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" CITY OF MIAM1, FLORIDA
INTER -OFFICE MEMORANDUM
Honorable Members of the CAM June 21, 1984 �«
City Commission
fLBJECT: Claughton Island -
Low -Income Housing Issues
M Howard V. Gary REFERENCES!
City Manager
ENCLOSURES:
Per your request the following summary has been prepared
explaining the origin and development of the Memorandum of
Understanding Between Claughton Island Investors And The City Of
Miami for the provision of low income housing.
September 9 1974. Assessment of the Regional Impact for
Clau h on Island by the outh Florida Regional Plannin ounc
s part of the SFRPC discussion explaining their reasons for
denial of the project, the staff recommended that the applicant
should make a written commitment for an appropriate amount of low
and moderate income housing. The applicant had made no such
prior proposal. The report further suggested donation of land or
buildings to Dade County HUD for this purpose.
December 18 1974. The Miami Planning Advisory Board, by
Resolution No. F 54-74 recommended issuance of a Development
Order after considering the SFRPC report.
February 12 1975. The City Commission after considering the
SFKF report, ordered the issuance of a Development Order by
Resolution 75-135.
Februa�rr.y�21 1975. The Claughton Island Develo ment Order. This
order, n �iec on states a e eve open has o ered to
furnish 300 units of medium income housing charging rental fees
that do not include a f1guFe for capitalized land value, but the
Planning Advisory Board found the resulting rental would be above
the low income threshold. This section further states that the
PAB encouraged the developer to provide at least 300 units of
medium -moderate income housing, and that the City Commission
would require he developer to provide at least 200 units of low
income rental units located on the island.
April 22 1975. By Resolution No. 75-4239 the City Commission
approve Lr*_;;randum of Understanding between Claughton Island
Developers and the City regarding low income housing. This
action was taken to dismiss an appeal of the development order by
the South Florida Regional Planning Council to the Florida Land
and Water Adjudicatory Commission.
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Yd
Honorable Members of the
City Commission
In the STIPULATION OF AGREEMENT TO CONDITION THE DEVELOPMENT
ORDER AND TO DISMISS THE APPEAL, it stated that the developer
would be bound to provide a minimum of 200 units of low-income
housing within 10 years as an integral part of the overall
development scheme for the island.
Maw 14 1975. Memorandum of Und•erstandin Between Clau hton
Islan nves ors And The City or Rrami In He Low Income ous ng.
Section /. Shall provide not less than 200 units of low
income housing no later than 2/12/85. The
units to be interspersed throughout the
development.
Section 2. Low -Income housing to be defined as units
available for rent, lease or sale, at option
of developers, at a price meeting the minimum
current standards of the Federal Department of
Housing and Urban Development as published in
the Federal Register.
Section 3. These low income units shall only be offered
to persons who meet the criteria for low-
income individuals.
Section 4. The developer is not prevented from receiving
any local, state or federal funds which seek
to provide or encourage the construction and
maintenance of low-income housing.
Section 5. No less than 200 low-income housing units
shall be completed and available for occupancy
by February 12, 1985.
Nowhere in the MEMORANDUM OF UNDERSTANDING is there any
requirement to provide medium or medium -moderate income units.
Page 2 of 2
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3i sa us S
URBAN LEAGUE OP VREATER MIAMI REPORT ON DEVELOPER OBLIGATIONS
PDX LOW-INCOME HOUSING IN MIAMI AND FEASIBLE ALTERNATIVE
APPLICATIONS OF THE OBLIGATION OF THE CLAUGHTON ISLAND
DEVELOPMENT INVESTORS
Executive Summary....................................................... ii
Purpose and Scope of the Report ................ 0........................ 1
General Considerations and Experience in Governmentally
Imposed Developer Obligations for Low-income Housing .................. 3
Urban League Findings and Recommendations re Imposition
of Developer Obligations for Low-income Housing in Miami .............. 6
Housing ?seeds and Housing Strategies in Miami ........................... 10
Urban League Findings and Recommendations re Means for
Satisfying Developer Low-income Housing Obligations in Miami .......... 17
Feasible Alternative Applications of the Claughton Island
Development Investors' Obligation ..................................... 19
Urban Findings and Recommendations Regarding Application of
the Claughton Island Development Investors' Obligation ................ 24
Attachments
Proposed San Francisco Office Housing Production Program Ordinance
Elements of 200 Unit Capital Grant Rental dousing Construction
Project in Miami
Elements of an Affordable Homeownership Demonstration
and Program
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PURPOSE AND SCOPE OF THE REPORT
In 1975, investors in the Claughton Island luxury condominium apartment
development entered into an agreement with the City of Miami to provide not
less than 200 units of low -incase housing within the development. The
agreement specifies completion of the low-income units by February 12, 1985.
Since 1975, the shortgsge of low-income housing units in Miami has become
more acute. The 200 unit obligation of the Claughton Island investors is
a more important resource now than it was ten years ago.
While conditions for establishing the Claughton Island obligation have
not been alleviated since 1975, the conditions for delivering low-income
housing are drastically changed. In 1975, over 500,000 units of federally
assisted low-income housing units were constructed in the United States.
Budget projections for the federal Fiscal Year 1985 anticipate 25,000 units
of assisted low-income housing construction, which constitutes less than
5 percent of the 1975 output. Upon signing the 1975 agreement, the Claughton
Island investors could confidently expect to utilize a federal assistance
program in the delivery of low-income housing units. In 1985 they cannot.
More importantly, the City of Miami in 1975 could find significant
benefits in the use of low-income housing resources to secure economic
integration of luxury developments. In intervening years, the City of Miami
has assumed vastly greater responsibility for low-income housing. The city
government is involved in virtually all low-income housing construction in
the city. None of its current programs are concerned with placing low-income
families in luxury housing developments, however. The city's strategies are
URBAN LEAGUE OF GREATER MUM REPORT
ON DEVELOPER OBLIGATIONS FOR LOW-INCOME
HOUSING IN MIAMI AND FEASIBLE ALTERNATIVE
APPLICATIONS OF THE OBLIGATION OF THE CLAUGTON
ISLAND DEVELOPMENT INVESTORS
The Theodore Gibson Institute for Social Change reports to the
Urban League of Greater Miami on issues of public policy with respect
to developer obligations to provide for low-income housing related to
other development in Miami. The report discusses a study of feasible
alternative uses of an obligation incurred by investors in the Claughton
Island luxury condominium development to provide 200 units of low-income
housing in that development. The Urban League reports findings and
recommendations pursuant to the study of policy issues.
The report finds national precedent for imposition by the City_ of
Miami of a code of obligations for low-income housing provision by
commercial and luxury housing developers both with respect to urban
growth policy and fair housing policy. The Urban League recommends the
institution of such a program.
The report finds sufficient administrative capacity within city
government for strategic and efficient use of developer deposit funds
for low-income housing. The report finds a strategic lack of low-income
benefit in the City's homeowner loan program} however. The Urban League
recommends the development of a low-income component for the homeowner
loan.program in order to provide strategic balance to the City's low-
income rental grant program and to enable a city low-income housing trust
fund capable of providing certain low-income benefits from funds deposited
to the trust fund.
The report finds a successful transference of the Claughton Island
developer investors' low-income housing obligation to be feasible, prac-
tical and desireable. The Urban League recommends the transference of
the obligation to a city fund in scale sufficient to enable 200 units of
low-income homeownership development. The report finds investment in
balancing the City's low-income housing strategy to be necessary to meeting
the Urban League's tests of feasibility of transference.
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aimed at using scarce resources to strengthen neighborhood housing markets
which moat be maintained to provide major housing opportunities for low -
and moderate -income persons. The goal of social integration has not been
abandoned in Miami. The arena has shifted from scattered efforts at economic
integration to concern for equity in the ability of neighborhood housing
markets to provide decent and affordable housing opportunities.
One of the city's surfacing concerns as it assumes greater responsibilities
for low-income housing is the linkage between housing needs and growth of
employment centers in the city. Considerations of obligations for low-income
housing, such as that of the Claughton Island agreement, are a focus of policy
concern. The satisfaction of the Claughton Island obligation is, thus, not
only the acquisition of desparately needed housing, it also has been cast
in the spotlight of public policy review.
The Theodore Gibson Institute for Social Change has undertaken a study
for the Urban League of Greater Miami of issues in the Claughton Island
agreement. The scope of the study includes issues of general consideration
in developer low-income housing obligations in Miami and of feasibility of
strategic use of the obligation of the Claughton investors. The purpose of
the study is to enable findings and recommendations re the use of developer
obligations in Miami and the achievement of strategic use of the Claughton
Island investors' obligation both in terms of securing benefits from the
units provided as a result of the agreement and with respect to the develop-
ment of low-income housing policy in Miami.
