 Good morning. Thank you for spending your morning with us. My name is Pat Gumb. I'm the Assistant Planning Director for the City County Planning Department, and I'm going to be the moderator of this morning's event. As I said, thank you so much for coming out this morning and supporting this important event. I first want to thank South Health Credit Union for sponsoring us today. A couple pieces of housekeeping. Most of you probably know that the restrooms to my left and the rear, secondly, as you came in, you received two index cards, and there should be enough pins for everybody if they're trying to ask for your neighbor. One index card has lines, the other one does not have lines. There will be a test on this. If you have questions for our panel, our expert panel that we'll have at the end of the presentation, please write those questions on the card with the lines. And at the end of Erin Kane's presentation, Erin, if you've not recognized yourself there, pass those to the end of the table, and Julia Black and Susan Willard of our staff will collect those so that we can address your questions to our panel. The other card with no lines, if you have any issues you want us to address as we proceed in this process, concerns about affordable housing transit, issues you want to make sure that we address as we go forward in our planning for affordable housing here at Transit, please make sure you write those issues on those comic cards and drop them in the green basket that's on the table in the rear and the way out of the presentation. At the end of our presentation, we'll also have our contact information and website address. What I want to emphasize right now is this is the beginning of the beginning. Erin Kane's going to go over a four-part City County strategy to look at ways we can preserve and create affordable housing here at Transit. In this meeting, it's just a kickoff of that strategy, framing and giving an overview of the issue and talking a little bit about the economics development of affordable housing. So I want to thank our City and County partner departments, specifically thank our City and County partner departments, Office of Economic Warrant Force Development and Community Development. The thing I can say unequivocally about this subject matter of affordable housing transit is partnerships and collaboration are critical. They're essential. And under the leadership of the City and County managers' offices, we have City and County departments engage with us, planning as a facilitator and convener, but there are really almost a dozen City and County departments that will have a role as we go forward in this effort. So I want to thank the City and County managers' offices, our partners in Community Development and Office of Economic Warrant Force Development. I also want to thank our community partners. You see some of the folks listed here, Triangle Transit, Durham Housing Authority, Durham Can, Durham Community Land Trust, and the Triangle J Council of Governments. There are many others, almost too many to mention. There is a legally aborted Carolina Housing for New Hope. The Durham community, these partners have done tremendous advocacy, research, evaluation, and really helped Durham employees to be a leader in the area of affordable housing and transit. I want to make a quick anecdote on various questions right now if she's here. Legally aborted Carolina sponsored an informal brown bag event at the end of July on the issue of affordable housing and transit. And actually, we're now next to her by the name of Sarita Turner, who's pictured here on the slide. Ms. Turner is from California, has been working in this field for over 20 years. She was providing us with an overview of best practices from the 29 communities that have implemented or planned for affordable housing since 1989. And she gave us some great information. And Kishoreka, who just walked in, I'm in the middle of embarrassing you actually. Commissioner Rackow very rightly asked, so Ms. Turner, which other communities started this process of looking at affordable housing and transit so early in the planning process, so we can reach out to those communities and find out their experience. Ms. Turner scratched her head for a minute and said, no, there's no community. There's no community in the country who's looked at this issue as early on, 12 plus years in advance of the train as Durham is. And that's the Durham's credit. Give yourself a round of applause. We're starting at the right time. And as everybody in this room I think knows, we're already beginning to see this here in Durham. We have almost 2,700 multi-family units coming on in the next 18 months near 9th Street downtown, and only about 3% of those are affordable folks at 60% of the area being accountable. And those are properties that are being developed in the Southside Project under the city's auspices. So it's already a concern that it's going to become more so one as we go forward. Another consideration here is today, not in the future, but today, the median household income of households that are currently within a half-mile of these future-friendly transit areas, the 11 light rail station areas in Durham are much lower than the Durham County average. So what you see is these areas are home to a lot of folks who are relying on affordable housing that's either currently subsidized or what I would call organically affordable, meaning the market hasn't yet raised the prices so much that they can, of course, live there. And much higher-personage renters relative to homeowners. Of course, if you're a renter, you're much more likely to be able to be displaced if market conditions change and a person who owns your property wants to redevelop it at a higher, more costly, more valuable use. And, finally, and very importantly, give a much higher percentage of folks that rely on transit for their access to employment and daily necessities. And I think this is an absolutely essential piece. Two to three times in most of our station areas where folks don't own a personal vehicle and really need to have access to transit and are currently relying on the bus system to provide that affordable or disciplined water. So where does that leave us? I think it leaves us with a situation where there's incredible community values from light rail. It's arguably, as I tried to argue earlier, an assassinity for a competitive 21st century city to develop transit-oriented development near our rail stations, but you have a situation where that is going to create displacement effects and force folks out of existing folks and folks that would like to live near transit in the future out of these areas. The only way to address this is through attention to the issue of equity and the term this is known in much terms credit for always being concerned about equity. Is it just? Is it fair? The sales tax is the primary way the state allowed us to help locally fund this system. Everybody in here probably knows sales tax is progressive. If you're a little moderate income, you're probably paying a higher percentage of your income in sales tax than in the real world right now. So there are basic issues of fairness where the community needs to ensure that the folks that are at all income strata have opportunities to access this incredibly valuable transit system in the areas of transit that provide these tremendous economic opportunities. And you have my commitment on behalf of all my county and city colleagues that we're going to look at these issues as we go forward as you can hear about from Aaron Kane to look at the issues of equity, the questions of equity and make sure that they're considered as we look at investments going forward. So our elected officials get this. Our elected officials get this. And many of the folks in this room work to add to this and adopted a very ambitious but appropriate policy goal and that goal is to have at least 15% of all housing units within a half mile of each transit area to be affordable to folks at 60% of