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HomeMy WebLinkAbout03/28/23 HOUSING AND HOMELESSNESS COMMITTEE MTGPOSTED ON 00 by City Clerk's Office City of 23MAR 24 l : BAKERSFIELD Bakersfield :THE SOUND OFbWAkk 964* by Staff: Committee Members: Christian Clegg, City Manager Vice -Mayor Andrae Gonzales - Chair Anthony Valdez, Assistant to the City Manager Councilmember Ken Weir Jenni Byers, Assistant Economic Development Director Councilmember Eric Arias Juan Heredia, Administrative Analyst III Special Meeting of the Housing and Homelessness Committee of the City Council - City of Bakersfield Tuesday, March 28, 2023 12:00 p.m. City Hall North, First Floor, Conference Room A 1600 Truxtun Avenue, Bakersfield CA 93301 AGENDA 1. ROLL CALL 2. PUBLIC STATEMENTS a. Agenda Item Public Statements b. Non -Agenda Item Public Statements 3. ADOPTION OF THE February 28, 2023, AGENDA SUMMARY REPORT 4. STAFF REPORT a. Staff update on the City's efforts to address housing and homelessness. 5. NEW BUSINESS a. Discussion of strategies for affordable housing development. b. COMMITTEE COMMENTS 7. ADJOURNMENT u BAKERSFIELD THE SOUND OFsaw"6e* Staff: Committee Members: Christian Clegg, City Manager Vice -Mayor Andrae Gonzales - Chair Anthony Valdez, Assistant to the City Manager Councilmember Ken Weir Jennifer Byers, Assistant Economic Development Director Councilmember Eric Arias Juan Heredia, Administrative Analyst III Regular Meeting of the Housing and Homelessness Committee of the City Council - City of Bakersfield Tuesday, February 28, 2023 12:00 p.m. City Hall North, First Floor, Conference Room A 1600 Truxtun Avenue, Bakersfield CA 93301 Minutes Meeting called to order at 12:05 p.m. ROLL CALL Committee members present: Vice Mayor Andrae Gonzales Committee Member Eric Arias Committee Member Ken Weir City Staff: Christian Clegg, City Manager Anthony Valdez, Assistant to the City Manager Jenni Byers, Assistant Economic Development Director Juan Heredia, Administrative Analyst III Joshua Rudnick, Deputy City Attorney II Nina Carter, Homeless Services Principal Gary Hallen, Assistant City Manager Joe Conroy, Public Information Officer Manpreet Kour. City Councilmember Brianna Carrier, Assistant to the City Manager Paige McCollister, Economic Development Planner II Sergio Carrero, City Fellow Cecelia Griego, Economic Development Principal Paul Soldona, Economic Development Director Scott Andrews, City Manager's Office Members of the Public: Stacy Kuwahara, Kern Behavioral Health Lauren Skidmore, Open Door Network Jim Wheeler, Flood Ministries Stephen Pelz, Kern County Housing Authority Dr. Aliyo S. Khizer-Varela, Kern Health Systems 2. PUBLIC STATEMENTS a. Agenda Item Public Statements None. b. Non -Agenda Item Public Statements None. 3. ADOPTION OF THE JANUARY 24, 2023, AGENDA SUMMARY REPORT Motion to adopt the January 24, 2023 Agenda Summary Report by Committee Member Arias. Motion was unanimously approved. 4. STAFF REPORT a. Staff update on the City's efforts to address housing and homelessness Assistant Economic Development Director Byers presented a PowerPoint on the committee's monthly housing report. Assistant to the City Manager Valdez presented a PowerPoint on the committee's homelessness report. 5. NEW BUSINESS a. Housing Burden and Cost of Housing Roundtable Assistant Economic Development Director Byers gave a PowerPoint presentation and made staff comments. 6. COMMITTEE COMMENTS None. 7. ADJOURNMENT The meeting adjourned at 1:01 p.m. ANDRAE GONZALES, CHAIR HOUSING AND HOMELESSNESS COMMITTEE Housing and Homelessness Committee Regular Meeting February 28, 2023 Minutes Page 2 ATTEST: JULIE DRIMAKIS, MMC, CPMC CITY CLERK and Ex Officio Clerk of the Council of the City of Bakersfield Housing and Homelessness Committee Regular Meeting February 28, 2023 Minutes Page 3 V BAKERSFIELD THE SOUND OF SmrUdl q�t?e* Bakersfield City Council Housing & Homelessness Committee Monthly Report: February 2023 Housing The City of Bakersfield's Development Services Department collects data on the number of residential housing unit permits that were issued which signify the beginning of development of new housing. VCCDCThe City of Bakersfield contracts with VCCDC for the Hope to Home L program. Hope to Home Is a deferred loan program to make A Nm Way Home homeownership possible for income qualified individuals, and requires . ..�uM. .��.o.. ...... recipients to first participate In home -buyer education. February 25th Virtual Training [English] 40 - 40 February 25'h Virtual Training [Spanish] 9 9 Home Acquisition ,.Habitat The City of Bakersfield contracts with Habitat for Humanity and Staples Energy for the for HU=Wty` Home Repair and Weatherization Program. This program helps qualified Wilm Ein,il homeowners receive necessary home repair and weatherizafion improve mehis. The program was recently released, target areas were canvassed, and three applications have been submitted and are under review. Page 1 of 3 The City of Bakersfield aims to ensure every Bakersfield resident has access to safe, secure, and affordable homes that meet their needs. ® The City contracts several companies to design, construct, and operate affordable housing projects. Projed Affordable Housing Infill HACK 28 -- -- Program Westchester Senior Village HACK 27 -- -- Residences at East Hills HACK 81 -- -- 22^d Street Lofts HACK 20 -- -- Chardonnay Tract(FTHB) Self -Help 10 - Enterprises 6t" Street Apartments HACK — 40 — (Homekey) Chelsea Sagewood Apartments Investment -- 72 -- Corp. Brentwood Crossings Danco — 58 — Milestone Housing Rehabilitation HACK — 32 — (Homekey) Self -Help Enterprises Multi -Family Self Help _ 80 Rehabilitation Project Enterprises Renaissance at Baker HACK — — 85 41h Street Senior Housing HACK — — 16 CityServe Housing (Homekey) HACK / 126 CityServe 800 South Baker HACK — — 8 Chelsea Auburn Street Apts. Investments -- -- 60 Corps. City View HACK — — 37 Letzring Senior Housing HACK — — 150 Bakersfield Senior Center Housing & Facility Project HACK — — 36 166 '.283 11a: Totals 956 Page 2 of 3 Homelessness The City of Bakersfield contracts with Flood Ministries for street outreach services to FIOOE unsheltered individuals. MlnWies 1i February Report Weekly Average Contacts with homeless individuals in the field 112 City's Brundage Lane Navigation Center (BLNC) turn -sways due to lack of dorm 53 or et ca oci1Y )includes field contacts, walk-in, and call -ins) BLNC um-awa s due to lack of dorm capacity 45 Male 25 Female 14 Couple # of individuals) 6 BILNG,turn-aways due to lack of p9t" capacity - 7 Male 2 Female 3 Cou le # of individuals Service Resistance . h Brs Refe 2 Monthly Total 123 Referred individuals who refused shelter 77 Percents e of individuals refusing service 63% .MERCY The City of Bakersfield contracts with Mercy House to operate all aspects of the HOUSE City's Brundage Lane Navigation Center (BLNC). 76 Couole (# of individuals) 1 18 1 20 1 90% BLNC's maximum capacity is 150 beds. Each night four f4) beds are held open for the Bakersfield Police Department to utilize which brings the functional capacity to 146. The City of Bakersfield contracts with the Open Door Network for a jobs program serving multiple City functions, including but not limited to downtown ambassadors, green solid waste, high -way clean-up, animal reimagne to I» shelter, and sump cleaning. The new City -funded Open Door Network Jobs Center building was completed in December. New l Nire d Em February ees ry Total Calendar YTD •1 7 Max. Capacity - 7. Filled -- Current Employees 111 94 118% Male 71 Female 40 -- -- Program Particlpanis Placed in Permanent Jobs 2 3 Page 3 of 3 3/28/2023 RECEIVE AND PLACE ON FILE AT H0WI0, 1EETING OF Zg 3 . ra a"s Affordable Housing Strategy Project funded by a planning grant from the Department of Housing and Community Development through S82 with the focus on housing production. The primary objectives of 582 were to: • Accelerate overall housing production. Streamline the approval of housing development. Facilitate housing affordability for low and moderate -income households. Promote development consistent with State Planning Policies. Ensure geographic equity in the distribution of funds. ram• 3/28/2023 3111 00 33AI9 OVIA 3VI3330 _____ 90 08IT33M TA Community Engagement s Created a project webpage with overview materials in English, Spanish and Punjabi �. Four focus groups were organized around existing, emerging and potential partners with three in�person meetings and an online meeting occurring in November and December, 2021. a Presentation to Planning Commission on November 10, 2021 o Project team presented an overview of draft strategies and tools to City Council on March 2, 2022 with direction provided. a Community Survey made available from December 15, 2021 through February 4, 2022 with 182 participants responding o Community Workshop held on April 27, 2022 at the Mlk Park. On -site transtation available in Spanish and materials available in Spanish and Punjabi. V Establish a capitalized long-term Affordable Housing Trust Fund Strategy 1: Use q� Create an impact fee mitigation program the city's toolkit V Online tool for developers to estimate impact to increase fees affordable housing { Develop an ADU incentive program production V Pre -approved ADU plans V An ADU guidebook, webpage, and calculator o' Database and tool for identifying vacant sites suitable to accommodate affordable housing Pro Forma Feasibility Analysis Tool 3/28/2023 O Develop an ADU incentive progr 1. Pilot a Fee Waiver Program for homeowners to build an ADU a. Bakersfield included in PLHA application a program for 10 units over the next 3 years b. Utilize Cal HFAADU Grant Program 2. Partner with one or more local lenders or a community development financial institution such as Valley Strong to develop a no interest five-year loan program 3. Facilitate more ADU production overall through consistent and targeted public information a. Created webpage �- b. Pre -approved ADU plan sets c. ADU Guidebook d. Budget calculator Welcome to Bakersfield ADU Accessory Dwelling Units IADUsi. also called granny flats, backyard cottages, io4aw units, or converted a garages, can meet the needs of residents while helping create new housing for our community. w_ae ADO' prOMenwnewners »tin nYOltily eslnY rve3 [nenge. Foram U space M your bved OMsb susomw aM mMrunity am dulYw your Oredament Nrwgh Fe ,WMADUwIpgm wNyoo E G.t Ihamfoemou.nveutaeed E1 a) -Ou jobe GUidwak rs ywr cunponim ars to he eMb ADU pe. sort buda get m[etns,resign Wesbans. gating your mirm am nun, am V� DU InNMN..z.icNs. wtll lme, you..—offlom a an vMnetyng CL gyuS t0gW3lpas tD ask a bay plyorer nor. yma pf,P[I Use our rrew Aouawe.m nu nlO bou.nady.mere ADU gan arobMg some Farocer fea resgn3 wo-nnsver nyrre 3 Wggamanmor end[ynlYNh oud u,,t,, vupWE, .W1.1fWl,f.prordeanwent¢«ofine Cornet pgeo<y pnd Oapen .M m norass t.IMamauryr Oovagg-a14ElEfy na erro ourmay,Mignt W tM amtml mtmltWagv you'll ¢'Moire or . bo kinbroun, nouraw, emI ow ArU [bum Limeb [aMMIM mn6.[msimatmn msm. OiM fees About BakeRMp ADU M e pR9reM OyraYom by tW Cry of adtersr ar support am IMum mme a mw"moo, o u mlo [Ity A5 pNdlne Agoreda HWnng SbaNgy, n n wn.. wegMothartmear. of Camay arrwde] by r m aray smn book Mannerepm Me ors I Orha Yon [nsillnnls sort ELONadnwY Wd 41Na bIYYI LgmmyWblLEWge, CDontM Jason Celer El—o and Cmsnun y Devebpme d MMega. FgadaEN H W a." e W nephCu .'be,. Clry of lo,'.. 3/28/2023 TH E ADU PROCESS ADU Guidebook GUIDEBOOK FEATURES -- —�� •_— Y ^� u—,�,— EKERCISEs u ,,,•,o CONTENTS INTRODUCTION 1 SECTIONS __— onq..q rirYnyx<c 1 Getting Started 9 aos _ ®^`• ®-' �- 2 Budgeting a Finance 17 ,N 3 Deign 23 9 KEY INFORMATION 4 Permitting 31 n°nr—„ '—�°m4 N^rbjOe""nta' ' 5 Dmrtrutlien 35 "° m �46eeem M1tlan Mlt +o u,.yy,x.ave. •� mien,uwi Is romm Mee in a Being. Landlord 45 vnv.e.,oa> Is ro-a.nm„e., zx miam.e.yrc n miab�.cee..! -n—me 7 Purpose: • Estimating up- front costs is vital to developers Interplay betvreen fees, finance, and policy can influence production • Aftematives to pay / finance impact fees can leverage other funding sources. 8 Draft Development Fee Estimator 4 3/28/2023 Action 2.6: Advocate for housing -related legislation at state and federal levels. At the State level the City's priority is to bring light to numerous barriers to housing production beyond the control of local governments that impacts housing production. Including: Construction cosh; New, building codes; CEQA cosh; Financing; State Interjection Into local housing ordinances, rules and regulations (100+new laws since 2016) Bakersfield Housing (Planning. Zoning. Homelessness) State Legislative positions are: • Financial support and incentives for programs that provide affordable housing for disabled and law - income residents, fomilies, and senior adults. • Incentives (tax benefits, grants, loans, credits for affordable artful to local agencies, private developers and non-profit groups in order to rehabilitate residential units and commercial properties. • Funding for rental subsidy assistance programs (such as Section 8) via more vouchers or certificates. • Oppose legislation that would diminish local control to set and assess development review and building inspection fees. • Oppose legislation or governance that attempts to supersede adopted planning documents or projects that have already been approved through appropriate processes. • Support state legislation that strengthens local incluslonory housing programs. • Support measures that would establish a formula -based Regional Housing Needs Assessment allocation methodology that reflects the unique needs and practical capacity of local communities. 10 Action 3-1: Improve the housing development permitting process to make it more predictable and efficient. Establish expedited plan check process for affordable and infill developments. Action 3-2: Review and amend the Zoning code and applicable design guidelines to encourage and promote a mix of dwelling types, sizes, and affordability levels. i Action portunitrl lots a°rking st Action 3-4: Accelerate planning for and investment in infrastructure in infill areas with infrastructure challenges. Seek state and federal funding for infrastructure projects. Action 3-5: Encourage innovative construction types that reduce costs and risks of producing affordable housing. Action 3-6: Align development impact fees with housing objectives Conduct an analysis of infill development capacity and feasibility in the Action 3 2 Review and amend the Zoning code and applicable design guidelines to encourage and promote a mix of dwelling types, sizes, and affordability levels. Action 3-3: Explore opportunities for shared parking strategies on infill sites near existing parking lots and city owned parking structures. Action 3-7 Conduct an analysis of Wit[ development capacity and feasibility in the downtown core Mion a 1: Id-.