GMERAL CONSIDERATIONS AND EXPERIENCE IN GOVERNMENTALLY
IMPOSED DEVELOPER OBLIGATIONS FOR LOW-INCOME HOUSING
The history in the United States of governmentally imposed obligations
on developers to provide for low-income housing incidental to other types
of development is about fifteen years old. Linked development through
housing obligations imposed on other developers has been standard in Europe
since use of the concept as a technique for rebuilding following World filar 11.
The use of developer obligations to provide coordinated commercial and
housing development is very recent in this country. The initial uses of
developer obligations in the United States was for the purpose of economic
integration of multi -family housing projects.
The concept of economic integration of housing projects was pioneered
by the New York State Urban Development Corporation (UDC), which was estab-
lished in 1966 with authority to issue public bonds by the New York State
Legislature. Pursuant to the bond authority. UDC was required to include
20 percent of dwelling units for low-income persons in each housing project
sponsored by the corporation. Simultaneous authorisation in New York for
the use of State issued public bonds to provide mortgage financing for non -
UDC multi -family housing projects also imposed the 20 percent low-income
requirement.
Largely because of the New York state 20 percent requirement, the fede=i
multi -family housing construction program enacted by Congress in It". the
Section 236 Program, contained a 20 percent low-income requirement. The
successor federal housing construction program enacted by Congress to 1974. do-
Section $ Program. continued the 20 percent low-iacow portion as a fund _ w
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priority. The Section S Program was designed and promoted by the Now York
State UDC as a more appropriate federal tool for enabling the agency to
pnraus its economic integration mission. The latest federal housing program,
created by Congress in 1983 and apparently destined to be called the Housing
Development Action Grant Program (RODAG) in forthcoming regulations, also
contains a form of the 20 percent low-income portion; although its purpose
Is more for the economic feasibility of projects than to beet social policy
objectives.
The 20 percent lbw -income goal for economic integration was commonplace
in the 1970's and was pursued through various housing programs and strategies,
including, though infrequently, the imposition of requirements pursuant to
the issuance of building permits by local governments. More typically, the
20 percent, and similar, goals were established through voluntary fair
housing actions as in the Fair Share Plan of local governments in the Miami
Valley (Dayton, Ohio region). The commonality among all such plans was the
use of federal subsidies for low-income units.
Many states initiated bond financed mortgage loan programs for multi-
family housing in the 1970'c. Most of the programs incorporated low-income
unit goals similar to the New York State provisions. The programs intended
to provide bonuses to developers of middle -income housing in the form of
lower finance costs. The state legislatures that established the programs
hoped to lower rents for middle- and moderate -income tenants in return for
inclusion of subsidised low -intone tenants in the projects. Developers. who
made the choice to participate or not participate in the programs, seldom
thought the low finance benefits to be worth the risk of marketing mixed -
income projects. lecause of this, state multi -family bond programs have
been little used and, therefore, have not been very effective in providing
low-income housing.
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The interrelated decline of federal housing construction programs and
rise of housing costs in the late 1970's and early 1960's caused an apparent
abift in the focus of government impositions on developers from goals of
economic integration to goals for securing housing supplies for lower income
persons in areas of urban growth. A feature of the shift is a transference
of obligations from developers of housing to developers of commercial
properties.
The most intensive policy reviews with respect to governmental
imposition of developer obligations for low-income housing at the present
time is in the State of New Jersey. The concern has been caused by a ruling
of New Jersey's highest court in 1983 that mandated local governments in
areas designated as having growth potential to find ways to ensure the avail-
ability of housing for lower income persons commensurate with the scale of
anticipated growth.
Many of the affected jurisdictions in New Jersey seem likely to respond
to the court decision by preparing developer obligation ordinances. The
administrative model for the New Jersey ordinance proposals and proposed
developer/housing actions elsewhere is program operations experience in San
Francisco and a program proposal currently before the San Francisco board
of Supervisors. The San Francisco experience is only partly relevant to New
Jersey concerns because the policy issues which led to the San Francisco
model are limited to linking urban growth and housing. San Francisco has
not been concerned with fair housing issues in its developer obligation
program. Now Jersey jurisdictions cannot neglect fair housing issues in
their considerations. The Now Jersey court decision was decided on fair
housing grounds. The court linked growth with fair housing concerns and
both concerns to provision of affordable housing.
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The proposed San Francisco ordinance is the outgrowth of sanctions
1"oaed by the city's Department of Planning since 1982 pursuant to an
ordinance governing the environmental impact of developments. The neap
ordinance would codify the sanctions in an office/Rousing Production
Program. The basic elements of the program are the following:
1) a formula for determining the unit number of housing obligations
to be incurred by a development proposal which includes:
a) the size of the development; and
b) the choice of vehicle for satisfying the obligation with
favor toward means which do not use government subsidies
2) satisfaction of the developer's obligation by means of:
a) sponsoring a housing development;
b) providing financial aid to another development; and
c) investing in a city second trust mortgage program.
The proposed San Francisco office/Housing Production Program is the
basic reference for discussion of administrative issues in developer low-
income housing obligation programs in the United States. A copy of the
ordinance is attached to this report for reference. Policy issues in
Miami are more akin to those of growth areas in New Jersey. The arenas for
discussion in New Jersey is public forum. Unfortunately, the arguments
have not been committed to paper for consumption in Miami.
Administrators of San Francisco's current environmental impact program
anticipate the principal choice of form of participation in the City's
Office/housing Production Program to be the City's junior lien mortgage
programs. Commercial developers (and luxury condominium developers) are
soot usually constituted for long-term involvement in low-income housing pro-
jects. The mortgage loam pools have proven to be convenient ways for devei-
opera to contribute resources to a city coordinated low-income housing
nth �vsnieace for contributors and the existence of a K�t�• rtant features of the
,00rd�ated strategy are viewed in San Trancisco as Apo rt for
predecessor eoYironmeatal impact program which has helps
d to gain
suppo
pr Proposal- 'fie
the ore comprehensive Office/Uousing Production Proarm p opo
Cup`s strategy coordination is given credit for providing perceptible impact
for
the proSTmg- These are important considerations for Miami-
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UnM LEAGUE FINDINGS AND RECOMMENDATIONS RE IMPOSITION OF
DEVELOPER OBLIGATIONS FOR LOW-INCOME HOUSING IN KUM
The Urban League of Greater Miami finds comonalities among housing
and urban growth conditions in Miami and other localities in the nation
which have developed or are considering programs which require partici-
pation by developers of commercial properties and luxury housing in
providing low-income housing. The Urban League further finds comeon ground
among Miami and localities which include fair housing concerns in their
development linked housing policies.
The Urban League of Greater Miami therefore recommends the adoption
in Miami of policy which links low-income housing strategy together to
development of commercial and luxury residential properties. The
appropriate vehicle for implementing such policy is a developer obligation
program.
The Theodore Gibson Institute review of developer housing obligation
program-- in other places has found them to provide limited guidance.
Their experience with regard to fair housing strategX although of
relatively long history, has depended on voluntary participation of
developers. The programs have, therefore, generated slight experience.
The programs which have focused on expansion of low-income housing supplies
are too recent to provide much experience. The guidance that is available
from precedent program indicates the importance of (1) delivery of
bsaefits through a strategic coordinating function and (2) providing a
eosvesxient cash depository system for developer participants.
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The Urban League of Grater Miami recommends the develop" t of the
City*s mortgage loan program, which are administered by the Planning
Department, as convenient depositories and strategic dispensories of
resources provided by participant developers. The single-family and multi-
faasily loan programs should be combined to provide a single depository for
developer housing obligation funds, and to facilitate strategic allocation
of resources.
The scope of this study does not permit the recommendation of a
formula or formulas for determining appropriate developer contributions
to a housing obligation program in Miami. We note, however, the national
historical precedent for 20 percent low-income requirements in housing
developments.
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HOUSING HEEDS AND HOUSING STRATEGIES IN MIAMI
Housing needs in Miami do not require detailed analysis. It is
commonly understood that low vacancies and short supplies exist in every
•category but luxury housing. The basis of needs is also widely under-
stood to be rapidly rising costs of constructing housing. The popular
knowledge includes understanding of the link between construction costs
and costs of. existing housing. The Miami News of April 10, 1984 reported
a rise in the number of families paying more than 25 percent of income
for housing to be from 36.6 percent of Dade County residents in 1983 to
47.2 percent in 1983. Everyone knows the trend is continuing because
everyone is experiencing the effects. What is not so well understood is
the linkage between price and quality. The relation is fundamental to
housing strategy.
