After a thorough review of the strategies being used by other jurisdictions to create a range of affordable housing opportunities, the Task Force developed a matrix to summarize its recommendations. The matrix attempts to describe each strategy, who is likely to benefit most from the strategy, the actions required to implement the strategy, the rationale for the Task Force recommendations, and the level of priority the Task Force places on implementation of each strategy.
The matrix summarizes who is most likely to benefit from a particular strategy based on two criteria: household income, and renter vs. owner. This portion of the Task Force assessment will address the group’s original charge to “Recommend specific measures to address the affordable housing needs for all economic segments of the population with particular interest for low income populations.”
The Task Force was not asked to develop implementation plans for their recommended strategies; however, members felt it was important to list some of the more obvious implementation steps to assist County officials to assess the time and level of effort it will take to implement these strategies.
As mentioned earlier in this report, the Task Force believes there is no single solution to creating more affordable housing in Pierce County. These recommendations reflect a wide range of approaches. However, with so many strategies being recommended the Task Force assigned a priority to each strategy. The priorities represent the urgency with which the Task Force members believe the County should work to implement a particular strategy. The high priorities are not only those with the greatest urgency, but those strategies the Task Force believes hold the greatest potential for increasing the supply of affordable housing for low income populations.
Finally, it is important to note that the Task Force operated by consensus. The ground rule for developing Task Force recommendations was that for a strategy to be recommended by the full group, each member had to support the strategy or “be able to live with” the strategy. As a result, these recommendations represent a strong consensus among the participating Task Force members.
In early 2006, the Pierce County Council and Executive created the Housing Affordability Task Force. It was asked to explore the affordable housing needs of Pierce County residents and recommend strategies to increase the supply of affordable housing. The group was charged with addressing the housing needs for all economic segments of the population, but with a particular focus on the needs of the low income populations.
The Task Force was comprised of members with a broad range of interests and perspectives, including for-profit and non-profit housing developers, low-income housing advocates, realtors, housing authorities, bankers, Mobile Home Park advocates, and elected and appointed officials from Pierce County government.
The Task Force met fifteen times between March and December 2006. They reviewed Pierce County income and housing data, defined the challenges in creating affordable housing for different income groups, conducted an extensive review of affordable housing strategies being used in other jurisdictions, reviewed the “typical” cost of development for single and multi-family housing, and developed a broad range of recommendations to increase the supply of affordable housing. With this report the group is transmitting its conclusions and recommendations to the Executive and Council for their consideration.
Defining the Problem
Much has been written in local papers and journals regarding the nature of the affordable housing needs. The Task Force spent considerable time understanding the size and complexity of the problems they were asked to address. The group reviewed data for a broad spectrum of users and housing types, including for-sale housing, rental housing, mobile home parks, and homeless shelters.
Here’s some of what was learned.
• About 64% of households in Pierce County are homeowners,
• and about 34% are renters
• Housing is considered affordable if the household pays no more than 30% of its income for shelter costs.
• The “housing wage,” that is, the wage necessary to rent a two-bedroom apartment in Pierce County and still pay no more than 30% of income for shelter costs, in 2005 was $14.88 per hour ($30,950 annually, working full-time).
• The median hourly wage for renters was $10.67 per hour ($22,381 annually), and
• The minimum wage was $7.63 per hour ($15,870 annually).
• Nearly 37% of renters and 27.5% of owners are paying more than 30% of their income for housing. Overall, 31% of all households are cost burdened, and 12% pay more than 50% of their incomes for housing.
• The median home price in Pierce County in August of 2006 was $273,000, an increase of 12.8% from a year earlier.
• Since 1998, housing prices have averaged a 7.84% annual increase, while incomes have risen by 3.5%. 2 everything a household buys, real wages during that time increased by an annual average of 1.39%.
• Rising house prices also affect the rental market. From 1998 through 2005, fair market rents for 2-bedroom apartments increased by an annual average of 3.13% from $566 to $736 per month.
• In addition, rising prices put pressure on apartment owners to convert their units to condominiums.
• In the past two years, about 30% of the apartment stock in Tacoma has been converted to condos.
Mobile homes have been an important component in the affordable housing mix.
• About 22,000 housing units in Pierce County, or 7.9% of all housing units, are mobile homes, and about 9,300 of those are in mobile home parks. Of the mobile homes in parks, 128 units are in parks closing in 2006, and another 234 are in parks that are expected to close in 2007. That represents a loss of nearly 4% of all manufactured homes located in mobile home parks.
