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HomeMy WebLinkAboutLake Oswego HPS Initial Strategy Recs revised 02-08-24 LAKE OSWEGO HOUSING PRODUCTION STRATEGY Initial Housing Strategy Recommendations Memo I February 8, 2024 Introduction This memorandum provides an evaluation and initial recommendations for the housing strategies that the City of Lake Oswego may consider as part of its Housing Production Strategy(HPS).These are potential strategies that the City and its partners can employ to address Lake Oswego's current and future housing needs, as identified in the recently-completed Housing Needs Analysis (HNA). This memo builds on prior work by City staff, consultants, and the HPS Task Force.The Task Force reviewed the "Strategy Alternatives Memo" at their meeting on December 8, 2023.At that meeting, the Task Force formed breakout groups to discuss which housing strategies could best address high-priority housing needs identified in the HNA—Government-subsidized affordable housing units affordable to people with very low or low incomes; Housing affordable to households with moderate incomes; Housing options/choices to meet a full range of household needs and preferences; and Housing for seniors and opportunities for seniors, people with disabilities, and aging in place. Based on this feedback, and on further evaluation of each strategy's potential impact and feasibility, the project team has provided initial recommendations for which strategies to include in the HPS. MEMO ORGANIZATION This memo is organized into the following four sections: 1. Recommended Strategies The project team's initial recommendation is to include these strategies in the HPS.These strategies have either received clear support from the HPS Task Force, City Council, and HPS Task Force; have a low-barrier to implementation; and/or are expected to have a moderate to high impact on housing production. 2. Strategies Needing Further Discussion These strategies need further discussion by the HPS Task Force, Planning Commission, and City Council before the project team can make a recommendation as to whether they should be included in the HPS. If adopted,these strategies could have a meaningful impact on housing production. 3. Contingent Strategies These are various ways that the City could allocate funds to support affordable housing production or preservation. Each of these strategies are contingent on adoption of a new funding source, such as Construction Excise Tax,for the City to participate meaningfully 4. Not Recommended These strategies are not recommended for implementation in the HPS because they are not MIG, Inc. I Lake Oswego Housing Production Strategy 1 of 42 Initial Strategy Recommendations Memo 2/8/2024 expected to have a meaningful impact on housing production. Currently, only one strategy is included in this category. STRATEGY EVALUATION This report provides additional background information for each of the housing strategies included in the "Strategy Alternatives Memo" and takes a closer look at the potential impacts to housing supply/affordability, benefits and burdens on priority populations,feasibility, and actions needed for implementation. The summary of each housing strategy includes the following information: Description What is the strategy? How can the strategy work to address identified housing needs in Lake Oswego?What are potential outcomes? Considerations What potential options,funding needs, challenges, etc. are applicable to the strategy?Are there potential trade-offs or negative externalities to consider? How feasible is this strategy, given other considerations? Anticipated What is the anticipated impact of the strategy?The following types of impacts Impact are considered: • Housing need addressed—Housing need identified in the HNA that is addressed by the strategy • Populations served by the strategy • Income levels addressed by the strategy • Benefits and burdens that priority populations may receive from the strategy. Priority populations include low-income households, people of color, people with disabilities, seniors, and other state or federal protected classes. • Housing tenure (either owner or renter) • Magnitude of the action for producing new housing: o Low impact:The strategy is unlikely to meet the relevant housing need. A low impact strategy does not mean an action is unimportant. Some actions are necessary but not sufficient to produce new housing. o Moderate impact:The strategy either may have a moderate impact on meeting the relevant housing need or be designed to target that need. o High impact:The strategy may directly benefit a certain housing need and is likely to be most effective at meeting that need relative to other strategies. Time Frame Implementation: When does the City expect the action to be adopted and implemented? Strategies are identified as Near Term (1-3 years), Medium Term (within 3-5 years), and Longer Term (>5 years) actions. Impact: Over what time period will the impact occur? Implementation What actions will the City and other stakeholders need to take to implement the Actions strategy? Lead & Partners Who will be responsible for implementing the strategy?What partnerships might be necessary or beneficial to the strategy? MIG, Inc. I Lake Oswego Housing Production Strategy 2 of 42 Initial Strategy Recommendations Memo 2/8/2024 Summary of Housing Strategies Implementation Strategy DLCD Category* Time Frame 1. Recommended Strategies 1.1 Code Audit and Amendments(Z01) Z. Custom Options Near Term 1.2 Remove or Reduce Minimum Parking Requirements B. Reducing Regulatory Impediments Near Term (B01) 1.3 Nonprofit Low-Income Housing Exemption (E01) E.Tax Exemption and Abatement Near Term 1.4 Low-Income Rental Housing Tax Exemption (E02) E.Tax Exemption and Abatement Near Term 1.5 Public-private partnerships for affordable housing(F04) F. Land,Acquisition, Lease,and Near Term Partnerships 1.6 Fair Housing Policy and Education (B14) B. Reducing Regulatory Impediments Near Term 1.7 Rezone Land (Z02) Z. Custom Options Medium Term 1.8 Evaluate accessible design incentives or mandates(A23) A.Zoning and Code Changes Medium Term 1.9 Use Tax Increment Financing(TIF)to support affordable D. Financial Resources Medium Term housing development(D10) 1.10 Affordable Housing Preservation Inventory(F19) F. Land,Acquisition, Lease, and Medium Term Partnerships 1.11 Modify System Development(SDC)fee schedule(CO2) C. Financial Incentives Longer Term 1.12 Pre-Approved Plan Sets for ADUs(A21) A.Zoning and Code Changes Longer Term 2. Strategies Needing Further Discussion 2.1 Zoning Incentives for Affordable Housing(A03) A.Zoning and Code Changes TBD 2.2 Construction Excise Tax(CET) (D09) D. Financial Resources TBD 2.3 Vertical Housing Development Zone Tax Abatement E.Tax Exemption and Abatement TBD (E03) 2.4 Multiple Unit Property Tax Exemption (MUPTE) (E04) E.Tax Exemption and Abatement TBD 2.5 Pre-Approved Plan Sets for Middle Housing Typologies A.Zoning and Code Changes TBD (A20) 3. Contingent Strategies 3.1 Housing Trust Funds(D03) D. Financial Resources Contingent 3.2 Low-Interest Loans/Revolving Loan Fund (D13) D. Financial Resources Contingent 3.3 Community Land Trusts(F03) F. Land,Acquisition, Lease, and Contingent Partnerships 3.4 Preserving Low-Cost Rental Housing to Mitigate F. Land,Acquisition, Lease, and Contingent Displacement(F05) Partnerships 4. Not Recommended 4.1 Homebuyer Opportunity Limited Tax Exemption E.Tax Exemption and Abatement N/A Program (HOLTE) (E06) MIG, Inc. I Lake Oswego Housing Production Strategy 3 of 42 Initial Strategy Recommendations Memo 2/8/2024 *DLCD Category refers to the type of action each strategy entails, according to DLCD's Housing Production Strategy Guidance Document'): A. Zoning and Code Changes B. Reduce Regulatory Impediments C. Financial Incentives D. Financial Resources E. Tax Exemption and Abatement F. Land, Acquisition, Lease, and Partnerships Z. Custom Options 1. Recommended Strategies The following recommended strategies have either received clear support from the HPS Task Force, City Council, and HPS Task Force; have a low-barrier to implementation; and/or are expected to have a moderate to high impact on housing production. Recommended strategies are organized into Near-Term, Medium-Term, and Longer-Term strategies. NEAR-TERM STRATEGIES The project team's initial recommendation is to implement the following strategies in the Near Term (1-3 years after HPS adoption). 1.1 Code Audit and Amendments (Z01) Description Undertake a comprehensive audit of the Community Development Code (CDC)to identify and eliminate barriers to housing production. The CDC audit could potentially address: • Barriers to accessory dwelling units (ADUs) and middle housing; • Ways to facilitate smaller units; • Procedural requirements that add cost and delay to land use approvals; • Open space requirements in high-density zones; • Barriers to residential development within mixed-use districts; • The impact of neighborhood overlays or other regulatory provisions; and • Other identified Code barriers. Considerations • This strategy could help reduce or eliminate some of the major code and procedural barriers identified by housing stakeholders. 'For each strategy,the corresponding strategy number from DLCD's List of HPS Tools,Actions,and Policies is indicated in (parentheses). MIG, Inc. I Lake Oswego Housing Production Strategy 4 of 42 Initial Strategy Recommendations Memo 2/8/2024 • The strategy could be shaped to prioritize housing types identified as most needed in the city, based on the City's recently adopted HNA and stakeholder input, such as: o Middle housing (e.g., townhomes, duplexes, and cottage clusters) o Apartments with family-size units (2-3 bedrooms) o Multi-family housing (of any size) o Smaller homes • Simply removing code barriers will not lead to housing development.This strategy should be paired with others that directly influence housing production. • There may be neighborhood resistance to this strategy, particularly for any code amendments intended to modify existing neighborhood overlays or neighborhood planning efforts. Extensive community engagement would be necessary. Anticipated • Housing need addressed: General need for increased housing production Impact and increased housing choices.The HNA indicates that nearly 2,000 new housing units will be needed by 2043.This strategy could also specifically address the needs for multi-family housing, middle housing, and smaller units such as ADUs. • Population served: Low to higher-income households • Income level:All income levels • Benefits and Burdens:This strategy is broad, and therefore difficult to evaluate in terms of benefits and burdens for priority populations. However, it does give the opportunity to target efforts in beneficial areas such as reducing barriers to affordable development or housing that is more attainable to low-and moderate-income households (e.g., multi-family and middle housing); facilitating smaller housing options such as ADUs, which could benefit seniors; and other areas aimed at helping priority populations. In addition, increasing overall housing supply can help keep housing costs down by balancing supply and demand,which benefits all residents, including priority populations. However, because the strategy is intended to increase housing production overall, it could primarily benefit upper income households, while leaving less land available for more affordable housing. Implementation of this strategy should include a focus on meeting the needs of housing types that benefit low-and moderate-income households, seniors, and other priority populations. • Housing tenure: For rent or sale • Magnitude: Moderate—This strategy could have a moderate impact on new housing production given the limited remaining inventory of buildable residential lands.The low inventory and relatively high land prices in Lake Oswego incentivize making more intensive use of remaining sites, if the code permits it. MIG, Inc. I Lake Oswego Housing Production Strategy 5 of 42 Initial Strategy Recommendations Memo 2/8/2024 Time Frame Implementation: Near Term Impact:The action can begin to have impact after it is implemented in the CDC. However,the impact on housing development is expected to be longer-term. Implementation • Identify priorities for the code audit,focusing on high-priority housing needs. Actions • Conduct a comprehensive CDC audit, potentially with support from a consultant. • Work with developers/housing stakeholders and residents to vet potential CDC amendments. • Work with Lake Oswego's Planning Commission and City Council to adopt code amendments. • City Council Action: Legislative CDC text amendments. Lead & Partners Lead: Lake Oswego Community Development Partners: Developer and housing stakeholders 1.2 Remove or reduce minimum parking requirements (B01) Description Removing parking requirements for residential uses provides the opportunity to reduce the amount of lot area used for pavement and storage of vehicles and provides more