Wednesday, July 12, 2017

Charleston City Council again backs plan for major increase in workforce housing requirements

Supermajority overrides Planning Commission recommendation

Posted by Dustin Waters on Wed, Jul 12, 2017 at 1:03 PM

click to enlarge New housing projects downtown could face increased workforce housing requirements if developers wish to take advantage of the benefits of Mixed-Use Workforce Housing zoning - DUSTIN WATERS
  • Dustin Waters
  • New housing projects downtown could face increased workforce housing requirements if developers wish to take advantage of the benefits of Mixed-Use Workforce Housing zoning
Charleston City Council reaffirmed support for major changes to workforce housing requirements in the city’s urban core Tuesday evening, drawing opposition from local developers who warn that the new rules go too far.

It’s no secret that Charleston, like much of the nation, is undergoing an affordable housing crisis. A recent report from the Joint Center of Housing Studies at Harvard University found that more than 42 percent of renters in the Charleston-North Charleston metro area spend more than 30 percent of their annual income on housing. Researchers look at severely burdened renters in the Charleston area and found that 23 percent of local renters spend more than half of their income on housing.

In an effort to turn the tides on affordability, City Council reaffirmed support for increased requirements for developers hoping to take advantage of the city’s Mixed-Use Workforce Housing zoning. Under the old rules, developers opting into this zoning were required to set aside 15 percent of rental units as workforce housing. These units would be required to be rented below market rates for at least 10 years.

In exchange for providing workforce housing, developers would be allowed an unlimited density bonus on how many units they can build and have reduced parking requirements. For example, the Skygarden development on Woolfe Street was allowed to build up to 121 units per acre by opting into the workforce housing zoning, more than six times the original allowance for density.

Under the new changes, given initial approval by City Council in January, developers would be required to set aside 20 percent of constructed units as workforce housing for a minimum of 25 years. City Council needed a supermajority to override a recommendation from the city’s Planning Commission, which would have kept workforce unit requirements at 15 percent, but increased the mandatory timeline to 15 years. City Council managed to get the 10 votes needed to approve the new requirements, with Councilmen Mike Seekings and Bill Moody opposing the effort, and Councilwoman Kathleen Wilson absent for the vote.  The main point of contention for the evening came during discussion of the proposed fee-in-lieu option, which would allow developers to pay into the city’s newly created affordable-workforce housing account. This money would then be used by the city to purchase property for use for affordable housing and fund improvements to existing affordable units.

As voted on by City Council Tuesday night, developers not wishing to set aside the required amount of workforce rental units must pay $5.10 per square foot of workforce housing space not provided. For projects already in the pipeline, this fee would be $3.40 per square foot. Developers are also given the option of donating land suitable for workforce housing to the city instead of paying the fee. Although the Planning Commission offered no formal recommendations on where the fee should be set, members of the development community, Urban Land Institute, and Charleston Metro Chamber of Commerce cautioned that too high a fee could slow growth on the peninsula.

“I can speak on behalf of Greystar, who is now completing their second project within the MU-2 zoning designation, that a calculation in the $2.50-$2.75 range would be fair to us and the overall development community and provide the appropriate net-neutral incentive to participate in the payment-in-lieu option,” said a statement read on behalf of Todd Wigfield, senior managing director development at Greystar.

Calls for a reduced fee around $2.75 per square foot were echoed by other representatives from the development community, who said that a higher fee related to housing may lead to an increase in the development of other types of projects, such as hotels. While several of those calling for a reduced fee did so in relation to the reduced workforce housing requirements recommended by the Planning Commission — suggesting that the fee be synched with the 15 percent for 15 years proposal — developers previously suggested a lower fee in April when addressing the Planning Commission.

Luther Cochrane, advisor to Evening Post Industries which owns the Post and Courier, previously called for a reduced fee when speaking to the Planning Commission in April.
“We don’t want an unintended consequence. We don’t want to have a fee in lieu so high that it chills development, not only no affordable and workforce housing — no housing. That will make our situation in Charleston so much worse,” Cochrane told council.

Under the $3.40 fee-in-lieu rate tied to projects already in progress, the city has previously estimated that Evening Post Industries’ Courier Square project at 465 Meeting St. would be required to pay $32,000 for every workforce unit not provided. This adds up to a total fee of over $1 million for the project, if developers choose not to set aside any of the 34 workforce units required.

“I find it interesting that a few months ago when we were all at 20 percent and 25 years, $2.75 was the fair number for the development community. The Planning Commission came along and did 15 percent at 15 years, and still the same number, $2.75, is according to them the fair number. So with all due respect, I think it was just the number that they were willing to pay on this thing without regard to what the alternative is, which we’ve now established to be 20 percent at 25 years,” said Mayor John Tecklenburg.

Requiring only a simple majority for this vote, City Council approved the $5.10 fee with a provision from Councilman Gary White requiring that the plan be assessed in six months to determine if the fee should be changed. Councilmen Peter Shahid, Seekings, and Moody opposed the fee as currently set, saying that the $5.10 rate will likely scare away developers and lead to a loss in new housing. Seekings said that the current rents set under the workforce housing designation are still too expensive for working class residents. He suggested that a lower fee in lieu would entice developers to pay up, allowing the city to build its own affordable housing and set more reasonable rents.

With the option on the table to reassess the fee after six months, those supporting the changes said that immediate action needs to be taken to bolster workforce housing in the city.

“Let’s run it for six months. If nobody wants to take us up on the offer, we can always bring it down,” said Tecklenburg.

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