(, W —1.1. new and expand. actual 42: Ux We Local rMeral.:mte. and local umMfele Honda, Tait emart fund t➢lev ,ad. aaline;' to aupport rea i,ment and state and allmd.aac noun." ..a, fmdms. acooRbn Affordable Housing Strategies and Actions WHAT DOES THIS PLAN DO? The Bakersfield Affordable Housing Strategy will serve as a guiding document for city staff and civic leaders to inform decision making and provide resources to accelerate affordable housing production in the city. The strategy is anchored in a vision where all Bakersfield residents have access to housing that is safe, stable, and affordable. Four core strategies and 21 actions were identified and prioritized as initial steps to address the greatest challenges and barriers to housing production in the city. LOCAL AND STATEWIDE PLANNING CONTEXT This project was funded by a planning grant from the Department of Housing SB2 Planning Grants and Community Development through SB2. The focus of the SB2 planning grant The SB2 Planning Grant program is on housing production. The primary objectives of SB2 were to: program was created to help ■ Accelerate overall housing production. cities and counties prepare, adopt, and implementplans ■ Streamline the approval of housing development. and process improvements ■ Facilitate housing affordability for low and moderate -income households. that streamline housing ■ Promote development consistent with Stale Planning Policies. approvals and acceleratehousingproduction. ■ Ensure geographic equity in the distribution of funds. This context is important because the affordable housing strategy is deliberately focused on housing production. The city has many other efforts underway including an update to the Housing Element of the General Plan and a Comprehensive General Plan Update. These efforts set forth a broader housing plan to address changes in statutory requirements, strategies to affirmatively further fair housing, preservation strategies, and programs to mitigate displacement risk. It is expected that many of the recommendations and strategies framed out in this affordable housing strategy will ultimately be implemented as programs in the Housing Element. GUIDING PRINCIPLES Guiding principles are the foundation of this approach and framework. Bakersfield is committed to addressing the housing needs of its low to moderate -income families along with middle -income families, who also lack housing options in the city. The overarching aims for the Affordable Housing Strategy are to build more housing, diversify the housing options, and target resources to less advantaged households. In Bakersfield, affordable housing: ■ Is essential in supporting economic and community development. ■ Supports stability in the workforce across all income levels. ■ Should be available throughout the city, especially in high resource areas. ■ Requires public and private collaboration. ■ Supports health, safety, and economic mobility for residents. © ECONorthwest WHAT ARE THE GREATEST CHALLEHGES IH BAKERSFIELD? This project included both quantitative and qualitative approaches to identifying the greatest challenges to housing production in Bakersfield. Technical analysis of market data, demographics, and socioeconomic factors were included in an Existing Conditions Assessment. Additional insights were gathered from community members, stakeholders, and the development community. Key challenges that were identified include: 1. The impact of accelerating price escalation on affordability. 2. Chronic underproduction of housing. 3. Lack of supply and variety of housing. 4. Lack of flexible tools to assist in facilitating housing production. 5. The influence of accelerating migration rates on perpetuating lack of affordability. 6. Antiquated zoning and land use policies. 7. Historical disinvestment, especially in low resource communities. 8. Lack of an ecosystem of institutional development and lending agents. 9. Accelerating war of construction. 10. Competitiveness for public subsidies for affordable housing. STRATEGIES: NOW CAN THIS STRATEGY HELP OVERCOME OUR GREATEST CHALLENGES? The Affordable Housing Strategy includes four core strategies and 21 actions designed to move Bakersfield forward in addressing its greatest challenges. Strategies and actions are designed to complement and build upon existing strategies and programs relating to affordable housing in the Cityls Housing Element Existing policies relating to affordable housing in the city's Housing Element me summarized below. Over the next year, the city will be assessing the effectiveness of these policies over the last planning cycle and updating and amending them as appropriate. Policy 1-1-• Seek assistance under federal, state, and other programs for eligible activities within the city that address affordable housing needs. Policy I-3: Encourage the development of housing and programs to assist special needs persons, including the elderly, the disabled, female -headed households, large families, farmworkers, and homeless persons and families. Policy 14: Assist the Housing Authority of the County of Kern to meet the growing demand for public housing units and rental assistance through the voucher programs. Policy 1-5: Provide the citizens in the City of Bakersfield with reasonably priced housing opportunities within the financial capacity of all social and economic segments of the community. Policy 2-1: Provide information to for -profit and nonprofit developers and other housing providers on available vacant land. Policy 2-2: Provide sufficient zoned land to accommodate development for all housing types and income levels. Policy 3-3: Preserve At -Risk Housing and existing affordable rental housing stock in the City of Bakersfield. Policy 5-1: Continue pursuing a housing "infill" program and specifically target projects for extremely low, very low, and low-income households. NEW STRATEGIES The foundation of the Affordable Housing Strategy is the toolkit of programs and resources created through this project. These tools will help facilitate implementation of actions identified in the core strategies to address affordable housing production challenges. These tools range from funding mechanisms and incentives to informative devices to identifying and prioritizing investments. These tools include: ■ A capitalized long -tern Affordable Housing Trust Fund. ■ An impact fee mitigation program. ■ An online tool for developers to estimate impact fees. ■ An ADU incentive program. ■ Pre -approved ADU plans. ■ An ADU guidebook, webpage, and calculator. ■ A database and tool for identifying vacant sites that are suitable to accommodate affordable housing. ■ A development feasibility tool to assess the marginal impact of changes in development standards for a range of housing typologies. 7 Nwe orthst kCC The prioritized strategies and actions below will give the city a range of policy tools to overcome barriers to affordable housing production, address the affordable housing needs of the community, and mitigate the identified greatest challenges. STRATEGY 1: Use the city's toolkit to increase affordable housing production STRATEGY ]: Build implementation capacity through strong partnerships, advocacy, and program monitoring Action 2-1: Create a master flow chart of all organizations doing affordable housing work and improve coordination across partners. Action 2-2: Mobilize a local collaborative to focus partner activities and form a cohesive direction for implementing the Affordable Housing Strategy. Action 2-3: Partner with community -based organizations and individuals most impacted by housing affordability challenges. Action 2-4: Proactively attract new affordable housing investors. Action 2-5: Expand or create partnerships with a Community Development Financial Institution (CDFI) to offer gap financing and low-cost loan pool for affordable housing development. Action 2-6: Advocate for housing -related legislation at state and federal levels. Action 2-7: Implementation, tracking and assessment of housing strategies and monitor the effectiveness of the city's existing incentive programs in delivering affordable housing units. IECON- A th NM STRATEGY 3: Increase the supply and access to affordable housing by making housing easier to build Action 3-1: Improve the housing development permitting process to make it more predictable and efficient. Establish expedited plan check process for affordable and infill developments. Action 3-2: Review and amend the Zoning Code and applicable design guidelines to encourage and promote a mix of dwelling types, sizes, and affordability levels. Action 3-3: Explore opportunities for shared puking strategies on infill sites near existing parking lots and city -owned puking structures. Action 3-4: Accelerate planning for and investment in infrastructure in infill areas with infrastructure challenges. Seek state and federal funding for infrastructure projects. Action 3-5: Encourage innovative construction types that reduce costs and risks of producing affordable housing. Action 3-6: Align development impact fees with housing objectives. Action 3-7: Conduct an analysis of infill development capacity and feasibility in the downtown core. STRATEGY 4: Support programs and funding to incentivize and assist in affordable housing production Action 4-1: Identify and evaluate new and expanded federal, state, and local revenue stream options available to support affordable housing production. Action 4-2: Use the Local Affordable Housing Trust Fund to leverage private investment and state and federal funding. Action 4-3: Explore additional funding options through non-traditional sources, such as foundations, individuals, major employers, health agencies, or educational institutions. Action 44: Implement the Developer Fee Assistance Program to evaluate application fees for density bonus proposals and defer or finance impact fees for targeted housing types. Action 4-5: Develop a strategic framework for acquiring and/or using city land for affordable housing development. Action 4-6: Provide additional land use incentives to developers that provide deeper affordability or a greater number of affordable units. ECONorthwest Summary of Outreach and Acknowledgements WHAT WE DID A series of community engagement activities helped to inform and shape the Bakersfield Affordable Housing Strategy. The purpose of the community engagement program was to: Educate the community and partners about why affordable housing is important, who it serves, the value of integrating affordable housing options throughout the city and the strategies and policies being developed; Listen to community input about housing options and opportunities that are important to them as well as specific feedback about draft policy and program options; Engage key partners to ensure that the strategy's overall design and specific components will have their support and participation; Ensure inclusion of those whose voices are not heard, including those with special housing needs; Incorporate input and feedback, ensuring that outreach is closely coordinated with other aspects of the strategy's development; Share how community and partner input shaped the final strategy and its components; Set the stage for the upcoming Housing Element Update and continued community engagement as part of that process. To support the engagement effort, a webpage was developed along with infogmphics and informational handouts in English, Punjabi, and Spanish. Staff also visited community groups and members where they were in the community to share information and encourage participation in the survey about housing needs. The project team also reached out to and interviewed various stakeholders (housing organizations, service providers, developers, funders, etc.), one-on-one and in focus groups, to ask for their ideas, incorporate their feedback, and build relationships. Below is an overview of the key project activities of the Community Engagement Program: PROJECT WEBPAGE AND OVERVIEW MATERIALS A f,o;ect w6paae was created on the City's housing website to: ■ Provide an overview of the affordable housing stratees purpose, objectives, and schedule. ■ Introduce key components of the strategy. ■ Provide links to key project documents and resources. ■ Highlight opportunities for people to be involved and link to engagement opportunities. ■ Link to other pertinent pages and related info on the city's and partners websites. Three informational handouts were also developed for easy use by a broad audience on what affordable housing is, who affordable housing serves, and how we can create a future of affordable housing. Click here to view the handouts. I ECONorthwest .a...� PARTNER FOCUS GROUPS Four focus groups were organized around existing, emerging, and potential partners, including: ■ An in -person focus group on November 10, 2021 with 16 representatives from existing partner organizations (county and nonprofit service organizations, developers and community groups); ■ Two additional in -person focus groups on November 19, 2021 with 23 representatives from emerging and potential partners, including potential funding partners; and ■ An additional online focus group with eight additional partner representatives on December 15, 2021. PLANNING COMMISSION PRESENTATION On November 10, 2021, the project team presented an overview of the Affordable Housing Strategy work program and key components, including the community engagement program, to the Bakersfield Planning Commission._ -_:... session can be viewed here.' CITY COUNCIL PRESENTATION On March 2, 2022, the project team presented an overview of draft strategies and tools to the City Council. Council provided direction on strategies to emphasize with respect to recommendations on zoning and land use characteristics. A recording of that meeting can be viewed here' COMMUNITY SURVEY (SELF -PACED ONLINE WORKSHOP( To support broad community engagement in multiple languages, an online "self -paced workshop" about housing issues and opportunities in Bakersfield was hosted from December 15", 2021 through February 411, 2022. It was accessible via the project webpage and promoted through multiple city communication channels. A news segment on 23ABC News (KERO TV) also helped encourage community participation.' The workshop attracted 182 participants who were able to view three short videos and answer a series of 15 questions in English, Spanish, or Punjabi. COMMUNITY WORKSHOP On April 27, 2022, the city hosted a community workshop to present draft strategies and get feedback from the community. The workshop was held at the community center at MLK Park The city provided on -site translation services in Spanish, and background materials were translated into Spanish and Punjabi. The project website and partnership with the Leadership Counsel for Justice and Accountability promoted the project. 