space for housing and open space.This strategy offers greater flexibility to site housing and reduces costs associated with providing parking. The City is not enforcing minimum parking requirements within 1/2-mile of priority transit, which includes the entire Downtown Town Center, and will likely remove minimum parking requirements in the City's other climate-friendly area (Lake Grove Village Center)to comply with state rules on Climate Friendly and Equitable Communities (CFEC). There is interest from City Council in potentially repealing minimum parking requirements citywide. Considerations • Parking mandates are often cited as a major barrier for market-rate multi- dwelling and regulated affordable housing. • Developers often choose to provide parking, even if not required. Lenders/investors may require some parking to ensure marketability of units. • There could be community opposition to removing all parking mandates, due to the potential for higher usage of on-street parking and the potential for parking overflow from commercial areas to residential neighborhoods. Anticipated • Housing Need Addressed: General need for increased housing production. Impact This strategy would especially benefit production of multi-family and government-subsidized affordable housing. • Population served: Especially beneficial to low-to moderate- income households • Income level:All income levels—especially 30-120%AMI MIG, Inc. I Lake Oswego Housing Production Strategy 6 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Benefits and Burdens:This strategy has the potential to benefit low-income households and people of color by removing parking mandates as a barrier to development of affordable housing. Access to convenient parking has been raised as an important need for people with disabilities; therefore, removing parking mandates could potentially burden those populations if parking is not provided.The City could consider encouraging property owners to provide parking for people with disabilities and set policy on when on-street parking designated for people with disabilities is appropriate. On the other hand, some people with disabilities are unable to drive and could benefit from removing additional costs associated with parking. • Housing tenure: For rent or sale • Magnitude: High—This action is likely to have the most impact on market- rate multi-family and regulated affordable housing. Parking mandates are often cited as a major barrier for those types of development. Reduced parking often allows for greater density (i.e., additional housing) on a site, improving the financial feasibility via replacing the sunk cost of building and maintaining the parking area, with additional revenue-generating space. Reduced parking also allows developers to be more creative with site planning and design features in general, often improving the aesthetics and functionality of a property as well. Time Frame Implementation: Near Term Impact:The action will begin to have impact as soon as the parking mandates are removed. Impacts to housing production are expected to be longer term. Implementation • Conduct outreach and education related to parking mandates. Actions • Work with Lake Oswego's Planning Commission and City Council to adopt code amendments. • City Council Action: Adopt Development Code text amendments. Lead & Partners Lead: Lake Oswego Community Development Partners: N/A 1.3 Nonprofit Low-Income Housing Tax Exemption (E01) NOTE:The project team's initial recommendation is to implement either or both the Nonprofit Low- Income Housing Tax Exemption and/or the Low-Income Rental Housing Tax exemption. Description This tax exemption benefits low-income residents by alleviating the property tax burden on those organizations that provide this housing opportunity. Eligible properties must be offered to low-income persons (at or below 60% AMI), or held for the purpose of developing low-income rental housing.The housing may be for rent or for purchase, and could be new development or existing housing acquired by a nonprofit for the purpose of converting it to income-restricted affordable housing.Jurisdictions may adopt additional MIG, Inc. I Lake Oswego Housing Production Strategy 7 of 42 Initial Strategy Recommendations Memo 2/8/2024 eligibility criteria for the exemption, provided they don't conflict with state statutes. Applicants must renew their tax exemption applications annually. As long as the housing remains affordable to low-income residents, there is no time limit to the tax exemption. While non-profit agencies can apply for tax exempt status through the state, that process is cumbersome and is not always successful.This strategy would provide a simplified and consistent method for eligible organizations to apply and qualify by adopting it as City policy and gaining participation from other taxing districts. (Authorized by ORS 307.540-548) Considerations Applicable to all tax exemptions: • Tax exemptions apply only to the tax levy of a governing body that adopts the exemptions. In order for the full property tax to be exempted,the City must seek approval from partner jurisdictions that,together with the City, make up at least 51%of the overall tax levy. Lake Oswego would need to secure agreement from either the School District or County or both. • The City and participating taxing districts will lose property tax income for the duration of any tax exemption, reducing revenue for City services and revenue for participating taxing districts. Such taxing districts may express resistance to new tax abatement or exemption programs that involve reduced revenue, particularly for programs intended to produce market-rate housing. Nonprofit Low-Income Housing Exemption: • By reducing operating income, property tax abatement programs can be a powerful tool to increase the feasibility of low-income housing, and perhaps increase the number of units that are feasible in planned projects. Many affordable housing developers cite abatements such as the Nonprofit Housing exemption as an essential tool in helping make projects financially feasible. • The City of Lake Oswego received a letter from Mercy Housing Northwest, the nonprofit developer of the Marylhurst Commons development, urging the City to adopt an affordable housing tax exemption.This letter(dated October 24, 2023) is included in the CAG#6 agenda packet.The letter describes various benefits of a property tax exemption—in particular, in reducing ongoing operations costs and supporting long-term stability for affordable housing developments. Anticipated • Housing need addressed: Government-subsidized affordable housing for Impact low-income households. • Population served: Low-income households • Income level:0-60%AMI (for residents' initial year of tenancy; after the first year, up to 80%AMI) • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production of subsidized affordable housing. MIG, Inc. I Lake Oswego Housing Production Strategy 8 of 42 Initial Strategy Recommendations Memo 2/8/2024 No burdens on priority populations are anticipated. • Housing tenure: For sale or rent • Magnitude: High—This abatement can have a large impact on making low- income affordable housing more feasible to develop.The open-ended nature of the abatement (as long as the project maintains affordability) can offer very significant savings to the property manager over time and increase the viability of offering affordable rents indefinitely.The property tax level in Lake Oswego is roughly$20,000 per$1M in valuation per year.A mid-to large apartment complex could expect a valuation of many millions of dollars, amounting to potentially hundreds of thousands in taxes per year. An abatement of these taxes is a strong incentive and improves feasibility considerably. Time Frame Implementation: Near Term Impact:The tax exemption can be used once it is adopted, and for as long as the City offers the exemption.The impact on supply of affordable housing is expected to be longer-term. Implementation • Work with other taxing jurisdictions to gain approval. Actions • Develop application standards and guidelines. • City Council action:Adopt tax exemption policy by resolution or ordinance. Lead & Partners Lead: Lake Oswego Community Development Partners: Lake Oswego Finance Department; overlapping taxing jurisdictions 1.4 Low-Income Rental Housing Tax Exemption (E02) NOTE:The project team's initial recommendation is to implement either or both the Nonprofit Low- Income Housing Tax Exemption and/or the Low-Income Rental Housing Tax exemption. Description This is a 20-year tax exemption for any entity that provides income-restricted rental housing, including nonprofits and for-profit developers. Eligible properties must be offered for rent to low-income persons or held for the purpose of developing low-income rental housing.Jurisdictions may adopt additional eligibility criteria for the exemption, provided they don't conflict with state statutes. (Authorized by ORS 307.515-537) Comparison of low-income housing tax exemption programs: While these two exemption programs appear similar,they do have some key distinctions. Nonprofit Low-Income Low-Income Rental Housing Housing Eligible Developers Nonprofits only Nonprofit or for-profit Income Levels Up to 60%AMI Up to 60%AMI Tenure For rent or for sale For rent only MIG, Inc. I Lake Oswego Housing Production Strategy 9 of 42 Initial Strategy Recommendations Memo 2/8/2024 New vs. Acquired New construction or New construction only Housing acquisition of existing housing Annual Renewal Yes No Required? Time Limit No limit 20 years NOTE:The project team does not see any issues with adopting both exemption programs. Each program has different opportunities and challenges, and it may be beneficial for housing developers to be able to choose which program best suits their project needs. Considerations • Key advantages of this abatement are that it is available to more than just non-profits and it does not require annual renewal.This can significantly reduce an organization's administrative burden in implementing the exemption. • However,this abatement has less flexibility compared to the Nonprofit Exemption because it is not available for ownership housing, cannot be used for acquisition of existing housing, and is limited to 20 years. Anticipated • Housing need addressed: Government-subsidized affordable housing for Impact low-income households. • Population served: Low-income households • Income level:0-60%AMI (for residents' initial year of tenancy; after the first year, up to 80%AMI) • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production of subsidized affordable housing. No burdens on priority populations are anticipated. • Housing tenure: For rent • Magnitude: High—Like the Nonprofit Exemption, this abatement can have a large impact on new affordable housing production.As noted above, an abatement of property taxes is a strong incentive and improves feasibility considerably.This abatement is available to for-profit developers and therefore may generate more new housing than the Non-Profit Exemption. While not open-ended, a 20-year exemption matches the period in which a property would otherwise undergo significant depreciation. However, at the end of the 20-year period,this housing often reverts to market-rate status. Time Frame Implementation: Near Term Impact:The tax exemption can be used once it is adopted, and for as long as the City offers the exemption.The impact on supply of affordable housing is expected to be longer-term. Implementation • Work with other taxing jurisdictions to gain approval. Actions • Develop application standards and guidelines. • City Council action:Adopt tax exemption policy by resolution or ordinance. MIG, Inc. I Lake Oswego Housing Production Strategy 10 of 42 Initial Strategy Recommendations Memo 2/8/2024 Lead & Partners Lead: Lake Oswego Community Development Partners: Lake Oswego Finance Department; overlapping taxing jurisdictions 1.5 Public-private partnerships for affordable housing (F04) Description Public-private partnerships (PPPs) are arrangements between public and private entities to develop housing, especially affordable housing. PPPs have the capacity to bring resources to the table that would otherwise not be available if each institution were to provide housing on its own. The City could partner with organizations to support their affordable housing efforts in a variety of ways: • Acquire land and/or donate city-owned land; • Provide grants or low-interest loans for specific development or rehabilitation projects; • Provide direct funding; and/or • Leverage federal, state, and regional resources. Additionally, the City can pursue specific types of PPPs such as: • Partnering to convert underutilized non-residential properties into housing.The City could work with landowners to evaluate opportunities for adapting vacant/underused buildings for new housing or mixed-use development. Implementing this strategy may depend, in part, on use of tools such as TIF funding (Strategy 