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Affordable units to rely on third party agreements

Friday, March 24, 2017 by Jo Clifton

City Council on Thursday approved on second reading zoning changes allowing the owners of two South Congress properties to build vertical mixed-use projects with deep affordability for some residents, but the developers will be looking for a private partner to enforce the affordability covenants.

Alice Glasco, representing the developer of South Congress Residences at 4714 S. Congress Ave., promised 10 percent of the units would be affordable for people earning 60 percent of the median family income (MFI). In addition, Glasco said Guefen Development Company would spread the units throughout the project, so some would be one-bedroom and some two-bedroom.

However, the city cannot enforce the requirement for the affordable units because the city’s density bonus program only addresses projects offering units for people at 80 percent MFI. The ordinance does not address 60 percent MFI.

Mayor Steve Adler and Assistant City Attorney Mitzi Cotton offered an explanation of how state law limits the city’s ability to require amenities like affordable housing.

“Under state law, what we’re allowed to require is what’s in our density bonus program,” Cotton said. “What the applicant is volunteering to do is additional affordability. That’s not part of the code and not part of the density bonus program. … What we’re allowed to require is what’s in our density bonus program,” or 80 percent MFI.

So to ensure that the affordable housing is “voluntary and would withstand attack,” Cotton said, the developer should enter into a private restrictive covenant that doesn’t involve the city. She pointed out that in the past developers have entered into enforcement agreements with groups like the Workers Defense Project did at the Grove at Shoal Creek.

“That’s the most enforceable way to achieve the additional affordability,” Cotton said.

But Council Member Alison Alter, in her third month on the dais, did not fully understand. She asked, “Why wouldn’t we just postpone this until the private restrictive covenant was written?”

Greg Guernsey, director of the Planning and Zoning Department, told her Council could do that or could just pass the item on second reading.

Adler jumped in quickly. “Certainly we wouldn’t want to do anything that would make it look like passage on third reading was contingent on the drafting of a private covenant because that makes it look like an exaction. So we have to be careful,” he said. He suggested that they ask Glasco to explain what her client intended to do.

Glasco told Council her client is committed to doing the affordable housing and that she had been having conversations with Habitat for Humanity to find out if the group would be willing to act as the third-party enforcement agent. She also said her client would provide a 1,500 square-foot commercial space at a reduced rent for a local business or artist.

Glasco also represents Lemco Holdings, which plans a vertical mixed-use project at 4411 S. Congress. In that case, she said, 5 percent of the apartments would be dedicated to people earning 80 percent MFI and another 5 percent would be for people earning 60 percent MFI.

However, Glasco said that developer would not be willing to spread the affordable units throughout the project, meaning that all of the affordable units would be one bedroom, unlike the other project.

Council approved that zoning case on second reading also.

Mayor Pro Tem Kathie Tovo expressed frustration that Council could not put the developer’s promises into an ordinance that the city could enforce. However, she remembered that Glasco had represented another developer who made similar promises and did a private restrictive covenant with no third party to enforce it. That turned out fine, she said.

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