23ABC News (KERO TV) covered the event and broadcast a segment on the evening news along with an online print story. Comments were received in English and Spanish from community participants ' Me November 10. 2021 City Planning Commiw io presenldian is available at httpa:tfw ..youmbtwo eaitch?r-xg45Y_oacps ' the March 2.202E City Co it presentation is available 9: httpa://loutabe'Sv NUSIwFQ?t=H7 ' A dip of the news segmem is available at: hopsd/putabe1H3R-ZWngA?t=114 4 haps:/hvw .t to23.comine n/ -newa@ infield-residents-rtruggle-to-find-aRordeble-houaing ECONorthwest � KONJMNS N' WHAT WE HEARD PARTNER FOCUS GROUPS While the City plays a key role in setting policy for affordable housing and helping to fund and facilitate new affordable housing development and related services, the actual delivery of both housing and services is primarily carried out by a network of partner agencies. To help ensure that the strategy was informed by their input, the four focus groups provided an opportunity for facilitated dialog and input on how best to achieve desired outcomes, including the roles that service providers could play and the types of support they need to be effective. '..ptpi NsN Srccr35,-. w � yl.rket Mr 3rY IN Aexaa i 'R IWGW"'M1ga Mr c Upy rsVW'rMY A k. Ir - vsn W arF/ I,n Yww.e ►Iws a „[ulRgl^I^ tlxn[ylt—,n B+a ra a w wu awns TrFateelw IMYsW r ntlll4 tl M II(t� 1� r 4iYr, �,I, SM {ASIrs Ix ylo [tl. n[•s -fr .rrW u - WM MC � Y Ibri �/I�cM/4.aW 1Ra1Mr[lW .r(t. NIT LM/.L. P„d[fNYxR �4IIt 1MVnt.X TltK r.NW4.,. 4[sE pV1u MR -MMXWtlY6 -WNMt�Wr'�MA. �4M 4.yn�MYmO n GE 41M1M 'wR A44G,~jrn,n ►®.rrv.4a � Memos describing each individual focus group are attached to this summary. Collectively, key take-aways included: Housing Needs and Priorities ■ We need more housing overall, and more diverse housing choices integrated in every neighborhood. ■ The lack of affordable housing is an issue of growing concern for many organizations in Bakersfield. ■ The strategy should set a bold goal and help stimulate and coordinate action on multiple fronts. Comprehensive and Coordinated Response ■ Emmethatthestrategyaddresses(and funds) notjusthousingproductionbutalsothe servicespeopleneedtobesuccessfil. ■ Address affordability in a comprehensive way by including transportation and transit agencies in the affordable housing conversation. Overcoming Obstacles ■ We need to reduce friction and costs (including time) associated with development review. ■ Community opposition ism obstacle to housing production. Partnerships ■ Community -based organizations, nonprofits, employers, educational institutions and others we eager to partner with the city and each other on proactive housing solutions. ■ Public sector entities with land resources are a key potential partner for the City and affordable housing developers. ■ Community -based nonprofits have land and the interest in supporting affordable housing development, but additional capacity building is needed for these groups. IECONorthwest Funding ■ Ongoing partnerships are needed to coordinate on defining funding priorities. ■ "Third -Sector" funding strategies involving nonprofit trust funds and community development financial institutions (CDFIs) are intriguing, but additional due diligence and capacity building is needed. ■ Bakersfield businesses increasingly see housing affordability as a major issue and are interested in supporting strategies to deliver more housing of all types. Community Education and Engagement ■ Ensure stronger outreach and engagement, especially to lower income communities and people of color, including the current and potential residents of affordable housing. ■ More education is needed throughout the community regarding what affordable housing is, who it serves, and why its important for everyone. COMMUNITY ONLINE WORKSHOP Who Participated The online workshop had 182 participants. In addition to answering the workshop questions, they provided information about themselves and their household characteristics. About half of the participants were between the ages of 30 and 49, with another third between the ages of 50 and 69. The participants represented a diverse mix of razes and ethnicities, with 30 percent of participants identifying as white; 26 percent as ITtspanic/Latino; 19 percent African American; 7 percent Asian/Pacific Islander; 10 percent Multi -racial; 2 percent Native American; and 4 percenter other. The group also represented different housing tenures with 48 percent of participants being homeowners; 40 percent renters; 10 percent living with friends or family; and 1 percent unhoused. What We Heard Through their responses to the survey questions, participants shared about their housing situation, their perspectives on affordable housing and priorities regarding areas of housing need and potential city action. The full summary of responses can be found here' Some of the key take-aways from participant input include: ■ Affordable housing is seen as a significant issue, with more than half of respondents indicating they "know too many people who have been impacted by a lack of affordable housing:' ■ When asked to describe their"ideal Bakersfield" the most frequently used words were affordable and safe, as reflected in the "word cloud" below (where the size of the font reflects the number of times a specific word was entered). ■ When asked to identifyBakersfield's most urgent housing needs, respondents ranked most areas of need as urgent, with housing for the homeless (including transitional housing and permanent supportive housing) just edging out housing for families, housing for smaller households, housing for seniors, and housing for people with special needs. ' As Mm orthesuovyro,msesuavaikbkat m ECON- rNt hl st a ■ To create more housing affordability, respondents reported the strongest preference for reducing the cost of building and for creating incentives for budding affordable housing, but there was support expressed by respondents for nearly every potential strategy, including allowing more housing in more places, using city -owned land for housing, and leveraging city funds for affordable housing development. ■ There was interest from respondents in nearly every potential form of additional housing, but in particular, there was majority support for small to mid -size multi -family buildings, duplexes/triplexes/fourplexes, and accessory dwelling units. Finally, survey respondents offered a wide range of thoughts on what direction they would like to see in future development and other housing -related needs and priorities: ■ Many community members shared that housing is just too expensive, both to rent and to own a home. Not only did community members want to we lower rents but cited the need for higher wages to be able to afford housing. ■ There is significant interest to make this an opportunity to create a more walkable and well-connected community through transit and infill housing. Bringing grocery stores, shops, and restaurants into the neighborhoods. Sustainability is also an interest, outfitting homes with solar panels and water collection systems to address the high cost of utilities for low-income residents. ■ Gentrification is a concern, with many seeing longtime residents being priced out and unable to purchase a home. Many residents cited a path to home ownership in addition to a desire to see more affordable housing constructed and rehabilitated for all income levels and household sins. ■ Housing size and type was brought up as an issue, with residents looking for more options beyond single family homes, and those with families wanting more affordable options in neighborhoods that are high in opportunity. ■ Many stated that rental housing is in poor condition, and in areas that feel unsafe and lack access to everyday amenities such as grocery stores. ■ Barriers to housing for specific groups, such as youth transitioning from foster cue, those formerly incarcerated, and unhoused populations. ■ Other concerns were a lack of community information in landlord and tenant issues, with landlord tensions, tents are fearful of eviction. ECONorthwest ECGpM13 PNMJ� RPNNNG COMMUNITY WORKSHOP What Wa Hoard The workshop included a Q&A session where community members were asked for their input on draft strategies and given the opportunity to ask questions and provide any additional commentaryto the city. Many community members participated verbally. Translation services were available for Spanish -Speaking residents. Participants were also given the option to submit questions and comments in writing. Key themes included: ■ A concern that an Affordable Housing Strategy focused on production will not result in the city developing policies that are responsive to immediate needs, specifically tenant protections, and rent stabilization. ■ A concern over accessibility of programs for non-English speaking residents and undocumented households. ■ A need for the Strategy to include feedback loops and metrics to ensure that it is going in the right direction. ■ A desire for the city to explore new local funding sources that are tied to market rate development, specifically linkage fees and impact fees. ■ A desire to see the city allow and promote innovative and less costly construction materials. ■ A desire to have public input into the disposition of Affordable Housing Trust Fund resources. Existing Conditions Context A comprehensive assessment of existing housing conditions in the community was completed at the onset of the project. This chapter was organized with two purposes: 1) To inform the Affordable Housing Strategy and frame the needs and challenges in the community. 2) To serve as a starting point for the city's Housing Element Update, the existing conditions report included much of the requisite analysis in the Housing Needs chapter of the Housing Element. This report in included in its entirety in the technical appendix. Key takeaways are summarized below. HOUSING BACKGROUND UNDERPRODUCTION Housing affordability is tied to the dynamics of economic and population growth and the production of housing to meet demand. According to the 2020 Annual Housing Element update, Bakersfield has under produced approximately 24,200 units to meet the needs of the local community. Underproduction is particularly stark for very low-income households (30 percent AMI or less). Between 2015 and 2020, Bakersfield added just 377 units of housing that are affordable to these households, leaving a gap of 9,329 units. Bakersfield however has made good progress to advance production for the moderate income (80 percent-120 percent AMI) households and above moderate income (greater than 120 percent AMI) households, permitting a combined 11,586 units since 2015, narrowing the production gap. Exhibit 1 below demonstrates the Regional Housing Need Allocation (RHNA) for Bakersfield compared to the number of permitted units by income segment. ® ECON st lrth 6 Inw Exhibit 1. Housing Underproduction by Income Segment m Keen c.n 0.F6 5800 N63 1115 4W1 n , as ■ RHINAARoconon -9329 ■ TMOI Rvmioed Unitt ■Very W. Income Wu Income Mad. IrcgM ABM M44M01e Gov k30%.11 00-sn AMII 180=A1NI Bnax AMR SOURCE: 5TH CYCLE BAKERSFIELD HOUSING ELEMENT TABLE B. HOUSING VACANCY Such housing underproduction has led to a tight housing market According to the 2019 American Community Survey, the overall vacancy rate in Bakersfield was 6.7 percent (Exhibit 2), which is a tighter housing market than both Kem County and California as a whole. Exhibit 2. Vacancy Rate Bakersfield'; vacancy rate is 3% lower than Kern County and 2% lower than the state of California SOURCE: US CENSUS BUREAU, 2019 ACS WEAR ESTIMATES, TABLE B25002 AFFORDABILITY The consequences of underproduction and a low -vacancy rate are creating challenges for affordability Housing affordability is typically defined as a household paying no more than a certain percentage of household income for housing, including payments and interest or rent, utilities, and insurance. The Department of Housing and Urban Development's (HUD) guidelines indicate that households paying more than 30 percent of their income on housing experience "cost burden" and households paying more than 50 percent of their income on housing experience "severe cost burden" Using cost burden as an indicator is one method of determining how well a city is meeting its mandate to provide housing that is affordable to all households in a community. About 37 percent of all Bakersfield's households were cost burdened in 2019, and 21 percent were severely cost burdened. Currently, about 54 percent of renter households are cost burdened or severely cost burdened, compared with 26 percent of homeowners. The lowest income households in Bakersfield are disproportionately cost burdened, with greater than 50 percent of households earning less than $50,000 defined as cost burdened ECONorthwest CONCPKSFlNVJ3 MNNeJG Exhibit 3. Share of Cost -Burdened Renter Households, Bakersfield, 2019 Of renter households 00 making less than $20,000, 76% of all are severely cost burdened. 