1.9)to address infrastructure deficiencies or support development of affordable housing. • Utilizing surplus land owned by faith-based organizations for affordable housing.The City could work with faith organizations to utilize their excess land for affordable housing.The City could assist such organizations with favorable zoning, permitting, and financial incentives. NOTE: PPP is an "umbrella" strategy that overlaps significantly with other strategies in this document(funding support for affordable housing,tax incentives, community land trusts, etc.). Implementing a PPP strategy could take many forms. In the final HPS, it will be important for the City to be clear about the specific actions it will take to pursue and support PPPs for affordable housing. Considerations • The City is pursuing this strategy with several ongoing projects.This includes partnering with the Sisters of Holy Names of Jesus and Mary and Mercy Housing NW in facilitating the Marylhurst Commons affordable housing development. • PPPs are often opportunity-driven and may be spearheaded by the City or by private developers or partner agencies. • Cities are often asked to provide land,financial assistance, and or technical assistance, with potentially moderate costs. More significant financial assistance would depend on a new funding source,such as construction excise tax. MIG, Inc. I Lake Oswego Housing Production Strategy 11 of 42 Initial Strategy Recommendations Memo 2/8/2024 Anticipated • Housing Need Addressed: Government-subsidized affordable housing for Impact low-income households. • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy is intended to benefit low-income households by increasing the City's involvement in development of affordable housing. No burdens on priority populations are anticipated for this strategy. • Housing tenure: For rent or sale • Magnitude: High—Partnerships with private developers or non-profit housing agencies are very often a key component of a City contributing to new housing production. Few City governments directly build housing.The incentives and funding offered are aimed at these partners, who undertake the projects often with a development agreement to ensure the public goals are met.The magnitude of impact is high, and in a sense these partnerships are necessary for most successful City-based housing initiatives. Time Frame Implementation: Near Term Impact:Timing of impact depends on the nature of the public/private partnership. Given availability of funds, impact to housing production would be expected to occur over the longer term. Implementation • More clearly define the relationship to other HPS strategies and which types Actions of actions would be proactively undertaken by the City vs more opportunistic actions based on proposals from potential partners. • Work with nonprofit,faith-based, or other organizations to discuss opportunities in Lake Oswego. • Take action on partnership models and programs that best benefit the organization and the City's financial and/or administrative capacity. • Partnership activities depend on the project, organization, and available resources. Lead & Partners Lead: Lake Oswego Community Development Partners: Possibilities include landowners and organizations with excess land, as well as nonprofit affordable housing providers. 1.6 Fair Housing policy and education (B14) Description This strategy involves amending the Comprehensive Plan to explicitly make Affirmatively Furthering Fair Housing a Housing Policy. Fair Housing laws protect individuals in "protected classes" from housing discrimination. Protected classes in Oregon include race, color, national origin, religion, disability, sex(includes pregnancy), sexual orientation, gender identity, age, and marital status.The City could add additional protected classes, such as ancestry, ethnicity, or occupation. MIG, Inc. I Lake Oswego Housing Production Strategy 12 of 42 Initial Strategy Recommendations Memo 2/8/2024 The City could also pursue the following types of actions to affirmatively further fair housing and work to reverse discrimination, exclusion, and concentrations of wealth in Lake Oswego: • Create an Analysis of Impediments to Fair Housing. • Conduct fair housing training for Council, Planning Commission, and other relevant policymakers. • Provide residents, property owners, property managers, realtors, lenders, and others involved with real estate transactions with access to fair housing information and referrals. • Ensure that City staff know how to identify potential fair housing violations and make referrals to the Fair Housing Council of Oregon and state and local enforcement agencies. In addition, other strategies identified in this list can also generally serve the purpose of affirmatively furthering fair housing to the extent they expand housing opportunities or choices for people in protected classes. Considerations • This strategy would not necessarily contribute to housing production except when it is implemented through other strategies described in this document that result in housing production. However, in all cases it would demonstrate the City's commitment to working towards fair housing outcomes. • Training and education would require staff time and resources to implement. Anticipated • Housing Need Addressed:This strategy would not directly address identified Impact housing needs in most cases, but it would help prevent housing discrimination against protected classes. • Population served: Protected classes • Income level:All income levels • Benefits and Burdens:This strategy is intended to benefit priority populations by formalizing the City's commitment to fair housing goals, better understanding fair housing issues in the community, and by educating City staff, housing stakeholders, and community members about fair housing laws and residents' rights. No burdens on priority populations are anticipated. • Housing tenure: For sale or rent • Magnitude: Low—Fair housing policy and education will not directly contribute to housing production, but it could provide additional protections against housing discrimination. It could also bolster the City's focus on prioritizing housing equity and affordability in its housing programs and investments. Time Frame Implementation: Near Term (Fair Housing Policy); Medium Term (other actions) Impact: Impact on community understanding of fair housing can be in the short term. Impact on fair housing outcomes is expected to be longer term. Implementation • Policy adoption requires Legislative Comprehensive Plan text amendment. Actions • Partner with organizations such as the Fair Housing Council of Oregon on training. MIG, Inc. I Lake Oswego Housing Production Strategy 13 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Develop informational materials. • Provide training to current staff and new hires. Lead & Partners Lead: Lake Oswego Community Development Partners: Fair Housing Council of Oregon MEDIUM-TERM STRATEGIES The project team's initial recommendation is to implement the following strategies over the Medium Term (3-5 years after HPS adoption). 1.7 Rezone Land (Z02) Description This strategy involves rezoning commercial, mixed-use, or other non-residentially zoned properties for residential uses, especially multi-family housing. It could also involve rezoning lower-density areas to allow higher-density housing. The HNA identified a need for additional residential land across all zone types to meet the 20-year housing need in Lake Oswego (a deficit of 86 total acres).As such, there may be a need to add to the city's capacity of residential land to meet the housing need. Rezoning is one way to help address this issue. Considerations • If nonresidential land is considered for rezoning, it would be important to ensure there is still adequate land available for employment and commercial/industrial needs in the city. Lake Oswego's Economic Opportunities Assessment identifies the city's future employment land needs. • In considering the most appropriate locations for City-initiated rezoning of land, the following criteria or factors should be considered: o Proximity to existing residential and higher-density areas. o Proximity to services (e.g.,transit, schools, parks, etc.). o Size and ownership—larger properties will be more attractive for development. • There may be neighborhood resistance to rezoning, especially"upzoning" single-family residential areas.This strategy would need significant community engagement. Anticipated • Housing need addressed: Rezoning would address the shortage of land for Impact housing, and the overall need for housing production in the city. Depending on how it is implemented, this strategy could also address the shortage of higher-density land by rezoning lower-density land. • Population served: Low to higher income households • Income level:All income levels • Benefits and Burdens: Rezoning can increase the availability of land zoned for residential development. Additional capacity for more housing MIG, Inc. I Lake Oswego Housing Production Strategy 14 of 42 Initial Strategy Recommendations Memo 2/8/2024 development can include opportunities for multi-family housing that is generally more affordable to low-and moderate-income households. A potential burden from this strategy is the possibility of lower-income households being displaced if rezoning leads to increased development pressures or increased property values. Rezoning commercial areas, or impacts of increased property values, can also lead to commercial displacement of small businesses. Rising commercial rents or pressures to redevelop for residential uses may have a larger impact on small-scale entrepreneurs and immigrant or minority-owned businesses.The characteristics of areas being considered for rezoning should be carefully considered as part of implementation to avoid displacement impacts. • Housing tenure: For rent or sale • Magnitude: Moderate to High—The impact of rezoning might be relatively high given the limited supply and high demand for buildable residential land in the community.The effectiveness of rezoning will depend on the physical and infrastructure characteristics of the rezoned land for residential use.The density of housing under the new zone will also depend on the physical constraints (e.g., steep slopes)that might limit the buildable portion of a site. Time Frame Implementation: Medium Term Impact: Land inside city limits will become available for development immediately after rezoning. Land outside city limits can also be developed, but will need to overcome the additional hurdle of annexation.The impact on housing development is expected to be long-term. Implementation • Use the criteria listed above to identify potential areas for rezoning. Prioritize Actions sites with the best potential for housing production and access to services. • Consider the demographic characteristics of potential rezoning areas to avoid potential displacement impacts. • Engage with property owners as well as the broader community in targeted areas. • Work with Lake Oswego's Planning Commission and City Council to adopt Zoning and Comprehensive Plan Map amendments. • City Council action: Legislative Zoning Map and Comprehensive Plan Map amendment. Lead & Partners Lead: Lake Oswego Community Development Partners: Property owners 1.8 Evaluate accessible design incentives or mandates (A23) Description This strategy involves evaluating incentives or mandates to increase development of housing that is accessible for seniors and people with disabilities or mobility challenges. Potential incentives could include: MIG, Inc. I Lake Oswego Housing Production Strategy 15 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Bonuses for height, density, lot size, or floor area ratio (similar to Strategy 2.1). • Tax abatements, e.g., MUPTE (see Strategy 2.4). Potential mandates could include: • Requiring visitability in middle housing development—this would ensure that anyone using a wheelchair can visit the subject homes.Visitability is most relevant for buildings with fewer than four units,townhouses, and detached homes that aren't subject to ADA requirements. • Requiring housing that receives public funding to provide more accessible units or more universal design features than required under federal standards.This could mean applying the standards to a higher percentage of units than would otherwise be required (above 5%) and/or requiring units to meet higher Universal Design or Lifelong Housing Certification standards. • Requiring elevators in some or all multi-story buildings. Currently,the Building Code only requires elevators to reach common spaces (such as exercise rooms) or units that are federally required to be accessible. Requiring elevators in one or more multi-family buildings would provide access to all levels of that building. It would also make all units "covered" units under the Fair Housing Act, meaning all units would need to have baseline accessibility features. Accessibility Standards. Eligible units (for either incentives or mandates) could be required to meet certain standards—which would go beyond minimum federal requirements or could target housing not subject to these requirements (e.g., single-family homes and middle housing).2 Options include: • Universal Design is a building concept that incorporates design layouts and characteristics into residences to make them usable by the greatest number of people and respond to the changing needs of the resident. Universal Design incorporates standards for features such as hallways, doorways, bathrooms, and kitchens that make these features usable for people with disabilities or adaptable for that purpose.' • Lifelong Housing Certification is a program developed by the Rogue Valley Council of Governments (RVCOG) in partnership with AARP Oregon as a voluntary certification process for evaluating the accessibility and/or adaptability of homes. Residences can be certified at three levels based on the extent of their accessibility: (1)Visitable (basic accessibility for visitors); (2) Fully Accessible (accessible for a person in a wheelchair on the main floor); and (3) Enhanced Accessibility(customized for specific accessibility 2 Multi-family developments are subject to the Fair Housing Act;for buildings with an elevator,all units must be accessible;for those without an elevator,all ground floor units must be accessible. Housing projects receiving public funding are subject to federal laws(Section 504 of the Rehabilitation Act of 1973 and/or Title II of the ADA),which require 5%of units to be mobility-accessible.Source: Disability Law Handbook,Southwest ADA Center. http://www.southwestada.org/html/publications/dlh/housing.html 3 Universal Design Standards, West Virginia Housing Development Fund. https://tinyurl.com/yx63h792 MIG, Inc. I Lake Oswego Housing Production Strategy 16 of 42 Initial Strategy Recommendations Memo 2/8/2024 needs).4 • Visitability is a design approach for new housing that allows anyone who uses a wheelchair or other mobility device to visit the home.A visitable home typically includes: o A zero-step entrance; o Wide interior doors; and o A half bathroom on the main floor. Considerations • This strategy would help address housing disparities for people with disabilities and provide more options for aging in place. • Strategies to promote accessible housing received support from the Middle Housing Code Advisory Committee as part of the House Bill 2001 code updates. • Accessibility features can add to the cost of construction for a development, which can make affordable housing projects less financially feasible. Elevators, in particular, add significant cost to a project. • While mandates may provide more accessible units,they could prevent some affordable housing projects from being developed. • Incentives must be calibrated effectively to be attractive to both a nonprofit and for-profit developer.The benefit of using the incentive should outweigh the costs associated with implementing accessible design features. Anticipated • Housing Need Addressed: Housing for people with physical disabilities and Impact mobility challenges.The HNA indicates that an estimated 8%of the population of Lake Oswego, or 3,140 people, report having some form of disability, including 2.9%with an ambulatory disability. However,the number of people that would benefit from physical accessibility in housing— especially amongst the senior population—likely exceeds these numbers. • Population served: Seniors; people with disabilities • Income level:All income levels • Benefits and Burdens:This strategy is anticipated to benefit seniors and people with disabilities by increasing the stock of accessible housing units in the city. However, a potential trade-off of mandating accessibility features— especially for subsidized housing—is that it would reduce the total number of units that could be provided in a building (because bathrooms and other areas would need to be larger). While this may provide more accessible units, it could make some affordable housing projects less feasible.This could be a potential burden on low-income households by limiting the opportunity for production of housing they can afford. Incentive-based strategies would not carry the same burden.This will be an important consideration for implementation. • Housing tenure: For rent or sale 4 Lifelong Housing Program, RVCOG. https://rvcog.org/home/sds-2/lifelong-housing-program/ MIG, Inc. I Lake Oswego Housing Production Strategy 17 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Magnitude: Moderate—Depending on how the strategy is structured, it could lead to production of a significant number of new units with accessibility features. However, the strategy could also have the effect of deterring housing production if requirements are too onerous.To improve feasibility, requirements may be applied to some but not all of the units in new multi-family development. New elevator requirements may significantly deter new development, due to high cost. Time Frame Implementation: Medium Term Impact:The action can begin to have impact after it is implemented in the CDC or adopted as a financial incentive.The impact on housing production is expected to be longer-term. Implementation • Code bonus. Actions o Evaluate a potential new height/FAR bonus with input from housing stakeholders. o Consider whether a bonus should apply in all zones or only certain zones. o A potential accessibility bonus should be carefully considered in conjunction with any other potential bonus provisions (see Strategy 2.1). o Implement via CDC updates. • Code requirement. o Evaluate potential new accessibility requirements, working closely with non-profit and market-rate housing developers to understand how their projects might be impacted. o Conduct a pro forma analysis to evaluate potential impacts to project costs. o Implement via CDC updates. • Financial incentive. o Evaluate an incentive program (e.g., MUPTE,Strategy 2.4)to increase the number of dwelling units designed accessibly. o Work with developers to gather feedback on program parameters and interest. o Implement incentive program through Council action. Lead & Partners Lead: Lake Oswego Community Development Partners: Home Building Association of Greater Portland; Fair Housing Council of Oregon;AARP; Rogue Valley COG; non-profit and for-profit housing developers. 1.9 Use Tax Increment Financing (TIF) to support affordable housing development (D10) Description This strategy involves using TIF funds to support affordable housing development.This could involve creating one or more new TIF districts and incorporating affordable housing into new TIF district plans. For example,the City MIG, Inc. I Lake Oswego Housing Production Strategy 18 of 42 Initial Strategy Recommendations Memo 2/8/2024 could create a TIF set-aside for affordable housing development programs within the district. TIF is a funding mechanism in which future tax revenues in targeted development or redevelopment areas (TIF districts/urban renewal areas) are diverted to finance infrastructure improvements and/or development. At the time of adoption,the tax revenue flowing to each taxing jurisdiction from the TIF district is frozen at its current level. Any growth in tax revenues in future years, due to annual tax increase plus new development, is the "tax increment" that goes to the district itself to fund projects in that area.TIF is a good tool to use in areas where new development or redevelopment is anticipated. While many different types of projects are eligible for TIF funds,for the most part,TIF funds are used to pay for physical improvements in the district itself. These projects can include participating in public/private partnerships with developers—including for affordable, workforce, or market-rate housing—or can be used to complete off-site public improvements that benefit and encourage new development in the area, or to acquire key sites.TIF funds also can be used to purchase land. TIF can be a direct source of funding for projects that meet public goals such as providing affordable housing, increased density, or mixed-use buildings that might not otherwise be feasible. In return for some public funding through TIF, private sector or non-profit developers agree to provide these benefits. Urban Renewal can also be used to purchase and reserve a key building site in the district to ensure that the development that takes place there meets public goals.The site can be offered to a development partner at reduced cost to provide the incentive. Considerations • There is direction from the Lake Oswego Redevelopment Agency(LORA)to expand the use of urban renewal in the city—particularly in the Foothills neighborhood. • TIF results in foregone tax revenue for the City and any other overlapping taxing districts for several decades, although it can (and should)grow the tax base in the long-term by supporting development that would not otherwise have occurred. • If a new TIF district were established, it would likely be several years before there would be sufficient revenue in the district to make significant investment in housing. • Coordination and agreement with other taxing districts is also important. • There are many examples of the use of TIF revenue for housing-related projects in Oregon. o In the Downtown Tigard TIF district, projects include the Atwell Off-Main project, which includes 165 market rate apartments, along with commercial space; and the current mixed-use development underway on Main Street near Fanno Creek, which will include a coffee roaster, office space, and 22 new apartments. o The City of Portland has participated in many housing projects in its districts over decades. For instance, over the last decade Prosper MIG, Inc. I Lake Oswego Housing Production Strategy 19 of 42 Initial Strategy Recommendations Memo 2/8/2024 Portland agency has contributed to the creation of hundreds of mostly affordable and workforce housing units in multiple buildings in the Lents Town Center.TIF also contributed to many of the early projects in the Pearl District. o The City of Beaverton Urban Renewal Agency's (BURA) budget allocates $300,000 to $3.3M per year in tax increment set aside for joint investment in affordable housing.This amounts to approximately 10%of the City's 5-year URA budget.' Anticipated • Housing Need Addressed: Government-subsidized affordable housing. Impact • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production of subsidized affordable housing. An intended outcome of urban renewal is increased property values and redevelopment within the district. If not balanced by adequate investment in housing production, urban renewal can lead to displacement of existing residents facing increased property taxes and development pressures.This can be a burden on existing low-income residents and should be considered carefully when designating new TIF districts. • Housing tenure: For rent or sale • Magnitude: High—An extended TIF district or new programs focused on housing have the potential to have a large impact on specific new projects with LORA partners.The impact of an expanded TIF program on housing production will depend on the revenue-generating potential of the district in question and the prioritization of housing projects among the broader range of projects eligible for urban renewal funding (e.g., general infrastructure projects, beautification, economic development, etc.). If housing is prioritized for funding, and development opportunities are available within the district, it can directly bring about housing production. Time Frame Implementation: Medium Term Impact:Analysis and planning for a new TIF district can take several years. Once a TIF district is established, it is expected to take several more years before adequate revenues are accrued to begin spending the urban renewal funds.The impact on housing production is expected over the medium or longer term. Implementation • Evaluate the potential for creation of one or more new TIF districts. Actions • Incorporate affordable housing into new district plans. • City Council to adopt URA boundaries and plan via ordinance. Lead & Partners Lead: Lake Oswego Redevelopment Agency Partners: Development stakeholders 5 Beaverton BURA Annual Report and Five-Year Action Plan, 2020. https://www.beavertonoregon.gov/1017/The- Beaverton-U rba n-Redevelopment-Agency MIG, Inc. I Lake Oswego Housing Production Strategy 20 of 42 Initial Strategy Recommendations Memo 2/8/2024 1.10 Affordable Housing Preservation Inventory (F19) Description Prepare an inventory of subsidized and naturally occurring affordable housing to support proactive policies intended to preserve the affordable housing stock.The inventory would be used to target potential properties for implementation of an affordable housing preservation strategy. Considerations • This strategy could help offset some of the need for costly new construction. • The strategy would be a good starting point for a housing preservation strategy(Strategy 