizontal mixed-use.” This allows each property to move forward on its own timeline, independent of delays that can affect the other property, but does not necessarily preclude opportunities for analyses to objective measures, it is also valuable to suitable sites should include that the site is: clear LOOK FOR OPPORTUNITIES TO SHARE INFRASTRUCTURE, SUCH AS PARKING GARAGES OR COMMON UTILITIES, WHEN CO-LOCATING HOUSING WITH PUBLIC FACILITIES. When doing this, however, it is of legal encumbrances (such as environmental- or important that the public agency coordinate with the historic-preservation restrictions); clean (free of housing developer at the beginning of the process. environmental contamination); adequately sized and This can ensure that the benefits outweigh the shaped so that multifamily housing can support a costs of coordinating the development of shared sufficient number of housing units to be managed infrastructure, and that architects and contractors and operated efficiently; and located in an accessible for both the residential property and public facility location near frequent transit, daily necessities, and are not working at cross purposes. include community stakeholders in the early stage of site development so that community members are fully informed participants in subsequent planning processes. Key criteria for choosing economic and educational opportunities. 2 8. Introduction Reducing the land costs of a residential project can be a valuable way to foster housing affordability for lower-income residents in the Washington, DC metro area. Given the region’s strong economy, growing population, and shortage of available land in desirable locations, the Washington, DC area is home to some of the highest land costs nationwide, making it difficult to build housing that is priced at levels affordable to low- and moderate-income households. By offering publicly owned land at reduced or no cost to developers, communities can reduce overall development costs significantly and make affordable housing possible with much lower direct public subsidy. Many localities in the region are using publicly owned Offering public land at a steep discount can be a land to support mixed-income housing and increase valuable form of support for affordable housing, but the supply of housing affordable to lower-income it is just one piece of the subsidy needed to produce households. Across the country and in the Washington, affordable housing in many parts of the region. In DC region, local jurisdictions are taking a broad view addition, to maximize public land’s potential for of public land development opportunities, exploring supporting affordable housing, jurisdictions need the potential for affordable housing on not just vacant to develop a comprehensive inventory of municipal publicly held sites but also under-utilized parking lots, land holdings and a plan to use public land more sites where no-longer-needed public facilities are strategically. The lessons from recent public land located, and—increasingly—as part of the development deals can help inform local jurisdictions, developers, of new public facilities such as community centers, advocates, and others on effective ways to reduce the libraries, fire stations, and police stations. costs of using public land for affordable housing and to maximize the potential for successful partnerships. 3 Offering public land at a steep discount can be a valuable form of support for affordable housing, but it is just one piece of the subsidy needed to produce affordable housing in many parts of the region. The term “affordable housing” is used broadly in this report to refer to rental or for-sale housing that is reserved and priced affordably for households earning less than 80 percent of area median income (AMI). Eighty percent of the FY2014 AMI in the Washington, DC region was defined as $68,500 for a family of four. 3. Drawing on a review of experiences from around the region and across the country, this section describes various types of public land development opportunities, ways that local jurisdictions have inventoried their public land, and how localities have approached setting affordable housing expectations for public land. 4. This report is divided into four sections: 1. PROMISING LOCAL PUBLIC LAND POLICIES. RECOMMENDATIONS FOR PUBLIC LAND STRATEGIES IN THE WASHINGTON, DC REGION. This section summarizes lessons and ANALYSIS OF LAND COSTS. This section insights derived from the analysis of land costs, examines the contribution of land costs to the total case studies, and public land policy review to costs of production of affordable and mixed-income provide specific recommendations for effectively housing projects. It discusses the key drivers of land using county-, city-, or school board-owned land values, provides local estimates of the ratio of land to increase the supply of affordable housing in local costs to total development costs, and assesses the jurisdictions in the Washington, DC region.1 ability of free or discounted public land to provide sufficient subsidy to support affordable housing under different scenarios. 2. CASE STUDIES OF PUBLIC LAND PROJECTS IN THE WASHINGTON, DC REGION. This section provides case studies of three affordable housing developments recently built on publicly owned land, analyzing the benefits and challenges of building affordable housing on public land and discussing important lessons for future public land projects. 4 1 Other sources of publicly-owned land, including land owned by the state and federal governments and by transit authorities, are not discussed as part of this report. While there are opportunities for these agencies to partner with developers and make land available for housing, the processes and stakeholders involved can be quite different from scenarios where the local jurisdiction controls both the land and the development review process. I Analysis of Land Costs Land costs are an important contributor to the overall cost of developing housing. While the contribution of land to total development costs varies with location, housing type, and site conditions, data from a sample of residential developers in the Washington, DC region suggest that land generally accounts for between 5 and 35 percent of total development costs. In most if not all of the Washington, DC region, the conducting due diligence,2 as well as short-term land- contribution of land in relation to total development acquisition-financing costs. These secondary costs, costs is not high enough for affordable housing to however, tend to be relatively small compared to the become financially feasible solely through the provision actual price of land. of free land. An assessment of the ability of reduced land costs to make affordable housing feasible on a Economic theory suggests that the value of land is given site requires a comparison of per-unit land costs determined primarily by the rents that can be achieved (the value of the land subsidy) with the gap between the through its development, less hard construction costs, total cost of developing an affordable housing unit and soft costs, and developer return. Hard construction the total amount of available financing. costs include the expense of labor and materials DETERMINANTS OF LAND COSTS that go into building or rehabilitating a property, Land costs can be defined as the purchase price for a property, less the value of any structures on that property. The cost of land may also include the expense of obtaining a purchase option while 2 Purchasing an option grants a land buyer exclusive right to purchase the property at a given price over a designated period of time, during which the buyer can conduct “due diligence,” such as market, legal, and environmental assessments of the property, and secure necessary acquisition financing. 5 including the residential units, as well as other features are infill sites or sites with existing development. In of the development, such as parking. Soft costs neighborhoods where such land is limited—either include everything else involved in the development because of jurisdiction boundaries or because process, such as developer staff costs throughout existing uses preclude redevelopment—land prices the development timeline; fees involved in moving are forced up. Physical limits on the availability of a proposal through the land use and design review land in the core of the Washington, DC area suggest approvals process; architectural, engineering, financing, continued upward pressure on land prices in the and legal fees; the cost of environmental assessments; years to come. and, where relevant, the cost of preparing a bid for a site made available through a public Request for • HOUSING DEMAND. Strong housing demand Proposals (RFP). The cost of land for development is in the region pushes up land costs. The level of affected by not just cost and current rents but also housing demand is determined by the strength of the assessments of future potential rents. regional economy, wages and household incomes, and population growth, among other factors. There are several key drivers of land values: • • COMPETITION FROM OTHER USES. Residential, LOCATION. A site’s location is a critical driver retail, office, hotel, public facilities, and industrial of land costs, as it drives the rent potential for uses can be associated with different land values at development on that site. The value of a location a given location. If zoning allows for a variety of uses is closely tied to accessibility. Higher land costs on a site, these uses may have varying capacity to are often found in locations near the central bid up the overall cost of land. business district, close to workers and customers, close to high-quality schools, and with access • DEVELOPMENT POTENTIAL ON SITE. Because to transportation and transit networks. Location land costs are driven by future rents of development, value also reflects neighborhood amenities. Land the type and amount of development that is in neighborhoods with abundant and high-quality possible on a given site will also drive land costs. retail, parks, and cultural institutions often command The site’s zoning, which determines which land uses higher prices. Features such as good connectivity are permitted on a given site and at what scale of (e.g., sidewalks, bike lanes, transit access), views, intensity, is a key factor in the overall value of the and architectural character can also be associated land. In some jurisdictions, the general land use plan with higher land costs. Dis-amenities, including can provide an additional signal of development nearby environmental hazards, neighborhood crime potential by describing the jurisdiction’s vision and noise, and poor-quality existing housing stock for the area. The presence of physical or legal can bring land values down. encumbrances on a site (including affordable housing requirements) that limit how much of a land • OVERALL SUPPLY OR AVAILABILITY OF ACCESSIBLE SITES. The supply of land is a basic input into its overall value. Within the urban areas of the