the area of median income. And there's some good news. I think there's some good news to start with that. This map shows that the properties in red or property, we define them as subsidized, which is what that means is they're under direct control of DHA, the city or some other public entity or they're under contractual obligation to stay affordable either for a very long term or for perpetuity. So you've got almost over 13% of 2,000 units already today within a half mile of transit areas that meet that criteria and that's a great baseline to start from. Another thing you have that's not reflected on this map, TJ Cog and others have done some great work and we will be producing some graphics and some data on this in the near future. But you have certainly hundreds and I would probably argue thousands will have that data soon. Organically affordable units, meaning market-grade affordable units, especially as you go part of the West House where it all came and powers to place that are today affordable and then we have the opportunity to potentially work with those folks to make sure that they stay affordable over time. Another piece of, I think a good news is the evolving concept of what affordability means plays, of course, a job mark. Traffic congestion is demonstrably reduced certainly when the system first comes in. Evidence research seems to suggest a peak hour traffic your morning and evening commutes are at least initially when the system is put in or reduced. Many of you have sat on my 40 or 85 or rush hour, you know how bad that is. Reducing pollution. Per passenger mile, light rail transit is 62% for invention districts because what they do is they create an environment where there's high density, compact development, walkable development, access to education and amenities and high quality design. And what that does is foster an environment where businesses can collaborate both in proximity, meat over lunch, meat over coffee and have an environment where their businesses can thrive and increasingly the economic sectors such as biopharmaceuticals, medical research, biotechnology, and other tech sectors are demanding these types of areas. Additionally, Gen Y, which is the largest generation of American history, 18 to 34 has a strong preference for this type of development. 62% in a recent poll by the Urban Land Institute favored mixed-use development, walkable, with child stress comments and offices. And increasingly the baby mover generation aged 50 to 68, the second largest generation in American history as they were talking, fundamental issue that we didn't initially consider. And that was the effect of trans and non-land values and housing costs. There was a 2004 review by a gentleman named Robert Severo who is a transportation planning expert and he looked at about two dozen communities and dozens of studies and showed that almost uniformly there is a significant increase in property values and housing costs near, especially within a half mile of transit areas. The effect he found was a range of 6 to 45% relative to similar housing that was not in that distance. The effects, the valuation increase effect is enhanced if the transit system serves a lot of employment, which our system is designed to do. And it's also enhanced for those properties that are closest to the driveway the way the state allowed us to help fund, locally fund this system. Everybody in here probably knows sales tax is progressive. If you're low to moderate income you're probably paying a higher percentage of your income in sales tax and you have issues of fairness where the community needs to ensure that the folks that are at all income strata have opportunities to access this incredibly valuable transit system in the areas near the transit system that provide these tremendous economic opportunities. And you have my commitment on behalf of all my county and city colleagues that we're going to look at these issues as we go forward on the strategy you're going to hear about from Erin Cain to look at the issues of equity. The questions of equity and make sure that they're considered as we look at investments going forward. So our elected officials get this. Our elected officials get this. And many of the folks in this room work to add this to the secrets and adopted a very ambitious but appropriate policy goal and that goal is to have at least 15% of all housing units within a half mile of each transit area to be affordable to folks at 60% of the area meeting income. And there's some good news. I think there's some good news to start with that. This map shows that the properties and random property, we define them as subsidized which what that means is they're under the direct control of DHA the city or some other public entity where they're under contractual obligations to stay affordable either for a very long term or for perpetuity. So you've got almost over 13% almost 2,000 units already today within a half mile of transit areas that meet that criteria and that's a great baseline to start from. Another thing you have that's not reflected on this map is what I would call organically affordable meaning the market hasn't yet raised the prices so much that they can't afford to live there. And much higher percentage of homeowners, relative homeowners of course if you're a renter you're much more likely to be able to be displaced if market conditions change and a person who owns your property wants to redevelop at a higher, more costly and more valuable use. And finally, and very importantly even a much higher percentage of folks that rely on transit for their access to employment and daily necessities. And I think this is an absolutely essential three times in most of our station areas where folks don't own a personal vehicle and really need to have access to transit and they're currently relying on the bus system to provide that report for just a while. So where does that leave us? I think it leaves us with a situation where there's incredible community values for light rail. It's arguably, as I tried to argue earlier, a necessity for a competitive 21st century city to develop transit oriented development near our rail stations but you have a situation where 12% So this is happening across the country and a lot of our inner cities have made this work and have seen tremendous benefits. This is our looks in Virginia, this photo was taken in 2011. In the 1990s or early 2000s they put in five metro rail stations and saw three tremendous benefits. They took an approach very similar to what Durham is taking which is encouraging. Most of the industry would probably have heard that the federal government identifies a threshold of 30%. You shouldn't spend more than 30% of your income on housing and utilities. If you do spend more than 30% of your cost burden. I think the evolving concept of this and TJ College does some great work on this is looking at housing utilities and transportation costs. Almost everybody in this room probably those of you who are too high costs in your household budget. So if you look at housing and transportation together, you've got up to 45% of your income is the accepted standard, some people use 50%. If you live near a transit area and you can organize your life to not have a vehicle you can afford to pay a little more in housing and you're probably paying much less in transportation. When all access pass to most light rail systems nationally is in the ballpark of $100 almost every car I've ever owned is cost worthy of that. But now let's switch to the batteries. As with almost every other city in America, the lowest income folks are the most cost worthy and that's no different in Durham. What this graphic shows is folks blow that threshold of 39 to 132 which is per year income which is very near 40% of our average median income are already cost burdened and the lowest income folks are the most cost burdened and they're competing for a very small pool of affordable units. And if you look at the metric I talked about a moment ago this is data from