The relation of housing price, housing quality and housing assistance
strategy can be illustrated with an example of current housing action
• projected onto ar historical backdrop. The housing price increases of
recent years have caused a rise, after over forty years of stability, in
the basic federal measure of housing affordability. In 1983, Congress
raised the contribution required of federal housing program beneficiaries
from 25 percent of income to 30 percent of income. The affordability
measure remained constant during the boom years of housing construction in
the 1950's; even though housing quality, as measurad by conaumption of
floor space, rose dramatically. Gains from production efficiencies held
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pricem of even larger houses to affordable levels. to the 1960's, pro-
ductivity gains are not evident. Subsidy funds have shrunk. Housing
consumption, though, continues unquestioned. From an historical per-
spective it seems of doubtful wisdom to expend scarce 1964 housing subsidy
funds for houses that are 30 percent larger than average non -subsidized
houses built in the 195O's. That is the fact of Miami housing strategy
in 1964, however.
The problem for housing strategists in Miami, as elsewhere in the
nation, is not how to provide benefits to consumers of subsidy programs.
Needs exist widely. Over 40 percent of Dade County residents are
classified as low-income by government housing program eligibility
standards. The strategic housing problems are (1) how to target subsidies
while (2) being equitable in the distribution of benefits and (3) positively
impact housing markets with scarce subsidy resources. The latter problem
chiefly pertains to avoiding the establishment of price supports for
housing quality standards that cannot be afforded by the many persons
who will not receive a subsidy commitment regardless of their eligibility
status, because of the scarcity of subsidy funds.
Miami low-income housing strategies are implemented through two generic
programs. There is (1) a program of deferred payment second trust loans
for moderate -income homeowners and there is (2) a program of capital grants
for low-income rental construction and rehabilitation.
The homeowner loan program is targeted to moderate -incomes as a result
of pricing due to reliance an market rate construction. Typically, a
$1O.000 grant will enable a $55.000 house to be purchased with a $45,000
loan, lowering necessary annual incomes from $29,800 to $24.400. The program
will be enhanced by the recently established County Documentary Surtax
Program.
The rental grant program is low-income targeted by policy that
re�'ts scarce resources to be used for most needy persons, principally
defined as lowest income. Typically. grants are $10,000 per rental unit.
The rental program will be strengthened by the addition of a similar
program created by Congress last year. Miami's administrative experience
should stand the City well in the competition for the federal funds, for
which applications are expected to be accepted in June, 1984.
Both the ownership program and the rental grant program can easily
be adapted to provide a convenient depository for funds generated by a
developer low-income housing obligation program.
The City's housing programs are delivered partly through a network
of neighborhood non-profit development groups. The neighborhood groups
implement strategy in terms of balance between ownership and rental and
new construction and rehabilitation in their neighborhoods.
Both the ownership and rental programs rely on a blending of resources.
Combinations of federal, state. county and city governments and private
sources may be used to support any project, be it as small as one single-
family house. Different sources may contribute to different elements of a
project.
Typically, federal Community Development Block Grants may be used to
reduce land and property acquisition costs. Federal Urban Development
Action Grants typically provide capital loans and grants for multi-fasily
projects. The County's Documentary Surtax Program is used to provide loans
principally for small unit projects. The City has principal planning,
administrative and coordinating roles. Private funds supplement government
funds and cover gaps due to governmental restrictions.
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Rousing needs in Miami are conditioned by (1) population growth and
(2) scarcity of resources for housing assistance. Under these conditions,
Miami's housing stratngy say be expected to contribute to the establishment
of housing patterns beyond the scale fo the implementation programs per se.
Housing patterns are most likely to be influenced by interactions
between (1) a bifurcation of rental market supply additions into luxury
non -subsidized and very low-income subsidized segments and (2) subsidization
at relatively high levels of new additions to homeownership supplies.
The absence of moderate and middle -income rental additions creates greater
demand pressures on lower cost rental and ownership supplies and programs
aimed at increasing these supplies. Helping to maintain a high floor on
prices of new sales units creates further pressures on lower cost rental
units.
The social consequences of housing patterns encouraged by current
housing strategies in Miami include the stifling of homeownership
ambition' among single -wage families. The Urban League's extensive
experience in counseling single parent families bears witness to the
severely negative impact on non -subsidized working mothers of being forced
into the same housing market segment as subsidized non -working families.
The housing patterns also weaken ownership opportunities for two -wage
earner families where one worker has recently entered the labor force.
Urban League counseling experience indicates that many such families are
motivated by homeownership aspirations.
Inappropriate response to inappropriate housing market effects are :
(1) providing deeper homeowner subsidies to needy lover income persons
and (2) reducing rental subsidies to benefit more persons. Homeownership
subsidies should not be deepened because the primary homeownership need
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is for a more affordable sales unit in Miami. Deepening the subsidy
lessens incentives to develop more affordable products. The rental
subsidy should not be thinned because moderate -income housing needs,
particularly in the absence of affordable sales housing can overwhelm
available subsidy resources. Families most in need are the priority
concern of public policy.
Mother inappropriate reaction to unfortunate market impacts is price
controls. There is hope for a viable low-income strategy in the context
of a growing -city. There is little to be gained in long term benefits by
acting against growth trends. In the choice between price controls and
developer obligations for housing, the latter is clearly the preferred
approach.
The correct response to undesirable market competitions induced by
Miami's current housing strategies is the addition of a program component
aimed at reducing prices of housing suitable for lover income homeowner-
ship. Forms of such programs include the City's recently completed
demonstration'of conversion to condominium and rehabilitation of an
existing nultl-family building at Northwest loth Street and 3rd Avenue
and organized affordable housing design and construction activities.
Fair housing concerns may be illustrated by comparison between
household characteristics of Miami residents and persons living in the
balance of Dade County. The following page is a data sheet which provides
the illustration.
Location in the Miami area is clearly influenced by income and race
and to a lesser degree by sex. Tenure (owning vs. renting) is also a clear
matter of location, as is housing condition, as represented by overcrowding.
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CHARACTERISTICS OF MIAMI AND DADE COUNTY REMAINDER
HOUSEHOLDS, I1mem TO POPULATION
MIAMI +
DAM COUNTY REMAINDER 100%
Population
312 (1)
692
(1)
Black Households
67% (2.16)
332
(.48)
Female Headed Households
39% (1.26)
612
(.88)
Households below Poverty
with Children
512 (1.65)
49%
(.71)
Female Headed Households
below Poverty with Children
48% (1.55)
422
(.61)
Female Headed Households
above Poverty with Children
322 (1.03)
68%
(.99)
One worker Households
27% (.87)
73%
(1.06)
Two -worker Households
242 (.77)
76%
(1.10)
Crowded Rental Units
612 (1.97)
39%
(.57)
Crowded Owner Occupied
Units
47% (1.52)
53%
(.77)
source: 1980 U.S. Census
Income data for 1979
Note: 1979 Dade County
incomes are
currently used
in
Miami and Dade County
to compute government
housing
programs eligibility.
Note on Index:
The index figure (in
parenthesis) is
the ratio of
the
category percent to the
population percent.
versus city locational categorization provides a c�eoient
The cou�c►ty It
tattoo of fair housing concerns generally in the Mimi area•
repreeen ardless of political
effectively Portrays conditions that say be w4acted setate. the county/city
jurisdiction- In addition to its we as a data surrog must "cure
Categorization also shows that fair housing strategy in Miami
regional cooperation to achieve full results-
El
UMAN LEAGUE FINDINGS AND RECOMMENDATIONS RE MEANS FOR SATISFYING
DEVELOPER LOW-INCOME HOUSING OBLIGATIONS IN X AMI
The Urban League of Greater Miami finds appropriate structure and
capacity within the City of Miami for institution of a suitable adminis-
trative function for the implementation of a developer low-income housing
obligation program. The City's current strategy is not comprehensive to
the degree required for targeting benefits to low-income persons by the
delivery of funds to the City's low-income housing program office unear-
marked for low-income beneficiaries. The Urban League recommends (1) the
use of the existing low-income programs, which are for renters. and
(2) simultaneous development of a strategic low-income homeownership
program.