Washington, DC region, the vast majority of the land available for residential development 6 parcel can be developed and rented at market rents can dampen the overall value of the site. • OTHER FACTORS THAT AFFECT DEVELOPMENT COSTS. The costs of other across the urban and inner-suburban core of the inputs into the development process can affect development costs for multifamily and townhouse the overall value of a site. These costs include residential projects falls within the range of 5 to 35 the cost of construction materials for different percent in urban areas of the region. Washington, DC region, and their share of total housing types (e.g., low-rise versus high-rise developments); the cost and availability of labor; Several factors affect the ratio of land costs to TDC: the need for removal of environmental hazards; the availability of local infrastructure such as roads, • MARKET STRENGTH. Land may be 20 to 30 sewers, schools, and parks; other costs associated percent of TDC in highly valued, amenity-rich with development (e.g., proffers, community locations where considerable market activity is benefits); the cost of attracting equity investors already occurring and rents or home prices are to a given location (i.e., what returns are equity projected to rise. In weaker local markets, land investors willing to accept given the returns they costs could account for less than 10 percent of could receive in other investments); and the cost of TDC. This pattern suggests it is not just the location lending capital, driven in large part by the financial that matters in explaining land’s contribution to total risk of developing housing or other land uses in costs, but the timing of the particular project in the a given location. In addition, the complexity and neighborhood’s development cycle is also critical. length of the development approval and permitting process in a particular jurisdiction may influence • PRODUCT TYPE. Land is a greater share of development costs for townhouse or other low-rise the cost of development. properties than for developments of five or more Given that land costs are shaped by a complex set stories, which require more expensive steel and of factors, they are also dynamic. Land prices for a concrete construction materials. For comparably particular site may rise or fall in response to nearby located properties, one developer shared that land development activities, public investment, or changes might account for 10 to 20 percent of the total cost to zoning permissions. Or land costs may change as a of development for townhouse projects but just consequence of changing local economic conditions, five to 10 percent for steel and concrete high-rise shifts in residential preferences, or rises and falls in development projects. construction costs. LAND COSTS AS A SHARE OF TOTAL DEVELOPMENT COSTS (TDC) • ENVIRONMENTAL CONDITION AND PHYSICAL CONSTRAINTS. Properties encumbered with environmental hazards, obsolete buildings that need to be demolished, or physical constraints such as Interviews were conducted with local housing steep slopes will have lower land-to-TDC ratios, developers who have recent experience with other factors being equal. townhouse and multifamily residential projects in urban DC region. Information gathered from these interviews ENTITLEMENT AND PERMITTING PROCESSES. If development approvals are subject suggests that land costs do, in fact, vary considerably to highly complex and lengthy processes, including and inner-suburban infill locations in the Washington, • 7 significant community opposition to the projects, the per unit, and high-rise construction somewhat greater total development costs may be higher, ultimately costs. Interviewed developers estimated that rents lowering the ratio of land to TDC. for these units, however, only generate enough net operating income to support roughly $100,000 in debt In certain unique situations, such as single-family financing per unit. The resulting average affordability neighborhoods where new home development gap of $150,000 per unit exists even before the costs opportunities are limited, schools are strong, and jobs of land are included.3 The gap becomes greater when are relatively accessible, land prices can climb to well land costs are added into total development costs. above 35 percent of TDC. “Tear-downs” of existing, Given the higher-income targeting associated with older homes are common in these neighborhoods. for-sale affordable homes, the affordability gap can be None of the developers interviewed for this report, smaller for ownership units. however, specialized in detached, single-family homes in high-value, suburban markets. IMPLICATIONS FOR THE USE OF PUBLIC LAND FOR AFFORDABLE HOUSING In the scenario described above of a 100 percent affordable rental housing development, free or reduced-cost land can help make affordable housing more feasible, but discounted land is not sufficient for feasibility. The remaining affordability gap must be filled With developers reporting land costs generally then with some form of public subsidy and/or tax credit between 5 and 35 percent of total development equity, and potentially through a mixed-income project costs, discounted public land can be one component where market-rate units can cross-subsidize affordable of the subsidy needed for making below-market- units. With mixed-income housing, discounted land rate housing financially feasible. It is important to creates more opportunities for making the affordable understand the relationship between land costs component feasible by increasing the profitability of the and the gap between total development costs and market-rate housing units. In areas with high location supportable debt to fully understand the potential for value, in which housing can command high market discounted public land to make below-market-rate prices, the savings on land costs for these market-rate housing more financially feasible. units may allow the developer to cross-subsidize the affordability gap on a share of the affordable units. Several developers estimated that the average Table 1 below provides an illustration of how the newly constructed multifamily affordable housing public land subsidy might support affordable housing unit qualifying for tax credit equity (affordable for development in three hypothetical scenarios. households at 60 percent of AMI) costs roughly $250,000 before land costs are included. Low-rise multifamily housing may have somewhat lower costs 8 3 This scenario is specific to rental properties. Table 1. Comparing the Capacity of Free Land to Subsidize Affordable Housing in Mixed-Income Developments under Different Rental Scenarios WEAKER MARKET/ MID-RISE DEVELOPMENT MODERATELY STRONG MARKET/ MID-RISE DEVELOPMENT HOT MARKET/ HIGH-RISE DEVELOPMENT LAND COSTS (PER UNIT) $25,000 $50,000 $100,000 TOTAL HARD AND SOFT DEVELOPMENT COSTS (PER UNIT) $250,000 $250,000 $300,000 TOTAL DEVELOPMENT COSTS (PER UNIT) $275,000 $300,000 $400,000 LAND AS A PERCENTAGE OF TOTAL DEVELOPMENT COSTS (TDC) 9% 17% 25% PROJECTED SUPPORTABLE DEBT (PER UNIT) $100,000 $100,000 $100,000 PER-UNIT SUBSIDY GAP FOR AFFORDABLE UNITS (TDC-RENTAL INCOME) $175,000 $200,000 $300,000 PER-UNIT SUBSIDY GAP REMAINING FOR AFFORDABLE UNITS, ASSUMING LAND IS PROVIDED FOR AFFORDABLE UNITS FOR FREE $150,000 $150,000 $200,000 NUMBER OF MARKET UNITS FOR WHICH LAND NEEDS TO BE PROVIDED FOR FREE TO OFFSET SUBSIDY GAP FOR ONE AFFORDABLE UNIT 6 3 2 SHARE OF TOTAL UNITS THAT COULD BE AFFORDABLE WITH SUPPORT FROM FREE LAND FOR THE ENTIRE DEVELOPMENT 1/7 (14%) 1/4 (25%) 1/3 (33%) As shown in the hypothetical examples above, the affordable unit in the moderate-market example (25 number of market-rate units that would need free land percent affordability), and two in the hot market/high to offset the subsidy gap for one affordable unit ranges construction cost example (33 percent affordability). from six to two, depending primarily on land values. In the weaker-market example, free land provided for Land encumbered with buildings that need to be every six market-rate units subsidizes the affordability demolished, environmental contamination, or other gap of one affordable unit (14 percent affordability). built-in costs, such as the need to provide public This figure drops to three market-rate units per facilities on site, has a lower value, and therefore 9 may support lower percentages of affordable units TAKEAWAYS without additional public assistance to defray these Four important conclusions can be drawn from the costs. Conversely, such activities as a public entity preceding analysis: contributing a share of the site’s infrastructure costs, creating an expedited land use approvals process, 1. Discounting public land in highly accessible, or allowing higher-income targeting for the affordable high-value locations with few neighborhood dis- housing units would decrease the affordability gap and amenities or site limitations has the best potential for allow for a greater share of affordable units in each of supporting mixed-income housing in the DC region. the scenarios above. 2. While free or discounted public land can often Mixed-income housing can be an effective way to begin to close the affordability gap, in many cases create more opportunities for making affordable additional subsidies and investments will be needed, housing feasible through discounting public land by particularly if the public land is provided in exchange cross-subsidizing the affordable units with returns for community benefits beyond affordable housing. from the market-rate units. In areas with high location value, in which housing can command high market 3. Public investments that reduce hard and soft prices, free or discounted public land that can be used development costs, such as clearance and in part for market-rate housing can be very valuable. decontamination of a site, infrastructure provision, The savings on land costs across both market-rate and or advanced completion of the rezoning and/ affordable units may be sufficient to allow the developer or permitting process, can further enable free to cross-subsidize the affordability gap on a share of or discounted public land to support a share of affordable housing. affordable housing. 4. When examining just how much affordable housing can be built with the support of free or discounted public land, it is important to understand the relationship between the value of land at the chosen location and the affordability gap for below-marketrate housing. 