T.J. Cough across all income strata in Durham meaning the richest of the poorest 78% of folks households are spending more than 45% of their income on housing and transportation. What's happened in America for over 50 years is something that many of you all have heard of drive to qualify. Folks when we farm around in the suburban frame to get a bigger house and then drive farther to get to employment that drives the transportation cost and create the effect you see here. So the transit system can also help I think bring that down across the board as we see preferences which to translate use. That is all households. It is. So again we can't bring that out we haven't done that yet. I'll go back to the goal. Professional planner is the kind of goal we love because it's specific and it's actionable and it gives us a staff working with our colleagues at OEDCD transportation and other departments something very clear to shoot at. But there are a lot of considerations that are going to happen that are going to have to be evaluated and we're going to get significant community input on. I'll leave it at this the cost of meeting the stated goal and in my opinion the likely success of outcomes of meeting the goal are going to be related to how the community values these different considerations and these different questions. There's no wrong answer. It's based on what we want to see at these areas and what's important. I'll use an example of our Sister City Chapel Hill has since 2000 focused on two things. They focused on ensuring that the private sector bears the vast majority of the burden through the development process of paying for their affordable housing meeting the goals and they focused on home ownership rather than rental. So that program is robust it's thorough they won't produce 235 units in 14 years. So the way you set up the various programs you're going to hear from Daniel and Aaron Cameron colleagues about more detail in this area the way you set up the program will influence the cost and the outcomes. Certainly today we're not at a point where we're looking at what those outcomes are going to be to help frame what we recommend to the administration since it allows officials. And of course probably an obvious point but I'll say it anyway the tools we use to pursue this goal are going to be very different at different income levels. 60% of AMIs is kind of where the bottom of what the market can provide where the issue of subsidy comes in the gap which we'll talk about in a minute comes in and above 60% we do see the market creating more and more units although within these transit areas you're probably getting closer to that hunger or even higher based on current market trends. So I talked about equity before fairness and justice there's another definition of equity and it's an important one to this subject that the common thread of solutions and all the strategies that we're going to talk about over the next the rest of the presentation over the next year as we go through the planning process is what I call the equity gap. The difference between what a property is worth or it costs to rent and what someone can afford to pay or that an owner owes. What I'm going to do now is I'll introduce Dan Tull I'll introduce him fully later as part of our panel but Dan's a local landscape architect and works with developers and has been involved in many projects here in Durham to talk a little bit about how the development finance process works and how this equity gap is created. Thank you. Good morning everyone, how are you? So about a month ago I had an error and asked if since I spent a lot of time in their office and they were getting tired of me they decided to give me a little task to do which they said can you put together a development scenario of what it actually takes to bring a project to market so that we could start defining just part of the problem that you're all here this morning to start addressing. As Pat said this is going to be a long journey. We're not looking for solutions this morning what we're doing is we're identifying the need and the problem so that we can get where we need to be and of course we're going to go ahead and advance the slide. What I've done is I've just taken a prototypical, I didn't use a particular project in fact as you follow through my slides here you'll see it's a project that I probably wouldn't actually want to attach my name to but what I did was I just wanted to do a very diagrammatic representation of those costs that revolved in bringing a multifamily project to the market. It doesn't matter if it's a sale project or a rental project it really doesn't matter whether it's a public sector project a private sector project or a public private partnership all the costs are relatively the same but as Pat said there are real costs associated in creating a project which also means that to have affordable housing components we need to be able to set some of those costs so that at the end of the day there is still an incentive for the developer be that the public sector or the private sector to do this project and to bring it to market. Durham has a relatively rigorous regulatory environment and on top of that we have a very rigorous state regulatory environment all which play into the costs associated. Now what I'd like to do is go through relative costs. This is very simple. Many of you in the room know this already and apologize for the simplicity of it but I think it's good to just put on the table the things that are involved and putting this this together. So let's start. So we start with a typical property that you might see on the Durham Chapel Hill light rail corridor low density residential development of some kind or another. There will be some houses down there some existing structures that might need to go away so one of the first, the very first cost that you're going to involve obviously is the land cost. Pat had some graphs earlier which were quite interesting but so land cost is very variable and particularly as the light rail system starts to become real and those station sites that have been identified start getting more development pressure, those land costs could go up. So we could see a higher percentage than I've actually represented here in terms of land costs actually be part of the project cost burden. The next big group of costs are involved also have a time factor involved and those are all the costs involved with the due diligence on the property. Does it actually work? Does it have any environmental issues? Are there constraints that would prevent you from developing it or make it more expensive development? There's costs involved with the design, architecture fees, traffic impact analysis fees and keep in mind we're specifically talking about a project that would be proximate to a light rail site within this half mile walk zone as Pat said so we think what we're trying to do is to drive some density is to drive ridership because the first thing that we need to achieve as a community is to make sure that we get our light rail system approved funded and built otherwise all of this conversation is for naught. So we are looking the federal government who we hope to help fund this system they are looking for a certain amount of density that will generate ridership to show that our light rail system is going to be viable and actually bring riders to the table and provide this quality of life that Pat has been talking about. So we have all of these design fees that are involved with the environmental investigations what we also have which is a very variable component is the cost of financing and the reason I throw a little clock up on top of that is that cost of financing is greatly affected by the time that it takes from starting a project to actually bring it to market and starting to achieve some revenue. In Durham typically it's about a year if there's not a rezoning involved you could call it a year and a half if there is a rezoning involved just to get to the point where you have