80% Y 60% 2 2 & 40% E 20% seVz,ry coa s„w„M � cam, e�,aerea a% . ® m o%� Less than S2000 to S55,000 to S50.o00 to S75,000 or $20Ao0 S34M $49,999 $74,999 more SOURCE: 2019 ACS TABLE B25074 AFFORDABLE HOUSING CASE STUDIES This analysis included case studies of three successful affordable housing projects developed or under construction in Bakersfield over the past few years. These case studies include valuable insights into the affordable housing challenges and lessons learned in Bakersfield. Key takeaways include: ■ Importance of thinking creatively about puking. ■ City's role to facilitate and align grant timing and availability of leveraging resources. ■ Importance of housing variety (i.e. project types and sizes). ■ Need for denser development. ■ Importance of local leverage to ensure a pipeline of projects. ■ Role of community outreach in project execution. ■ Need to prioritize developments that affirmatively further fair housing. ■ Important to form relationships with the development community to build a Critical mass of development expertise and capacity. ■ Need for the city to play a role in coalition building, as well as being a broker of information on sites, funding, and partnerships. These case studies are included in technical appendix N of this report. ECONorthwest o�� Household Production Tools The scope of the Bakersfield Affordable Housing Strategy is more than just a strategy. In fact, the lion's share of this effort was the development of a series of tools and programs to support and catalyze implementation of the Affordable Housing Strategy. These tools range from funding mechanisms and incentives to informative devices to identify and prioritize investment. A summary of these tools is included below. AFFORDABLE HOUSING TRUST FUND In June 2022, the Bakersfield City Council passed a resolution establishing an Affordable Housing Trust Fund (AHTF) to further the city's broader economic development goals and provide support for housing production across affordability levels to meet the needs of the Bakersfield community. Created with an initial one-time funding allocation of $5M from the Public Safety and Vital Services Measure (PSVS), the trust fund will receive annual funding of $500,000 from PSVS, as well as funding from other federal, state, and local sources and potentially private and philanthropic contributions. As part of the housing trust fund creation process, the city tasked the consultant team with developing a feasibility analysis and strategy for establishing and administering an AHTF consistent with best practices and based on local needs and economic conditions. The scope of work for this part of the strategy included three major deliverables: 1. Analysis of potential revenue sources and organizational models. This deliverable also included analysis, research, and outreach to local funders and key stakeholders. 2. Detailed feasibility and program recommendations. This task included additional outreach to potential private -sector partners for the trust fund. 3. Final report detailing concrete short and longer -term actions, suggested uses, and a feasible structure to implement the fund. These actions included a recommended administrative structure as well as alternatives for future additional funding sources. ECONorthst ECCON XRNest FUNDING SOURCES As described above, the consultant team reviewed a comprehensive set of potential funding sources with key city staff with the objective of narrowing the list of sources to only those with the highest political feasibility and greatest overall revenue generation potential. Working with City staff, the consultant team identified the following recommended funding sources: Public Sector Sources The fund is initially capitalized with a one-time investment of $5M from the Public Safety and Vital Services Measure (PSVS), the trust fund will also receive one-time and ongoing funding from the following key local, State and Federal sources: ■ $5M in one-time funding from the American Rescue Plan (ARPA). ■ Ongoing annual allocations of $5M per year from PSVS. ■ Payments on outstanding city loans averaging $100,000 per year. ■ State of California Permanent Local Housing Allocation (PLHA) funding of $LOAM over four years. ■ State of California Local Housing Trust Fund (LHTF) grants of up to $SM per year. In total, assuming the city is successful in competing for State LHTF funds, up to $63.7M in total funding would accrue to the AHTF from fiscal yew 2021/2022 through fiscal year 2025/2026. This funding would support the creation of between 1,000 and 1,700 new housing opportunities in the Bakersfield community over five years. Private -Sector Sources Additionally, there is potential to attract private and philanthropic funding to the AHTR were it to be managed by a Community Development Financial Institution (CDFI). This structure could enable the fund to leverage private capital alongside the city's trust fund program. Possible sources could include: ■ Employer contributions. ■ Foundation and private donor contributions. ■ Commercial bank loans and grants. m ECON-R rtt s Ew E Oa Program Structure, Priorities, and Next Steps If the AHTF is funded entirely by public sources and administered by staff from the ciWs Economic and Community Development Department, the city has identified a few initial key programs to be supported by the fund: 1. New ADU fee reduction and deferred -interest incentive programs targeted primarily to lower and moderate - income homeowners. 2. Expanded first-time homebuyer down payment assistance for lower and moderate -income families. 3. New affordable rental and ownership housing production funding program implemented through annual NOFAs. Building on outreach already conducted for the Affordable Housing Strategy and as an additional next step, it is recommended that the city continue to conduct outreach to private -sector and community partners to seek additional non -governmental sources of support for affordable housing that could be channeled through a new partner organization such as a CDFL FINANCIAL COMMITMENT RECOMMENDATIONS The utilization of the AHTF to provide financing particularly for new deed -restricted affordable housing should ensure that the city's financial commitment to projects leverages the most external available funding sources possible while maximizing the project's unit potential before making a funding award. As part of its underwriting review of NOFA applications, the city should consider the following: ■ Align AHTF underwriting standards with HCD's established standards to ensure the template is consistent across the applications for LIHTC and NOFA awards. ■ Eau code requirements to yield more units or lower costs. Many affordable housing projects must include features that increase the overall project cost or reduce unit capacity unnecessarily (i.e., construct a podium to support on - site parking requirements or demand high set -back or step -back requirements). Relaxing project -specific zoning could enable the AHTF to finance more projects. ■ Pre -development and acquisition loans have a quicker payback period. Applications requesting funds to cover the cost of land acquisition will typically be able to support a paid -interest rate and will recycle back into the AHTF once permanent financing takes effect. This helps to retain fund balance and enables proceeds to support more projects. ■ Grants and interest rates should be determined based on a projects ability to pay. More challenging projects that have lower Net Operating Incomes (NOIs) or are offering significant public benefits should receive more leniency on paid interest and debt structure. ■ NOFA awards for permanent gap financing should be sized after accounting for all other identified sources. To ensure that projects are leveraging the most outside available funding sources. AHTF gap financing commitments should be sized after all other sources of each projects capital stack are estimated and have received a soft commitment. ■ Documentation of soft commitments from other financing sources should be provided as part of the NOFA application for the city to review funding commitments. ECONorthwest m DEVELOPER FEE ASSISTANCE PROGRAM The City of Bakersfield assesses one-time impact fees on developers to pay for infrastructure improvements that must be built, expanded, or maintained due to new development and growth. The city assesses impact fees to pay for parks, schools, sewer and water infrastructure, and transportation -related infrastructure. Combined these fees can account for as much as five percent of a dwelling unit's total cost of development. While these fees are critical for the city to support vital infrastructure needs, the structure and timing of impact fee payment can pose challenges to unit production. In crafting a proposed developer fee assistance program, the following factors were considered along with targeted recommendations. TRANSPARENCY IS IMPORTANT FOR DETERMINING FEASIBILITY Knowing a project's impact fee incidence is important for developers to determine whether a project makes financial sense. The more the city can provide transparency in terms of impact fee payment, structure, timing and availability of incentives, the better developers will be able to identify project feasibility and increase unit production. To help the city and development community understand a project impact fee incidence, ECONorthwest developed a tool that enables anyone to estimate a prospective project's fees at any given geographic location in the city. This tool provides a reasonable estimate so that developers both large and small can evaluate their project and revise accordingly. STRUCTURE OF LOCAL IMPACT FEES DISINCENTIVES HOUSING VARIETY Three out of five impact fees (park, sewer and transportation fees) are levied on a per unit basis. Assessing fees in this way means that a unit that is 1,000 square feet must pay approximately the same fee as a unit that is 3,000 square feet. However, the actual local impact of the 3,000 square foot home on infrastructure is likely higher than the 1,000 square foot home due to larger family size and higher personal vehicle use. The recent passage of AB 602 requires jurisdictions to impose impacts fees according to an HCD nexus study model that will estimate impact fees on a per square foot basis and align with local service funding levels. The City should implement AB 602 upon completion of the nexus study to incentivize the development of more housing variety throughout the city. It should also consider providing deeper discounts for central city infill to attract more development and investment in the City's downtown core where much of the surrounding infrastructure is already in place and impact fees for any existing structures would have already been levied on those infill sites. Central city infill sites are also more likely to have lower impacts on transportation infrastructure. TIMING OF PAYMENT IS CHALLENGING The cityh current policy requires impact fee payment at the time of permitting. Requiring payment this early in the pre -development process means housing developers must cover impact fees from their own cash reserves since securing financing for the project would not occur until after entitlements and permitting. The city should allow developers to pay impact fees as a requirement to receive Certificate of Occupancy (C/O). Allowing payment at C/O recognizes that housing developers are diverse, with organizations ranging from small mission -driven nonprofits to national housing developers, each with a different capacity to pay impact fees before their financing is in place. The timing of payment should not over burden smaller developers. mECONorthwest � KONMNS fW.NCE G FINANCING IMPACT FEES CAN MAKE BAKERSFIELD MORE COMPETITIVE FOR LIHTC AWARDS Tax credits are a very competitive source of affordable housing funding in California. In the annual application process, projects from across the state often tie on the points awarded based on the scoring criteria in the Qualified Action Plan (QAP). When there is a tie, the award will go to projects that have dedicated local soft debt to fill financing gaps. To help facilitate more LIHTC awards for local projects, the city should consider offering a low interest financing option to pay for impact fees. This would enable the project's cash flow to pay for the impact fees over time and help leverage State resources to finance local affordable housing development. RECOMMENDATIONS: ■ Restructure impact fees to align with the ciWs housing and production goals. This includes sizing fees to incentivize more housing variety (i.e. smaller unit types and more missing middle housing types such attached townhomes, fourplexes and duplexes) and providing deeper discounts on impact fees on central city infill sites to align with actual infrastructure impacts. ■ Allow for payment of Impact Fees at C/O. This will enable developers to utilize their financing to cover the fees rather than dipping into their cash reserves, which is problematic for smaller, mission driven developers, who might be offering additional public benefits as part of their development projects. ■ Offer a low or no -interest financing option to affordable housing developers. This will allow impact fees to be paid through a project's cash flow and will help to make Bakersfield more competitive for LIHTC awards. AFFORDABLE ADU INCENTIVE PROGRAM The goal of the Affordable ADUs Program is to encourage homeowners to build ADUs and rent them affordably. It includes new online and print resources, a Pre -reviewed Plans Program, and direction on how the city can incentive the rental of ADUs to qualified or low-income tenants. PRE -REVIEWED PLANS PROGRAM As part of this project, the consultant team developed a Pre -Reviewed ADU Plans Program, to save homeowners money, generate interest in building ADUs and remove barriers by providing free, pre -reviewed plans and an online gallery to compare a variety of ADUs. To develop the pre -reviewed plans, the City and the consultant team issued a Call for Submittals to solicit designs from architects, both lowily and throughout the state. We then formed a Selection Committee, made up of City of Bakersfield Planning, Building and Fire Department representatives, to review the more than 30 plans submitted and select which ones the city will pre -review then make available to the public for free. An online gallery is currently under development that will include the free, pre -reviewed plans, as well as any additional