The Urban League of Greater Miami recommends use of the City's rental
rehabilitation and new construction capital grant program as a vehicle for
channeling developer obligation funds to neighborhood development cor-
porations or other non-profit sponsors of Housing Development Action Grants
or similar multi -family housing project. Alternatively, a developer with
an obligation should be permitted to provide direct assistance to the
sponsor of a qualified project. Attached to this report is an outline
description of a typical qualified project.
The Urban League of Greater Miami further finds that the City's
homeowner deferred payment second trust mortgage program should be augmented
with a component program of organization of affordable housing design and
construction activities.
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The Urban League reconw ds the initiation of an affordable housing
dssiga and construction program by the City and the addition of the
program qualify the mortgage loan program as a vehicle for the discharge
of developer low-income housing obligations in Miami. A discussion of
elements of an appropriate program and demonstration is attached to this
report.
The purpose of a demonstration is to establish marketing experience
for lower cost housing in Miami. The goals of an affordable housing
program include low-income housing supply concerns and they address fair
housing issues. The development of low -incase homeownership opportunities
in Miami -and Dade County are necessary to modernising fair housing strategy
pursuant to the implementation of a program of developer low-income housing
obligations that appropriately implements fair housing policy.
nASIELE ALTZRNATIVE APPLICATIONS 07 THE CLAUGHTON ISLAM
DI"WPMENT INVESTORS' 0NLIGATION
The principal consideration due in regard to the Claughton Island
investors' agreement to provide up to 200 units of low-income housing
within the development is the feasibility of a site transference of the
obligation. This study is not concerned with legal issues in such a
transference nor is this report concerned with benefits of a transference
to the Claughton Island investors. The questions addressed in this study
with respect to site transference are (1) is community support for a
transference feasible and likely; and (2) is the successful accomplishment
of a transference feasible and likely.
In previous sections, this study has found conditions in Miami to
support a conclusion that the Claughton Island obligation can be used
to support the City's low-income housing strategy and that the City's
plamaing and implementation capabilities for low-income housing strategy
are *tong. Successful results from a transference of the Claughton Island
obligation to the City's low-income housing mechanisms are cost likely to
be achieved.
The question of community support for a transference requires further
attention. The Urban League of Greater Miami believes community support
is likely for transfering the obligation from Claughton Island to
projects determined through the City's low-income housing program if the
tests of feasibility listed below are set.
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(1)* The scale of the commitment is unquestionably undind fished.
(2) The likely results of transference clearly contribute more
to solutions for low-income housing problems in Mimi than
200 units located on Claughton Island.
(3) The transference is likely to provide clearly identifiable
benefits for truly needy persons.
The issue of undiminished commitment is resolvable to Claughton Island
development investor contributions in the City's rental housing capital
grant program 4n sufficient amount to ensure the development of a project
with rents that unquestionably low-income persons can afford. The
applicable standard for this test are the guidelines for the new federal
capital grant rental program. The federal standards require projects to
be operated at rent levels affordable by person with 50 percent of the
area's median income paying 30 percent of income for rent.
A calculation of the amount of capital reduction required for a rental
project in Miami to meet the federal standards is provided as an attachment
to this report. The calculation estimates that $5.8 million of capital
reduction is needed to provide 200 units of low-incose housing through the
federal program. That is a grant of $43,500 per unit. In establishing
the program. Congress estimated federal expenditures of $20,If00 per unit.
The onus on local governments applying for the program is $23,500 per unit.
The requested amount of local capital grant fund and/or cost reduction for a
200 unit project is, therefore, 4.7 million. The deposit of this amount in
a city fund for us of the City's rental capital grant program should be
sufficient to meet the test of undiminished obligation in a transference of
the Claugbton Island development investors' obligation.
The test of clear contribution to solving the City's low-income
housing problems probably cannot be set by the rental grant program alone.
MAE
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(2) The seal* of the cofiitsient is unquestionably uedind Ishad.
(2) The likely results of transference clearly contribute more
to solutions for low-income housing problems in Miani than
200 units located on Claughton Island-
(3) The transference is likely to provide clearly identifiable
benefits for truly needy persons.
The issue of undiminished comssitment is resolvable to Claughton Island
developsuent investor contributions in the City's rental housing capital
grant progrfm,in sufficient amount to ensure the development of a project
with rents that unquestionably low-income persons can afford. The
applicable standard for this test are the guidelines for the new federal
capital grant rental program. The federal standards require projects to
be operated at rent levels affordable by person with 50 percent of the
area's median income paying 30 percent of income for rent.
A calculation of the amount of capital reduction required for a rental
project in Miami to meet the federal standards is provided as an attachment
to this report. The calculation estimates that $5.8 million of capital
reduction is needed to provide 200 units of low-income housing through the
federal program. That is a grant of $43,500 per unit. In establishing
the program. Congress estimated federal expenditures of $20,1)00 per unit.
The onus an local governments applying for the program is $23,500 per unit.
The requested amount of local capital grant fund and/or cost reduction for a
200 unit project is, therefore, 4.7 million. The deposit of this amount in
a city fund for us of the City's rental capital grant program should be
sufficient to meet the test of undiminished obligation in a transference of
the Claugbton Island development investors' obligation.
The test of clear contribution to solving the City's law -income
housing problems probably cannot be met by the rental grant program aloe►*,
•
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21
base r.' that is because it cannot be clearly demonstrated that project
location alone is sufficient strategy for solving problems of low-income
housing. A more convincing test of the investors' contribution to the
City's low-income housing strategy is a simultaneous deposit of funds with
the homeowner loan program for the purpose of enabling the development of
a program of cost reduction to bring the ownership program within reach
of low-income persons. This cannot be done by grants alone because of
the price support function of the loan program in neighborhood housing
markets. Income barriers in the homeowner loan program can only be
breached by the development of more affordable housing. A low-income
homeownership program is critically important to the establishment of
w
comprehensive low --income strategy, inclusive of fair housing strategy.
Both low-income homeownership and fair housing are important to the
establishment of a viable developer low-income housing obligation program
in Miami. Because of the potential of the Claughton Island obligation as
a model for a developer obligation program, the deposit of demonstration
funds with the City's homeowner loan program is,a highly desirable action
for meeting the Urban League's feasibility tests for tranference of the
obligation. A demonstration fund of $1,000,000 would unquestionably provide
for an adequate affordable housing demonstration.
The third element of the Urban League's feasibility test, providing
clearly identifiable benefits for truly needy persons. can best be not by
• simultaneous deposit of funds with the City's rental grant and homeowner
loan programs in a city low-income housing trust fund. The test cannot
Clearly be met by a deposit of funds with the rental grant program alone;
even though rental grants may be sufficient for establishing undiminished
tranforeace of the obligation. That is because matching funds are not
the sufficient cause of a grant from the federal rental program. Matching
3
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22
roads are not required, even if they appear to be assumed. If no juris-
dictious obtain substantial matching funds, no jurisdiction will be
disadvantaged without than. Private funds sight only reduce the federal
aoatribution. There is no way of knowing in advance of comaaiting private
foods that federal grants will be forthcoming merely because private
matching funds are available. The combination of deposits is, therefore,
a clearer way of establishing benefits to low-income person than same amount
of funds deposited to either the rental or the ovh*rship program alone.
The scale of a combined deposit sufficient to meet all of the Urban
League tests for feasibility of a transference of the Claughton Island
investors' obligation is estimated by this study to require $5.7 million.
The sum is composed of $4.7 million allocated to the City's rental grant
program and $1,000,000 to the City's homeowner loan program for the purpose
of enabling a housing affordability demonstration.
The $5.7 million figure is further established by an alternate estimation
of the amount necessary to enabling 200 units of low-income housing. In an
alternate calculation, attached to this report, costs affordable by persons
having intones below 80 percent of the area's median income was used as the
low-income standard. The 80 percent of medium income level has been the
standard in use in Miami for establishing eligibility for low-income housing
assistance prior to the 50 percent standard mandated by the new federal rental
grant program. This report's attachment of calculations estimates the need
for grant capitalisation for rental projects with rents affordable by families
with 80 percent of the area's median income to be $29,000 per unit. That
indicates the need for $5.8 million of capital grant funds. The 5.7 mil•lion
estimate is thus further substantiated as a "Ballpark" figure for the amount
requested to establish unqualified feasibility for a tranfsrence of the
Claughtoms 151OW Investors' obligation.
Ll
UREAX LEAGUE FINDINGS AXD RECOMMNDATIONS REGARDING APPLICATION
OF TIM CLAUGBTON ISLAND INVESTORS' OBLIGATION
The Urban League of Greater Miami finds great potential in an
alternative use of the obligation incurred by investors in the Claughton
Island development to provide for no less than 200 units of.low-income
housing in the project. The obligation can be used to great advantage
in service to the low-income housing strategy of the City of Miami.
