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6.0. SR 07-29-2002Item ~ 6 MEMORANDUM TO: FROM: DATE: Housing and Redevelopment Authority Mayor & City Council Catherine Mehelich, Director of Economic Developmen~L~ July 29, 2002 SUBJECT: Affordable Housing Update Attached Related Information · "Homefront" - Central MN Housing Partnership 2002 Summer Newsletter. · "Richfield Rediscovered" ne~v home construction program · "Cities demand new vision of housing" - The Business Journal. June 21, 2002. At the June 24, 2002 joint meeting of the HRA and City Council, staff reported that the city had received a request for an apartment project, which was willing to consider affordable units contingent on financing assistance from the city. The HRA and Council indicated interest in looking at options for affordable housing with this project and directed staff to provide information on financing options. Since that time the developer has withdrawn from the proposed project. Staff met with the city's financial advisors, Ehlers & Associates, to learn about various financing options for the development of affordable housing. Ehlers & Associates indicated that financing for multi-family housing developments is extremely complex and requires staff to admimster the annual reporting requirements of tenant income and rents. It was suggested that providing financing assistance for affordable single-family development might be a more workable alternative. Ehlers & Associates suggested a project similar to the attached "Richfield Rediscovered" program, which provides sites for new homes by removing substandard structures on lots throughout Richfield. Properties are purchased by the Richfield HRA through voluntary sale. Sites are cleared of the original structure and sold for redevelopment of new homes. Any such project would ,require additional staff time to administer unless the services are contracted. In follow up to the Central MN Housing Partnership study, staff will be conducting a detailed analysis of the housing stock with GIS (geographic information system) to clarify the extent of housing needs in the city based age of the home and market value. 30 June 2l, 2002 THE BUSINESS JOURNAL twincities.bizjoumals.com SUBURBAN HOUSING Cities demand new vision of ,housing BY FRANK JOSSI CONTRIBUTING WRITER The typical vision of the subm'bs as end- less streets of single-family homes has undergon~ a radical transformation over the past decade. In the sprawling Twin Cities metro area, suburban mtfltifamily housing such as townhouses and apartments have risen in greater ntm~bers than ever before as land for development dwindles. The evidence can be seen from Woodbury to Maple Grove. With the growth of multffamily housing has come suburban density levels in some cities that rival those of Minneapolis and St. Paul. Sttbnrban ~nnltifamfly housing develop- ments also are likely to have features in connnon with an re'ban neighborhood, say panel members invited to speak on the issue by The Business Journal, often with mixed-use development mandated by local governments. Such communities, where retail and office mix attractively with hottsing for everyone from singles to sen- ~ors, invite walking rather than drivmg. In other words, this isn't the suburb you may have grown up in. This is the new sub- urb, where multffamily housing is not frowned upon and which, in most places, isn't facing old fears about urban-style development. With more than 600,000 more people expected to live in the Twin Cities over the next 30 years, many more resi- dents will be living in suburban multffami- ly developments. John (Jack) Brandt, president o£The Hartford Group Inc., Edina. has been developing multJfamily and mixed-use projects f'or over 20 years, including The Regent at Plymouth. The Regent at Burnsville, The Legacy Village at Apple Valley and mixed-use developments in Maplewood and Oakdo lc. Armand Brachman, principal o£ Dominium Development & Acq uisition, Plymouth, handles new prolect work for Dominium, the largest privately held owner/operator of multifamily housing in Minnesota. He Ioined the firm ~n 1979. S. Scott Pollock. vice president of investment services at Bloomington- based United Properties. has spent 2o years in the real estate business the last years in investment brokerage specializing in multifamily, office and retail sa es. He has sold nearly 4,o0o apartment umts, half'in the Twin Cities metro area How would you describe the market for suburban housing? Jack Brandt: The market is generally good throughout the Twin Cities area. There are pockets of problmns, but long term the prognosis is strong. Armand Brachman: I would concur. Where the market has seen a softening in the last three to four months has been in the across-the-board portfolio. Vacancies have gone up, but we're optimistic that when the economy picks back up onr occu- pancies will also go back up. s. Scott Pollock: After a tremendous run in terms of ~-ental growth and vacancies, we're seeing the market leveling off, not unlike the other property markets industrial and office. ~he demand side has cooled somewhat and caused vacancies to rise somewhat. We've seen the first quar- ter-to-qum-ter decrease ill average Fent in 10 years and vacancms have decreased along with thegn. The vacancies that have been reported don't necessarily tell the whole picture, which is the people in the trenches are reporting a little higher vacancy than maybe the averages reported by Apartment Search and others who track that information. How important is city financial support for your multifamily projects? Brandt: Our firm is revolved in five mixed. use projects, in