• Homelessness is often the extreme consequence of a lack of affordable housing. A number of organizations offer emergency shelter to people with no other housing options. However, the number of available facilities does not meet the current need. In 2006, there were about 38,000 times when individuals were turned away from shelter and 9,600 times when families with minor children were turned away – usually because the shelters were full.
• A number of programs are available to help with housing costs for people with incomes below 80% of the area median income (AMI), and most focus on people below 50% of median. While some programs have seen major funding cuts, new programs and approaches have been created. The net effect in Pierce County has been that in the last ten years there has been a loss of about 2,000 housing units intended for people with incomes below the area median.
• The rapid increase in home prices, coupled with increasing interest rates, is straining the ability of middle-income-and-below households to obtain housing.
• As a result, by the end of 2005, assuming that households should spend no more than 30% of their income for housing, 50% of the houses for sale were out of reach for 60% of the households.
• For 51,000 households, renting the average-priced 1-bedroom apartment was out of reach.
• There are a total of 53,068 households in Pierce County with incomes below 50% of the area median, and
• a total of 15,644 units of housing programmed to assist with their housing needs,
• suggesting a shortfall of 37,424 housing units for low-income people.
• At 180 units per year, it would take 208 years to meet this shortfall, provided no other units were lost.
The Cost of Construction and Development of Housing
The Task Force conducted a review of the cost of developing and constructing single-family and multi-family housing units. The purpose of the review was to better understand the cost pressures that affect for-profit and non-profit developers, including the specific costs that drive up the expense of constructing new housing. We also wanted to identify potential cost savings that could be achieved if specific fees/land use regulations were waived for lower income housing projects, or the time to secure permits was shortened. The information provided came from two real projects.
For the single-family development, the analysis explored both the cost of land acquisition and development, as well as the cost of home construction. The project was a 148-lot development. It took four-and-a-half years to secure approvals for the subdivision. For land development, the purchase price of the raw land accounted for the highest cost of the project, 46%. Permit fees/mitigation costs reflect 11% of the total.
For home construction, 40% of the cost was a result of acquiring the improved lot. The resulting price per square foot was $140. If the commission/closing costs and permit expenditures are subtracted, the cost per square foot would decrease to $127. The price per square foot would be further reduced to $64 per square foot if land cost and interest/loan fees are also subtracted from the project’s total cost.
The multi-family project was a 40-unit three story, three building low-income multi-family project. If permit/utility fees and parking requirements were waived or reduced, the project may have realized a cost savings totaling $423,218, or 6.4% of the total cost.
Recommendations
The Task Force recognized that no single strategy will solve the shortage of affordable housing. As a result, the Task Force has recommended a broad range of strategies, including changes to Pierce County land use regulations, incentive-based approaches to encourage developers to construct more affordable housing, state legislative action, and local funding strategies.
The Task Force identified four population groups that should be served by their recommendations: extremely low income (those families making 30% or less of AMI), very low income (between 30 – 50% of AMI), low income (between 50 – 80% of AMI), and moderate income (between 80 – 100% of AMI). The matrix in the report describes a range of specific strategies to address the needs of each of these groups.
The Task Force used its priority rankings to suggest a focus on strategies that would best serve low income populations. They established as high priorities those strategies that hold the greatest promise for creation of new affordable units for populations at or below 80% of area median income. While the Task Force was asked to focus its attention on low income populations, it also came to understand the significant need for more moderate income work force housing. One of the conclusions reached by many Task Force members was that when the supply of housing for moderate income families is limited, it places greater demand on the housing supply that would otherwise be available for low income families.
While the Task Force believes that approval of a range of strategies is necessary, there was a strong consensus that if Pierce County is going to make significant progress creating more affordable housing for its lowest income families, additional public subsidy is essential. In fact, the Task Force would suggest that without new local revenues the other strategies by themselves are not sufficient to make substantial progress toward meeting affordable housing needs.
The following provides a brief summary of the Task Force recommended highest priority strategies, and the income groups (described above) that would receive the greatest potential benefit from the strategy.
High Priority Strategies The Potential for Creating Affordable Housing for Each Income Group
<30% <50% <80% <100%
1. Planned Development Districts (PDDs) to create mixed income communities within the Urban Growth Area
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2. Inclusionary Zoning: voluntary and required (in some circumstances)
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3. Incentives to assist developers create affordable housing (for populations below 80% AMI), including: density bonuses, fee waivers, reduced zoning requirements, and expedited permitting
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4. Encourage development of Single Room Occupancy (SRO) housing
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5. Encourage development of transitional housing
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6. Create new local dedicated revenue source for populations below 80% AMI.
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7. Provide property tax relief for commitment to build and maintain affordable housing
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