The city has recently assumed greater responsibilities for planning and
implementing a low-income housing strategy. The strategy requires both
additional private resources and further development of strategic programs.
The Claughton Island investors obligation comes due at an opportune time
to be instrumental in setting an appropriate course for the City not only
in low-income housing policy but also in significant respects with regard
to fair housing policy.
The Urban League further finds that feasible forms of transference
are available both with respect to public policy issues and with respect
to administrative capacity of City programs. Strict tests of feasibility
with respect to benefit criteria and likelihood of community acceptance are
also found to be met.
The Urban League of Greater Miami endorses a transference of the
Claughton Island investors' obligation with the following recommendations:
(1) that the Claughton Island investors provide cash and other resources
to enable a City of Miami application for a federal Housing Development Act
Great (NOW) for a project or projects containing 200 unites of Im-lecoos
bouaiag; and
24
(2) that a one million dollar grant or equivalent cash and technical
amsiatance contribution be made to enable a demonstration of housing afford-
ability through the City's homeowner loan program.
We believe the following are terms under Which the Claughton Island
Investors' participation in a HODAG application Would be significant to meet
the conditions of feasibility for transference of their obligation. The
terra recognise that 1) the City of Miami is a likely sponsor of a HODAG
application and will provide capital grants for the project; and 2) that
the considerations that lead to the 1975 agreement most likely anticipated
the use of a program of federal operating subsidies, reducing need for
developer capital, Reasonable terms for obligated developer participation
in a 200 unit low-income housing project in 1985 are listed below.
(1) The obligated developer should provide seed funds. The funds
should provide for site, architectural drawing, soil and engineering studies
and a financial plan. The City's strategy for delivering new low-income
housing through neighborhood non-profit development corporations and the
federal anticipation of mixed income developments indicates that 200 units of
low-income housing through the HODAG program will require more than one
project. Three projects may be desirable. Seed fund needs are estimated
to be up to $50,000 per project. A developer with a 200 unit obligation
should, therefore, deposit $130,000 to a City low-income housing trust fund
to provide HODAG project seed funds.
(2) A 200 -unit obligated developer should also make a major capital
contribution to HODAG projects. Because HODAG projects have no history.
there is no rule of thumb for assessing adequate amounts of private versus
local government amounts of non-federal capital grants. However, the City
of Miami has a tradition of granting up to $10.000 of city funds for low -
Iacono housing grants. Thus funds applied to HODAG projects leave a gap
a
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23
estimated at $13.300 per snit of local share. A reasonable obligated
developer participation in HODAG projects is, therefore, 2.7 million dollars.
(3) As an alternative to providing cash grants, an obligated developer
should be able to work directly with the neighborhood development corpora-
tions that are likely sponsors of HODAG projects. The obligated developer
should provide for the preparation of all plans and cover capital grant gaps
In the application. This option should be available for obligated developers
who chose to use there development skills in partial substitution of capital
grants.
The qualification attached to the HODAG conditions for feasible
tranference of obligation is that the HODAG applications to the Federal
Government are successful.
g
,KTTi,cmaNT I
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ILZMENTB 07 200 UNIT CAPITAL GRANT
RENTAL SDUSING WNSTRUCTION PROJECTS IN MIAMI
Proiact for 302 of Medium Income Tenancy - HODAG Qualified
Loan Amount (Federal maximum @ $50,000 per unit)
$10,000,000
Annual Debt Service (13.5% interest,
40 year ter')
1,356,300
Annual Operating Expenses (2,400 per
unit)
480,000
Total Annual Expenses
1,836,300
Annual Income of Eligible Tenants
11,500
Annual Tenant Rents (952 occupancy,
302 of income)
655,500
Annual Deficit
11180,800
Capitalisation of Deficit
8,706,000
Per Unit Capitalisation of Deficit
43,500
Project for SOX of Median Income Tenancy - Miami Capital
Grant qualified
Annual Income of Eligible Tenants
18,400
Annual Tenant Rents (95X occupancy,
30% of income)
1,048,800
Annual Deficit
787,500
Capitalisation of Deficit
5,806,200
Per Unit Capitalisation of Deficit
29,000
ATTACHPM" II
------- jr-W
404
IPILE NO.
.
0
ORDINANCE X0.
(Planning Commission Permit Approval)
AMENDING PART Ile CHAPTER II OF THE SAN FRANCISCO MUNICIPAL CODS
(CITY PLANNING CODE) BY ADDING SECTION 313 THERETO, ESTABLISHING
A REVIEW PROCESS FOR CERTAIN OFFICE DEVELOPMENT PROJECTS AND FOR
PROJECTS DISPLACING HOUSING IN ORDER TO IMPOSE CONDITIONS ON
APPROVAL OF PERMIT APPLICATIONS DESIGNED TO MITIGATE HOUSING
PROBLEMS CAUSED BY THE PROJECTS.
NOTE: This Section is entirely new.
118 He it ordained by the People of the City and County of
12 San Francisco:
13 Section 1. Amending Part II, Chapter II of the
141 San Francisco Municipal Code (City Planning Code) by adding
Section 313 thereto, to read as follows:
Section 313. Soecial Review and Approval of Projects for
Office Development.
(a) Findings.
follows:
The board hereby finds and declares as
There is a low vacancy rate for affordable rental housing
21 in the City and County of San Francisco (hereinafter *City*).
22 Large scale developments have attracted and continue to attract
233 additional e®ployees to the City ano County of Son Francisco.
2 Consequently, mope of those employees are competing with present
25 residents for these scarce,,vacant rental units in Ilan Francisco,
26 In addition, the residence element of the San Francisco
RQARD OF SUPtRVISONA PA" No* �
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4
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waster Plan calls for the provision of additional housing to
accormodate the demands of now residents attracted note by
expanding employment opportunity mace available by large seal*
commercial development.
In *root to enable the City to impose requirements on
developers of commercial projects designed to mitigate the
adverse effects on housing availability caused by such projects,
I a special review approval process is necessary. To that end, the
City Planning Commission is authorized affirmatively to promote
10 the policies of the residence element of the San Francisco Master
]t Plan through the imposition of special housing development
12 requirements.
i3 (b) Application. The special review and approval process
14 shall apply to:
iS (1) Any development proposing the net addition of more
�e than S0,000 gross square feet of new construction for office
17 space or proposing the conversion of more tnan 50,000 square feet
from another use to office space;
t (2) Any development that will displace existing
housing, provided tnat it is not in one of the neighborhood
23 commercial special use districts governeo by Sections 242, It
n M. of this Codes
(e) Imposition of Conditions. The City Planning
Commission shall impose conditions on the approval of
applications for protects covereo by this section, in order to
mitigate the impact on the availability of housing which will be
WAM of SOPURVISO"
PA= Sp.
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caused by the proposed project. Tne conditions shall require
that the applicant provide houoina, or cause housinq to be
provided. The applicant shall have the option of paying a fee in
lieu of providing housing, which fee may, at the direction of the
Planning Commission, be paid to the City and thereafter used for
the development of housing projects or may be applied toward the
construction of housing development projects specified or
approved by the Commission. Notwithstanding the requirement set
forth in this Section, a housing condition need not be imposed,
10'or need be only partially imposeo, if the proposed project is on
III public property or if the Commission determines, under the
12factual circumstances particular to the proposed uevelopment,
13 that there will be no adverse impact, or only minimal adverse
impact, on the availability of housing because of the oroposea
15 project, or if the Commission identifies an overriuing public
16 interest in exempting the proposed development from imoosition of
such a conaition.