different stages of the development process, encompassing senior housing, general occupancy housing, retail, offices, restaurants and so forth, and in vir. tually all cases there's a TIF flax-increment financing) colnponent and any other kinds of assistance that might be reqnired. Brachman: In order to ha~e a successful development today, I think it is critical that you have the participation of the local municipality to make the numbers work. You really have to have a city participate with TIF and any other soft money that might be available. Pollock: Cities need to be involved because they are also requiring developers to add a mixed-use component to these projects. They all want first-floor retail, depending on the location, for example, and m order to make projects work you're going lo need the city's Involvement in some fashion. There's also a recognition among cities that all these projects have to have an affordability component [for housing]. Why do suburbo n muhifamily develop- ments look better now than, say, 10 years ago? Brandt: The expectations of cities have changed dramatically the last couple of years. We conld not present a project to a city that we might have presented 10 or 15 years ago. For the most part the market and cities reqnire much more attractive produ_ct brick, stucco, higher-quality external materials; Eden Prairie for sever- al years has had a 75 percent-brick require- ment. We present renderings of each por- tion of the product and we certainly bear comments from staff members, mayors and others on what they want to see in the architectural integrity of the product Brach~nan: We're spending a lot more time in the unit layout and design. In the past, most apartment units were fairly straightforward. Because of the higher St. Lores Park officials were targeting residents' wishes for mult family housing and a town center w~th the Exce s or & Grand project which w feature hous ng above reta a ong w th a town green. twincities.bizjournals.com THE BUSINESS JOURNAl. June 21, 2002 31 rents we have to charge, we have to make the interiors of our units much more simi- lar to a single-fanfily home, improving the quality of the cabinetry, granite counter- tops, improving the qnality of the wood trim, the size of the units. Pollock: A lot of this got started in other parts of the country Sunbelt cities have been building 9-foot ceilings for seven to 10 years. The tutu of the century brought about a new level of presentation to the high-end renten Where are the projects going on? Brm~dt: We have two St. Paul suburban locations. In Oakdale we're doing a 31-acre mixed-use development with perhaps a senior component as well as general occu- pancy componeut. And we have a project in Maplewood that's a very large 80-acre site: general occupancy apartments in a row-home format, assisted liviug and sen- ior housing as well. Pollock: Look along the fl~eeway systems, like 35W to the south. Lakeville and Apple Valley continue to add nnits. Looking to the northwest, we've seen some additions to the supply. In Maple Grove there are more than 1,000 units under construction and that city delivered almost 500 units in the last 12 months. We've seen in the past Woodbury to the east, again along the flee- "The expectations of cities have changed dramatically. The market and cities require much more attractive product." JACK BRANDT way system -- the first paths of growth to the outer reaches. In infill, it's at or around a ring road -- Eden Prairie, Chaska, Chanhassen, have experienced significant additions, too, and Savage/Shakopee to a different degree. We're working on a large project with Pratt Homes, the Apache Plaza redevelop- ment in St. Anthony What are the barriers to more growth? Brandt: Certainly cities m'e uot coming for- wm-d to developers, in my estimation, m~d suggesting there's a mtfltitude of multffami- Small ]uvestment...Big Return Subscribe now - twincities.bizjournals.com or call 612.288.2100. ]]-IE BIJSINESS JOIJRNAL ly sites they want to develop. It's an individ- ual, isolated situation. You still have the same difficulty with a protracted approval process, at a minhnum eight or nine months, and that's on a good project. On some proj- ects that are difficult it can take well in excess of a year by the time you're tlwough the approvals and agremnents m~d so forth. Brachman: In the last six months, banks have gotten more couservative. They're taking a harder look at the numbers and they're not as aggressive as they were. It is more dffficnlt to finance a project today than six months ago. Pollock: Low interest rates affect renters in the market. They're the people who leave and opt for owner-occupied housing, buying their first home. Everyon'e in this room would say the biggest competition for the renter today is home ownership more than anything else. I've heard cases where more than 90 percent of move-outs are to home purchases. The same low interest rates that help the feasibility of a project are helping the renters who might become first-fime buyers. Frank Jossi is a freeqance writer based in St Paul. Log onto twincities.bizjournals.com to receive a page of local business news headlines emailed to you once a day. Breaking lines sent daily via email A free Business Journal reader service. THE BUSINESS JOURNAL twincities.bizjournals, com INDEPENDENT THINKING,,, St. Anthony Park Bank Rick Beeson, President Direct Dial: 651-523-7830 2265 Como Avenue, St. Paul 217l University Avenue, St. Paul www.park-bank.com Franklin Bank Dorothy Bridges, President Direct Dial: 6i2-874-4318 525 Washington Ave. N., Minneapolis 2100 Blaisdell Ave, Minneapolis Highway 55 & 494, Plymouth ww