plans the Selection Committee decides to include. Homeowners will be able to view all plans in an easy -to -use interface and connect directly with architects and modular ADU companies. ECONorthwest m KONOM IMM RAw'!NG ADU GUIDEBOOK, WEBPAGE AND CALCULATOR The consultant team also developed an ADU guidebook and webpage that walks homeowners through the process, from pre - development to lease up. The team also developed an ADU Calculator, an online tool that estimates construction costs, taxes, rents, and payback periods based on location and the type of ADU. As part of these tasks, we reviewed the permit process, rules, fees, and other resources available in the community. We also analyzed current rents and construction costs to provide homeowners with a range of what to expect and developed a visual ADU process graphic that can used as handout. An ADU Guidebook is includes a detailed explanation of each step in the process, photos, tloorplans, and activities to help homeowners with everything from identifying their goals to hiring a general contractor or property manager. A companion webpage is also in development, which will be available on the City of Bakersfield Affordable Housing Strategy webpage. It will similarly walk homeowner through the process and connect them to the Pre -Reviewed Plans Gallery and the ADU Calculator. ADU INCENTIVES RECOMMENDATION Over the course of the summer and fall of 2021, the consultant team conducted research and interviewedjurisdictions throughout California with affordable ADU programs, as well as staff from the Bakersfield Kern Regional Homeless Collaborative (BKRHC) and the City of Bakersfield Housing Authority. Key findings were: ■ Rapid or streamlined review processes can be helpful. ■ Strict criteria and deed restrictions can be a barrier. ■ Administrative costs should be factored into any program budget. ■ ADU bonuses and fee waivers are seeing a lot of interest. ■ ADU owners can easily opt -in to Section 8 programs. ■ It is important to publicize any incentives or opportunities throughout the community. In consideration of the teams research, analysis. and engagement efforts, we developed the following recommendations: Pilot a Fee Mitigation Program for Income -Qualified Homeowners. Provide impact fee mitigation to build an ADU if a homeowner agrees to rent their ADU affordably for up to five yens. This could include renting the ADU to Housing Choice Voucher (HCV) recipients. Doing so will remove a significant barrier to more ADUs beingbuilt by those who could benefit the most, while increasing production and affordable housing options throughout the city. 2. Partner with local lender(s) to develop a no -or -low interest five-year loan program in exchange for rent - restrictions. Qualified homeowners who agree to rent their ADU to Section 8 voucher holders or community mECONort w ccCO E Nlt members earning up to 50 percent AMI for five years could qualify for the loan program. The lender would create the ADU loan product. qualify homeowners and collect loan payments, and the city would create an interest payments fund and annually monitor compliance. 3. Facilitate more ADU production through consistent and targeted public information. For each new program, tool, resource, or incentive for ADUs that is developed moving forward, it will be important to provide funding and staffing for outreach, develop public information and messaging emphasizing benefits to specific stakeholder groups, and create a plan to communicate throughout the community in multiple languages. HOUSING SITE IDENTIFICATION TOOL CONTEXT Over the next year the city will be updating the Housing Element of its General Plan. A part of this process is to create an inventory of vacant and underutilized parcels with the capacity to accommodate its Regional Housing Needs Allocation for the next eight -year planning cycle. Kern COG is responsible for developing a methodology to allocate regional need to representative cities. It has determined that Bakersfield is responsible for accommodating zoned capacity for 37,461 units of housing. Among these, 18,211 most be suitable to accommodate affordable housing. The magnitude of lower income housing need underscores the importance of a targeted approach in identifying sites that are most suitable for affordable housing development. This tool will help guide the cities decision making in allocating its limited resources to sites that are physically suitable for affordable housing, are most competitive for external funding sources, and have impact on social factors like mitigating displacement risk or affirmatively furthering fair housing. The site inventory tool in this project arcs developed to serve two purposes: Initial Sites Inventory Screen. An initial screen to identify vacant parcels that could be available for housing development. Affordable Housing Site Candidates. Identification of a subset of parcels that are stronger candidates to accommodate affordable housing development that should be prioritized for investment METHODOLOGY The methodology for identifying potentially vacant sites was developed in coordination with the Citys Geographic Information Systems (GIS) team, the Kern County Assessor's Office, and the Building Services Department. The city started the current parcel basemap. Potentially vacant sites were identified using five inputs: Previous Housing Element inventory sites. The provided a baseline shapefle of its 5" Cycle housing inventory with associated parcel ID numbers (APNs). This inventory was cross walked to current parcelization and approximated using spatial analytics. Housing Allowance. Sites where housing is allowed as a permitted use or conditionally permitted use were considered. Also, several zones that do not currently allow housing were included to inform potential rezoning opportunities. Improvement value. Parcels whose assessed improvement value was less than $10,000 were identified as potentially vacant IECONorthwest Exhibit 4: Bakersfield Land Inventory _ kL f a1: �'•�� Y • Dev@oWms°c)ae 'w - iJ r • mnween, s"cr=�e.rvm Deew 9 • emen,aivaovns,eno, mciueeem s^qce Use description. Assessor's data includes a description of existing land use. parcels with "vacant" in the description were also considered. Sites that currently allow housing. Only vacant sites that have allowed densities of 30 DUA or greater in the zoning code were included. Land Value. The four previous steps resulted in an inventory that included many irregular parcels that are technically vacant but should not be considered. Examples include interior courtyards of existing apartment buildings, and right-of-way. These parcels tended to have a $Oland value in the assessors records. This step removed all parcels with a $O land value. AB1397 Context AB 1397 was passed by the California Legislature in 2017. Among other things, this law requires cities to identify sites that were used in previous housing element updates. Vacant sites identified in the previous two housing elements must be identified and rezoned with specific criteria to be included in subsequent housing element inventories. A digital version of Bakersfield's 4'" Cycle was not available for this analysis. This project did identify sites used in the 5' Cycle inventory. ® EON tEw t NANl a A At DESCRIPTION OF THE TOOL Sites identified in the initial vacant inventory were organized into three categories. 1) Sites identified in the 5's Cycle inventory that were subsequently developed over the planning period. 2) Sites identified in the 5's Cycle inventory that were not developed and presumably remain vacant. 3) Sites that met the criteria for being considered vacant but were not included in the previous site inventory. LIMITATIONS AND CAVEATS It is important to state that this total does not reflect achievable development capacity. The tool is intended to be a starting point for identifying candidate vacant sites that could be suitable for housing development. There are many factors that can positively or negatively influence development potential that were not considered in this analysis. These may include: ■ The impact of lot consolidation and assemblage. ■ Potential environmental constraints. ■ Availability and access to infrastructure. ■ Land dedication required for right-of-way, open space, or infrastructure (net -to -gross). ■ Nuances in the zoning code and incentives that could impact allowed density. ■ Ability of the market to achieve maximum density under existing code. ■ Further, the methodology used to screen for potentially vacant sites was a programmatic analytical process and did not include site -level ground truthing. There remains potential for sites with irregular data to be misclassified. AFFORDABLE HOUSING SUITABILITY To be considered a viable site for lower income capacity, the California Department of Housing and Community Development (HCD) states that a site should be between 0.5 and 10 acres in size and allow density of at least 30 dwelling units per acre (DUA). In Bakersfield, only a handful of zones currently meet this 30 DUA, specifically the R-3, R-4, C-C, and C-B zones. Even though the R-2 zone does not allow 30 DUA, the city has historically included sites in the R-2 zone as being viable for affordable housing development based on the TCAC Resource established precedent in the city. Categories But these are not the only criteria that make a site suitable for affordable housing. Other • Highest Resource factors include competitiveness for public subsidy, proximity to public resources, and • High Resource opportunities to affirmatively further fair housing. This tool stratifies the subset of sites • Moderate Resource that meet HCD's criteria with these factors to identity —to the extent they exist —sites • Low Resource that have physical characteristics that are suitable for affordable housing, are competitive • High Segregation for federal and state funding, and offer access or proximity, to areas of opportunity in the community. Sites, corridors, or nodes identified through this process can be prioritized and Poverty for investment and involvement by the city. Factors considered include: ECONorthwest Sites in Qualified Census Tracts. Qualified Census Tracts (QCTs) are defined as areas with "50 percent of households with incomes below 60 percent of the Area Median Gross Income (AMGI) or have a poverty rate of 25 percent or more. Site's within QCTs receive an increase in eligible basis for Low Income Housing Tax Credits (LIHTC) and make project's more feasible/require less gap financing, all else equal. However, because QCT's are generally in low resource areas, they often direct affordable housing subsidy into areas that already disadvantaged. Lower -income -eligible sites identified in the inventory are organized by QCT status. Sites by TCAC Opportunity Areas. In February 2017, the Department of Housing and Community Development (HCD) and the California Tax Credit Allocation Committee (TCAC) convened a group of independent organizations and research centers that would become the California Fair Housing Task Force ("Task Force"). TCAC and HCD charged the Task Force with creating an opportunity map to identify areas in every region of the state whose characteristics have been shown by research to support positive economic, educational, and health outcomes for low-income families —particularly long-term outcomes for children. Census tracts throughout California are organized by resource typology. FINDINGS ■ A large portion of East and Southeast Bakersfield include QCTs. Most of Downtown Bakersfield is in a QCT This will make infill and redevelopment sites in Central Bakersfield more competitive for affordable housing funding. ■ QCT areas we not well -aligned with areas of opportunity. Most of Bakersfield is in low resource areas or in areas of high segregation and poverty. High resource areas are in Northwest and West Bakersfield. ■ High resource areas are typically correlated to areas with lower density sites that are not supportive of affordable housing. These areas are also areas where proximity and access to public services are more limited. ■ Strategies directed at improving investment and resources in low resource areas should be considered alongside opportunities to increase allowed density on vacant sites in or proximate to high resource areas and other important amenities such as grocery stores, schools and parks that improve TCAC scoring. STRATEGY FRAMEWORK ARCHITECTURAL MASSING ANALYSIS ECONorthwest engaged Deca Architecture and Amp to assist with a comprehensive analysis to identify the financial, physical, and policy challenges to housing production in Bakersfield. The evaluation included developing parcel -specific housing prototypes across seven unique sites and testing the trade-offs of different approaches to development (see technical appendix for additional details). To highlight some of the main physical, financial, and policy challenges, this summary presents two examples of building prototypes on a 0.70-acre parcel located in a Commercial Center zone (C-C) alongside architectural massings that include maximizing density while accounting for height, set -back, landscaping, and on -site parking requirements. The following sections will summarize and illustrate our technical analysis: ®, ECONorthwest E �na AHAH�E � Exhibit 5. Infill Multifamily Prototypes coos underparking sed Lam alley (6R) stalls 5 h alde.ard RESIDUAL LAND VALUE: $682,000' RESIDUAL LAND VALUE: $2.3 MILLION 8 A, bncl eaping at loml streets z � 15 h rear yard setback ) 7'""20 for quired _ � elLresldentlal L building , J FSNotYM spates: • Four floors (wood frame); One floor tuck -under parking ■ 92 units ■ 8,000 sf of retail ■ 62 parking stalls 150%reduction for mixeduse ■ FAR 295:1 cMlleng.: ■ Tuck under parking more expensive construction type ■ Miseduse development is more challenging ■ setbacks and landscaping requirements limit density protary" spew: ■ Four floors (wood fmmel ■ %units ■ No retail ■ %parking stalls located off -tile ■ FAR 3:1 Imaxl cMllengos: ■ off -site parking may command W. market rents d Shared parking required within a walking distance of 500 R 'ASSUMES A 5%RETURN-ON-COST cIBID. SOURCE: ECONORTH EST AND DECA ARCHITECTS ElcCON- rthwest Massing 1 This prototype features a five -story wood frame construction (the