(d) The Planning Commission shall adopt regulations and
guidelines governing the imposition of conditions authorised by
this section in order to further the purposes of this ordinance,
211 Conditions may be imposed only in accordance with these
regulations and guidelines. The Commission shall impose housing
conditions in a manner that is calculated to provide housing
affordable to low, moderate and siodle income households in Such
numbers* proportion and locations as to insure, to the extent
feasible, socio-economic integration of the City's housing
DOMM or SuP1fR lso" IPA= No, �
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stock. The regulations anu guidelines shall set forth the nu*ber
of square feet of new or converted office space or other use
which cequires an additional housing unit. The Commission may
allow a developer extra credit toward$ satisfaction of the
housing obligation imposed herein for the provision of housing
affordable to households of low and moderate income.- Households
of low income are those composed of one or more persons with a
combined adjusted gross income for all adult persons as
calculated for federal income taxation purposes that is under 801
100 of the median income for a household of four persons as •
III established for the San Francisco Standaro Metropolitan
121 Statistical Area by the Uniteo States Department of Housing and
_ 131 Urban Development. Households of moderate income are those
14composed of one or more persons with a comainect adjusted gross
13 income for all adult persons as calculates for federal income
taxation purposes that is between 80% and 1201 of the median
171 income for a household of four persons as established for the San
161 rtancisco Stanoard Metropolitan Statistical Area by the United
States Department of Housing and Urban Development. Households
of middle income are those composeo of one or more persons with a
21 combined aojust*d gross income for all adult persons as
22 calculated for federal income taxation purposes that is between
d
121• and 1501 of the median income for a household of four
persons as established for the San Francisco Stanoard
Metropolitan Statistical Area by the United States Departsont of
O wsing and Urban Development.
OF suruvin"
PAM NO. 4
T
(e) Criteria to be Considered by Commission. ~.he
Commission shall impose conditions permitted by the provisions of
this section only when it finds a causal connection between the
proposed development and an adverse effect on the availability of
housing in the City and Countv of San Francisco.
(f) Violation. The violation of any condition imposed
under this section shall constitute a violation of the City
Planning Code.
(g) Hearing Required Prior to Approval. After the
10effective sate of this ordinance, the Department of City Planning
11 may not approve any application for a builcaing permit for any
12 construction which is subject to this section unless the project
11 has been referreu previouslv to the City Planning Commission for
is its action as providea herein.
13 (h) Scheduling of bearings. Wnen a ouiloinq permit
14 application has been filed with the Department of City Planning,
17 the Zoning Administrator shall determine whether the proposed
It project falls within the scope of this section and shall inform
1 the applicant of his determination within sixty (60) days after
the filing of the application.
21 (1) Notice of Hearings. The requirements for the notice
22 of hearing to be provided for the special review and approval
" process set forth in this section shall ne :he case as those
24 provided for a conditional use tearing, as set forth in Section
25 306.3 of this Code.
(a) Conouct of Hearings. The provisions of Section 306.4
9OAXD 01F surs"Ism tAM sp# 3
11
40 40
of this Cod* shall apply.
tki• Appeals. The action of the City Planning Commission
purouant to tnis section shall he appealable to the Uosro of
Permit Appeals in accordance with Section 308.2 of tnis Code,
within ten (10) ciays after the aaoption of written findings by
the City Planning Commission.
Section 2. The Board hereby finds that the housing
I problems which the City ano County of San Francisco is currently
9 experiencing can be reasonably anticipated to continue for the
10 foreseeable future. However, in view of the fact that those
11 problems may change, so as to no longer require the provisions of
12 this ordinance or so as to require different legislative
13 solutions, this ordinance shall terminate two years from its
14 effective date unless the Board by legislative action extends the
151 duration of the ordinance.
1
17 APPROVED AS TG FORlS
18 GEORGE AGNOST, City Attorney
By 1 f1
20 putt' CiSy Attorney "
21 7369C
22
2a
EE
IM)ARD OF SUPERVISORS
PAG9 NO, t
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ATTACHMENT III
ELEMENTS Of AN AF?ORDAELE HOMEOWMSHIP
DEMDNSTRATION AND PROGRAM
Source of Information
Since early 1987, a collaboration among three entities involved in the
delivery of housing to low -and moderate -income person has sought the iden-
tification of the ideal mix of actions for achieving effective housing aford-
ability programs. The following are the agencies, their housing perspectives
and their roles in the affordability collaboration.
* The National Urban League (NUL) coordinates a national network of
some 50 housing counseling programs. NUL conducted an extensive
national investigation into housing affordability programs and de-
vices over a twelve month period.
* Shelter-Ket, Incorporated (SK) is a manufacturer of pre-cut post
beam modular housing frame and shell components, located in Tilton,
Now Hampshire. Shelter -Kit developed standardised hose designs for
the affordability collaboration and recruited manufacturers of in-
terior components to provide complementary products for the SK
affordable house kits.
* The GNP is a housing planning and construction management firs located
in Harrisburg, Pennsylvania. The GNP has developed model sffotdable
housing development processes.
This paper reports from the experience gained by these particular three
entities in their particular collaboration to achieve affordable bouaing.
The purposes of the paper are limited to providing information and such
f
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2
recorendations as may be generalised from the collaborative experience. It
Is not intended to recommend the particular housing system or the particular
management styles involved in the experience. Our mutual experience in the
collaboration and in dealing with other housing affordability operations is
that attachment to known qualities tends to be universal in housing, at the
same time, often hinders the creative endeavor that is the sine qua non of
affordable housing. This paper seeks to stimulate creative actions through
indication rather than prescription.
Tfindings of the National Urban League Housing Affordabilitz survey
The principal finding of the MM survey is that affordability must be
cumulative of many activities to attain significant goals. Housing afford-
ability must be viewed as a holistic process. Programs that rely on single
elements such as finance or land acquisition cannot reach significant levels
of affordability.
The process must also be controlled by an agent of affordability. There
must be an affordability program that fills the traditional role of developer.
Providing economic incentives to developers, as in a homeowner second trust
mortgage loan program, is the avoidance of appropriate control. Reliance
an a product, such as a manufactured house, through seemingly reductive of
management burdens to a few necessary choices is, in fact, the equivalent
of anarchy in affordability.
The reason for the latter comment is the NUL finding that housing
affordability subsumes the issue of quality as well as price. Manufactured
houses may be delivered at very accomodating price levels but the many choices
required to ensure quality as well as cost efficiency will have been shirked.
Correlated to the quality/price finding is that effective housing
affordability programs tend to be continually evolving toward simplicity.
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The ttsative ospact of bouslug affordability *suns directed toward making
the product, its construction/fabrication and its delivery less complex in
Order to control more for the sake of affordability.
Although affordability is quality as well as cost oriented, affordable
houses tend to have marketing problems. The cumulative effects of many
decisions in favor of affordability results in houses without gimmicks. The
enhancement of marketability with frills that many persons would not purchase
except in a mortgage, is a standard practice in the housing industry. As a
result the no -frills house that emerges from an affordability process looks
odd to any consumers. It even feels funny to mortgage investors in many
.cases. Successful affordability programs cope with their marketing problems
by developing their houses with selected options carefully priced and pre-
sented as cost additions in marketing steps. Affordability customers are
also counseled beyond the scope of most developers of housing.
Market problems are also addressed in demonstrations, one of the purposes
of which is to demonstrate the marketability of a different product. Afford-
ability processes are appropriately established through demonstrations also
because housing affordability is a process. Time and resources are essential
to establishing the process. First houses in affordability programs require
prototype investments not only in the product but also in creating appro-
priate production and delivery systems.
Another important finding of the NUL affordability survey is that the
appropriate market targets for affordable houses are first ties homeowners.
That is because the appropriate production procedures for affordable houses
are mat suited to the development of detached, sami-detached or raw houses
of three stories or less (most likely two stories). There are three cost
likely types of consumers for homeowner affordability programs. They are:
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3
the creative aspect of bousing affordability seam directed toward making
the product, its construction/fabrication and its delivery less complex in
order to control sore for the sake of affordability.
Although affordability is quality as well as cost oriented, affordable
houses tend to have marketing problems. The cumulative effects of many
decisions in favor of affordability results in houses without gimmicks. The
enhancement of marketability with frills that many persons would not purchase
except in a mortgage, is a standard practice in the housing industry. As a
result the no -frills house that emerges from an affordability process looks
odd to any consumers. It even feels funny to mortgage investors in many
.cases. Successful affordability programs cope with their marketing problems
by developing their houses with selected options carefully priced and pre-
sented as cost additions in marketing steps. Affordability customers are
also counseled beyond the scope of most developers of housing.
Market problems are also addressed in demonstrations, one of the purposes
of which is to demonstrate the marketability of a different product. Afford-
ability processes are appropriately established through demonstrations also
because bousing affordability is a process. Time and resources are essential
• to establishing the process. First Muses in affordability programs require
prototype investments not only in the product but also in creating appro-
priate production and delivery systems.
Another important finding of the NUL affordability survey is that the
appropriate market targets for affordable houses are first time homeowners.