w. franklinbank mpls.com University Bank David Reiling, President Direct DiaL: 651-265~5627 200 University Avenue West, St. Paul w ww.universitybank.com~ 3lemher FDIC ~ Equal OpportmuO, Employer ~w,t ,ous,.o LENDER new home construction Page 1 of 2 New Home Construction Building a New Home: Richfield Rediscovered RICHFIELD REDISCOVERED PROCEDURE FOR PARTICIPATION Summary: The objective of the Richfield Rediscovered Program is to provide sites for new homes by removing very small, poor quality structures on lots throughout Richfield. Properties are purchased by the Richfield Housing and Redevelopment Authority (HRA) through voluntary sale. Sites are cleared of the original structure and sold for redevelopment of new homes. MINIMUM REQUIREMENTS FOR PURCHASING A SITE FROM THE HRA · The new home must be owner-occupied upon completion. The purchase agreement (between buyer and builder) and the development agreement (between the builder and the Richfield HRA) are the two essential contract documents. · Only "builder/buyer teams" may reserve sites - not a builder nor a buyer on their own. Under the Richfield Rediscovered program, no builder, builder subcontractor, nor builder realty agent may occupy or purchase the property. · The builder/buyer team will also be required to follow general design and development criteria established by the HRA. Finished properties must meet or exceed a minimum value specified for each site. · End buyers, unless licensed in the trade specified, may not put any sweat equity into the construction of the foundation, wall/roof framing, shingling, electrical/plumbing/HVAC systems, nor interior carpentry. RULES & PROCEDURE FOR MAKING AN OFFER ON A SITE 1. All interested participants on the mailing list receive an information packet by mail. 2. Interested participants form a builder/buyer team (see above), and submit an offer to purchase a lot within approximately 2 weeks of receiving a mailing. Mailings go out when a list of lots is available, approximately once a year. No offer will be accepted for less than the minimum stated price. If all proposals are for the same dollar amount, all other things being equal, the first qualified offer will be accepted. 3. Proposals submitted after the offer deadline for any properties not selected within the offer deadline will made available on a first-come, first-served basis. 4. Each interested participant may only submit one proposal. All proposals will be kept confidential. All builder/buyer teams submitting a proposal will be notified by mail of whether their proposal was selected. 5. The HRA reserves the right to reject any and all offers at its sole discretion. ' ' 6. A complete proposal will include: a signed Participation Agreement, a check payable to the Richfield HRA in the amount of $500 (the program fee), and a completed Proposal Form. The program fee will be refunded on any unselected proposals. HOUSING DESIGN AND SITE DEVELOPMENT CRITERIA House design and street presence are critical. The HRA will require the following: 1. Each home shall be an owner-occupied single-family dwelling. 2. Each home must have a minimum of three bedrooms and two bathrooms. A two car garage, attached or detached, must be provided on the site. 3. Exterior materials should be Iow maintenance. Hardboard siding materials (i.e. masonite) are not acceptable. 4. All building plans must be prepared in consultation with an architect or a qualified draftsperson. 5. Important Note: All house plans will be reviewed by the HRA. Issues of design to be reviewed include house building lines, roof lines, door and window placement, house orientation to street, and minimized garage door presence. Street-facing front doors are required. Window muntins (pane grids) are http://www.ci.richfield.mn.us/homeNewHomeConstruction.htm 7/22/02 new home construction Page 2 of 2 encouraged on all window styles, for the front of the house and other street-facing elevations. The HRA will not sell to builder/buyer teams if design issues have not been resolved to the satisfaction of the HRA. 6. Existing trees must be protected during construction. After construction, the site must be fully landscaped, including plantings around the foundation and complete sod installation. New trees are encouraged, and should be labeled on the required landscape plan. 7. Adjoining properties must not be disturbed by the construction process. 8_. The finished buildings and site grading must improv_e, or not have a detrimental impact on storm water drainage patterns in the neighborhood. Gutters will be required on all roof edges which are pitched toward neighboring homes. BUILDER REQUIREMENT SUMMARY The Contract for Private Development requires the builder to: · Demonstrate financial capability by providing o A statement from a financial institution of sufficient construction capital; o A letter of credit; and o A summary of the financial conditions of the company. · Must meet or exceed State requirements for' insurance including Builder's Risk, Comprehensive General Liability and Worker's Compensation Coverage. · Have a written warranty policy to be shared with the homeowner to perform warranted repairs required by Minnesota State Statute. The builder should anticipate being asked by the HRA to provide references from: o Five satisfied customers o Three major suppliers, one being the construction lumber supplier o Building inspectors from two cities in which the builder has constructed new housing within the past three years. Preference will be given to licensed builders over inexperienced individuals who want to general contract. http://www.ci.richfield.mn.us/homeNewHomeConstruction.htm 7/22/02