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Planning Commission looks at UNO fee-in-lieu policies

Monday, November 1, 2010 by Kimberly Reeves

In 2004 the city created a way to promote high-density redevelopment in the area west of the University of Texas: the University Neighborhood Overlay (UNO) district.


The Planning Commission was charged with reviewing the fee-in-lieu policies to promote affordable housing within the overlay, but at the commission’s meeting last week, the question became why UNO seemed to work while no other program did.


Among the programs applied to trade additional density for increased affordable housing, UNO appears to be the only program that has generated affordable housing units and put aside $1 million toward the creation of deeper affordability.


The results of other programs around the city? Zip, according to city staff and former employee Stuart Hersh, who laid out the “why fix it if it ain’t broke” argument, given the lack of production in other areas of the city.


“It’s a choice you have,” said Hersh, who formerly worked with the city’s affordable housing programs and attended UNO stakeholder meetings. “It doesn’t seem to make any policy sense,” he told the Planning Commission last week.


The creation of UNO pushed the development of new housing units unmatched by any area other than downtown. Since the UNO ordinance was passed in 2004, close to 3,000 units have gone up in the tight boundaries of West Campus, creating new options to relieve the pressure on the University of Texas housing market and tacitly discouraging super-duplexes.


That doesn’t mean everything is going well. Hersh said UNO kicked off with a flood of development that has trickled to nothing. Discussion with stakeholders should include removing impediments to further development, such as a fairer cost-share of infrastructure and utility improvements, rather than tinkering with the fee in lieu structure itself, Hersh said.


The choice of developers to use CURE zoning, rather than the downtown density bonus, has often been cited as the reason why the density bonus has failed downtown. Asked his opinion by Commission Kathryn Tovo, Hersh said it was his impression that the problem was in the density bonus ordinance, not CURE.


“The downtown density bonus ordinance could have been an amended version of CURE,” Hersh said. “But the recommendation that came out of the affordable housing incentives task force that this commission recommended without amendments and Council approved without amendments did not consider taking CURE and the density programs and merging them in a way that made sense.”


Downtown stakeholders had discussed the issue and failed to come to a conclusion everyone wanted, Hersh said. Chair David Sullivan added it was not too late for the issue to be addressed within the downtown plan.


Two main differences exist between UNO and other affordable housing fee-in-lieu initiatives: UNO has no mechanism for adjusting its rate annually. And it is a lower fee-in-lieu rate of 50 cents per-rentable-square-foot, based on total rentable square space, compared to $6 to $10 per-rentable-square-foot based on additional square footage above original entitlements.


Commissioners Kathryn Tovo and Saundra Kirk both were interested in seeing an analysis as to which calculation makes more economic sense. Some of that research and analysis is ongoing with city staff.


In his testimony, college housing agent Mike McHone described the creation of UNO as an incentive-based affordable housing redevelopment scheme with both developers and affordable housing advocates at the table. McHone said the amount of the fee-in-lieu was carefully considered back in 2004 and based upon the consensus of what would be the financial “breaking point” for developers.


“Could it have been sixty cents? Maybe. Could it have been a dollar or two dollars? Probably not. That would have been the breaking point,” McHone said. “There’s got to be enough cookies in that cookie jar, or the developers won’t go for it. The numbers just don’t work.”


During stakeholder meetings, which included about a dozen participants over two meetings in September, developers agreed to annual adjustments to the rate, based on the consumer price index. The preference would be a possibly graduated increase, such as a 10-cent increase over three years.


There was also a discussion about pricing the fee-in-lieu rates by bed, rather than by bedroom, since many units are set up for roommate situations.


Representatives from the university co-op community also addressed the commission. Brian Donovan of ICC Co-Ops said his group hopes to be the next recipient of fee-in-lieu funding. Almost all the housing units within co-op houses are at 50 percent median family income and below. The challenge for the co-ops, Donovan said, is having the cash on hand to pursue construction.


For a co-op project of $2 million, ICC Co-ops would be required to have $750,000 on hand to commence with construction.


In other areas, stakeholders, and especially university students, would prefer to waive parkland fee dedications. Many University of Texas students already pay substantial fees to the university for recreational amenities.


Recommendations will go to both the Community Development Commission and the Planning Commission before heading to Council. Last week’s hearing at the Planning Commission initiated a hearing at the Codes & Ordinances subcommittee on Nov. 16. Given the holiday schedule for the Planning Commission, the ordinance will be back before the full commission on Dec. 14, likely with incorporated feedback from the CDC.

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