a building permit. If there's a contentious rezoning Durham is not Chapel Hill. If we were looking at a Chapel Hill project this would be two to three years to get to this piece which is one of the reasons that Chapel Hill has decided to go a different way than we have right now affordable housing and that is to try and legislate it. I think Aaron will give you some numbers in a little bit to show you that that has not been highly successful. He gave me a look that he's not. Pat had some numbers but I believe that the number is over the last 20 years Chapel Hill has actually generated only about 235 235 affordable units over a 20 year period so that's a model that may not work for Durham. So time is definitely money in this case. We then got a component of the project and again the clock is ticking while we're going here. We have all of the fees involved with going through the city process, the county process the state permits the other permits we need to get DOT is a huge factor in that in terms of time and things that we need to pay for. There are fees for zoning, for site plan approvals. We may need use permits depending on the design of the project. There are fees from the inspections department and the public works department for construction plan approval. There are fees from the county or the state for grading permits and erosion control those things just start adding up over time as well and again we have not yet started building the project. Those are costs that are going to be incurred that need to be financed before revenue comes up. There's another really big section of fees that contribute to the cost of a project and those are various and sundry impact fees and again, regardless of whether it's a public project or a private project, these are all going to contribute to the cost of bringing this project to the market. We have transportation impact fees. I've done some multifamily projects where those impact fees have been hundreds of thousands of dollars so they come out to many dollars per unit. There's a requirement that we have parks and recreation fees and open space fees. All told those fees could add up to two thousand dollars for residential units so you can see those can be the trigger between whether a unit can be brought on affordably or nonfortably. All told those fees could add up to two thousand dollars for residential units so you can see those can be the trigger between whether a unit can be brought on affordably or nonfortably. Water and sewer fees are fairly big in Durham as much as a hundred thousand dollars for a water meter and a sewer impact fee for a large project that needs to be brought on for water meter. Stormwater facility fees. Durham unfortunately is at the cutting edge of managing our stormwater to keep the nutrients and the silt and things down in Jordan Lake and Falls Lake but there's a cost associated with that. One of those costs is that the public works department requires that for every stormwater facility we build there be a fee to get that approved and review our plans but there's another huge cost component to that and that is that they require assurity. Assurity is a guarantee money in the bank so that if that facility is not maintained in the future and repairs are needed that there is money available to pay for that and again I have had projects where that stormwater is in excess of a hundred thousand dollars and if any of you are familiar with construction bonds that sort of thing this is not a bond this would actually be taking that money putting it in an escrow account so in other words it is a hard project cost that rides with the land for forever. And then of course we have building construction costs there's a reason that most of the new multi-family projects that you're seeing going in and around downtown are about five stories and that is you can build a five story building with a concrete podium for a parking deck as they call it by using stick framing construction wood stud, steel stud things of that nature and there is a cost advantage to bringing something to market using stick frame construction rather than going to have your form of construction and of course in a competitive marketplace if the first developer out of the gate is building with stick frame construction and he can build it for X dollars per square foot the next developer who's bringing that same product to the market is not going to develop a more expensive construction type because he's going to be a competitive disadvantage bringing his project to the marketplace so once you go beyond five stories up to seven stories you get into a different construction type more robust type of construction more elevators things of that nature which increase the cost of construction per square foot or the way people have had it per unit there's another big break when you go over roughly seven stories or 75 feet and that is you get into what's called high-rise construction which is a much more robust and expensive form of construction so for instance even though our downtown design district allows buildings to be more than 75 feet tall it's only a rare occasion where people are proposing to do that because of the really higher cost of construction to bringing that to market that would be a very special building but the building costs as you can see are variable but a large part of the project beyond the building then we have non-site development costs again this because we're looking at doing a denser development and because parking is a requirement parking is a given unless we are in the downtown district you have to require parking whether it's affordable or not affordable you need to provide parking space for those units so that adds up into land preparation costs demolition clearing of the land the removal of anything else that might be there old utilities things like that obviously we need to have utilities and lighting for the site we need to have water and sewer and gas and electricity and fiber and storm drain things of those nature as I said we have to have storm water management and again another penalty for going dense is that rather than in a suburban scenario where we can generally handle storm water management through design of a rain garden or a pond or a wetland or something like that which is on the ground and less expensive when we get into an urban environment and a dense type of development that storm water management is generally underground it's under your parking deck or it's under a small corner parking area something like that and what that is that drives the cost of those storm water management devices up from $75,000 to many many hundreds thousands of dollars it goes back to the high cost of those storm water surety fees that I referenced a little bit earlier we still have tree requirements some landscaping that sort of thing that adds to the cost depending on what zoning district we're in we actually may have tree coverage requirements to do some replanting and reforestation there's costs for refuse handling obviously and site amenities as Pat said these fancy fancy projects highly miniatized ones any market rate project is going to really want to bring some things to the table whatever that might be whether it's a swimming pool or a rooftop back or something like that I'll let the architects talk about that see all of these quickly add up to a good number of costs and I'll go back to parking just for a second in a typical suburban environment city development you can develop a surface parking lot which you've seen most of the suburban projects having you can develop a surface parking lot for roughly $1500 per parking space when you start getting into a denser type of construction and you're doing a parking deck structured parking and think of you've all watched these new apartment projects going up around downtown 605 West West Village Phase 2 West stone project just on the other side of the Durham station some of the ones over on 9th Street typically they're developing a parking deck with building