That is because the appropriate production procedures for affordable houses
are seat suited to the development of detached, semi-detached or row houses
of three stories or less (most likely two stories). There are three mast
likely types of consumers for homeowner affordability programs. They arm:
----------
4
(1) single -wage families, requiring hoses that can be afforded an
annual incomes as law as $15,000, with subsidies, as low as
$10,000;
(2) two -wage earner families where the second earner has recently
entered the labor force, requiring homes affordable with
$20,000 of annual income; and
(3) young,'upwardly mobile first time homeowners who must have
homes on less than $23,000 of income.
The strategies for reaching the three prime housing affordability markets
vary. For instance, single -wage families must be provided very small units,
two -wage families need sometrhat larger units and upwardly mobile starter
families should be affored expandable units. An important affordability
tactic is the building of homes for starter families during periods of high
mortgage costs, on the customer's land because land prices tend to level in
high interest markets. The starter families may conveniently expand their
homes, on the site of their choice, when interest rates decline.
In sun, the National Urban League survey of housing affordability
actions finds that affordability achievements can best be made through
programs of development control of total processes. The program usually
have to begin as demonstrations in order to establish the controls and this
process. The most appropriate consumers for housing affordability programs
are first tine hosabuyers.
Coals add Components of an Affordable Housing Design and Development Process
The elements of design and construction within an affordable housing
program say be considered under the following headings:
Sits Selection and Planning;
building design;
� S
i
Local Coda and Ordinance Approval,
Construction Bid Solicitation and Awards; and
Construction.
The goals of a progras of design and construction of affordable housing
feasibly include the following:
a to reduce construction costs;
o to optiaise quality;
o to provide options;
o to proaote replication; and
o to increase choices of decent affordable housing for
all income groups .
The materials which follow are tips from National Urban League's
collaborators for affordable housing in pursuing the goals listed above
for affordable housing design and construction actions.
.
"'""'
TIPS ON AMRDAELE HOUSING
DESIGN AND CONSTRUCTION
I. SITE SELtCTION AND PLANNING
Potential sites should be carefully evaluated by the developer for
their suitability for affordable housing. Sites not suitable
for standard cost housing, because of topography, size or shape
may be usuable for low-cost housing. Infill lots should be sur-
veyed.. They are often the least expensive land to develop and their
redevelopment spay help stabilize a deteriorating neighborhood.
Replatting of existing subdivisions might result in additional lots
and higher value for a low-cost housing development.
In some instances existing zoning on a particular piece of land
might make it highly desirable to the low-cost housing developer.
In other instances, the zoning might be wrong. In this case the
developer should not waste time and money challenging the zoning.
These costs will ultimately fall upon the purchaser even if the zoning
is nodified. Look for the land carrying few legal problems.
be aware of the community goals and land use plans. Strategically
placed low-cost housing units may find great favor with the city. Be
aware of neighborhood goals. Selection of sites in a neighborhood
already attempting to secure new housing insures greater support of
the prof ec t .
Develop options. A greater number of lots to choose from will help
to keep land costs down. However, don't accept any land gift with-
out first making a thorough evaluation of the property for affordable
housing. The gift horse sight be a white elephant.
When the site is identified and acquisition is assured, the site
should be carefully planned to keep costs down. Locate the building
to keep utility runs, sidewalks and drives as short as possible.
Consider incremental landscaping plans that can be accomplished by
the purchases over a period of time. Building orientation and solar
access are important considerations, even if the building is not
specifically designed for maximum energy efficiency.
Each of these items must be considered to insure the lowest possible
site development costs.
IZ. MUM DESIGN
?erbaps the single most important aspect of a low-cost housing
development is the use of appropriately designed buildings. The
final design oust be acceptable to the consumer and the community.
•
2
A basic level of quality oust be insured and the building oust meat
local codes and ordinances.
The greatest single cost saving decision that can be made is to reduce
the amount of floor space in a house. However, the purchaser of a
smaller home oust be assured that the building has enhanced flex-
ibility, expansibility and better use of interior space.
Standardisation of building components and materials will also reduce
costs. This is more easily achieved if a building system is employed
which drove upon the best of both industrialised and conventional
homebuilding techniques.
The selected system should meet all of the following criteria:
o seats national codes and hazard standards and can be modified to
Beet•unique local requirements;
o provides maximum flexibility of initial layout design and building
expansion at a later time;
o uses non -exotic materials and permits a wide choice of finishing
materials and exterior appearances;
o can be used for both detached and attached housing for inf.ill
or planned -unit development;
o is modular in design but not necessarily prefabricated in a factory;
o can be erected by semi -skilled crews in a relatively short period
of tine; and
o can increase the possibilities that the buyer can participate in
each step of the design and construction of his or her home.
WCAL CODE ORDINANCE APPROVAL
By using one building system and a limited number of highly
standardized designs, the problems associated with code approval
are lessened. Fever problems result in greater cost savings.
Another important aspect of using a "standardized building" is that
after the first building has been approved subsequent buildings will
more easily receive local approval. For this reason the discussion
with local officials should design early in the low-cost housing
delivery process, in most cases even before the final building design
is selected. In this way there are no "surprizes" for the code en-
forcement officers. It is important for affordable housing developers
to keep local officials fully award of their intentions and insure
that they fully understand the buildings to be constructed.
DID SOLICITATIONS AND AWARDS
Affordable housing requires now methods of insuring the widest possible
participation in the actual building of affordable housing units. The
method should include the use of a customized Proposal Packet,
3
containing the specifications for each of the discrete parts of the
actual construction of the unit and a solicitation for bits or pro-
posals for each of these parts.
The Proposal Packet should be developed so that the maximum number of
local contractors and vendors will want to participate in the bidding
process. A major goal is to seek participation of entities that
seldom, if ever, are able to submit bids on new housing construction
because of the size or experience of company. Lower overhead and, in
some cases their desire to establish housing experience will encour-
age these small companies to submit competitive proposals.
The Proposal Packet simplifies the bid solicitation and awards process.
It is possible for the developer to request bids on selected parts of
the construction work while negotiating other parts. Bids can be soli-
cited for "any or all" of the parts so that the developer has the
option of awarding a package of bids that will result in the lowest
possible costs.
The Proposal Packet should contain all information needed by the
bidder including a description of the project and instructions on
how to prepare and submit a proposal. A pre -bidding conference might
be held to help reassure first time bidders and answer questions they
may have.
Specifications for the following materials or parts of the construction
work are necessarily included in the Proposal Packet:
site preparation
foundation work
main frame erection
additional framing
roofing
gutters
siding
windows
insulation
plumbing
heating and air conditioning
electrical
lighting fixtures
wall board
cabinets
floor covering
painting
appliances
landscaping
In addition to proposals for these parts of the construction work, the
packet should also contain a solicitation for a proposal for a construc-
tion supervisor. The involvement of a contractor or builder familiar
with the local construction scene is vital. This link with the local
situation will help to insure the lowest possible construction costs.
El
Mien received by the developers, the proposals will be evaluated
and the low bids for each part selected. At that point a firm
cost estimate on the projects can be established. Then a "build/
no build" decision can be made*by the developer. This process is
somewhat unique. Since a standardised building is the basis for
the proposals, solicitation can take place early in the process.
This results in the development of both an estimate of cost and
a firm cost proposal at the same tine, eliminating the uncertainty
associated with the usual process of preparing cost estimates,
basing a decision to build on those cost estimates and then
soliciting bids.
If a decision is reached to build the project proposal or bid awards
can then be made. The awards will hold the bid for the period of
tine necessary to get the actual construction under way. The use of
the Proposal Packet and the decision making it brings about will
help to reduce costs, insure participation by small vendors and
contractors and provide the developer with the greatest number 'of
options.
CONSTRUCTION
Significant cost reductions can be affected during the construction
of a low cost housing project. If possible use local, semi -skilled
workers to erect standardized building frames. Some of the finish
work can be done by these same workers or the purchasers. Training,
should be provided to all participants prior to construction. Over-
sight of the assembly of the initial building is important to make
sure all those involved have a thorough knowledge of the building
system being used.
The use of a standardized building results in shortened construction
periods. This brings about shorter term construction loans and
reduced interest expenditures. Overhead is reduced as are other
costs associated with construction of new housing. A bookkeeping
system should be established so that constant monitoring of project
costs is possible. During the construction of the initial houses
checks should be made constantly of the quality of construction work
and compliance with the sepcifications contained in the proposal
awards.