3.4). Understanding the city's stock of affordable housing could influence decision-making and prioritization for a preservation strategy. • The strategy would require staff time and resources to implement. Anticipated • Housing Need Addressed: Housing for low-income residents. Impact • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy is expected to benefit low-income residents by evaluating the city's stock of naturally occurring affordable housing, in support of a low-cost housing preservation strategy. No burdens on priority populations are anticipated. • Housing tenure: For sale or rent • Magnitude: Low—This strategy will not contribute to new housing production, but it will contribute to the preservation of existing affordable housing, and aids in tracking performance metrics. Time Frame Implementation: Medium Term Impact:This strategy can provide information and influence decision-making about housing preservation in the shorter term. However, impacts to the city's housing inventory are expected to be longer term. Implementation • Use Census data as a starting point. Actions • Work with property owners to document housing costs. • Update inventory on a regular basis. Lead & Partners Lead: Lake Oswego Community Development Partners: Property owners LONGER-TERM STRATEGIES The project team's initial recommendation is to implement the following strategies over the Longer Term (>5 years after HPS adoption). MIG, Inc. I Lake Oswego Housing Production Strategy 21 of 42 Initial Strategy Recommendations Memo 2/8/2024 1.11 Modify System Development (SDC) fee schedule (CO2) Description SDCs are one-time charges assessed on new development to pay for the costs of expanding public facilities to serve new development.The City of Lake Oswego charges SDCs for water, sewer, parks, and transportation.The Lake Oswego School District also charges a construction excise tax(effectively an SDC) for new construction in the city(except for affordable housing). This strategy involves updating the City's SDC fee schedule so it is tied more directly to dwelling size. Currently, the City charges the same rates for all single- family homes regardless of size. Each unit of a duplex is also charged the same single-family fee. Multi-family housing (3 or more units) is charged a lesser fee per unit.' Scaling SDC fees to dwelling size would better match a development's charges to its actual cost or impact on the system. Smaller housing units, including some middle housing types,typically have less impact on water, sewer, or transportation facilities,given the reduced average size and occupancy of these units.This is not fully reflected in Lake Oswego's current SDC schedule, although the current schedule does include lower fees for multi-family housing units. The City could consider charging fees on a per-square-foot basis, rather than per- unit. Considerations • This strategy would reduce barriers to construction of more affordable, smaller-scale homes, including small single-family homes and middle housing. • The City sets its SDC fee schedule based on projected needs for system construction and improvements. Modifying the SDC methodology would likely increase fees for larger homes to make up for the reduced fees for smaller units. • Notes on current SDC strategies: o The City has already adopted regulations to waive SDCs for income- restricted affordable housing (80%or less of AMI) and for accessory dwelling units. o As part of the current Parks Plan 2040 update project (completion expected in 2025),the City will consider modifying its Parks SDCs to be scaled by housing unit size.That could provide a jumping off point and a model for a larger discussion about SDC schedules and potential future refinements to SDCs for other services. Anticipated • Housing need addressed:This strategy will facilitate development of smaller, Impact more attainable housing units that may be affordable to moderate-income and smaller households.The HNA indicates that 16%of new needed housing units over the next 20 years will be needed by those earning 80-120%AMI. • Population served: Moderate to higher income households;first-time homebuyers; single or two-person households; seniors 6 Lake Oswego Master Fees and Charges, 2024. https://www.ci.oswego.or.us/finance/master-fees-and-charges MIG, Inc. I Lake Oswego Housing Production Strategy 22 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Income level: 80%AMI and above • Benefits and Burdens:This strategy can increase production of smaller and lower-cost units which may benefit lower-income households, but is more likely to benefit moderate-or higher-income households. Smaller unit sizes may be of particular benefit to seniors due to lower maintenance and lower housing costs. No burdens on priority populations are anticipated. However, reducing SDCs for smaller units would likely need to be offset by increased SDCs for larger units,the cost of which would be passed onto homebuyers. It is anticipated that homebuyers that can afford larger units likely can also afford the increased cost. • Housing tenure: For rent or sale • Magnitude: Low to Moderate—Given current SDC incentives already available,this tool may have a low to moderate impact in incentivizing additional housing units. It may incentivize some projects to produce a greater number of marginally smaller units,thus increasing density and unit production somewhat. Time Frame Implementation: Longer Term Impact:The process of modifying a city's SDC methodology can be lengthy, as it is necessary to analyze projected needs for system construction and improvements and ensure that SDC revenues will be adequate to meet projected needs. Once a new SDC schedule is implemented,the impact to housing development is expected to be longer-term. Implementation • Work with City Council, other departments (Public Works, Finance, Parks, Actions etc.), and development stakeholders on policy discussions around modifying SDCs. • Potentially work with a consultant to develop an updated SDC methodology. • City Council action: Adopt modified SDC schedule by resolution or ordinance. Lead & Partners Lead: Lake Oswego Engineering Partners: Development stakeholders 1.12 Pre-Approved plan sets for ADUs (A21) Description Pre-approved (or permit-ready) plan sets have been reviewed in advance for conformance with zoning and building codes. Permit-ready plan sets can reduce housing development costs by reducing design and permit process times and fees.This strategy could be used to encourage more development of accessory dwelling units (ADUs) or middle housing types (see Strategy 2.5). Permit-ready plans can reduce costs in three main ways: • Streamlining permit processes—Permitting times are frequently cited by market-rate builders as a major barrier to housing production, as delays in permitting often translate into increased costs. MIG, Inc. I Lake Oswego Housing Production Strategy 23 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Reducing permit fees—The Building Department may decrease permit review charges for applicants because of the simplified review. • Reducing design fees—The builder would pay less in professional services to architects, etc. ADUs are a type of housing located on the same lot (and sometimes in the same structure) as a primary dwelling unit.They are generally smaller in size compared to the primary home and come in a number of different configurations. In Lake Oswego,there may be one ADU per primary home. ADUs offer opportunities for multigenerational living, with family members living on the same site but in a separate dwelling.ADUs can also be rented out, allowing the homeowners to supplement their income. Considerations • This strategy potentially lowers site and building design costs,which could lead to an increase in new ADU units and increase rental stock. • There are upfront costs associated with developing the pre-approved plans, including paying design fees for architects that develop the base plans, and dedicating staff time for working with the architects and reviewing the plans. • The City could partner with a university, design institution, or develop a competition to produce plans. • ADUs may be a better candidate for this program due to their small size and relative simplicity(as compared to middle housing, which may require more customization).Also, homeowners wanting to build an ADU may be more interested in pre-made designs than experienced homebuilders. Anticipated • Housing Need Addressed: Increased housing choices within existing Impact neighborhoods. Increased rental opportunities. Options for multigenerational housing. Opportunities for aging in place. • Population served: Moderate to higher-income households; seniors; people with disabilities; multigenerational households; renters • Income level: Likely 80%AMI and above • Benefits and Burdens:ADUs are a popular choice for elders who wish to live on the same property as their children/grandchildren (ADUs are sometimes referred to as "granny flats"). As such,this strategy can offer benefits to seniors and multigenerational households. Because ADUs are often single- level, small homes,they may also benefit people with disabilities—with the potential added benefit of enabling family to live nearby for assistance and support. No burdens on priority populations are anticipated. • Housing tenure: For rent • Magnitude: Moderate—This strategy would likely lead to more development of ADUs in the city. Pre-approved plans can lower the logistical barriers for prospective ADU builders, and can be paired with a faster, cheaper permitting process.This could increase the number of available rental properties and increase housing choices in existing developed neighborhoods. However,the strategy would have a limited impact on overall housing supply. MIG, Inc. I Lake Oswego Housing Production Strategy 24 of 42 Initial Strategy Recommendations Memo 2/8/2024 Time Frame Implementation: Longer Term Impact:The action is expected to have impact over the longer term. Implementation • Develop ADU plans in collaboration with one of the partners listed below. Actions • Work with the Building Department to ensure plans meet all City Code standards, approve the plans, and adopt reduced fees for the plans. • Work with the Building Department to implement a streamlined review process. Lead & Partners Lead: Lake Oswego Community Development (including Building Department) Partners: Universities, design institutions, and/or design firms MIG, Inc. I Lake Oswego Housing Production Strategy 25 of 42 Initial Strategy Recommendations Memo 2/8/2024 2. Strategies Needing Further Discussion The following strategies need further discussion by the HPS Task Force, Planning Commission, and City Council before the project team can make a recommendation as to whether they should be included in the HPS.These strategies have not yet received clear support from these bodies, but are expected to have a meaningful impact on housing production. 2.1 Zoning incentives for affordable housing (A03) Description This strategy involves allowing additional height, density, bonus floor area ratio (FAR), or relaxing other zoning standards for affordable housing. The City currently allows a limited height or density bonus for affordable developments in the WLG-OC and R-DD zones.The City could consider modifying the bonus, expanding it to apply in more zones, or adopting new bonuses, such as reduced open space for affordable housing. Considerations • Zoning incentives likely would not incentivize private developers to include affordable units in their projects.These types of bonuses typically don't lead to mixed-income development on their own unless the base entitlements are very low and there's a lot of demand for more density. • Incentives would more likely be a way to allow affordable developers to make more efficient use of land and potentially better compete for land with market-rate developers. Non-profit housing providers have indicated that such bonuses can be very effective in improving the financial feasibility of their developments. • Senate Bill 8 (2021 session, encoded as ORS 197A.445) requires cities to allow affordable housing that meets specific criteria on a wide range of sites and provides height and density bonuses. If the height/density bonus exceeds local bonuses for affordable housing,the SB 8 bonus will apply directly. Potential bonus provisions in Lake Oswego could be crafted to be consistent with or go above and beyond SB 8 requirements. Anticipated • Housing need addressed: Government-subsidized affordable housing for Impact low-income households.The HNA indicates that 30%of future needed housing units by 2043 will be needed by low-,very low-, or extremely low- income households, and also identified a current gap in supply of affordable units. • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy would benefit low-income households by increasing the feasibility of affordable developments, thereby enabling more such projects to be built and potentially enabling more