wrapped around it which is a very nice form of design but those parking spaces in a structured format are about $15,000 so you can see the cost of parking goes up by a factor of 10 if you're in a really dense environment and you actually have to start going down I have seen those parking space costs at the end of the day be as much as $45,000 or $50,000 a piece the Greenbridge project in Chapel Hill you may be familiar with they went two stories down below ground at the end of the day those parking spaces ended up being about $45,000 a piece so there's a big site development cost in any apartment so parking is an issue that could be discussed in terms of how do you mitigate some of these site costs and then we have offsite development costs you don't think about this a lot of times but even relatively low density projects in and around downtown Durham and some of the neighborhoods are needing to meet modern codes or fire flow things of that nature and our old infrastructure cannot handle Pat mentioned the SASE project that's one of the things that SASE is looking at is whether or not we have adequate infrastructure at these station sites to afford this but there may be offsite development costs and I've run into these to replace or upgrade offsite water lines as much as three to four blocks away from a project just to make sure that we have adequate water pressure to fight fires and sprinkler systems and things of that nature particularly at some of the more remote station sites we may not have all of the water and sewer and storm infrastructure in place yet at those locations so there will be a cost to bring it to them typically those are borne by the developer there are typically always going to be offsite road improvements any project of size is going to require continued or traffic impact analysis and what they're doing is they're identifying where the proposed development is overburdening the current road network sometimes as much as a mile away from the project site and those costs could include adding turn lanes re-timing signals adding new signals, restricting so we've had projects where that has added up to millions of dollars and of course because the size of the project the scale of the project in terms of number of units is directly proportional to the number of cars that are going to be going in and out of that project the more units you have the more burden there is potentially going to be on that road network and potentially the more offsite road improvements that you're going to entail and obviously there's the good things that we need to do and we have to do but all make for a good neighborhood and that is to provide sidewalks sometimes we do sidewalks that aren't even in front of the project just so we can make good connections to the transit stations and bus shelters, that sort of thing streetscape amenities in terms of the nice sidewalks and brick patches we have around downtown now and trees and grates and benches and trashcans and bike racks and all things of that nature, all good things but all add up to the cost and obviously then the remarking cost this is not my daily way I don't know what all goes into that but I know it can be a substantial portion of the project and finally there's profit and lest you think that profit is optional in its development I will assure you it is not profit is also sometimes the thing that gets squeezed as these development costs go up and you run into unknown factors but I will also tell you that if Mr. or Mrs. Developer go to the bank and they have not actually put sufficient profit in their pro forma in their business plan the bank will send them packing they won't finance the project and then we don't have a project that will be an important component so what does this all mean what it means is we have the relative costs and then we have to offset that with revenue and a traditional market rate project that does not have affordable housing component those all balance out at the end of the day but if we incorporate an affordable housing component with the market rate component then we have a revenue gap that we need to figure out how to offset so that we can build that project bring it to market and provide those affordable units and that in essence is the task that we're going to be moving forward on over the next couple of months or more and that is how do we offset developing costs or offset a revenue so we can create a doable appreciable incentive for the private development community to say yes I will incorporate affordable housing in this project that I'm bringing to market because many of you may know we have a density bonus in our current ordinance that's been on the books for how many years? 12 years and we've created through that zero so what we have is not working and so the task at hand is let's have this conversation every one of these development cost items and equity gap items are potential opportunities for infusing something that will help offset the cost bringing that to market to close that equity gap time is a factor as we say the cost of the land may be a factor building construction costs maybe to some extent but those aren't necessarily controlled by their own building codes that are written by the state and other folks offsite development costs impact fees I think you could take anything on that list and we can have a conversation about whether or not there is a way to infuse cash development costs so that we can close that red gap to the point where we do create a appreciable incentive program so that we can get affordable housing where we need it and with that I'm going to hand it over to Aaron Kane and he's going to take us on a little bit of a journey about how we're going to get there Thanks Dan and what I'm going to be talking about what I want to talk about today are just some options and this is just the start of a community discussion that we'll be having over the next at least a few months I don't want anybody to take away oh these are our only options or these are the right ones and the wrong ones that's not what we're talking about today we're talking about just giving you all some ideas further the discussion talk about some pros and cons to as we move forward both with the community and the elected officials and how we want to address this issue Dan's told a little bit of my thunder on this yes we do have a current affordable housing incentive it's essentially what it is is if you will provide one affordable unit to somebody who meets the 60% AMI threshold or 60% of the area meeting income you can build an additional market rate unit above the density that you're allowed and as Dan alluded to it's not what we've ever used it before it's basically not a strong enough incentive it doesn't provide enough of a profit for private development to this property affordable housing so as Dan talked about how do we fill that equity gap how do we provide some sort of incentives to the private market whether it's private sector, whether it's non-profit whether it's a public sector we provide these affordable units that we're looking for in transit areas basically two ways to do that one is we decrease costs or somehow increase revenues and what I've got up here are simply a list of options that we can discuss as a community and there are others besides these so these are some of the more popular ones by right zoning Dan talked about time is money for a development project having a developer go through a rezoning process takes in Durham usually a minimum of 6 months can take up to a year that it's additional costs to development if we're looking to have areas with higher density and affordable housing that is one way we can look at decreasing those costs impact the rebates or reductions would be another Dan mentioned a bunch of those costs transportation, open space, parks and recreation so forth is that something that we as a community would be willing to accept less money for in return for affordable units being constructed provision of infrastructure the Sassett