lowest cost construction type) building with tuck -under parking on the ground floor to accommodate 62 puking stalls and an 8,000 square foot retail space. The prototype qualifies for a parking reduction of 50 percent as a mixed -use project. Tuck -under parking is more expensive than surface parking; however, this enables the prototype to nearly maximize the Floor Area Ratio (FAR) allowed under the current zoning. The mixed -use prototype also necessitates higher setback and landscaping requirements than a purely residential building, limiting the total number of units produced. Massing 2 This design assumes that the developer can achieve an off -site parking arrangement, enabling the prototype to maximize the floor -area ratio (FAR) and the total number of units physically allowed under the current zoning. However, since parking does not count towards the FAR, Massing 1 with tuck -under parking can achieve five stories (75 feet in height) while Massing 2 can only achieve four stories (60 feet in height), with both scenarios yielding a similar quantity of units. FINANCIAL FEASIBILITY ANALYSIS Methodology To compare development feasibility and the impact of zoning changes on production between Massing 1 and 2, ECONorthwest used a Common method called a residual land value (RLV) analysis. Residual land value (RLV) is an estimate of what a developer would be able to pay for land given the property% income from rental or sales revenue, the cost to build as well as any cost to operate the building, and the investment returns needed to attract capital for the project. In other words, it is the budget that developers have remaining for land after all the other development constraints have been analyzed. The RLV is a useful metric for assessing the impacts of new policy requirements and accompanying development incentives, because these policies principally affect land value, especially in the short run. An advantage of the RLV approach is that it Exhibit 6. Positive Land Budget In this graphic, the development value Land Budget Net Operating Income from RenN (blue column) isgreater than the cost (grey column), so there is budget to buy Hard Costs Parking Revenue land (shown in yellow). soft Costs Vamnq Rates Apositive land budget means that Market proposed development project is likely to Capim imrign Rates befeasible (contingent on theprice for �i which the land is being offered). DEVELOPMENT DEVELOPMENT COST VALUE mECONorthwest SOURCE: ECONORTHW ST ECWMI6 � G Exhibit 7. Negative Land Budget Han! Cosh Soft Costs IimPor� rK:. DEVELOPMENT DEVELOPMENT COST VALUE Exhibit 8. Residual Land Value by Massing For a development that is not feasible, the development cost (grey column) Subsidy Needed l.m,. ,a,.j exceeds the value (blue column), so a subsidy is needed to get the project No e Incomea from rom Rentz to a positive land budget (shown in a dashed outline). Parking Revenue vacancy Rates A land budget below $0 means that a Maher proposed development project is not coalmli atlon Rates feasible, absent offsetting subsidies or incentives that can cover the difference. Sn% 51% 51% 53% 54% Si"-: 6.6°[ Sl% SB% Sys ReNmromcoa ■ Abalrgl 1♦ NnttlMR SOURCE: ECONORTHWEST s10000 San 00 WOO 0 sleooW SPOW) s(oWA 60X SOURCE: ECONORTHWEST IECONorthw Ns does not rely on land prices as an input. Rather, we compare the RLV model outputs with observed land prices to help calibrate the analysis and ensure it reflects reality. Using RLV as an output allows us to identify the land budget for a development project and compare the land budget to actual land prices in the market today. The prototypes described above were analyzed using this RLV approach. For each of the prototypes, the RLV methodology compared the budget remaining for land with and without zoning allowances. This approach provides a strong indicator of the relative likelihood of feasibility, rather than an absolute measure of return to a specific investor or developer. New Does the Residual Land Value Method Work? Exhibits 6 and 7 summarize the residual land value method by illustrating two example developments, one that is likely feasible and the other is likely infeasible. In both scenarios, the right column (shown in blue) illustrates the total value that comes from the project (derived from rental revenue less any operating expenses and vacancy costs). The left column (shown primarily in grey) shows the total costs to build the project, both the hard construction costs and the soft costs such as design and fees. Using market data to inform a pro forma model, we used the RLV methodology to test the financial feasibility of Massings 1 and 2, discussed in the Architectural Massing Analysis section above. Exhibit 8 below illustrates the results of the financial feasibility analysis. While each developer has different return expectations and approaches to financial feasibility, our analysis accounts for a range of return -on -cost metrics to determine the likelihood that a developer would find the project viable. We recognize that for the Bakersfield market, these return -on -cost percentages are likely insufficient to attract institutional investment but are attractive to local and regional investors and developers. According to the results, Massing 2 has the greatest potential to be financially feasible, yielding a positive RLV at a few return -on -cost targets. A few factors contribute to this. ■ The shared off -site parking solution reduces development costs. ■ Reduction in set -back and landscaping requirements compared to Massing 1 enable a higher lot coverage, yielding more units. ■ Rents are unchanged between Massing 1 and 2 and each massing assumes no additional parking income. Additionally, Massing I possess some additional risk due to its mixed -use structure. While providing ground floor commercial space is an attractive use to both reduce required on -site parking and help drive future rents, depending on the market, it can be viewed by a lender that is underwriting the project as an additional financial risk. Should the retail space remain vacant for long periods or not achieve the underwritten lease rate, its inclusion in the project can pose a risk to debt service payments. This risk makes mixed -use projects much more challenging to develop, particularly in downtown Bakersfield where there has not been a lot of newly constructed mixed -use projects. More comparable mixed -use development and city support to improve feasibility would help to mitigate any perceived risk by lenders. mECONig •tea eg KEY FINDINGS AND ZONING RECOMMENDATIONS The cost of infrastructure is challenging on infill sites Recent urban infill development in Bakersfield consists of moderate density multifamily rental apartments. ARUP estimates that for Massing 1 and 2, infrastructure could cost approximately $1.7 million. The estimate includes new utility work to provide potable water to the development, fire service such as hydrants, sewer and storm water connection, electrical, gas, and frontage improvements including sidewalks, curbs, and gutters. To cover these high infrastructure costs, rents need to be adequate to support the total cost of development while still delivering attractive returns to investors. Our analysis of Massing 1 and 2 demonstrates that even on infill projects where off -site parking is achievable, no additional density is allowed under the current zoning code that could potentially make that project more financially feasible. Greenfield development converselyoffers options for developers to mitigate the cost of infrastructure that are otherwise limited on infill sites. For example, single-family homeownership development is much more common on the edges of a city or in suburban jurisdictions. Land tends to be cheaper outside of city centers, impact fees are often lower, development costs are less, and there is more potential to cover these costs through the sale of units or establishing special tax districts to pay for infrastructure nowbut repaid with assessments to property taxes over time. For many developers, given the choice of greenfield or infill development, they will select the most financially feasible and proven product to develop. The city can help to flip the equation to make infill development more financially viable and thus attractive to the development community. Make zoning code less discretionary The code includes reductions to required puking quantity in certain situations, including using public off-street facilities (17.58.090), and an on -street puking credit (17.58.100). The C-C zone provides incentives for mixed -use and multiple -family developments (17.58.120), however some of these reductions we discretionary and limited. These incentives are situation dependent and do not provide a high level of certainty for developers. Making the code less discretionary should help to improve certainty for the development community. Reduce required parking quantify The current code requires a large quantity of parking stalls particularly for downtown infill sites zoned C-C. Requiring large amounts of parking on a per -dwelling unit basis limits the number of units that can be achieved while adding expensive structured parking, which increases development costs. Massing 1 above demonstrates that tuck -under parking is a strategy that can work but poses financial feasibility challenges. If market conditions are not adequate to support the more expensive construction type needed to provide the high parking requirements, then the project will not be viable. The city should consider the following code changes to increase production: ■ Remove parking requirements on infill sites in the downtown core. Developers understand the parking needs of the market and generally try to supply is needed to achieve target rents to support development. Allowing each project to determine the appropriate on -site or off -site parking quantity and arrangement would allow projects to improve financial feasibility while still providing an appropriate quantity of parking for the location. ■ Reduce base parking requirements for zones outside of the downtown. For multifamily residential, the current code requires on -site parking to have one stall per bedroom (e.g. a two -bedroom unit requires two parking stalls) plus an additional 10 percent for guest parking. Setting a parking requirement on a per bedroom basis makes providing three -bedroom units cost prohibitive. This increases the quantity and cost of providing parking and reduces the number of units that can physically fit on a site. The city should require only one stall per unit regardless of unit size and allow the further reductions in required parking if a project has good access to public transportation or has a high walkscore (i.e. good access to daily needs and amenities). Extend the allowable distance For off -site or shared parking arrangements Downtown Bakersfield has ample opportunities to identify shared or off -site parking arrangements to support new multifamily or mixed -use development. The current code allows for as -of -right off -site parking within 500 feet of the development. This should be extended to 1,350 feet (.25 miles). Research shows that people are willing to walk up to 0.25 miles to access their daily transit needs in most urban areas. Extending the allowable distance for off -site parking will allow for greater flexibility for developers to negotiate off -site parking arrangements. It will support the financial feasibility of new development, and it will maximize underutilized existing parking facilities. More C zones should permit housing and R zones should permit mixed -use Most commercial designated zones, other than C-C, prohibit the development of housing. This produces a few challenges: 1) it artificially limits the land available for development, particularly for Low Income Housing Tax Credit (LiHTC) projects, by removing opportunities for affordable housing development in areas that would score very high in the state application process; 2) it limits the city's ability to meet its Regional Housing Needs Allocation target. While allowing residential uses as -of -right may be politically challenging in some areas of Bakersfield, the city can address these issues in a few ways: ■ Allow just deed -restricted affordable housing as -of -right in all C zones. This will help leverage more tax credits to support development in high resource areas of Bakersfield. ■ Authorize multifamily development as a conditional use in certain or all C zones ■ Streamline the spot rezoning process. This approach will enable the development community to identify the best opportunity sites for multifamily residential or mixed -use development. ®j ECONorthwest 40NCNYS MPIICE NG Minimum lot areas limit unit production In the C-C zone, buildings used exclusively for dwelling purposes must comply with the minimum lot provisions of the R-4 zone which requires 600 sf per dwelling unit. 