units to be included within each project. No burdens on priority populations are anticipated. • Housing tenure: For rent or sale MIG, Inc. I Lake Oswego Housing Production Strategy 26 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Magnitude: Low to Moderate—This strategy might lead to a small percent increase in the number of units that are possible for affordable housing developments.This incentive may help increase affordable production in projects that are already being pursued but is unlikely to initiate new projects on its own. While the developer and property manager must demonstrate compliance, the administrative burden should be kept to a minimum to reduce added time and cost, both for the applicant and the City. Time Frame Implementation:To be determined based on further discussion Impact:The action can begin to have impact after it is implemented in the CDC. The statutory bonuses under SB 8 (ORS 197A.445) are already available.The impact on supply of affordable housing is expected to be longer-term. Implementation • Consult with affordable housing providers to determine what type(s) of Actions incentives would be most beneficial in supporting their work. • Evaluate SB 8 to determine how the statutory bonuses compare to the potential new bonuses. • City Council Action: Implement through CDC updates. Lead & Partners Lead: Lake Oswego Community Development Partners:Affordable housing providers 2.2 Construction Excise Tax (CET) (D09) Description CET is a one-time tax on construction projects and is a potential funding source for affordable housing. Cities and counties may levy a CET on residential construction for up to 1%of the project's permit value; or on commercial and industrial construction with no cap on the rate of the CET. The allowed uses for CET funding are defined by state statute'and can include support for a variety of housing-related projects and programs. • Residential CET revenues must be allocated as follows: o Up to 4%can be used to cover administrative expenses incurred from implementation of the CET. o 50% must be spent on developer incentives (e.g., permit fee and SDC reductions,tax abatements, or finance-based incentives). o 35% may be used flexibly for affordable housing programs. o 15%flows to Oregon Housing and Community Services (OHCS)for homeownership programs. OHCS's policy is to spend the revenue in communities where it's collected. • Commercial/industrial CET has fewer restrictions on how revenues are spent: o 50% must go towards housing-related programs (not necessarily limited to affordable housing). o 50% is unrestricted and can be used as the City sees fit. Oregon Revised Statutes 320.192-195. MIG, Inc. I Lake Oswego Housing Production Strategy 27 of 42 Initial Strategy Recommendations Memo 2/8/2024 Some cities have used CET to pay for gap financing of new affordable development, backfilling SDC waivers, acquisition of properties for affordable housing preservation, and down payment assistance for first-time homebuyers. As an example,the City of Eugene adopted a CET in 2019, and has used $2.2 million in revenues to leverage $45 million to fund the construction of 178 new affordable homes.' Additional examples are detailed in Appendix A: CET Supplemental Memo. Considerations • CET is one of the few available sources of the few available locally-controlled funding streams for affordable housing. • Several other strategies under consideration for the HPS would depend on adoption of a new funding source (see Section 3. Contingent Strategies, below). Without a new funding stream, the City could not participate meaningfully in those strategies. • CET is a tax on development, meaning that it raises costs for construction of commercial, industrial, and/or market-rate residential housing.The statute exempts regulated affordable housing, public buildings, hospitals, and certain other types of facilities. The City can also choose to exempt other types of development(e.g., multi-family housing, accessible housing,or small housing units) or exclude residential development altogether. For example,the City of Tigard exempts ADUs of 1,000 sq ft or less and projects valued at less than $50,000; and allows cottage clusters, courtyard units, and quadplexes to be exempted from 75%of the CET.' • Alternatively, by structuring a policy with offsetting incentives or tools for housing to reduce development barriers,the City could potentially limit the impact on feasibility for certain housing projects.This strategy can be paired with other complementary strategies to increase its effectiveness. • Because CET revenue is development-derived, it will fluctuate with market cycles. Anticipated • Housing need addressed: Government-subsidized affordable housing for Impact low-income households. CET implementation can be tailored to prioritize certain income levels or other housing needs, such as extremely low-income households (earning below 30%AMI) or residents needing housing with wrap-around support services. • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production of subsidized affordable housing and other housing programs. Because CET funds offer flexibility for the local government to choose which projects and $ City of Eugene,Affordable Housing Trust Fund. https://www.eugene-or.gov/4232/Affordable-Housing-Trust-Fund 9 Tigard Municipal Code, Chapter 3.90 Construction Excise Tax. https://library.gcode.us/lib/tigard or/pub/municipal code/item/title 3-chapter 3 90 MIG, Inc. I Lake Oswego Housing Production Strategy 28 of 42 Initial Strategy Recommendations Memo 2/8/2024 programs to support,the City has opportunities to direct funding toward projects that benefit priority populations that need additional support. A CET has the potential to inhibit some development, including housing development(if a residential CET is pursued). However,the City has options to avoid impacts to the types of housing most needed by priority populations, thereby limiting burdens on these communities.Affordable housing already must be exempt. As noted above,the City could also exempt multi-family housing, small units,ADUs, housing that meets Universal Design criteria, and other types.This is a way to address or mitigate potential burdens. • Housing tenure: For rent or sale • Magnitude: High—The revenue potential of a CET in Lake Oswego is potentially quite high. Over the last five years,the value of residential construction and addition permits, including mixed-use projects, has totaled over$385M, or an average of$77M per year.Applying a standard 1%CET to this activity could have generated as much as$750k per year for a CET housing fund.A CET applied to commercial permits, which includes multi- family development, could generate an even greater$850k per year to a housing fund, based on the five-year average. (See Appendix A: CET Supplemental Memo for a more detailed analysis of revenue potential.) The CET is a tax on new development activity, and thus has the impact of raising costs on developers. Time Frame Implementation:To be determined based on further discussion Impact:This strategy may take several years for funds to accumulate to an amount that could be used to support development of housing. However, cities that have adopted a CET have seen real results in terms of housing production within 4 to 5 years. See above for the City of Eugene example. Implementation • Evaluate a potential approach. Include projections of potential revenue and Actions determine what programmatic goals could be accomplished with revenue. Consider both residential and commercial/industrial options. • Analyze potential impacts to development. • Engage with the development community—including both housing providers that could benefit from CET funds, and developers that might be impacted by the tax. • City Council could impose the CET by adoption of an ordinance or resolution that conforms to the requirements of ORS 320.192—ORS 320.195. • If directed, create a plan for the use of CET funds, in collaboration with housing providers, low-income communities, and other historically marginalized communities. Lead & Partners Lead: City of Lake Oswego Community Development Partners: Finance Department; local developers; non-profit housing partners could implement funded programs MIG, Inc. I Lake Oswego Housing Production Strategy 29 of 42 Initial Strategy Recommendations Memo 2/8/2024 2.3 Vertical Housing Development Zone Tax Abatement (E03) Description This abatement is intended to incentivize multi-story mixed-use development and affordable housing in targeted areas.To qualify, a project must have improved, leasable, non-residential development on the ground floor and residential development on the floors above.The program allows a 10-year partial property tax exemption of 20% per floor(and up to 80%total)for mixed- use developments within the designated Vertical Housing Development Zone (VHDZ). The exemption is only allowed for the improvements to the property(not the land itself), unless the development provides low-income housing; in that case, the land can also be exempted from property taxes at the same rate as the improvements (on a per-floor basis).The low-income units must remain affordable for at least as long as the length of the tax exemption.The tax exemption is available for both new construction and rehabilitation projects. (Authorized by ORS 307.841-867) Considerations • A pilot VHDZ project was recently approved for the North Anchor development site.The City could consider a more broadly-applicable program in an area (or areas) where it wants to encourage mixed-use development. • As mentioned above under Strategy 1.3, the City and participating taxing districts will lose property tax income for the duration of the tax exemption, reducing revenue for City services and revenue for participating taxing districts. Some taxing districts expressed some resistance to the pilot VHDZ proposal at North Anchor due to this reduction in revenue, particularly as the VHDZ program is intended to produce market-rate housing. • VHDZ has the potential to displace residents by encouraging redevelopment in certain areas. Per state law, a city must consider the potential for displacement of households within a proposed VHDZ before designating the zone. Anticipated • Housing need addressed:This strategy has the potential to increase Impact development of high-density housing in targeted areas of the city. Stakeholders in the HPS process identified a particular need for more multi- family housing outside the Town Center. • Population served: Low-income to higher-income households • Income level:All incomes • Benefits and Burdens:This strategy is expected to primarily benefit moderate or higher income households, rather than low-income populations, because developers are not required to include affordable units to take advantage of a VHDZ. However,the extra exemption for affordable units may incentivize developers to include those units,thereby benefiting low-income populations. Further, increasing housing options in mixed-use areas with good access to services has the potential to benefit various populations, including seniors looking to downsize and people with disabilities who do not drive. MIG, Inc. I Lake Oswego Housing Production Strategy 30 of 42 Initial Strategy Recommendations Memo 2/8/2024 As noted above, VHDZ has the potential to displace residents by encouraging redevelopment in certain areas—which could burden low-income households. Equity considerations, such as a displacement risk analysis and anti-displacement measures, should be part of implementation for this strategy. • Housing tenure: For rent or sale • Magnitude: Low to Moderate—This abatement may have a lower impact on new housing production than the low-income housing tax incentives because mixed-use housing tends to produce fewer units, and also because this program is more complicated for the City and applicants. If there are key districts where the City would like to incentivize more vertical buildings and mixed-use,this may be appropriate. If multiple programs are available,the VHDZ may compete poorly with more attractive and easier to use tax incentives. Time Frame Implementation:To be determined based on further discussion Impact:The tax exemption can be used once it is adopted, and for as long as the City offers the exemption.The impact on housing supply is expected to be longer-term. Implementation • Define VHDZ geography(ies).Analyze displacement risk and consider anti- Actions displacement strategies as part of this process. • Work with other taxing jurisdictions to gain approval. • City Council action: Adopt tax exemption program by resolution or ordinance. Lead & Partners Lead: Lake Oswego Community Development Partners: Lake Oswego Finance Department; overlapping taxing jurisdictions 2.4 Multiple Unit Property Tax Exemption (MUPTE) (E04) Description This exemption can be used to encourage multi-family or middle housing with particular features or at particular price points by offering qualifying developments a partial