10 II Case Studies of Public Land Projects in the Washington, DC Region 11 Figure 1. An exterior photo of the Arlington Mill Residences 1. Arlington Mill Residences DEVELOPER: ARLINGTON PARTNERSHIP FOR AFFORDABLE HOUSING (APAH) Arlington Mill Residences, completed in February 2014, serving as the foundation for each building. The is the first public/private partnership using existing property is located along Arlington County’s rapidly public land for affordable housing development in redeveloping and transit-served Columbia Pike, next to Arlington County. Its success has encouraged the a popular bicycle/walking trail and park. county to expand its use of public land for affordable 12 housing through a new initiative currently known as The apartments at Arlington Mill are oriented Public Land for Public Good. The developer of the predominantly toward families. Ninety-eight of the 122 Arlington Mill Residences is the Arlington Partnership apartments have two or three bedrooms. Most (94) for Affordable Housing (APAH), a nonprofit corporation of these two- and three-bedroom units are priced that develops, preserves, manages, and advocates for families earning up to 50 and 60 percent of AMI for quality rental housing for low- and moderate- respectively, with rents between $1,107 and $1,557 per income families. The Residences is a four-story, month. One-bedroom rents range from $923 to $1,123. 122-unit property with 100 percent of the apartments Additionally, 13 units at Arlington Mill are designated priced for households earning less than 60 percent for formerly homeless individuals and families with of area median income (AMI). The property was built very low incomes. Eight of these units are “no-barrier” on county-owned land alongside a new county-built supportive housing studios for formerly homeless community center, with a shared parking garage individuals living with or recovering from addiction or 12 mental illness. These apartments are linked with a lease that gave APAH the right to build Arlington Mill full-time supportive service coordinator. Residences atop the county-constructed parking garage and own the residential “improvements” The immediate proximity of the community center for 75 years without having to purchase the land is a significant amenity for Arlington Mill residents. beneath it. APAH purchased a share of the garage Tenants regularly use the center’s recreational for use as parking for its tenants. According to spaces and computer lab, and participate in Maureen Markham, Arlington County Senior Housing community center programming. Development Specialist, the county preferred a DEVELOPMENT PROCESS ground lease because it enabled county ownership of the land in perpetuity, and offered greater control Arlington County purchased the land that would over what happens at the site than would have been later support the Arlington Mill Community Center possible through land use covenants. and Arlington Mill Residences in 1996. At that time, land along the Columbia Pike corridor was relatively inexpensive. The site was home to an obsolete Safeway and a large surface parking lot. The county DEVELOPMENT TIMELINE DECEMBER 2009 Initial developer backs out due to financing problems JULY 2010 County issues new RFP for just the housing component OCTOBER 2010 APAH selected as developer of housing component FEBRUARY 2011 Land use approvals secured OCTOBER 2012 Groundbreaking on residential component FEBRUARY 2014 Arlington Mill Residences completed acquired the site to utilize the Safeway structure as a community center and eventually include a small school. Housing was not part of the original site plan, but when plans for the school fell through, a residential component was added to help make mixed-use redevelopment financially feasible and to respond to growing calls for more affordable housing in the county. In 2009, a final plan was approved to build the new community center and market-rate and affordable housing. However, as a result of the economic downturn, the developer was unable to finance the market-rate housing portion and pulled out FINANCING of the project. In December 2009, the county The total cost of developing the Arlington Mill board modified the approved plans, splitting the Residences was approximately $30.9 million, or development into two phases, so that it could move $253,373 per unit. The project was financed with forward with the development of the community low-income housing tax credits. center. In October 2010, the county selected APAH as the developer for the affordable housing The discounted public land and other shared development to be constructed adjacent to the infrastructure were critical to the financial viability community center. of the project. The county provided the land for Arlington Mill Residences to APAH through a The county provided the land to APAH for the discounted, 75-year ground lease. APAH pre-paid Arlington Mill Residences through a 75-year ground the lease with a lump sum payment of $1.55 million. 13 Figure 2. Arlington Mill Residences, shown here next to the community center, credit: Anice Hoachlander Figure 3. One of the outdoor common areas at Arlington Mill Residences, credit: Anice Hoachlander Dave Perrow, APAH Director of Development, estimates one shared garage rather than two side-by-side that the value of the land on the open market would garages increased efficiency and avoided structural have been over $8.5 million, increasing per-unit costs challenges that engineers discovered would have to $310,750. This additional expense does not include necessitated expensive correction. The county billed the interest costs that APAH would have incurred in APAH on a pro-rata basis for the construction of the financing the site’s acquisition, or the cost of obtaining garage, passing along savings that resulted from the an option for the land. greater economies of scale. Additionally, the county paid for the construction of shared infrastructure, Deeply discounted land eliminated the need for including utilities, streetscape improvements, and financing from the county’s Affordable Housing storm-water management. Investment Fund, and enabled APAH to return a portion of its tax credit award to the state—a first in Virginia. BENEFITS AND CHALLENGES OF USING PUBLIC LAND 14 For APAH, having access to discounted land was preferable to receiving direct financial assistance to purchase the land. Perrow explained that a discounted ground lease provides more certainty in the current The combined cost savings of discounted land and political and fiscal environment than a series of county-provided infrastructure enabled APAH to include financial assistance packages that may be subject to apartments at rents affordable to very low-income more competition and the unpredictability of annual households and to build more family-sized units. The governmental appropriations, and that subject the county-built parking garage and infrastructure resulted borrower to a host of additional tax issues. Also, in important cost savings for the project. Constructing financial assistance often requires more immediate repayment than a 75-year ground lease. The Arlington public land and coordinated development with Mill Residences will revert to ownership by the county public facilities. The success of the Arlington Mill once the ground lease expires, so the discounted land Residences and Arlington Mill Community Center effectively has a 75-year repayment period. has propelled a countywide initiative to explore affordable housing at other publicly owned sites. As While there were benefits associated with the county part of the county’s proposed FY2015–2024 Capital partnership, the project also encountered several Improvement Plan, the county has identified eight challenges. First, while economies of scale were publicly owned sites with significant potential for achieved through a single garage and the county’s future affordable housing development.Key lessons provision of shared infrastructure, the project required from Arlington Mill Residences: frequent coordination between APAH and the county’s architects and contractors to ensure the garage • Discounting public land and sharing some costs would properly interface with the housing above. of development can enable a locality to create This added some costs and delay during the early affordable housing options for very low- and stages of construction. In addition, APAH was unable extremely low-income residents without the need for to use its low-income housing tax credit award for substantial additional local subsidy. 11 months because it could not begin construction on the Residences until after the county had finished • These forms of “in-kind” subsidy may be more construction on the garage. As a result, APAH incurred valuable to developers than direct financial assistance a $15,000 penalty ($1,500 per month) from the Virginia because of the greater certainty they provide, and the Housing Development Authority, which issues state much longer repayment period involved. housing tax credits. ASSESSMENT AND LESSONS Both APAH and Arlington County officials report that the joint development of Arlington Mill Residences and the Arlington Mill Community Center was a very positive experience. In September 2013, APAH received more than 3,600 applications for the Residences’ 122 units, indicating the strong demand for affordable housing in the county. The development of both new housing and a new community center is expected to be both an anchor and a catalyst for the continued revitalization of Columbia Pike. In November 2014, the property won the 2014 Virginia Governor’s Housing Conference Award for “Best Affordable Housing Development.” Both APAH and county officials say there are IMPACT OF PUBLIC LAND According to APAH Executive Director Nina Janopaul, “APAH was able to dramatically increase housing for extremely low-income families at Arlington Mill Residences because of significant cost savings achieved by building atop the county-built parking garage that is shared with the adjacent Arlington Mill Community Center. This public benefit of building on public land is having a profound impact on our very low–income individuals and families living there.” opportunities for similar, future partnerships involving 15 Figure 4. Diagram of the shared garage connecting Arlington Mill Residences and the Arlington Mill Community Center • Separate development of housing and public • To ensure that the savings outweigh the costs facilities on shared public land can enable a locality of coordinating the development of shared to build a public facility without being slowed by infrastructure, architects and contractors for both market changes affecting housing development. the residential property and the public facility need to coordinate from the beginning of the project. • By developing housing and public facilities on the same site, the locality and the developer can • While new for Arlington County, offering public achieve net cost savings by sharing infrastructure, land through a ground lease was not prohibitively including parking. complicated and is a promising tool for the county to use in the future. 