'Ihis is a very high minimum and limits the density achievable for modest, urban -style developments. A typical three to four-story urban housing development routinely approaches 300 sf of site area per dwelling unit. A lower minimum in line with typical medium density housing development will help with both feasibility and unit production. Landscaping, setback, and step -back requirements limit flexibility in building design General zoning regulations require that residential uses above another use meet the substantial setbacks of the R-4 zone (17.08.120) The combined set back requirements contribute to 15 feet or more setbacks for the mixed -use portion of building, but small setbacks of five feet for residential multifamily projects. Setbacks coupled with a 45-degree diagonal airspace requirement prevents placing buildings on a significant portion of the site. Generally, stepping buildings at each floor to match the airspace diagonal is costly to development and inefficient for building design. Similarly, minimum landscape standards (17.61.030) require significant on -site landscaping adjacent to major arterial roads. The combination of these regulations limits the building footprint of a potential development thus the number of units that can be achieved. The city should: ■ Eliminate setback, step -back requirements in certain zones. In some parts of the city there is a desire to increase density and mixed -use development, these requirements should align with these goals. ■ Require just that 10 to 15 percent of the lot area be landscaped This would allow for architects and developers to determine where landscaping might best serve the residents or customers of the commercial uses. Allowable height not aligned with allowable FAR The C-C zone allows buildings up to I80 R./12 stories high, but the FAR limit is 3:1 which would rarely generates buildings above six stories in an urban setting. Additional FAR may be awarded for public benefit features, but these tools are too discretionary and do not provide certainty for developers. Creating dear and objective FAR bonus standards would increase certainty for developers and allow more accurate evaluation of the costs and benefits of these bonuses. This could include utilizing a shared parking arrangement, providing dedicated off -site parking, or proximity to public transportation to receive a boost in FAR from 3:1 to 4:1 or higher. Lack of minimum density requirements may produce unwanted outcomes The current zoning code does not require any minimum densities for residential development, especially in the downtown core, which may allow many sites to be developed in a style inappropriate to their urban location. Adding minimum density provisions may encourage urban sites to be developed more densely and efficiently. However, depending on market forces, it can also discourage incremental development on certain sites if the minimums are set too high. The city should align residential density requirements with the housing types and commercial densities that it would like at a minimum in each zone. I ECONorthwest KS que,�Q RPNNN ECONorthwest ECONOMICS • FINANCE • PLANNING www.ECONW.com EUGENE,OREGON PORTLAND The Washburne Building KOIN Center 72 W Broadway, Suite 206 222 SW Columbia St., Suite 1600 Eugene, OR 97401 Portland, OR 97201 541-687-0051 503-222-fi060 LOS ANGELES 9415 Culver Boulevard, Suite 248 Culver City, CA 90232 213-218-6740 SEATTLE, WASHINGTON Park Place 1200 61h Avenue, Suite 615 Seattle, WA 98101 206-823-3060 BOISE, IDAHO Eagles Center 223 North 6th Street, Suite 430 Boise, ID 83702 208-515-3353 RECEIVE AND PLACE ON FILE ATW4 MEETING OF -4&2J Appendix L ADU Incentives Bakersfield Affordable Housing Strategy Final Report �!c'O)TiWJ n1�lll{n���Tfaf°r ��I!\IIi Il�be: ECONorthwest ECONOMICS • FlNANCE • PLANNING LOS ANGELES 9415 Culver Boulevard, Suite 248 Culver City, CA 90232 213-218-6740 ECONorthwe t 238 This page intentionally blank ECONorth.e t Overview Accessory Dwelling Units (ADUs)—also called granny flats, backyard cottages, in-law units, or second units —provide homeowners with additional rental income or space for loved ones while helping our community create new housing that is "affordable by design' as it typically rents for less or even for no or low rent when it is used as housing for relatives or friends. Their popularity has increased dramatically in recent years, bolstered by state laws adopted in 2019' that have made it easier than ever for homeowners and multifamily property owners to build an ADU. In addition, many cities are looking to ADUs as a housing strategy to meet their Regional Housing Needs Allocations, or RHNA. The California Department of Housing and Community Development has provided a methodology for projecting ADU production (typically based on the average production over the past three years) and allows many of the projected units to be counted as meeting lower income housing needs (in the San Francisco Bay Area, HCD has indicated that jurisdictions can allocate projected ADUs as serving 30 percent very low-income households, 30 percent low-income households, 30 percent moderate -income households and 10 percent above moderate -income households). ADUs are also a promising strategy for creating new rental housing opportunities in established neighborhoods, thereby helping to counter the segregation of owner -occupied housing from rental housing. Increasingly, California cities and counties are also working to develop new programs and resources to encourage people to not only build new or legalize existing ADUs, but to also rent them to income -qualified tenants, creating more affordable housing options housing and responding to pressing community housing needs. The City of Bakersfield is similarly committed to increasing ADUs broadly, and affordable ADUs specifically, by developing an Affordable ADU Program that will help residents and multifamily developers navigate through the ADD process, create more ADUs, and encourage renting ADUs to lower income households. Bakersfield has long been considered one of the most affordable large cities in California. However, in recent years housing costs have begun to outpace incomes, and production overall has not kept pace with the need for housing at every income level. According to a comprehensive housing needs assessment recently prepared by ECONorthwest for the Bakersfield Affordable Housing Strategy, 55 percent of renters and 27 percent of homeowners now overpay for housing, spending more than 30 percent of their annual income. Lower - income households and people of color are even more likely to overpay for housing and live in overcrowded or unsafe conditions as costs continue to rise. Increasing the supply of ADUs is one important way to address the need for more housing. ' Nip Lw whcdca youtpol'cv-resea¢hlaccessorydwcll ix mitcvh(m&booklet ECONorthwest The Bakersfield Affordable ADD Program will make it easier for homeowners to build ADUS by providing improved information and resources. It can also incentivize homeowners as well as multifamily developers to build ADUs and rent them affordably. To inform potential program design options, the city engaged Baird +Driskell Community Planning to conduct background research, including interviews with peer cities and local stakeholders, leading to the recommendations outlined in this memo for consideration by City staff and leadership. Summary of Recommendations 1. Pilot a Fee Waiver Program for lower and moderate- income homeowners to build an ADU. leveraging dedicated funding from the City's Affordable Housing Trust Fund? 2. Parhi r with one or more local lenders to develoR a no interest five -veer loan RLQUarrI for qualified homeowners who agree to rent their ADD to a Section 8 voucher holder or community member earning up to 50 percent of the Area Median Income as defined by the State Housing and Community Development Department (HCD) for a period of at least five (5) years. 3. Facilitate more ADU production overall through consistent and targeted public information. Key Findings Over the course of the summer and fall of 2021, Baird + Driskell conducted research and interviewed jurisdictions throughout California with affordable ADU programs, as well as staff from the Bakersfield Kern Regional Homeless Collaborative (BKRHC) and the City of Bakersfield Housing Authority (see Summary Table). Key takeaways include: 1. Rapid or streamlined review processes can be helpful Several jurisdictions have developed new systems to speed up or streamline the ADD review process, resulting in more ADU permits completed and lower costs for applicants. For example, the City of San Diego developed a virtual 15-minute ADD permit meeting and the City of Napa has an express review for JADUs. The ADU Standard Plans program and enhanced ADD permit information being developed for the Bakersfield Affordable ADU Program will be an important step towards implementing this best practice. 2. Deed restrictions may pose a barrier for some homeowners Many jurisdictions shared that their programs, while well -received and sparking a lot of interest, were often underutilized due to strict program criteria and deed restrictions. For ' Funding for the ADU Incentive program will be available both from State of CA Permanent Local Housing Allocation (PLHA) funds and Local Housing Trust Fund (LHTF). It is estimated that between $500,000 and $1.3M per year will be available for ADU Incentive programs. ECONorthwest example, Habitat Monterey's "My House My Home' program provides no -interest loans to seniors who build an ADU and rent it affordably (i.e., to an income -qualified renter). However, the age and income requirements coupled with the long-term deed restriction resulted in a small pool of qualified or interested homeowners and only five ADUs built in the first two years. In Los Angeles, LA Mas developed a program to help people through the building process in exchange for renting affordably for five years. With the goal of assisting up to six projects, only one has moved forward in the first two years. The City of Del Mar developed an ADU Incentive Program, and while they have received 70 applications the past two years, people are only using state incentives, due to the deed restriction required for local incentives. This finding has been factored into the recommendations for Bakersfield's program. 3. Administrative costs should be figured into program or budget allocations Jurisdiction staff similarly cautioned about the need of building administrative costs into budget allocations or pilot program funding. For example, the County of Santa Cruz ADU Forgivable Loan Program began with the allocation of a $300,000 budget to provide up to eight loans. Administrative costs were not included in the budget, creating a lot of stress on existing staff to double or triple their workload. Monitoring compliance with program restrictions on scattered sites across the city can be time-consuming in addition to administering loans or other incentives. It is key that the Bakersfield program's design and funding factor in ongoing administrative costs. 4. ADU fee waivers, loan programs and bonuses and are seeing a lot of interest Jurisdictions are developing fee waiver and no- or low -interest loan programs to incentive homeowners to build ADUs. The County of San Diego developed a Fee Waiver Program that waives all permit fees until the beginning of 2024—including building permit, onsite wastewater, development impact, park, traffic impact and drainage fees —estimated to save homeowners between $10,000 to $15,000 on their ADU project. Regarding loan programs, as part of the Second Unit ADU Program in the City of Pasadena, homeowners could apply within a 30-day period for comprehensive assistance through the entire ADU process if they agreed to rent their unit to a Section 8 voucher holder. If the homeowner's household income was below 80 % AMI, they were also eligible for a 3-year loan for new ADUs or a 20-year loan, both at 1 % simple interest. Other loan programs include the City of Napa JADU Forgivable Loan Program, which provides a deferred interest -free loan up to $50k, and the County of Marin ADU BMR Rehab Loan Program, which provides loans up to 25k and technical assistance to homeowners who are income -qualified. While these two programs come with income qualifications and deed restrictions, the level of assistance provided has helped overcome the hesitation to participate for at least some households. Some jurisdictions have also received interest from smaller infill developers since state laws were expanded in 2019 allowing ADUs as part of multifamily developments. In response, they have considered how to further incentivize all possible builders of ADUs. The City of San Diego ECONorthwest 242 developed a density bonus for multiple ADUs, allowing one bonus ADU for every ADU constructed on site if rented affordably for 15 years. 5. ADU owners can opt -in to Section 8 programs ADUs can be an option for Section 8 voucher holders. Homeowners right now can find a Section 8 voucher holder as a tenant on their own and opt -in, utilizing existing systems. Such an option could be offered in conjunction with a no interest loan program. After discussing this possibility with staff from the Housing Authority and BKRHC, we teamed that annual Section 8 monitoring could easily be expanded to include ADUs. Homeowners can also include their ADU in an existing inventory of units to provide housing for the unhoused and homeless. Doing so could provide housing for an individual or family waiting for rapid rehousing or housing without on -site services, which represents the majority of those in need in Bakersfield. According to a 2020 survey and analysis conducted by BKRHC3, of the more than 6,000 people who are unhoused or experiencing homelessness in Kern County, 36 percent need rapid rehousing (with the majority being single adults followed by families) and 28 percent require no assistance but may need referrals to mainstream services (with the majority being families followed by single adults). 6. It's important to publicize any incentives or opportunities Interviewees repeatedly emphasized the importance of getting the word out about incentive programs and related opportunities. In addition to allocating resources to create and run any program, it is important to ensure adequate staffing and budget to conduct effective marketing and community outreach. Recommendations 1. Pilot an ADU Impact Fee Program Anyone building an ADU in Bakersfield will pay on the order of $6,500 to $7,500 in habitat conservation, sewer, and school district fees. Although ADUs are already exempt from transportation impact and parks fees, for lower- and moderate -income households, an additional $6,500 or more in development costs can be a barrier, particularly for those with limited equity to invest. By covering these costs (through waivers, grants, or a low interest loan), the City would help facilitate more ADUs development while also providing lower- and moderate -income homeowners with another opportunity to build household wealth and long- term economic stability. I httR,akohc orBA-Report,d( ECON.nhwest We recommend piloting a program that covers the cost of all city impact fees for homeowners making up to 120 percent of the Area Median Income as defined by HCD. Doing so will remove a barrier to more ADUs being built by those that could benefit the most. Combined with permit process streamlining and the potential cost and time savings from the ADU Standard Plans program, these efforts can help make the ADU process less daunting and more affordable for lower income homeowners while helping increase production and affordable housing options throughout the city. As economic conditions allow in the future, the program could also be designed to allow higher income homeowners to qualify for a fee waiver, grant, or low interest loan if they commit to renting their ADU affordably for up to five years to an income -qualified renter (for example, through the Section 8 Housing Choice voucher program). By piloting the program for up to five years, the city can assess the program's viability while signaling to homeowners that now is the time to build. If the program continues to incentivize production, it could be extended, or allowed to sunset. Funding is available to support this program through the City's Affordable Housing Trust Fund, leveraging ongoing funding and, potentially, State PLHA and LHTF program funds (although use of these funds will require a deed restriction, which may deter some homeowners from participating). Saving approximately $6,500 to $7,500 in upfront impact fees, coupled with the low-cost ADU Standard Plans, including pre -reviewed designs, could save homeowners a significant amount of upfront investment (on the order of $10,000 to 25,000). That kind of savings can take many people from just thinking about building an ADU to doing it, especially if they know that at least part of those savings is only available for a limited time. Eligibility Requirements 1. Any low- or moderate -income qualified homeowner would qualify for the program. An AMI threshold would need to be set (we recommend up to 120 % AMI). 