project is looking at not only where what types of infrastructure do we need to provide to optimize the future rail system but also looking at options for financing that it's going to be expensive it's going to be very expensive but if some of that infrastructure is provided by the public sector that reduces the cost of the private sector which could be directed to affordable housing land banking and land banking most people think of as a purchase of land let's purchase the land now while it's less expensive before the train system comes in and drives up this land crisis as Pat talked about but land banking could also be looking at land that is already owned by the public sector or by nonprofits in these areas and holding on to that or making sure that might be set aside for affordable housing provision and then also reduced requirements that was one thing Dan talked about was parking if you're looking at dense developments all-screen parking those in-depth it's very expensive we want to look at reducing our all-screen parking requirements we want to look at reducing our transportation requirements we need in our design requirements increasing revenues is another option we've tried the density bonus density bonuses can work in some communities that have very strong markets we've seen successful density bonuses happen in places like DC suburbs, San Diego Seattle, San Francisco but those aren't quite the same market that we have here in Durham and they're also much stronger density bonuses 2 to 1, 3 to 1, even up to 5 to 1 so we're talking about a greater amount of density is that something we're willing to accept as a community, something we need to talk about development options and also direct participation is this something where the city the county other ways of finding revenue might actually infuse capital into a development project in return for affordable units then also coordination of the economic development incentives we do have the economic development program through the city and the county and we're looking at that into some of these affordable projects so what the city and the county manager's offices have directed us to do is look at a four part strategy for addressing these and the community discussion will be a part of this four part strategy development options and also direct participation is this something where the city the county other ways of finding revenue might actually infuse capital into a development project in return for affordable units then also coordination of the economic development incentives we do have the economic development program through the city and the county do we want to look at maybe tying that into some of these affordable projects so what the city and the county manager's offices have directed us to do is look at a four part strategy for addressing these and the community discussion will be a part of this four part strategy the institution of design districts coming up with a long term funding toolbox that we can use to address this issue over time potential regulatory incentives and then also direction of federal and state resources so what are design districts Pat and Dan both talked about this a little bit in their presentations design districts are what we've implemented in downtown and in the night street area and the policy that we've had for a few years now from the city is to apply these design districts to all of our rail transit areas it's a zoning scheme that says that basically creates a four base code if you follow certain regulatory requirements and you design the project successively you will be approved you don't need to go through a rezoning and you don't need to go through a community input session on that what we do is instead on the front then have a much longer conversation with the community around that rail transit area and setting up those standards so we set up the standards for the community we did this in night street it took about three to five years are they five years from when we first had the first community input session at the time we actually got the standards approved so we go through a lengthy community input session then and then projects are approved more easily through the administrative process we'll talk about that a little bit in more detail but one of the purposes of this is to make sure that we have the appropriate density and design around our rail stations as both Pat and Dan said job number one here is making sure we're able to get the rail transit system working and one of the best things we can do to ensure that our application to the federal government is successful is to make sure that we have the appropriate density and design around those stations but there's a lot of work up front in the community and a lengthy process to make sure everybody's on board with those standards before we move forward on the legislative side there is greater community control on individual products greater community input on individual projects however one project could be having to require to do some things one project might have to do another because each one gets approved individually so it also lengthens the time and the uncertainty for the development of certain funding tool locks and some of the things and again this is just a somewhat a list of options that could be other things we could look at but I think the top ones are the ones we want to look at the most affordable housing retention strategies as Pat showed we already have quite a bit of affordable housing around some of our transit stations and one of the most cost-effective ways that we could go about making sure there's affordable housing is to keep that affordable housing is to come up with ways to keep that from flipping over into something more expensive than being redeveloped we want to look at ways that we might be able to do that value capture is something that we're looking at in the SASE what value capture means is that you take the value of the land as it is now and then you see after it's re-zoned after it's redeveloped what the new land values are I think Pat if I had that number right 100% higher over 10 years in some areas which do you take that difference and then you redirect that difference of tax revenue into certain projects that are going to be spent in that area that could be infrastructure that could be provision of affordable housing so some people won't look at it Land Bank and I've already discussed LIHTC is low in compulsive tax credits because we as the city and county try to help direct those projects that apply for local housing tax credits into transit areas but these are again just a few options that we have moving forward regulatory incentives in this robert decade they haven't worked so but they are popular in a lot of places why? well the chapel uses them they're not this expensive the private sector bears most of the burden of the provisions and they're usually by right for the developer if you will build affordable housing you get these bonuses it's voluntary it only tends to work as I mentioned before in very strong markets and they don't have to be taken there's no guarantee if we provide some regulatory incentive there's no guarantee that anybody will ever take that's my experience so regulatory incentive examples that we see across the country the ones in blue on the left are ones that are more popular and have been more effective in other places height increases density increases reduction of parking reduction of some design criteria that might make the building more expensive to construct and making sure that these are by right that you don't have to get a separate council approval to move forward some things on the right in red are things that we've seen haven't worked anywhere sat back reductions landscaping reductions the density bonus is too low to make it profitable for the developer and permit these reductions of waivers that tend to be such a small portion of the development's cost that they haven't really been affected and then finally the fourth part