property tax exemption for 10 years (or longer,for housing subject to affordability agreements). It can be offered to new development or existing housing that is converted to meet the eligibility criteria. MUPTE is a flexible tax abatement that can be used in various ways to encourage needed housing.The City has broad discretion as to how to structure the program. Eligibility criteria could include requirements for affordability, accessibility/universal design, unit size, or other desirable features. The City must designate specific areas where the MUPTE applies, unless including affordability as a criterion, in which case the whole city could be eligible. (Authorized by ORS 307.600-637) MIG, Inc. I Lake Oswego Housing Production Strategy 31 of 42 Initial Strategy Recommendations Memo 2/8/2024 Considerations • Could incentivize multi-family developers to incorporate desirable features in their projects, such as accessible units or family-size units. Affordability to lower-income households could also be an eligibility criterion, if desired. • As noted below,this strategy could outcompete affordable housing tax incentives with for-profit developers who would rather build market-rate housing in some cases. Anticipated • Housing Need Addressed:This strategy has the potential to increase Impact development of multi-family housing in targeted areas of the city. Stakeholders in the HPS process identified a particular need for more multi- family housing outside the Town Center. Depending on how it is structured, this program could also encourage apartments with family-sized units (2-3 bedrooms) and accessible housing options for seniors—both of which were also identified by stakeholders as gaps in the local market. • Population served: Depends on how the program is structured; could be targeted to benefit low-income households, people with disabilities, larger families, etc. • Income level: Depends on how the program is structured. • Benefits and Burdens:This strategy has the potential to benefit various priority populations by encouraging housing needed by those communities (accessible units,family units, affordable units, etc.).The City could also target a MUPTE program to specific geographies to target housing development in neighborhoods where it is most needed.A challenge for the City will be to determine how best to balance those various needs to determine what housing types or features are most appropriate to include as criteria for the MUPTE abatement.This should be considered in the broader context of the HPS to ensure that the City's actions benefit all priority populations in equitable ways. No burdens on priority populations are anticipated for this strategy, provided it is implemented in the ways described above. • Housing tenure:Typically for-rent. • Magnitude: Moderate—This strategy could encourage production of more multi-family units that meet housing needs not currently being met by the private market. However this program does not necessarily require the provision of affordable housing;therefore, it may outcompete affordable housing tax incentives with for-profit developers who would rather build market-rate housing.This program should be carefully considered as competitive with the low-income tax exemptions. However,the MUPTE can also be designed to require affordable units as well. Time Frame Implementation:To be determined based on further discussion Impact:The MUPTE can be used once it is adopted, and for as long as the City offers the exemption.The impact on housing supply is expected to be longer- term. Implementation • Further evaluate the various options for structuring the MUPTE program to Actions determine whether—and how—it should be implemented. MIG, Inc. I Lake Oswego Housing Production Strategy 32 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Consult with developers and housing providers to determine their level of interest. • Determine desired eligibility criteria (e.g., affordability, accessibility, etc.). • Seek input from overlapping taxing districts on their willingness to support the exemption. • City Council Action: Adopt tax exemption program by resolution or ordinance. Lead & Partners Lead: Lake Oswego Community Development Partners: Lake Oswego Finance Department; overlapping taxing jurisdictions 2.5 Pre-approved plan sets for middle housing typologies (A20) Description The pre-approved plan sets strategy discussed above (Strategy 1.12) could also be used to encourage more development of middle housing typologies, such as duplexes, triplexes, and cottage clusters. Considerations • This could help attract developers that typically develop only single-family housing to get involved. • Middle housing builders have expressed support for this strategy and believe it would be frequently used and would cut down on costs. • A potential consequence is too much architectural uniformity. • Template plans may not work on all lot layouts or provide enough personal design flexibility, so they would not be appropriate for all projects. Lake Oswego has significant topography and often requires customized designs, so template plans for middle housing may be less feasible. • See other considerations under Strategy 1.12, Pre-Approved Plan Sets for ADUs. Anticipated • Housing Need Addressed: Increased housing choices, including Impact homeownership options. • Population served: Moderate to higher-income households • Income level: Likely 80%AMI and above • Benefits and Burdens:This strategy is expected to primarily benefit moderate-or higher-income households, rather than low-income populations. However,the strategy may support more affordable homeownership opportunities via middle housing development—thereby increasing the overall stock of attainable ownership housing available in the community.This has the potential to benefit people of color and other households that have faced systemic barriers to homeownership. Middle housing types with smaller footprints can also benefit seniors looking to downsize. Potential burdens from this strategy are that facilitating middle housing development could increase likelihood of demolition of older low-cost homes and displacement of low-income residents.This strategy should be MIG, Inc. I Lake Oswego Housing Production Strategy 33 of 42 Initial Strategy Recommendations Memo 2/8/2024 paired with a displacement risk analysis and potentially displacement mitigation measures to support low-income residents as well as inclusive engagement, home repair assistance, and other programs that support low- income homeowners. • Housing tenure: For sale or rent • Magnitude: Moderate—This strategy would likely lead to more development of middle housing in the city.The cost savings to builders wouldn't necessarily translate to reduced sale prices or rents, but would have the potential to deliver more housing. In addition, many forms of middle housing will have a lower market-rate price point than detached single-family housing. Time Frame Implementation: Longer Term Impact:The action can begin to have an impact after the permit-ready plans are pre-approved and made available to builders. Implementation • Evaluate which housing type(s)to adopt plans for and which programmatic Actions approaches to pursue. • Develop middle housing type plans in collaboration with one or more of the partners listed below. • Work with the Building Department to ensure plans meet all City Code standards, approve the plans, and adopt reduced fees for the plans. • Work with the Building Department to implement a streamlined review process. Lead & Partners Lead: Lake Oswego Community Development (including Building Department) Partners: Universities, design institutions, and/or design firms 3. Contingent Strategies The following strategies describe various ways that the City could allocate funds to support affordable housing production or preservation. Each of these strategies are contingent on adoption of a new funding source, such as Construction Excise Tax,for the City to participate meaningfully. Currently,the City has very little in the way of uncommitted resources that it can use to support affordable housing. 3.1 Housing Trust Funds (D03) Description Housing Trust Funds are a public sector tool used to direct financial resources to support a variety of affordable housing activities. Housing Trust Funds are not revenue sources themselves, but rather are tools for consolidating revenue, planning for how the funds are spent, and directing them to housing programs. A Construction Excise Tax could be a potential revenue source (see Strategy 2.2). Other sources could include the City's general fund,TIF funds, state grant funding, and/or other types of taxes or fees. For example,the City of Ashland MIG, Inc. I Lake Oswego Housing Production Strategy 34 of 42 Initial Strategy Recommendations Memo 2/8/2024 dedicates a portion of its local marijuana sales tax to fund Ashland's Affordable Housing Trust Fund.1° Considerations • Provides flexibility for opportunity-based investment. However, some funding sources (e.g., CET) have requirements for how funds are spent. • Takes time to accumulate enough to make a difference and requires consistent investment with a long-term outcome perspective. • Relies on identifying a sustainable funding source with sufficient revenue to have impactful contributions. • There is potentially a high cost to seed the program. Anticipated • Housing Need Addressed: Government-subsidized affordable housing. Impact • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production of subsidized affordable housing and other housing programs. Because Housing Trust Funds offer flexibility for the local government to choose which projects and programs to support,the City has opportunities to direct funding toward projects that benefit priority populations that need additional support.This could include extremely-or very-low income residents and those needing wraparound support services. No burdens on priority populations are anticipated. • Housing tenure: For rent or sale • Magnitude:The amount of housing production depends on the funds raised and contributed through these resources. See Strategy 2.2 (CET)for further evaluation. In and of itself,the strategy does not result in production of units. Time Frame Implementation:To be determined based on further discussion. Contingent on adoption of a new revenue source. Impact:This strategy may take several years for funds to accumulate to an amount that could be used to support development of housing. Implementation • Identify a potential funding source (or sources). Actions • Identify priorities for how funds will be spent. • Continuously fund a Housing Trust Fund. Lead & Partners Lead: Lake Oswego Community Development Partners: Nonprofit affordable housing providers 10 City of Ashland, Housing Trust Funds. https://www.ashland.or.us/page.asp?navid=10828 MIG, Inc. I Lake Oswego Housing Production Strategy 35 of 42 Initial Strategy Recommendations Memo 2/8/2024 3.2 Low-interest loans/Revolving loan fund (D13) Description This strategy would provide low-interest loans or revolving loans for affordable housing production, preservation, or maintenance activities. Housing Repair and Weatherization Assistance is offered to low-income households through various County governments—the City could contribute funding for use within Lake Oswego. An example of offering loans for housing production is the City of Tigard's Middle Housing Revolving Loan Fund.This fund was created by the Tigard City Council in 2021, using funds from the American Rescue Plan Act, and was made available in September 2023.The fund is managed by the Network for Oregon Affordable Housing, Craft3, and the Community Housing Fund, and will provide short-term construction lending to developers building middle housing.At least 30 percent of the units must be made available to lower-income buyers participating in down payment assistance programs. Considerations • Opportunities depend on what type of loans are offered. • Loans for home repair could help prevent displacement by assisting existing low-income residents remain in their homes. • Loans for affordable housing development could help non-profit developers bridge gaps in construction lending. Anticipated • Housing Need Addressed: New or rehabilitated housing for low-income Impact households. • Population served: Low-income households • Income level:0-80%AM I • Benefits and Burdens:This strategy would primarily benefit low-income households by increasing the City's capacity to support production or preservation of affordable housing, or to contribute to programs that promote housing stability for low-income residents. No burdens on priority populations are anticipated. • Housing tenure: For rent or sale • Magnitude: High (if funded via a new revenue source; else Low)—This strategy can be used to participate in public/private partnerships and administer the types of programs discussed in previous sections.The benefit of this program is that it regenerates funding as loans are repaid