16 Figure 5. Artist’s rendering of the future Bonifant apartments, with new library in the background, credit: VOA Architects 2. The Bonifant at Silver Spring DEVELOPERS: MONTGOMERY HOUSING PARTNERSHIP AND DONOHOE DEVELOPMENT The Bonifant at Silver Spring, now under construction, is of housing affordable to lower-income residents. The a mixed-income, 149-unit apartment building for seniors property is located in a prime, highly accessible location in downtown Silver Spring, located adjacent to a new, in downtown Silver Spring. In addition to being adjacent nearly completed public library. The development is a to a new, 60,000-foot, state-of-the-art library, the site joint venture between Montgomery Housing Partnership is located within walking distance of the Silver Spring (MHP)—a 25-year-old nonprofit housing developer—and Metrorail station, the future Purple Line transit station, Donohoe Development—a division of The Donohoe and various bus lines. As Robert Goldman, President of Companies, Inc., one of the largest real estate MHP, said: “Our ultimate goal is to deliver an attractive, companies in the Washington, DC region. MHP will be affordable rental option, located within the heart of the long-term owner of the property. seniors’ existing support networks, and within walking distance to shops, grocery stores, and the vibrancy that The Bonifant and the Silver Spring library are being built downtown offers.” on public land that Montgomery County acquired and assembled in the late 1990s. The Bonifant will be the The 11-story property will include 10 studio, 119 one- first residential property built alongside a public-use bedroom, and 20 two-bedroom apartments. Most of facility in Montgomery County and is part of growing the apartments will rent at prices affordable for seniors efforts to use county-owned land to increase the supply earning between 30 and 60 percent of the area median 17 income (AMI), while 10 apartment homes will have that it would be difficult to obtain tax credits for no income restrictions. The project is anticipated to a property with such a small percentage of tax be completed in June 2016. credit–eligible units. Ultimately, the county dropped this restriction. The property is oriented toward active seniors seeking independent living. Amenity spaces In addition, the county asked initially for the will include a secure, access-controlled entry, housing component to be built on top of the new a multipurpose community room and exercise library. But concerns grew that a long entitlement room, and an outdoor terrace. The property process for the housing component would stymie will also have 6,300 square feet of retail space plans to fast-track the library, so the county instead on the ground floor. The development team is planned for side-by-side development with the still working out which support services will housing and library portions on separate parcels accompany the property. and separate timelines. DEVELOPMENT PROCESS TIMELINE The Montgomery County Department of Housing and Community Affairs (DHCA) acquired the FEBRUARY 2010 County issues RFP for The Bonifant JANUARY 2013 Groundbreaking for the library JULY 2013 County planning board approves development plan for The Bonifant OCTOBER 2014 Construction commences for The Bonifant MARCH 2015 Expected completion of library JUNE 2016 Expected completion of The Bonifant land for The Bonifant and the new county library in the late 1990s as part of efforts to remedy a dilapidated apartment building with a long history of health, safety, and fire-code violations, and to create space for a new public library. Montgomery County purchased the apartment building as part of a housing-code-enforcement action in 1999, with acquisition funds coming from the county’s local housing trust fund. The county subsequently purchased two adjacent commercial properties and eventually consolidated the three properties into a single parcel totaling 1.5 acres. This parcel was later subdivided into two separate ownership plats to facilitate financing for the housing component. FINANCING 18 The first request for proposals at The Bonifant site When completed, the total cost of The Bonifant is asked that no more than 30 percent of the housing expected to be $44.8 million or about $300,671 per units be affordable to households with incomes unit. Given its deeply affordable rents, the property below 60 percent of area median income (AMI), relies on multiple sources of public funding to and that 40 percent be market-rate. The remainder cover development costs. One of the key subsidies was to be priced below 120 percent of AMI. But for the project is a deeply discounted ground developers countered that the development would lease of $25,000 per year. Over its 77-year term, need low-income housing tax credit equity, and ground lease fees will total just $1.925 million. An County Executive Isiah Leggett has said: “This project exemplifies how government and the private sector can work together towards a worthwhile goal of creating more affordable senior housing.” independent appraisal prepared in 2013 valued the land for The Bonifant at $8.2 million, assuming no affordability restrictions for the property. It is unclear at what price the land would have been appraised under normal conditions, assuming 12.5 percent affordability per the county’s inclusionary housing requirements. Other public support included: $11.7 million from the Montgomery County Department of Housing and Community Affairs (DHCA) for permanent financing; an additional $1.7 million in operating funds for the 30 percent AMI units from DHCA; 4 percent low-income housing tax credits and bond proceeds from the Maryland Department of Housing and Community Figure 6. The new Silver Spring library, under construction Development; Rental Housing Works funds from the State of Maryland; and a property tax exemption from Given the high costs of constructing the 11-story the county through the county’s PILOT program. Private property, and the high level of public financing needed financing included an FHA-insured loan from Wells to cover the gap between affordable rents and Fargo in the amount of approximately $15.1 million. combined hard and soft development costs, it would BENEFITS AND CHALLENGES OF USING PUBLIC LAND have been impossible to assemble sufficient resources from the county and state to cover even moderately expensive land costs, according to MHP Senior Project A shortage of affordable land in Montgomery County Manager and Legal Counsel Stephanie Roodman. has led to few new affordable housing properties being The spatial constraints of building in a tight, downtown constructed recently in Montgomery County, and none location triggered the need for higher-cost, high-rise in accessible, downtown locations. By offering public construction. land for mixed-income housing in downtown Silver Spring—at a deeply discounted price—the county Another financial advantage for the development team made it feasible to create a rare example of new was that the county offered the site clear of existing housing for seniors in a location with convenient access buildings or debris, having previously demolished to many services and transit options. existing structures. Additionally, the county handled lot 19 consolidation and subdivision in advance of MHP and Donohoe taking hold of the ground lease, shielding the development team from needing to engage in what proved to be a two-year process. Given the deep discount on the land lease and significant public subsidy, MHP and Donohoe Development were able to set rents at lower levels than MHP typically is able to offer, with many units affordable to households at 30 percent of AMI. Finally, Roodman reports that the county was a valuable ally in the land use approvals process. “They were with us every step of the way.” This support, says Roodman, was “essential to getting things done in a timely manner” and keeping down costs. Acquiring and developing the Silver Spring site has not been without challenges, however. The site’s development was subject to a higher level of scrutiny than typical private development in the county, given that it involved public land. MHP and Donohoe received multiple requests for design changes as the Figure 7. Project Site Plan, credit: Parker Rodriguez IMPACT OF CO-LOCATION Jay Greene, Chief of the Housing Division of the Montgomery County Department of Housing and Community Affairs, reports that the experience of The Bonifant and the Silver Spring library demonstrates that co-location can lead to a “better design and a better living environment” for affordable housing. The two properties relate to each other physically and programmatically in a way that would not have occurred had they not been developed on adjacent sites, at approximately the same time. development process unfolded. Additionally, the public/ private partnership created a need for more intensive and frequent communication with a larger and broader group of public agency stakeholders than normal during the development process, which added to staffing and overall development costs. The county found it advantageous to provide the property for The Bonifant through a ground lease, rather than selling the property outright. Among other benefits, a ground lease allowed the county to hold on to development rights for the land in perpetuity, and to write into the lease some notification provisions, such as a requirement to be notified of new commercial tenants. But this also created challenges for the development of The Bonifant. To create a legal ownership structure for The Bonifant that would 20 enable project financing, the county had to establish a Key lessons include: separate ownership plat for the site, which the county had not done before. Also, the county’s lease covers • Public land can provide otherwise unavailable the minimum amount of land necessary for the housing sites for mixed-income and affordable housing in component, leaving the county in control of adjacent amenity-rich, transit-served locations. land such as alleyways, forest conservation areas, and roads, and allowing it to maintain control of the • Co-locating housing and public buildings can create access to the public library. But the county’s ownership a better design and a better living environment for of the land at both The Bonifant and the library made affordable housing than normally available. easements complicated, and the county and MHP had to negotiate separate access agreements to resolve easement issues. • Given that public-use facilities and housing properties sometimes need to move forward on different timelines, it can be helpful to pursue Lastly, extra work was involved in coordinating the horizontal mixed-use rather than vertical mixed-use construction of the library and The Bonifant. The on public land. library’s construction began first, and construction crews used The Bonifant site for staging. Coordination • Developers and public agencies should anticipate was required to ensure that the construction timelines that the development process may involve more overlapped successfully, and that The Bonifant site was staff time than normal given the extra coordination clear of debris and staging materials by the time the involved in a public/private development partnership. crew intended to break ground. ASSESSMENT AND LESSONS • While discounted public land can be very valuable for mixed-income housing developments, both In spite of the challenges involved, both the discounted land and significant public subsidy are development partners and Montgomery County officials needed to build properties with high percentages of report a very positive experience with the development affordable housing and/or deeply affordable housing of The Bonifant at Silver Spring. According to Jay in high-cost properties. Greene of DHCA, the experience with The Bonifant has encouraged the county to go forward with co-locating other mixed-income housing developments with public facilities. It has “opened up a new way of thinking” about how to use public land for affordable housing 21 3. 