of our strategy is the HUD consolidated plan every five years the city's community development department cements a five year plan to the federal department housing and urban development to tell them how they're going to spend three main federal sources of dollars community development block grants home funds and emergency shelter grants the first two especially can be devoted to affordable housing one thing we can explore is devoting some of that funding in the future plan to transit areas to help ensure that there's affordable housing for that system that next, Wilmer you're going to correct me 2015 is the next one that's due so sometime next year is correct and with that I would like to turn it over to the federal discussion we've got five folks are going to come up here and be able to answer your questions I've also got the contact information up here from Patrick and myself on the bottom is our website from the city if you direct yourself to the planning department I don't know how I was going to take this but we will eventually have this presentation as well as a video of today's session for any of you to see in the future Thank you Aaron, appreciate that and we are very fortunate today and we're very fortunate to have folks that have amazing knowledge and resources in this subject matter area five of which you're sitting in front of me now I'll introduce each of them from my right to my left before I do that I want to remind you that you have two index cards looking at you on the way in and if you have any questions for our panel if you can write those down on the card with the lines on it our staff, Ms. Black and Ms. Wilmer can come by and pick up those cards and pass them to the table we'll try to get as many questions as we can in the time we have so on my far right is Kim Cameron Kim is the director of real estate for self help which provides strategic leadership to the 15 member real estate team of self help Kim directs and manages the commercial and residential investment portfolio and all related real estate development projects include sales lease projects oversight asset management which is a 20 years experience and community development and it's worked on projects that serve as catalyst revitalization neighborhoods in Milwaukee Wisconsin and Atlanta it's welcome Kim Cameron Kim's left we have is Karen Lado Karen is the vice president for enterprise community partners which is a national nonprofit organization dedicated to creating opportunities for low-modern income people through affordable housing in diverse and thriving communities and relocated to Durham which brings over 20 years of experience in community development research project management consulting to her current role Karen Lado Karen's left to Shannon McLean Shannon is the chief development and operations officer of the Durham Housing Authority she has extensive over 17 years of experience in housing and development industry she's worked with housing authority multiple positions including director of development real estate strategies in this claim also serve as the senior program specialist and federal programs manager with the city of Durham for two and a half years so welcome to Shannon and Dan Joel you heard from earlier Dan's local landscape architect co-founder of Coulter Drill 10 P.A. site design firm right here in downtown Durham Dan and his firm have been involved in design of various landmarks here in Durham American Tobacco Districts and a large role in creation of Durham Central Park Dan is co-founder of the Durham area designers and has served as sort of the chairman president of the American Society of Landscape Architects sort of being a tool last but not least is Selena Mack who is the executive director of Durham Community Land Trust she has provided key leadership of the DCLT through many ups and downs most notably through its expansion of commercial and real estate rental housing development projects and under her leadership DCLT has completed over 200 units of permanently affordable housing here in Durham Selena Mack I'm going to kick off a couple questions we came up with this staff while your questions are being collected and again like I said we'll get to as many as we can try to get you out here at 9.30 I'm going to address this first question to anyone panel who wants to take it what are some of the financing or value capture tools that have been used most successfully in other cities to help us up the equity gap that you heard Dan in the talk about we'll start with Kim I'll give a quick two minute response you heard my introduction I've done this in Milwaukee, Wisconsin and Atlanta, Georgia in Atlanta we used urban enterprise companies I know that's not allowable or legal in North Carolina but it was a big incentive it was a two-year property tax abatement for developers to improve 50% AMI affordable housing in either mixed-use developments or multi-county developments and again it started out with full five-year property tax abatement and leveled off to about 100% by year 11 also taxed incremental financing and then the availability to compete in a competitive process with the local housing authority for project-based housing choice vouchers for the lower 30% AMI affordability units I think one of the key things as you think about affordability is to really understand what affordability is needed if you're trying to serve and what the roles are different players in the system one very important strategy that Durham has an option to get right now is really in this value-capture arena Durham is looking at doing an up-zoning of property around transit quarters up-zoning means that you're going to make it denser you're allowed higher density than it's currently allowed at the moment that Durham does that there's creation of economic value the land is now worth more because we've been doing more with it and that economic value is being created strictly because of public sector investment in the zoning and transit and there is very strong argument and I certainly can make it which is the public sector has a right and an obligation to ensure that that value that is created endures at least a part to the public sector and to the people who most need it and who are most likely to be harmed on the downside who is wrong one way to get at this is inclusionary zoning is something that's discussed and you have a requirement if you build more than 30 and that's 10% to get affordable you can't do that north of your land and it's not the right kind of city to do that but what we could think about doing is in areas where we're going to have significant up-zoning only allow that density increase in return for some consumations of affordability and that can be either the creation of affordable units or part of development it can be the payment of a fee into a fund that's then used to fill the secondary gap by commercial or retail developers who aren't building housing or even by rental housing developers because you can really only get 60% area median income or moderately priced rental units using kind of a market trading strategy if you want to be more deeply subsidized you need to think otherwise it the option ahead of us is to say can we create a buy-right system that allows developers to have more density than they could otherwise have basically only allows the density that people want in return for affordable and this is something that's been done in Arlington and Fairfax there is some track record for it and I think what's going on in 9th street and in downtown is the case that Durham is no longer the first step child or child area that there is a real interest in investing in this community and there's a real market demand for construction today. Good morning I have not worked in another city but in addition to the section 8 that would be a potential or opportunity for the development you also have on the public housing side there's a Fairfax limit that is set for each housing authority so for example we have 900 units and we only have 1800 that would