2. In the future, as economic conditions allow, the city may also explore a similar program for all homeowners regardless of income in exchange for restricting rents on new ADUs to affordable levels or agreeing to rent to a Section 8 housing voucher holder. At present, however, research and analysis conducted for this study suggests that covering fees alone would not be a meaningful incentive given the relationship between market rents and restricted affordable rents. Options to Reduce or Eliminate City Impact Fees for ADUs In Bakersfield, City impact fees including habitat conservation, school and sewer fees average on the order of $6,500 to $7,500 depending on the project. Based on best practices from other jurisdictions in California, one potentially viable way to incentivize ADU development would be to eliminate or reduce these fees for ADUs for a period. There are three ways to do this: 1. Utilize Cal HFA ADU Grant program ECONorth.e t 2" The California Housing Finance Agency (Cal HFA) ADU Program provides a grant of up to $25,000 to qualified homeowners for the reimbursement of ADU pre -development costs, including but not limited to impact fees. To qualify, a homeowner must be low or moderate income, low equity, and/or live in a socially disadvantaged community. The City could utilize this program and provide a local match to ensure that the total grant covered City impact fees in addition to other pre -development costs. 2. Allocate funds to pay impact fees for ADUs Assuming city and school district impact fees range from $6,500 to $7,500 per ADU built, waiving them for up to 50 units per year would require an allocation of between $325,000 and $375,00 per year from the City's Affordable Housing Trust Fond. For school district fees, Memorandums of Understanding (MOUs) would need to be developed between the City and the individual school districts to provide a clear mechanism for the City to compensate the School Districts for waived fees. 3. Exclude ADUs from city impact fees As an alternative to allocating funds, the city can exclude ADUs from city impact fees due to their lower impacts compared to single family homes. However, because impact fees are established based on the costs of providing services, this may not be feasible (the costs to public agencies for services would still need to be funded through another source). If established as a time -limited program, this might be a feasible approach that could further incentivize homeowners to build within the timeframe offered. The departments or agencies that receive each fee payment would need to agree to this approach and identify workable strategies for covering costs absent the expected fee revenue. What to Consider In developing the fees program, some key considerations include: • Per -unit cost of covering fees to incentivize an ADU in an established single-family neighborhood, versus cost of subsidizing another type of affordable unit. Keep in mind that ADUs tend to rent for less than many other types of studio, 1- or 2-bedroom rental units, even without a guarantee of being affordably priced and can be integrated in low density neighborhoods throughout the city. • Rent restrictions will discourage participation due to cost benefit consideration for homeowners but linking to the existing Section 8 housing voucher program may be feasible. If participating homeowners are required to rent their ADU at 50 % AMI, it is unlikely that many if any will participate. Assuming a 5-year period, lost rental income could total up to $30,000 depending on the sub -market that the ADU is in (Table 1). This means that most homeowners would see little or no benefit from this type of program when factoring in lost income over time. However, if the unit is rented to a qualified Section 8 voucher holder, this income loss would be significantly reduced or eliminated. Some homeowners may choose to opt in to participating as through Section 8, but many will still choose to forego participation due to concerns about loss of control or flexibility in how they use a portion of their property. The City should weigh the benefit of investing in ADUs as a general strategy for increasing rental housing options that are "affordable by design" (but not regulated for affordability) with a more regulated approach that requires affordable rents in return for a financial benefit, but which may produce fewer units. Table L-1: Example Value of Fees Incentive ADU Sq. Ft. 900 $/Sq. Ft. - $225 Total Development Costs $202,500 Fees $6,949 Market Rate Rent 11 BR) $1,300 50%AMI Rent $780 Deferred Rent Year 1 $6,240 Net Present Value (NPV) of Deferred Rent over 5 Years ($27,016) ____.-_..-__..-._____—_.___._-___.___.._._..._.—.___ _ Net Savings to Homeowner ($20,167) 2. Partner with one or more local lenders or a community development financial institution (CDFI) to develop a five-year No -Interest Loan Program for qualified homeowners who agree to rent their ADU to a Section 8 voucher holder or low-income community member for 5 years. Many homeowners need to take out a loan from a bank, credit union or other financial lender to finance their ADU, and interest costs on these loans are becoming more and more significant as economic conditions change. One way that some communities have attempted to address this barrier is by directly offering or working with local financial institutions to offer homeowners low or no -interest loans. Typically, a homeowner would then agree to rent their ADD at a below market -rate rent for a set period of time, like the City of Pasadena's Second Unit Program and the City of Del Mar's ADU Incentive Program. We recommend that the City partner with a local lender such as Valley Strong Credit Union or a new community development financial institution (CDFI) to establish and manage a Five-year No -Interest loan Program. The lender would create the ADD loan product, qualify homeowners and collect loan payments, and the city would create an interest payments fund and annually monitor compliance. The Kern County Housing Authority may also be able to provide ECONorthwest 246 monitoring, and additionally help identify and place qualified renters (with homeowner approval). Developing a 5-year No -Interest Loan Program is a more sizeable commitment than the fees program described in the first recommendation and will require evaluation of cost benefit in comparison to other potential city investments to create affordable housing units. Program feasibility may rely on implementation being primarily overseen by a local lender, with renters qualified and monitored by the Housing Authority. Loan and Repayment Terms Homeowners that commit to renting to a Section 8 voucher holder or at rents based on AMI (tiered by size of ADU) for a five-year period, would not have to pay interest on their loan for the same period. The loan would remain no -interest for as long as the ADU is rented affordably, with no deed restriction. Homeowners would either find a voucher holder on their own to rent to or have their ADU listed on an existing inventory website through the Housing Authority. It will be important to define repayment terms in case the ADU is no longer rented affordably within the 5-year period. For example, the County of Marin provides an interest free loan to homeowners who build or legalize an ADU and rent to a Section 8 tenant, when homeowners no longer rent to a voucher holder, they must pay the loan back within three years at 3 percent. Estimated 5-Year Cost to City and Value to Homeowner Providing a no -interest loan in exchange for renting a new ADU at reduced rent could be a potentially significant benefit to homeowners. For example, in the case of an ADU costing $202,500 to build with the owner taking out a loan representing 70 % of total development costs at an interest rate of 5.5%, a no -interest loan could save them up to $7,796 a year over the course of five years (Table 2). Considering annual inflation, the net present value (NPV) of these interest reductions over five years would be on the order of $33,292. At the same time, the decrease in rental income associated with renting the ADU at 50% AMI would only be $26,647 (net present value), providing a net benefit to homeowners of approximately $6,636 over the course of five years. Table L-2: Value of No -Interest 5-year Loan ADU Sq. Ft. .'�'f $/Sq. Ft. $225 Total Development Costs JI�$202,500 Equity (.30) $60,750 Debt (.70) 1141,750 247 Interest Rate Interest Net Present Value of Interest over 5 Years (2022 $) 5.50% Market Rate Rent (1 BR) $1,300 .__ _... '__ ___ -__ 50%AMI Rent ban Net Present Value (NPV) of Deferred Rent over S Years �26,647 Net Savings to Homeowner Over 5 Years $6,646 What to Consider • Despite the value to homeowners, it could be costly to the city to originate and manage a portfolio of loans, including annual household income certifications to ensure that ADUs are being rented to lower -income households. • Cost to the City: The annual costs of this program would include both the deferred interest payments to partner lenders and City administrative and staff costs for managing the program. The costs of this program would also increase from year to year as more homeowners take advantage of the program, and the City assumes the responsibility of subsidizing additional interest payments. Assuming up to a total of 50 loans in the City's portfolio at any given time and an average interest deferent of between $5,000 and $10,000 per loan per year in current dollars, the annual cost would potentially range from $250,000 to $500,000 plus staff time for a .25 FTE employee to administer the program and liaise with homeowners and lenders. • Partnering with one or more local lenders to originate and manage loans is an option. It may be possible that they do this in exchange for Community Reinvestment Act (CRA) credit. The City would just pay the interest write downs over the ter of the loan. • Annual monitoring will be necessary to ensure the unit continues to be rented to a voucher holder. • Assess and build in administrative costs before allocating money and structuring the loan to ensure the program is properly resourced and staffed. • Homeowners can rent to an unhoused person or family by additionally including their ADU in an existing inventory website, and service providers will work on a placement. • It will be important to structure this as a pilot program to test the viability of this type of loan product with Bakersfield homeowners. 248 3. Facilitate more ADU production overall through consistent and targeted public information on ADU programs, tools, resources, and incentives As part of the Bakersfield Affordable Housing Strategy, we developed a webpage, infographics and informational handouts in English, Punjabi, and Spanish. Staff visited community groups and members in the community to share information and our survey about housing needs. We also reached out to and interviewed various stakeholders, like housing organizations and nonprofits, builders, real estate developers, to ask for their ideas, incorporate their feedback, and build relationships. For each new program, tool, resource, or incentive for ADUs that is developed moving forward, it will be important to build off this approach and momentum: • Provide funding and staffing. We heard from many jurisdictions that budget or staffing plans for marketing their ADU work was an afterthought, resulting in existing staff being overburdened and under-resourced. Considering a staffing plan and setting aside additional budget for public information and outreach will be essential for a program, tool, resource, or incentive to be successful. • Identify the audience that should know about it or give feedback, such as homeowners interested in building, homeowners that have built an unpermitted unit, multifamily developers that could include ADUs, or real estate and building professionals. • Develop public information emphasizing the benefits and how it will create solutions to existing problems facing community members. Consider how to message to different stakeholders about the benefits, to both them and the community. • Create a plan to communicate the message throughout the community in multiple languages. Share the message widely, including handouts, social media, website, and newsletter posts, to advocates, community partners and organizations, builders, real estate professionals, service providers, the business community, school districts and all city departments. Getting information on the radio, particularly to the Punjabi and Spanish communities, and contacting media like was recently done for the Housing Strategy survey, can get the word out and continue to keep the public informed. This will ultimately result in more people understanding and using what is made available. ECONorthwest 249