1115 H Street DEVELOPER: 1115 H STREET PARTNERS LLC (LED BY WALL DEVELOPMENT GROUP) Wall Development Group—a for-profit developer in first streetcar line in 50 years and existing bus service. the District of Columbia—leads a partnership that Both transit services connect riders to Union Station, is building a 16-unit, mixed-income, mixed-use where passengers can access the regional Metrorail development for first-time homebuyers on the eastern system as well as Amtrak and commuter trains and edge of the emerging H Street District in northeast buses. Given H Street’s rapid revitalization over the Washington, DC. The property, known as 1115 H last decade, residents at this location will also have Street, is under construction on a lot formerly owned access to a growing number of shopping, dining, and by the city that had been vacant since the late 1960s. entertainment options within walking distance. Four of the 16 units (25 percent) will be offered at prices affordable to households earning between 50 Each of the condominiums is a one-bedroom unit and 80 percent of area median income (AMI). The approximately 650 square feet in size. Two of the remaining units are expected to be priced for first-time four below-market-rate condominiums will be priced homebuyers with prices starting at $349,000. The affordably for households at 50 percent of AMI at a building is anticipated to be completed by the end of maximum purchase price of $114,200. The other two January 2015. affordable homes will be priced for households at 80 percent of AMI at a maximum price of $216,600. The five-story property will offer four stories of Because the property has fewer on-site amenities than condominiums over ground-floor retail on a site that typical new properties in the District (for example, no is just 1/8 acre in size. The development team aims to swimming pool), condominium fees are set relatively low. make it the first mixed-use residential/retail building in DC to achieve a LEED Platinum certification from DEVELOPMENT PROCESS the U.S. Green Building Council. The property will The District of Columbia took ownership of the lot feature an array of environmentally friendly features at 1115 H Street following the riots of 1968 that that are expected to help residents save money on devastated the H Street neighborhood and accelerated transportation and utility costs, including a green roof, the abandonment of properties along the corridor, triple-glazed windows, high-efficiency heating/cooling including the site’s previous structure, a Woolworth systems, wiring for potential electric car charging department store. With limited investment flowing into stations, and covered bicycle storage. Units also come the neighborhood over the next 30 to 35 years, the with a one-year “transit package” that includes a pre- site stood vacant. But as demand for city living grew, loaded transit card and complimentary memberships to city planning efforts focused on the corridor, and local car-sharing and bike-sharing services. nearby H Street properties such as the Atlas Theater were renovated, the corridor began to rebound in the The 1115 H Street project is located along a corridor that will be well served by transit, including the city’s 22 mid-2000s. Interest in neighborhood retail and housing grew further as plans for a new streetcar line Gaining city approvals and securing financing took moved into the construction stage. six years. It took four years to secure financing and obtain DC Council approval for the sale, and In 2007, the city issued an RFP for purchase and it was another two years before Wall Development development of 1115 H Street with the expectation Group was able to close on the property and of at least 20 percent affordability. The city initiate construction. initiated the RFP to spur private development along the corridor and to further goals established by community planning documents such as the H Street NE Strategic Development Plan, which TIMELINE FALL 2007 Wall Development Group selected for RFP JULY 2011 DC Council approval of project JULY 2011 TO JAN 2013 Completion of conceptual drawings, design, and construction drawings, and community outreach and engagement APRIL 2013 Land transferred to Wall Development Group AUGUST 2013 Final planning/zoning approvals AUGUST 2013 Groundbreaking for 1115 H Street JANUARY 2015 Expected completion of property prioritized mixed-income housing and ground-floor retail in this section of H Street. At the time, the District lacked a rigid affordability standard for public land, but staff were authorized to negotiate for affordable housing whenever extending tax incentives, public financing, and/or the right to purchase or lease District-owned land, and 20 percent was a common affordability request.4 In late 2007, a partnership led by Wall Development Group was selected as the site’s developer. The development team offered greater affordability than required—25 percent—by voluntarily subjecting the property to the city’s inclusionary housing policy, which was still being phased in and not yet mandatory. By doing so, the project could benefit from bonus density offered with inclusionary housing. With a 20 percent density bonus, the development team was able FINANCING to move from initial plans for 14 total units (with At completion, development costs for 1115 H Street three affordable units) to 16 total units (one extra are expected to total approximately $6 million market-rate unit in exchange for one additional for the 16 residential units as well as the 2,700 affordable unit), leading to four of 16 units priced square feet of retail space. This cost includes land below market (25 percent). acquisition, soft costs, and hard costs. Total costs would have been higher had the city 4 The District has since moved to standardize its affordability standards—first with the adoption of a city inclusionary housing ordinance, fully implemented in 2009, and more recently with the passage of the Disposition of District Land for Affordable Housing Amendment Act of 2014, which is discussed later in this report. not agreed to sell the property at a reduced price that reflected the reduced income potential of pricing four of the condominiums well below market rate. The District Office of the Deputy 23 Mayor for Planning and Economic Development (DMPED) sold the land to the development team for $1 million (approximately $61 per square foot of floor area). DMPED also provided seller financing to aid with 1115 H Street LLC’s purchase of the property. This improved the feasibility of the project by allowing the development team to defer payment for a portion of the land costs. The development team also accessed city financial incentives for such elements as green building features that are available to building owners throughout the city. The cost of making a fourth condominium available at a below-market-rate price was fully cross-subsidized by the 20 percent density bonus, which enabled the addition of an extra market-rate unit at the site. BENEFITS AND CHALLENGES OF USING PUBLIC LAND The greatest benefit of utilizing public land for the development of 1115 H Street, according to Stan Wall of Wall Development Group, was the flexibility Figure 8. Artist’s rendering of the exterior of 1115 H Street, credit: Square 134 Architects shown by city staff and their commitment to helping the development balance city social objectives with IMPACT OF EXPEDITED REVIEW Said developer Stan Wall: “Given that there are already significant challenges associated with any development project, the city should provide enhanced certainty on public properties through a truly expedited development review and permitting process.” the need for financial feasibility. As mentioned above, staff at DMPED negotiated a unique financial package, which included seller financing, to aid with the financial feasibility of the development. In addition, staff helped make sure the development team was aware of citywide incentive programs that could help offset some of the property’s development costs associated with the extensive green building elements necessary for achieving LEED Platinum certification. Finally, by virtue of the site being publicly held, the development team did not need to take out an option to purchase the site, which reduced land-holding costs during the lengthy approvals processes. A major challenge for development of the site was the lengthy entitlement and sale process. The land use approvals and design process alone took several years. 24 Overall approvals were extended by an additional year because of the need for City Council review of the sales purchase agreement. “There were no shortcuts” resulting from this being a publicly owned site, according to Wall. Not all of the delays with the project were related to the use of public land, however. While Wall Development Group expects the streetcar will be a “tremendous asset” for future residents, it was also a significant challenge throughout the development process given that the streetcar was under construction and undergoing initial testing at the same time the development project was under construction. The need to coordinate with the Figure 9. 1115 H Street in neighborhood context streetcar implementation team added approximately three to four months to the overall construction schedule. ASSESSMENT AND LESSONS • Clear cost data is important to setting a fair land price. It is helpful for both developers and city staff The development of 1115 H Street will not be complete to enter into price negotiations with clear data on until the end of January 2015, but initial lessons can be costs to accurately assess the affordability subsidy drawn from the development process: gap, and the resulting land price discount needed to support both affordability and financial feasibility. • It is important to find ways to expedite the sale and approval process to reduce uncertainty and • Mixed-income housing can be feasible on public accelerate the delivery of affordable homes on land in moderately warm housing markets like H public land. As Stan Wall explained, “Given that Street. But land discounts will be insufficient to there are already significant challenges associated support significant levels of affordability (in this case, with any development project, the city should 25 percent affordability) without complementary provide enhanced certainty on public properties forms of public support, such as zoning bonuses through a truly expedited development review and and other financial incentives. In the case of 1115 permitting process.” This could reduce the time H Street, the property needed a density bonus and soft costs involved in the overall process of to move from 20 to 25 percent affordability, and developing mixed-income or affordable housing on benefitted from other widely available incentives that public land, and ultimately could reduce the need reduced costs while proving local environmental and for additional public assistance to enable these economic development community benefits. properties to provide important community benefits. 