allow for additional public housing units to be integrated into the developments as well. Financing is not by strong suit other than trying to get my clients to pay me so I don't know I mean a good thing about going last is that everybody else is already I'll give you quite a list but my list will just be to increase the number of residents in the truck in housing projects in the targeted areas. Thank you all much. Erin talked about and Karen alluded to the idea of value capture. Clearly you can do that on the front side or the back side or both and so in terms of how value capture relates to two different approaches to zoning that Erin outlined the two basic approaches you see this in the triangle are that Erin talked about. Have almost every development subject to a discretionary approval process and have the up zoning be the primary method of value capture versus a system that identifies the area of the community once that higher density allows higher density and intensity makes it the use of by right and does value capture more in the back end. What are some of the trade-offs between these two approaches and what factors might cause a community to move forward? The trade-offs between the two are if you put the zoning out by right with no sort of affordability requirement then the value is gone. The value is out there and the only way the public sector can benefit from it is basically eating into its own revenue for a tax increment financing strategy which again is worth pursuing absolutely. If you do it from a discretionary basis in Colorado or any transit bill that in our Chapel Hill's folder in Colorado where everything is negotiated you make every transaction more expensive because it takes longer and it's much more unpredictable and fellowbers hate unpredictability because they're already very risky business, it's very expensive and you're just making it hard for them. I would say that there is a middle ground and that would be certainly what I would argue for which is you make very clear rules of the game that are by-right but only by-right with a provision of specific benefits for support for health but once those benefits are provided it's a by-right development the developer knows exactly what to expect and can then then move forward and accordingly and at that incentive so they can either develop by-right at a lower density or they can develop by-right at a higher density in return for affordability, contribution to affordability and that contribution is very very clearly specified and that then the development process is predictable and the cost can be modeled and that incentive has to be powerful enough to compensate for the cost for the gap that Dan talked about which is very real the reason the market doesn't provide affordable housing is because there is no market rate return the only way to make it happen is to find some way and the only way to happen and have a private developer deliver it is to ensure that market rate return can happen Karen's a lot smarter than I am on this and she raises some excellent points my the thing we need to make absolutely sure of is that we don't give an opt-out option because at these transit station sites at these transit neighborhoods we need the density if we don't get the density we won't have transit and that's why I think and you started alluding to this that in order to close that equity gap rather than saying Mr. Developer, Mrs. Developer you can either build this much or you can build this much if you provide an affordable component I fear that without the infusion of other incentives we're going to see the developer have allowed us to develop housing for homeless populations so we have had a couple of successful relationships with the city of Durham and self-help so certainly we have also had similar local partnership private local private partnership sorry with self-help and obviously with the city of Durham we could make square certainly one of those which is housing for seniors that we developed a partnership and self-help and with a broadly non-profit called Durham on the DHIC we also want to also kind of reference the what's happening in Chapel Hill it's a little busy back here that can speak to this but in Chapel Hill the developers that we talked about earlier I won't say required but are more or less required to either build affordable housing units within their own development or provide funding or provide funds that then go into a fund for the creation of other affordable housing units those private entities are actually being developed for the public entities only affordable units are actually being developed by their local community land trust or community housing trust in Chapel Hill so they are actually functioning as the developer of those affordable housing units or even developer I mean even when those units are actually being developed by by the actual product of the developer those units are then turned over to the community land trust and they are still responsible to sell them and to provide the ongoing stewardship of those units and I would venture to say that something similar to that could also happen here in Durham looks like we have one time for one more question I'll repeat quickly what Aaron said the presentation we saw in a video of this entire session beyond our website hopefully by the end of the day certainly next day or two and if you have any questions or concerns please hesitate to reach out to Aaron where I again this is just the beginning before we break up I want to thank our panel so we've got a question about the focus of today's session has been around rail stations and how to ensure affordable housing is going to have milder stations but are there examples where bus hubs or bus hubs that feed into these transit areas have also been successful sites or affordable housing development do you need considerations to go along with that type of development? The answer is yes I recently moved to Denver which is a very large expansion that includes both bus and rail and the reality is there is one bus corridor in Denver that now carries more traffic than any single light rail line then any single light rail line will ever carry when it's at max so long-estate highway even in the country Holtebacks Boulevard and every city has a Holtebacks Boulevard it's kind of that commercial old commercial quarter that doesn't quite get provided and that has become a very common target for transit and development because it is both a major bus corridor and it links to the light rail system in several points I would say that when you think about bus rapid transit or not bus rapid transit when you think about bus-oriented transit and development the key factors to consider are frequency of service it can't just be the bus comes twice now where it has to be a major bus corridor and what does that bus corridor connect to? and then I think the second piece is I think that the catchment area we sort of think about half mile radius for a fix for a transition I think when you start thinking about a bus corridor that probably shrinks a little bit we used a world well important mile I don't think there's any magic to these numbers but they can be very very valuable and they can be important targets in particular for preservation opportunities as well as new construction because where bus is most relevant is often the most in the interest of getting you all out on time we're going to make that the last question there were a lot of questions we couldn't get to that were excellent on our website we're going to have the presentation video of this and we'll begin to answer any questions we received today or in the future I'm sorry just to have people drop their name tags if you would please drop your name tags out in the back if you have any questions that you didn't get to formulate you want to drop them in the grease on the way out let's take our panel and each of you again for taking the time to come out and look forward to working with you on this in the future thanks very much