1P
a
itwh r-Kit !'O Box 1, 22 Mill Stun Tilton New Mempthiro 03276 1603) 934.4327
SUGGESTIONS AND THOUGHTS ON REDUCING
FINISHING COSTS OF HOUSING ASSEMBLED
FROM SHELTER -KIT COMPONENTS
Shelter -Kit Incorporated is very concerned about some of the estimates being
wade for finish work on houses using our modules. We are also worried about other
development cost estimates. In most instances, the costs are too high because
both building and site planning seem to have been predicated upon the irrational
attitude that the cost of individual elements are not significant in determining
the total cost of new housing! Site planning is often not sensitive to the top-
ography of the site. Contingency and other overhead costs built into projects
are too high and often reflect profit levels that are unjustifiable. The designs,
interior layouts, and other elements proposed for the buildings do not take ad-
vantage of the potential cost savings that can be achieved when using Shelter -
Kit components. It is this last point, how to optimize cost reduction when using
our buildings, that we explore in this paper.
It appears that the housing industry is so accustomed to loading the price
of new housing that truly affordable housing can only be achieved by making sure
every element of the delivery system is being provided at the absolute bottom
price. Lower interest rates or reduced site improvement cost or other reductions
of a single element will not bring the price of a new house into the reach of
families currently unable to participate in the new housing market.
While Shelter -Kit Incorporated is not prepared to analyze every element of
the delivery system, some specific suggestions can be made regarding how to re-
duce the cost of buildings assembled from Shelter -Kit house kits. These suggested
reductions can occur when the architect or other person planning the house accepts
the design parameters inherent in the Shelter -Kit design and is willing to work
within those limits. He or she must also accept the idea that the design attitudes
reflected in single family housing built during the 1960's and '70's are no longer
financially appropriate for the majority of today" home buyers. The interior lay-
out mist now call for less square footage, single bathrooms, less custom cabinet
and other finish work, less exotic materials and more passive utility systems.
The ideas reflected in passive solar heating systems versus active systems should
be applied to other housing systems. Most Americans don't need and can't afford
24 hour video surveillance of the'door connected to a tv monitor in the kitchen
and bedroom which is also connected to a computer that turns the microwave oven
on 5 minutes before you open the garage door so the bread in the microwave will
be ready to move to the regular oven for browning . . . and so on.
The housing industry has caught on to part of the need. The have "down -
sized" homes and are advertising them as the size homes we now need. However.
they have added junk and manipulated costs so that the square foot cost is in-
creased and the average total cost of these "new design" homes is the same or
greater than the larger homes of just a few years ago.
1
-z-
Here is a list of items we have determined should be considered basic de-
sign criteria when a Shelter -Kit shell is being used for a low-cost affordable
house. Some of the items could be modified if a cheaper solution can be iden-
tified that accomplishes the same end with no reduction of "l ity or perfor-
mance. Others, identified with an "*", should be considered as "givens" not to
be modified. Some of the suggestions, such as keeping all plumbing on one wall,
reflect optimal design but may not be possible to achieve if the potential
benefit is offset by an inefficient room layout. Many of these items should
be standard criteria for affordable housing regardless of whether or not Shelter -
Kit components are being used.
* In general, follow the new (1982 edition) of the HUD Minimum Property
Standards for One and Two Family Dwellings. The new MPS eliminates many
of the minimum space and other requirements of earlier editions that had
contributed to high costs.
- Use only one full bath ideally located on the first floor and adjacent
to the kitchen to reduce plumbing costs. If possible, additional bathroom
facilities should be adjacent to or directly over other plumbing. Attempt
to use a single drain -waste -vent stack in each house.
- Build on piers - this will reduce foundation costs and might eliminate
need for general grading of the site.
- Use an open plan for the interior layout to reduce the cost of interior
partitions and improve heating or cooling circulation.
* Install as much of the electrical distribution system as possible in
interior partitions or in surface mounted baseboard chases. Surface
mount the main electrical distribution box.
- Reduce the number of "installed" light fixtures to a minimum and install
switches for these fixtures on interior partitions or use pull chains.
- Lay out the kitchen for standard size "knock down" cabinets. Arrange
kitchen adjacent to bathroom, if possible.
* Use no appurtenances such as entry alcoves or storage sheds that need
framing and are attached to the exterior of the Shelter -Kit modules. Main-
tain flat planes for exterior walls. Jogs and offsets are very costly and
exterior trim can be used to accomplish the same visual impacts,if necessary.
* Reduce glass area to a minimum unless vet careful consideration has been
given to the role solar energy will play in the heating and/or cooling of
the building. In any case, reduce or eliminate glass area on north sick of
buildings in most areas of the U.S.
40
-3-
4
* Do not reduce stud spacing below 74 inches on center in either exterior
walls or interior partitions.
- Use plywood products, such as Texture 1-11, for exterior siding when
possible.
* Use, as a minimum, k" CD exterior plywood sheathing applied directly to
the exterior of the posts and studs of the Shelter -Kit modules if Texture
1-11 or other plywood products are not used for exterior siding.
* Do not alter the basic framing system used in the Shelter -Kit modules;
contact us directly if any questions arise about the framing system.
- Beyond the basic module used in the house, use additional modules spar-
ingly. Additional modules should be considered only when needed to achieve
the minimum total floor area required.
- Attempt to eliminate all hallways and other "unproductive" floor spaces
within the building. Consider built-in furniture for storage, especially
on the second floor under the low portion of the roof.
- Use sleeping cubicles for children's bedrooms. This design has been used
in Europe for many years to reduce floor area while providing needed pri-
vacy for family members. Such cubicles could be as small as 6'xlO'.
• Leave as much work as possible to be done by the owners after they have
taken possession of the house. An example might be to leave the upstairs
unfinished or provide uninstalled floor covering and painting materials to
the buyer in the price of the bui.iing.
Reduce customizing of the building to a minimum; however, the house
should be compatible architecturally with other buildings in the neighborhood.
The relatively plain exterior of the Shelter -Kit modules make architectural
integration of the buildings possible and inexpensive.
• Use urethane foam materials in conjunction with fiberglass insulation to
bring the building up to required thermal levels.
- ' Use standard, readily available finishing materials. Do not use exotic
or untried materials. However, do not use the lowest grade of materials in
order to achieve cost reductions. Quality reduced too far is false economy.
• * Shelter -Kit modules should be erected by small crews of unskilled or semi-
skilled workers under the direction of one skilled person. The erection of
the buildings must follow Shelter -Kit procedures. When possible, contracts
with selected contractors should be negotiated instead of competitively bid
for erection work.
-4-
The number and type of options available to the purchaser should be
limited. However, an adequate variety of options is necessary so the in-
dividuality of the purchaser can be expressed. Options requiring variety
of choice might include appliances, exterior finishes, floor covering and,
to a lesser degree, window placement and interior layout.
' The building and site should be planned for additional modules to be
attached at a later date when family size and perhaps family income make
the addition needed and feasible.
' Use standard stairs provided by Shelter -Kit since they are specifically
designed for the Shelter -Kit modules.
Many of the foregoing items are so obvious as to seem unnecessary that they
be mentioned. However, our experience indicates otherwise. All of these "prin-
ciples" have been ignored at one time or another by architects and others when
developing plans using Shelter -Kit modules.
Some of these items may seem insignificant, cost -wise, but the point is
that every penny unnecessarily spent falls ultimately upon the purchaser, and the
multipliers built into the housing delivery system increase that penny several
fold before the building is purchased. Every penny must be saved if we are to
produce a truly affordable, low-cost home.
It is possible for the items we have suggested to be used without reducing
the quality of the homes below some minimum level. The spread between highest and
lowest quality building materials is great, as is the cost. However, careful se-
lection can save a considerable amount of money without reducing significantly
the performance, life, and aesthetics of many products.
Here is an example of how the question of minimum quality could be approached:
3/8" gypsum will board should never be installed because of its lack of strength.
The use,of 1/2" gypsum is ideal. There is no need to use 5/8" gypsum because the
increase in strength over 112" is not necessary in this type of construction. If
an open floor plan is used, then part of the savings in reduced interior partitions
could be used to offset the added cost of the 1/2" gypsum versus 3/8" gypsum.
We are not really talking about design considerations or careful selection of
materials per se. We are suggesting that those of us really intent upon providing
affordable housing must begin to think about housing in a completely new way.
We can no longer permit .evveryoonee involved in the housing delivery system to "get
rich" before the buyer wakes a down payment. We must reject the kind of thinking
that lets every participant in the system. often including the non-profit sponsor
say "it's only $100.00 extra % "just a drop in the bucket", or "it will only add
$1.00 a month to the mortgage payments". When everyone having anything to do with
providing the new home adds his nickel or dime the bottom line becomes hundreds
of additional dollars, and once more the financial threshold for participation in
the new home market moves beyond the reach of the very people we are trying to reach.
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