25 III Promising Local Public Land Policies In most communities, local public agencies control significant amounts of land. Publicly owned land can include both undeveloped and developed parcels, such as schools, public hospitals, parking lots, fire and police stations, and municipal buildings. Communities may also have surplus properties that are no longer needed to serve public purposes. Others may have properties that are underutilized and could accommodate more intensive development. By finding affordable housing opportunities on or schools, have extra land that could be spun off as publicly owned land, localities can free up land in affordable homes, or whether certain types of locations, desirable locations where development opportunities such as surface parking lots or low-density municipal are expensive and limited and help bring down land offices, could be redeveloped as mixed-use properties, costs to make affordable housing possible with less with housing above, to both fulfill the original use and significant direct outlays. provide affordable homes. With a little creativity, housing development Key steps in making public land available for affordable opportunities can be found in places other than housing are: vacant sites, including sites in active use, as well as in outdated structures that the community cannot or will not demolish. In high-growth housing markets, such • Conducting an inventory of publicly owned land that would be suitable for affordable housing; as the Washington, DC region, communities may wish to consider whether publicly owned sites, such as hospitals, libraries, community centers, public housing, 26 • Prioritizing the use of suitable publicly owned land for affordable homes; • Engaging community stakeholders in a shared vision of using public land for affordable housing; and PRIORITIZE THE USE OF SUITABLE PUBLICLY OWNED LAND FOR AFFORDABLE HOMES Since publicly owned land may be sold or transferred • Ensuring that the procedures for property for any number of purposes, communities that wish disposition allow transfers to occur (whether by sale to use publicly owned land for affordable housing or lease) in a timely fashion, at below-market prices. development will need to clearly articulate that as a IDENTIFY OPPORTUNITIES ON PUBLICLY OWNED LAND ACROSS ALL AGENCIES priority. Legal mechanisms, such as local ordinances, can authorize and require the use of suitable public land for affordable homes, or at least establish the inclusion of affordable homes as a default expectation, In most communities, publicly owned land is controlled subject to review. For localities that have not conducted by numerous separate agencies, such as school an analysis of public land that would be suitable for boards, hospital boards, fire and police departments, affordable housing, providing some flexibility in a and departments of transportation. In jurisdictions requirement may be useful given that some public in the Washington, DC region, the city or county properties may hold more promise for affordable and the school board are the primary owners of housing than others. local public land. A formal structure, such as an interagency taskforce or an agency assigned to this Another approach used by several states and local task, can facilitate the identification of sites that have legislators is to adopt a public land disposition policy development potential, create a unified list of these that first offers publicly owned land (whether for parcels, and improve public and private awareness sale or lease) to affordable housing developers. Two of these hidden assets. Another approach that can limitations of this approach are that it does not ensure facilitate the identification of sites with development that publicly owned sites are protected as development potential is for a single municipal agency to assume opportunities for affordable housing at times when the ownership of all public land that is under the jurisdiction development community is not ready to build affordable of the municipality. housing at an offered site, and it does not necessarily lead to the provision of public land at a discounted Because few agencies like to give up land they think price. However, a first-right-of-refusal policy can still be they might need in the future, or go through the helpful in facilitating access to publicly owned land for headache of new construction over or next to existing affordable housing development. buildings, strong support from the jurisdiction’s leadership as well as tangible incentives for the agencies may be needed to ensure an effective, interagency process, and especially to consolidate public holdings under a single office. ENGAGE COMMUNITY STAKEHOLDERS IN A SHARED VISION OF USING PUBLIC LAND FOR AFFORDABLE HOUSING However a local jurisdiction develops a plan for prioritizing public land sites for affordable housing, it is critical that it engages with community stakeholders early in the process. Residents, businesses, advocates, 27 sites for affordable housing. These challenges raised by BEST PRACTICES FROM AROUND THE REGION AND AROUND THE COUNTRY community stakeholders may be economic, strategic, Across the country, many local communities have or political, and understanding where concerns may adopted policies around the use of public land for arise early is essential to developing a public land affordable housing. King County, WA; San Francisco, policy. Early engagement with the community can also CA; New York, NY; Arlington County, VA; Montgomery help the local jurisdiction identify potential champions County, MD; and Washington, DC are among the many for a public-land-for-affordable-housing policy from a cities and counties that have developed promising diverse set of interest groups. approaches to identifying public land development and others can help illuminate issues or obstacles in an overall public land strategy or in the use of particular REDUCE BARRIERS TO THE DISPOSITION OF PUBLICLY OWNED LAND FOR AFFORDABLE HOMES opportunities, prioritizing affordability on these sites, and/or reducing barriers to the disposition of publicly owned land for affordable housing. Standard procedures for selling or leasing publicly KING COUNTY, WA owned land can involve lengthy delays and inflexible King County’s Ordinance 12394, approved in 1996, requirements for sale to the highest bidder without states that any surplus parcels that are suitable for regard to the planned land use. While the public housing should be sold or leased for the development has an interest in getting the maximum value for of affordable housing. Each year the surplus property publicly owned assets, and ensuring oversight and list is updated, and suitable properties are offered for accountability, these procedures can increase the cost development as affordable homes. Factors considered and hinder the goal of promoting the development of in determining suitability of public sites include affordable housing. topography, zoning, and availability of utilities. To facilitate more efficient affordable housing In its first examination in 1997, King County found development on public land, land disposition that 52 out of 750 surplus county-owned parcels had procedures can be amended to acknowledge some housing development potential. By the beginning of legitimate public purposes for below-market sales, 2007, the ordinance had generated 400 new affordable and to authorize below-market sales specifically for housing units, including 170 units in the Greenbrier affordable housing. Additionally, some communities Heights development in Woodinville.5 have established clear, expedited procedures for the disposition of publicly owned land for affordable homes to increase the predictability and speed of this process. 5 See: Center for Housing Policy, “Identify opportunities on publicly-owned land across all agencies” (http://www. housingpolicy.org/toolbox/strategy/policies/public_land. html?tierid=156) 28 SAN FRANCISCO, CA allows the transfer to take place for below-market San Francisco is another example of a community value or at no cost. requiring publicly owned land to be used for affordable homes, though presently the city applies While the ordinance has led to the creation of this requirement to only some of its agencies. In 150 affordable homes since 2002, including 111 2002, the City of San Francisco amended its Surplus efficiencies and apartments for formerly homeless City Property Ordinance to require the transfer of families and veterans, city staff are leading the underutilized or surplus property to the Mayor’s Office adoption of a broader Public Sites Development of Housing for the development of affordable housing, Framework to increase the supply of affordable particularly housing for the homeless. The policy homes on publicly owned land. One of the limitations excludes “land and buildings reserved for open space of the San Francisco ordinance is that it places the or parks purposes,” various rights-of-way, and any responsibility for determining which properties are property owned by the school district. It also excludes underutilized or surplus with each individual city “enterprise” city agencies that rely on the proceeds of department, and does not audit departments or disposed land, including the city transportation agency, provide incentives for turning over property for use utilities commission, and port. Examples of agencies as affordable housing. Additionally, only two of the 15 subject to the policy include public works, public health, sites donated to the Mayor’s Office of Housing to date libraries, and parks and recreation. have been usable for housing development. Properties that are suitable for housing development By taking a broader and more proactive approach are to be sold or leased to a non-profit for the to the use of public land for affordable housing, city development of: staff aim to create up to 4,000 new housing units by 2020, with half affordable for low- or moderate-income • Affordable housing for the homeless and households earning less than 20 percent of AMI, • On-site services for the homeless or non-profits serving the homeless, or • Affordable housing for households earning less than households.6 Some of the ideas being considered are expanding efforts on enterprise-agency and school property, and allowing mixed-income housing on public land to improve the potential for cross-subsidizing affordable units with a market-rate component. 