Members of Charleston’s Community Development Committee met Thursday to discuss a possible referendum to sure up funds for affordable housing and continue debating an ordinance to increase workforce housing requirements.
During a conversation regarding the use of city bonds to finance affordable housing, Councilman Keith Waring questioned whether money from the accommodations tax could be used to help fund affordable housing for hospitality workers. Under this special tax, 2 percent of all revenue generated by hotels goes to the city. Local and state laws limit how this money can be spent, meaning that funds can only be used for tourism-related capital projects and operating costs.
For 2016, the city budgeted for a little more than $6.4 million to be generated from this tax — with $2.7 million going to support tourism-related salaries, most of which include paying police officers to patrol the city’s main tourism areas, and another $472,800 going toward parking enforcement officers in the historic district. Waring proposed the city look into using some of this money to support housing bonds for those employed by the tourism industry.
“There are so many people that lived on this peninsula for decades that work, then and now, in the tourism and service industry that had affordable housing provided … Those people now live in North Charleston,” Waring said.
Councilman William Dudley Gregorie said the city should consider a “per head” fee from the cruise ship industry based on those entering through Charleston’s port. Gregorie acknowledged the idea would be controversial, but would provide a great source of revenue for affordable housing initiatives. The discussion on a possible referendum concluded with a successful motion from Mayor John Tecklenburg to task city staff with determining an estimated dollar figure to present to voters to raise funds for affordable housing.
The meeting drew comments from several members of the development community who questioned the proposed changes to the city’s Mixed-Use Workforce Housing Zoning districts. Having already passed first reading by City Council before being passed to the committee, the new ordinance would extend affordability requirements from 10 to 25 years, raise the percent of required workforce housing from 15 to 20 percent, and create a “fee-in-lieu” option that would allow developers to pay into the city’s workforce housing account in place of constructing the required amount of affordable housing.
Developers can opt in to a Mixed-Use Workforce Housing Zoning district, and in return for constructing the required number of affordable units, they receive incentives such as an unlimited density bonus and reduced parking requirements. According to a few examples of local projects that took advantage of this unlimited density bonus, developments were able to build more than four to eight times the number of units that would have been allowed under their original zoning. Looking at the incredible amount of density allowed at some of these sites around the city, Councilman Gary White questioned whether the density bonus was partially responsible for some of Charleston’s affordable housing woes.
“It seems to me that there’s a lot more driving the affordable housing issues here and some of it may be the density allowed at some of these sites is inflating the overall prices of dirt and therefore causing some of the problems with affordable housing,” White said.
While the perks of this zoning are apparent for those looking to build, members of the development community facing the possibility of higher requirements for workforce housing have made their worries clear to city leaders.
“We’re passionate about affordable housing, as I’m sure you all know from reading our newspaper, and we’d like to see more affordable housing. We’re just concerned that the way this is written will not accomplish that at all,” said Ron Owens, chief financial officer for the Post and Courier’s parent company, Evening Post Industries.
Joined by David Ingle, a senior broker with NAI Avant who handles the real estate needs of Evening Post Industries, Owens said the company currently owns approximately 11 acres in downtown Charleston, and he questioned what the new ordinance would mean for their development plans.
“The way the math works in this current ordinance with the change in years and the timing of the fee-in-lieu calculation, it would make the economics unobtainable so that no one could develop, therefore no new housing units, much less affordable housing under the way it’s currently contemplated,” Owens told the members of the Community Development Committee. “We would like to see a grocery store in our location. We were approached by grocery stores, and in conversation, one of the first things they ask was ‘How many units are you doing in your current project?’ If the ordinance were to stay as it is, then we would not be able to complement potential retail use.”
Owens, along with representatives from Greystar Real Estate Partners and CMB Property Co. Inc., asked that city leaders sit down with members of the development community to discuss how the proposed ordinance can be amended.
Geona Johnson with the city’s department of Housing and Community Development told committee members that approximately more than 2,000 units that have already been approved by the city and of those maybe 300 will be workforce or affordable housing. Discussing the proposed fee-in-lieu option, which gives developers the option to pay the difference between market rent and affordable rent for each workforce unit they choose not to build, Johnson provided an example of the revenue that such a fee would generate for the city’s workforce housing fund.
For just a single one-bedroom unit with a monthly rent of $1,350, the fee would be $127,500 over 25 years. Under the proposed ordinance, this money would be used by the city to create or improve workforce and affordable housing, including redeveloping existing housing stock, and purchasing land.
“As we look at the calculations, we want to be fair, but we also need to be mindful,” said Johnson. “If we’re asking ourselves to build somewhere else, it’s likely going to cost us to do that because we’re going to have to naturally bid it out to secure the development community’s participation, as we do with most of our developments.”