to be used again on future projects. For developers who need financing for their projects (which is almost always the case), offering lower-interest loans that may have other favorable terms can have a large impact on the feasibility of a development, as interest rates are a significant cost factor over time. Time Frame Implementation:To be determined based on further discussion. Contingent on adoption of a new revenue source. Impact:The impact on housing production or preservation is anticipated to be longer term. MIG, Inc. I Lake Oswego Housing Production Strategy 36 of 42 Initial Strategy Recommendations Memo 2/8/2024 Implementation • Identify a potential funding source (or sources). Actions • Identify priorities for how funds will be spent. • Develop loan programs, potentially in partnership with lending institutions. Lead & Partners Lead: Lake Oswego Community Development Partners: Housing developers and providers; Clackamas County and other organizations offering home repair and weatherization services 3.3 Community Land Trusts (F03) Description Community land trust (CLT) is a model wherein a community organization owns land and provides long-term ground leases to low-income households to purchase homes on the land, agreeing to purchase prices, resale prices, equity capture, and other terms.This model allows low-income households to become homeowners and capture some equity as the home appreciates, but ensures that the home remains affordable for future homebuyers. Proud Ground is an example of a CLT working in the region. Proud Ground partners with other organizations to build the homes,then manages the sales, ground leases, and other programs. Habitat for Humanity uses a similar approach to CLT to maintain the affordability of the homes it builds—largely through volunteer labor and limiting resale prices, while allowing owners to accrue home equity. Portland Region Habitat for Humanity is the local affiliate organization. Cities can support CLT and other models for affordable homeownership by providing land, grants/loans, direct funding, or leveraging state/regional resources. Considerations • Dependent on partnership,funding stream, and land acquisition. • Financing the initial acquisition of land and securing enough equity to scale the strategy are key challenges for the CLT model.Across the country, land trusts use a variety of land acquisition mechanisms,from private financing and municipal subsidies to relationships with land bank entities. • CLTs are unlikely to produce substantial unit numbers unless significant resources are raised from a broad mix of funding partners, but they can provide permanent affordability of the units they develop.The City's funds can help to leverage investments from other partners. Anticipated • Population served: Low-income households Impact • Income level:0-80%AMI Benefits and Burdens: In addition to benefitting low-income households, depending on how it is administered,this strategy has the potential to benefit communities that have faced structural barriers to homeownership— particularly people of color and other marginalized communities. No burdens on priority populations are anticipated. • Housing tenure: For sale MIG, Inc. I Lake Oswego Housing Production Strategy 37 of 42 Initial Strategy Recommendations Memo 2/8/2024 • Magnitude: Moderate (if funded via a new revenue source; else Low)—The effectiveness and impact of CLT programs is highly reliant on the partner who is developing and administering the property. Another factor is the availability of residential building sites large enough to accommodate multiple housing units, though CLT model can be applied to small developments as well. Cities can provide entitlements, incentives, and perhaps funding to the development partner(usually a non-profit agency). This is one of the few models to provide lower-cost ownership opportunities as opposed to rental opportunities. Time Frame Implementation:To be determined based on further discussion. Contingent on adoption of a new revenue source. Impact:Timing of impact depends on partnership opportunities with a CLT. Given availability of funds, impact to housing production would be expected to occur over the longer term. Implementation • Work with CLTs to discuss opportunities in Lake Oswego. Actions • Take action on partnership models and programs that best benefit the organization and the City's financial and/or administrative capacity. • Potentially provide on-going financial support through development/ rehabilitation grants, homeownership grants/loans, donation of City-owned land, and/or an annual funding set-aside. Lead & Partners Lead: Lake Oswego Community Development Partners: Proud Ground, Habitat for Humanity, and/or other nonprofit developers of for-sale units 3.4 Preserving low-cost rental housing to mitigate displacement (F05) Description This strategy involves preventing displacement and preserving "naturally occurring" affordable housing through acquisition, low-interest loans/revolving loan fund for preservation, and/or code enforcement. Most low-income households do not live in the limited supply of subsidized affordable units that are available. Rather they live in market rate housing that is "naturally" more affordable due to the location, age, size, condition, or other factors that lead to lower rent or cost. Often it is much more cost effective for housing agencies to try to preserve this type of housing(e.g., a mobile home park)than try to create an equivalent number of new units. While continuing to produce new higher-standard affordable units is necessary and key goal, protecting the units that are currently low cost is also important. Considerations • Dependent on partnership and funding stream. • Acquisition of existing low-cost housing is only possible if property owners are willing to sell. • Lake Oswego does not have a large stock of naturally occurring affordable housing. However,what's there is important to preserve if possible. MIG, Inc. I Lake Oswego Housing Production Strategy 38 of 42 Initial Strategy Recommendations Memo 2/8/2024 Anticipated • Housing Need Addressed: Government-subsidized affordable housing. Impact • Population served: Low-income households • Income level:0-80%AMI • Benefits and Burdens:This strategy is expected to benefit low-income residents by ensuring preservation of the city's low-cost housing stock, and ensuring it remains affordable long-term. No burdens on priority populations are anticipated. • Housing tenure: For rent • Magnitude: Moderate (if funded via a new revenue source, and if inventory is available; else Low)—This can be an effective approach and is a major focus of the Portland Housing Bureau,for instance, which has bought large older apartment complexes for preservation, and hotels/motels for conversion. In becoming involved in areas or properties where housing is naturally less expensive, it can be important to be cautious and take a "first do no harm" approach, as attempts to improve or invest in these properties can sometimes have the unintended effect of raising property value and rents/housing costs. Time Frame Implementation:To be determined based on further discussion. Contingent on adoption of a new revenue source. Impact:This strategy can begin to have an impact after the City has conducted an inventory of affordable housing and accumulated adequate funds to contribute to housing acquisition. Impact to the City's supply of affordable housing is expected to be longer term. Implementation • Identify a potential funding source (or sources). Actions • Identify affordable housing units to preserve (see Strategy 1.10. • Develop loan programs, potentially in partnership with lending institutions. Lead & Partners Lead: Lake Oswego Community Development Partners: Housing property owners; nonprofit affordable housing providers MIG, Inc. I Lake Oswego Housing Production Strategy 39 of 42 Initial Strategy Recommendations Memo 2/8/2024 4. Not Recommended The following strategy is not recommended for implementation in the HPS because it is not expected to have a meaningful impact on housing production in Lake Oswego. 4.1 Homebuyer Opportunity Limited Tax Exemption Program (HOLTE) (E06) Description The purpose of this program is to encourage homeownership among low-and moderate-income households and to stimulate the purchase, rehabilitation, and construction of residences in certain areas as a form of infill development. The program allows a limited 10-year property tax exemption to owner-occupied single-unit housing that has a market value upon completion of no more than 120%of median sales price of dwelling units located within the city (or a lesser value adopted by the jurisdiction).The tax exemption can be granted for up to 10 successive years, and only applies to the value associated with property improvements, not the land value. While not required by statute, local governments can establish income criteria for eligible homebuyers. For example,the City of Portland limits eligible homebuyers to those earning no more than 100%of the area median income.' Single-family housing units,townhomes, multi-family homeownership units (i.e., condos), and manufactured housing are eligible for the exemption. Eligible units can be new construction or rehabilitated existing homes.The housing must be in an area defined and designated by the City.The City also would create criteria and establish required design elements or public benefits that would be applied to properties using the exemption. (Authorized by ORS 307.651-687) Considerations • Strategy to facilitate homeownership among moderate-income households. • Effectiveness depends on the local housing market and land costs.The recent median sale price in Lake Oswego is$780k, so this program could in theory apply to home values of$940k(120%of median).An income of about $200k is needed to afford the median home with a 20%down payment. With less of a down payment, even higher incomes would be needed.The HNA found that the number of homes selling at the lower end (less than $500k for instance)was a small share of the overall inventory. • The City could consider lower sales price limits (below 120%of median sales price), but this would be less enticing to developers given the profit potential of market-rate development in Lake Oswego. Anticipated • Housing Need Addressed: Homeownership options for moderate-income Impact households.The HNA indicates a need for 1,024 new ownership units (52% of new needed housing) over the 20-year period.The HNA also indicates that 11 City of Porland, HOLTE Program. https://www.portland.gov/phb/holte/sale-requirements MIG, Inc. I Lake Oswego Housing Production Strategy 40 of 42 Initial Strategy Recommendations Memo 2/8/2024 16% of all new needed units will need to be affordable for moderate-income households (80-120%AMI). • Population served: Moderate-income households • Income level:80-120%AMI • Benefits and Burdens: If calibrated effectively, this strategy would be expected to benefit moderate-income households by increasing affordable homeownership opportunities.This would especially benefit first-time homebuyers that would otherwise be challenged to purchase a home in Lake Oswego, and potentially seniors looking to purchase a downsized home.This strategy also has the potential to benefit communities that have historically faced structural barriers to homeownership—particularly people of color and other marginalized communities. No burdens on priority populations are anticipated. • Housing tenure: For sale • Magnitude: Low—This program is expected to have limited impact due to the land and housing costs that prevail in Lake Oswego. Unfortunately,there will be few opportunities for appropriate homes for lower-income first-time homebuyers. While this exemption would certainly help with homebuyer finances, it would not apply to land cost, and there are few homes or neighborhoods in the community that are low-cost candidates for rehabilitation. Time Frame Implementation: Not Recommended Impact:The HOLTE can be used once it is adopted, and for as long as the City offers the exemption.The impact on housing supply is expected to be longer- term. Implementation • Define eligibility and design criteria. Actions • Work with other taxing jurisdictions to gain approval. • City Council action:Adopt tax exemption program by resolution or ordinance. Lead & Partners Lead: Lake Oswego Community Development Partners: Lake Oswego Finance Department; overlapping taxing jurisdictions MIG, Inc. I Lake Oswego Housing Production Strategy 41 of 42 Initial Strategy Recommendations Memo 2/8/2024 Appendix A: CET Supplemental Memo The attached memo provides additional information about Construction Excise Tax (CET). An initial version of this memo was included in the agenda packet for the Planning Commission's January 8, 2024 Work Session.Additional information has been added, examining potential CET revenue generation based on past permit data in Lake Oswego. MIG, Inc. I Lake Oswego Housing Production Strategy 42 of 42