60 percent of AMI. NEW YORK, NY Properties that are not suitable for housing Due to the limited availability of land in New York City development are sold in order to generate financing for for housing development, the city has decided to think affordable housing. creatively about developing affordable housing on underutilized, publicly owned sites. As part of the city’s San Francisco’s Surplus City Property Ordinance New Housing Marketplace plan, created in 2003, the also waives the city’s standard requirement that city actively considers the potential of all underutilized, properties must be sold for no less than 100 percent publicly owned sites, such as low-rise structures in of fair market value. When properties will be transferred for the development of affordable housing or the provision of on-site homeless services, the ordinance 6 Mayor’s Office of Housing and Community Development, Public Sites Development Framework: Presentation to the Capital Planning Committee, December 11, 2014. 29 ARLINGTON COUNTY, VIRGINIA Public Land for Public Good Potential Affordable Housing Sites Tier 1 and Tier 2 157 ! ( 165 ! ( ! ( 351 397 389 ! ( ! ( 390 ! ( 420 Legend ! ( Tier 1 and Tier 2 Sites ID DESCRIPTION TIER Rosslyn Highlands 1 Park/Fire Station #10 Courthouse Square and 1 397 Plaza Land Adjacent to Lee 1 420 Gardens North Gables North Rolfe 1 389, 390 Street 157 Fire Station #8 2 165 Edison Complex 2 261 Lubber Run Park 2 Land Adjacent to Jennie 2 521 Dean Park 351 County Line PO TO M Roads AC RI VE R 261 ! ( # # μ 0 0.25 Map prepared by Arlington County GIS Mapping Center Arlington County maintains this data for reference purposes only, and shall not be construed as a legal document. Map © 2014 Arlington County, VA ! ( 521 0.5 1 Miles Figure 10. Tier 1 and Tier 2 Public LandConsideration for Public Good in Arlington County Map 1: Sites Recommended for Further forsites Affordable Housing Development areas that permit mid-rise or high-rise buildings, to ARLINGTON COUNTY, VA determine the feasibility of incorporating affordable Because of the scarcity of affordably priced land in homes on the premises. the county, and in response to calls from local housing Public Land for Public Good advocates to use “public land for public good,” the Under the New Housing Marketplace plan, the Arlington County Board in 2013 directed the county city’s Department of Housing Preservation and manager to identify three to five publicly owned sites Development has worked with a wide range of city with the greatest potential for near-term development and state agencies to acquire underutilized and of affordable housing. County staff scanned sites surplus sites for affordable housing development. owned by both the county and Arlington Public These sites include a historic public school in East Schools to assess the potential for including affordable Harlem and other Department of Education properties, housing in redevelopment plans within 10 years. The underutilized parking lots owned by the Department of analysis ultimately recommended eight sites for closer Transportation, a former hospital on Staten Island, and consideration. surplus land at a Brooklyn psychiatric hospital. 7 7 See: Center for Housing Policy, “Policy: Make PubliclyOwned Land Available for Affordable Homes” (http://www. housingpolicy.org/toolbox/strategy/policies/public_land. html?tierid=153). 30 Arlington County followed five steps to prepare its list of priority sites: 8 • Owned by the county board (as opposed to Arlington Public Schools); • Sufficiently large to support multifamily or 1. PUBLIC LAND INVENTORY. The county used tax records and previous studies to identify all land parcels owned by Arlington County or Arlington Public Schools. Staff used a geographic information system (GIS) to map these parcels and identify where contiguous, townhouse development; • Accessible to Metro stations or the other transit offering frequent, regular service; • Located in a “special planning area” designated by the General Land Use Plan; publicly owned lots could be consolidated into larger, • Located in upcoming planning study areas; and discrete sites. This process yielded a total of 391 sites • Included in the adopted 10-year Capital for consideration. Improvement Program. 2. INITIAL FILTERING. The county developed Other site characteristics, such as existing land use, “disqualifying criteria” to eliminate sites unsuitable tree coverage, and historic preservation status, were for multifamily or townhouse development. The also considered. This stage narrowed down the list to following conditions generally disqualified a site from 24 promising sites. consideration: 4. REFINEMENT BY INTERDEPARTMENTAL STAFF TEAM. • Site is smaller than ¼ acre; A county interdepartmental staff team further narrowed • Site is predominantly used as street right-of-way; its list to eight total sites. This team included staff with • Site is oddly shaped with one or more dimensions expertise in planning, urban design, affordable housing, that are too narrow to accommodate housing the county’s real estate holdings, and park- and development; facilities-planning efforts. • The buildable portion of the site is too small or oddly shaped after accounting for environmental features 5. GROUPING BY READINESS. A management that limit development potential; or team consisting of senior staff and the county • Site has known environmental constraints that would be difficult to remediate. • More than half of the sites in the county’s inventory manager confirmed the eight sites selected by the interdepartmental staff team and grouped them into two tiers based on how soon a planning process and were eliminated after applying these criteria, leaving development could begin. Tier 1 sites include those a list of 177 sites for consideration. that are currently in the planning or development process. Tier 2 sites are not yet under development or 3. SITE PRIORITIZATION. The county used additional being planned but are identified in the county’s Capital criteria to favor sites that were: Improvement Program for future study. Map 1 below shows the county’s current Tier 1 and Tier 2 sites. Examples of sites included are: 8 Arlington County, County Manager’s Report: Public Land for Public Good – A Preliminary Review of Countyowned Parcels to Identify Sites Where the Potential for Development of Affordable Housing Should Be Studied Further, May 13, 2014. • Two sites presently occupied by fire stations, including a 1.25-acre site that is being planned for 31 redevelopment with a new fire station, park and The Bonifant and new public library in Silver Spring, the recreation space, and affordable housing; county has also become more aggressive in seeking • Land formerly used by the county’s Department of Human Services; out opportunities to co-locate housing with new government facilities. • A large surface parking lot adjacent to a community center slated for redevelopment; • A parking lot across from the county’s courthouse; and • Parcels acquired by the county along a popular bicycle/walking trail network. To maximize its opportunities for using public land to help address local affordable housing needs, the County Executive and the County Council have endorsed a strategy that, whenever possible, affordable housing will be included in the development of county land. All capital improvement projects or county agency County staff will reevaluate its prioritization of sites plans to redevelop or dispose of county-owned land are annually. The county is also currently developing Public required to assess the potential for affordable housing Land Site Evaluation Guidelines, which will set goals, as part of the site’s redevelopment and to present this evaluation criteria, and a process for determining how analysis to the County Council. (A similar assessment to balance public priorities on county-held land. is required of the potential for child-care facilities.) The analyses must examine several factors, including: Since the completion of Arlington County’s prioritization process, various community members have raised concerns about sites in their neighborhoods, in particular park sites, and felt blindsided by limited • The physical feasibility of including a significant share of affordable housing; • The financial feasibility of including a significant community notification. In December 2014, the County share of affordable housing; Planning Commission recommended that the county’s • The proximity of public transit; Site Evaluation Guidelines be set aside until they • The proximity of the site to other public facilities; could be considered as part of a broader community • The proximity of the site to existing affordable process and reconciled with other county plans. A potential lesson from Arlington County’s experience is that greater community involvement and education housing; and • The conformity of multifamily housing with existing zoning. during the process of identifying sites might be useful for ensuring political and community support during Additionally, the County Council has passed legislation the next steps of developing affordable housing on that expresses a preference for at least 30 percent public land. affordable housing on public land. Proposals from county agencies for the redevelopment of county land MONTGOMERY COUNTY, MD that would involve less than 30 percent affordable Montgomery County has an active program of housing are subject to greater scrutiny from the developing strategically located county land to support County Council. mixed-income housing. Since the late 1980s, the 32 county has developed a comprehensive county land Lastly, most county-owned land is owned by a single inventory and has facilitated mixed-income housing on agency—the Department of General Services. The multiple county land holdings. With the development of chief exceptions are school-district property and parking-lot districts. Single ownership has aided in the Key terms of the law include the following: compilation of a comprehensive inventory of countyowned land, and ensured better coordination among agencies in its development. • Property may be transferred at less than appraised value, and the city may provide additional subsidies to ensure that affordability requirements are met; Examples of public land holdings that are being considered for future mixed-income housing in the • Half of for-sale affordable homes must be county include the site of a new police station, a site affordable to households earning less than 50 that formerly hosted a police station, a former public- percent of AMI and half to households earning up safety-training site where fire fighters were trained, and to 80 percent of AMI; a future fire station. 9 • One-quarter of the rental affordable homes must be WASHINGTON, DC affordable for households at 30 percent of AMI, and Washington, DC recently passed the Disposition of three quarters for households at 50 percent of AMI; District Land for Affordable Housing Amendment Act of and 2014, which requires that all new multifamily residential 10 developments on city-owned surplus land include at • The mayor may waive or reduce the affordability least 20 to 30 percent affordable housing. The exact requirements as necessary but only under certain level of affordability depends on the site’s location. The circumstances, such as the appraised value of the percentage rises to 30 percent for sites within ½ mile of site being insufficient to support affordable housing a Metrorail station, within ¼ mile of a streetcar line, or in light of all other available sources of public funding within ¼ mile of a Priority Corridor Network Metrobus for supporting the affordable housing component, Route. Property owned by DC Public Schools is not or the disposition of the property enabling the subject to the new policy. financing of a “significant public facility.” 9 Interview with Jay Greene, Chief of the Housing Division of the Montgomery County Department of Housing and Community Affairs, December 2014. 10 D.C. ACT 20-485. 33 IV Recommendations for Public Land Strategies in the Washington, DC Region The preceding sections of this report, which • Discounted public land provides a valuable subsidy examined the role of land costs in affordable housing that can enable deeper levels of affordability in development, recent case studies of affordable higher-cost development areas and in higher-cost housing on public land, and promising public land building types than otherwise financially feasible. policies, illuminate both the benefits of making public land available for affordable housing and the types of policies that can maximize these opportunities. • While the exact percentage of affordable housing that may be feasible on a given site depends on both the site’s land value and the incomes served, Many benefits accrue to both communities and land values on publicly owned sites are often high developers accrue when they form partnerships to enough to enable localities to support a significant provide affordable and mixed-income housing on share of affordable housing by offering these sites at discounted public land: a low cost. • Public land development opportunities can help 34 • Discounted public land is a more certain form of facilitate affordable housing in high-amenity, highly subsidy (i.e., involving less “subsidy risk”) than direct accessible, and gentrifying neighborhoods through financial assistance because it is less subject to cross-subsidization of market-rate units. budget cuts and delays in allocations. • The co-location of housing and public facilities can location and the difference between revenue and lead to better design and integration of the two development costs for below-market-rate housing, land uses. as this relationship clarifies the potential for crosssubsidizing the affordable housing component. • Local jurisdictions can serve as allies in securing land use approvals and helping to ensure the public 3. review process moves forward in a timely manner. INVEST PUBLIC RESOURCES IN PREPARING PUBLIC SITES FOR DEVELOPMENT. Public activities that reduce hard and soft development costs—such as clearance and decontamination • Joint development of a public facility and housing property can also lead to infrastructure cost savings of a site, infrastructure provision, or advanced for the developer. completion of area land use planning—can further enable free or discounted public land to support RECOMMENDATIONS a significant share of affordable housing. These Based on these findings and additional insights activities reduce the hard costs of development as gleaned from the review of promising public land well as the risk and time involved in mixed-income policies, this report suggest the following guidelines or fully affordable development, which further and recommendations for cities and counties in the reduces the need for additional public subsidy and Washington, DC region that are looking to develop can attract better development proposals. mixed-income or 100 percent affordable housing on IDENTIFY PUBLICLY OWNED SITES IN ACCESSIBLE, HIGH-VALUE AREAS. Discounting ADOPT A POLICY THAT PROTECTS SUITABLE PUBLIC LAND SITES AND ENABLES THEIR DEVELOPMENT WITH AFFORDABLE HOUSING. A local public land policy should set public land in highly accessible, high-value minimum affordability expectations for residential locations with few neighborhood dis-amenities or development on public land, ensure that all capital site limitations has the best potential for supporting improvement project proposals are reviewed for mixed-income housing without the need for their potential to include housing, and permit the significant additional public subsidy. These sale of public land for affordable housing at prices sites offer the greatest potential for subsidizing lower than appraised prices. public land: 1. 4. affordable housing through greater returns on the market-rate units. 2. BASE AFFORDABILITY EXPECTATIONS FOR INDIVIDUAL SITES ON AN UNDERSTANDING OF THE RELATIONSHIP BETWEEN LAND VALUES AND THE AFFORDABILITY GAP. When 5. EMPOWER A LOCAL AGENCY TO LEAD A REGULAR, CROSS-AGENCY ASSESSMENT OF OPPORTUNITIES FOR DEVELOPING AFFORDABLE HOUSING ON PUBLIC LAND. It may be helpful also to authorize a single agency to consolidate public holdings to streamline the examining just how much affordable housing can be process of both inventorying and disposing of built with the support of free or discounted public public land. Without an express mandate or land, it is important to understand the relationship meaningful incentive to do so, many municipal between the value of discounting land at the chosen agencies not focused on housing are unlikely 35 to take a hard look at their property holdings to 7. determine if some could be used to support the development of affordable homes. CO-LOCATE AFFORDABLE HOUSING DEVELOPMENTS WITH NEW PUBLIC FACILITIES. In addition to repurposing surplus sites and obsolete public buildings, localities 6. LOOK FOR OPPORTUNITIES FOR CITIZEN EDUCATION AND ENGAGEMENT DURING THE PROCESS OF IDENTIFYING PUBLICLY OWNED SITES SUITED FOR AFFORDABLE HOUSING DEVELOPMENT, AND ESTABLISH CLEAR CRITERIA TO DRIVE THIS PROCESS. should consider co-locating affordable housing While it is important to limit site inventories and “horizontal mixed-use.” This allows each property analyses to objective measures, it is valuable to to move forward on its own timeline, independent include community stakeholders in the early stage of of delays that can affect the other property, but site development so that community members are does not necessarily preclude opportunities for fully informed participants in subsequent planning sharing infrastructure. with new public facilities such as libraries, fire stations, community centers, police stations, and parking garages. For sufficiently large sites, it may be advantageous to separate the housing property from the public facility and to develop the site as processes. Key criteria for choosing suitable multifamily housing can support a sufficient number LOOK FOR OPPORTUNITIES TO SHARE INFRASTRUCTURE, SUCH AS PARKING GARAGES OR COMMON UTILITIES, WHEN CO-LOCATING HOUSING WITH PUBLIC FACILITIES. When doing this, however, it is of housing units to be managed and operated important that the public agency coordinate with the efficiently; and located in an accessible location near housing developer at the beginning of the process. frequent transit, daily necessities, and economic and This can ensure that the benefits outweigh the educational opportunities. costs of coordinating the development of shared sites should include that the site is: clear of legal encumbrances (such as environmental- or historicpreservation restrictions); clean (free of environmental contamination); adequately sized and shaped so that 8. infrastructure, and that architects and contractors for both the residential property and public facility are not working at cross purposes. 36 Interviewees, ULI Staff and Member Advisors The authors of this report wish to thank the following individuals who agreed to interviews for this report, reviewed drafts, or otherwise shared their time in providing guidance. The insights and information they shared were especially valuable. Ilana Brand Brian Nagendra POLICY AND NEIGHBORHOOD DEVELOPMENT MANAGER MONTGOMERY COUNTY HOUSING PARTNERSHIP SENIOR INVESTMENT ASSOCIATE LIVING CITIES Jim Campbell Dave Perrow FOUNDING PRINCIPAL SOMERSET DEVELOPMENT COMPANY DIRECTOR OF DEVELOPMENT ARLINGTON PARTNERSHIP FOR AFFORDABLE HOUSING Martine Combal Art Rodgers DEPUTY DIRECTOR OF DEVELOPMENT DC OFFICE OF THE DEPUTY MAYOR FOR PLANNING SENIOR HOUSING PLANNER DISTRICT OF COLUMBIA OFFICE OF PLANNING Cheryl Cort Stephanie Roodman POLICY DIRECTOR COALITION FOR SMARTER GROWTH SENIOR PROJECT MANAGER AND LEGAL COUNSEL MONTGOMERY HOUSING PARTNERSHIP Dave Flanagan Lisa Rother PRESIDENT AND PRINCIPAL ELM STREET DEVELOPMENT EXECUTIVE DIRECTOR ULI WASHINGTON Jay Greene Sandy Silverman HOUSING DIVISION CHIEF MONTGOMERY COUNTY DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS PRINCIPAL PERKINS EASTMAN Linda Kelleher DIRECTOR, COMMUNITY AND RESIDENT RELATIONS ARLINGTON PARTNERSHIP FOR AFFORDABLE HOUSING Joe Lapan PROJECT MANAGER DISTRICT OF COLUMBIA OFFICE OF THE DEPUTY MAYOR FOR PLANNING AND ECONOMIC DEVELOPMENT Stan Sloter PRESIDENT AND CHIEF EXECUTIVE OFFICER PARADIGM COMPANIES Aakash Thakkar SENIOR VICE PRESIDENT EYA Stan Wall Jair Lynch OWNER WALL DEVELOPMENT GROUP, LLC OWNER JAIR LYNCH DEVELOPMENT PARTNERS Teresa Yanga Maureen Markham SENIOR HOUSING DEVELOPMENT SPECIALIST ARLINGTON COUNTY CPHD - HOUSING DIVISION DIRECTOR OF HOUSING DEVELOPMENT SAN FRANCISCO MAYOR’S OFFICE OF HOUSING AND COMMUNITY DEVELOPMENT 37 ABOUT THE URBAN LAND INSTITUTE ABOUT THE NATIONAL HOUSING CONFERENCE ULI is a nonprofit research and education organization supported by its members. Founded in 1936, the Institute now has over 30,000 members in 95 countries, representing the entire spectrum of land use and real estate development disciplines working in private enterprise and public service. Members of the Urban Land institute are automatically members of ULI Washington, one of ULI’s largest District Councils worldwide, with over 2,000 members. ULI Washington includes members from the real estate and business communities, both public and private, who share the commitment to responsible land use to sustain the growth and prosperity of the National Capital region. The National Housing Conference (NHC) represents a diverse membership of housing stakeholders including tenant advocates, mortgage bankers, nonprofit and for-profit home builders, property managers, policy practitioners, realtors, equity investors, and more, all of whom share a commitment to a balanced national housing policy. As the research division of NHC, the Center for Housing Policy specializes in solutions through research, working to broaden understanding of America’s affordable housing challenges and examine the impact of policies and programs developed to address these needs. Since 1931, NHC has been dedicated to ensuring safe, decent and affordable housing for all in America. NHC is a nonpartisan, 501(c)3 nonprofit that brings together their broad-based membership to advocate on housing issues.
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