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Aligning Policy and Housing Outcomes

Inclusionary Zoning

Update Inclusionary Zoning Regulations

Case Study — Inclusionary Zoning, Newton, MA

In 2018, the City of Newton, Massachusetts began a
process to revise their Inclusionary Zoning policy. Housing
affordability was worsening, and the City was experiencing
an influx of large residential and mixed-use projects which
provided ample opportunities to increase the overall
number of affordable housing units.

The existing IZ policy was both confusing in its language
and intention and was not leveraging private development
effectively to produce affordable units. The City hired a
consultant to create a financial feasibility model which
could test different residential development scenarios
(both owner and renter) to better understand the potential
impacts of the changes the City and housing advocates
were calling for.

The results of the financial feasibility model showed the
City could indeed update the IZ policy to create stronger
linkages between the size of the project and affordable
housing requirements. For example, larger rental projects
were required to set aside a higher percentage of
affordable units. The new policy also created income tiers
based on HUD area median income (AMI) thresholds
which ranged from 50% of AMI to 110% of AMI. The City
also included options for developers to provide fewer units
but make them more deeply affordable to households at
30% of AMI.

Nashua Housing Study - 67

The City’s new IZ policy has different calculations
and requirements for ownership projects and rental
projects requiring different levels of affordability.
Affordable ownership units are offered at 80% and
110% of AMI while rental units can go as low as
30% of AMI.

There are also calculations for cash payments and
specific circumstances defining when the cash
payment option may be considered favorable.
Smaller projects between 7 and 9 units have the
option of cash payments, the City Council can grant
a Special Permit to allow cash payment, and in
instances where the percentage set aside
calculation results in a fraction of a unit less than
0.5. The cash payment from the development is
deposited into the Inclusionary Zoning Fund which
is then distributed equally to the Newton Housing
Authority and the City of Newton. These funds can
only be applied to affordable housing supporting
households at or below 80% of AMI.

Sources: Newton IZ Policy
Newton IZ Guidebook

Newton IZ Information

ASSOCIATES INC

Newton IZ Requirements for Rental Projects

Renial Projects: Number of Inclusionary Units Required

Tier Level 7-20 UNITS 21+ UNITS
Tier 1: 50%-80% AMI 15% 15%
Tier 2: 110% AMI 0% 2.5%
Total 15% 175%

Rental Projects: Number of Inclusionary Units Required

EFFECTIVE January 1, 2021

- 20 21-99 100+
Tier Level
UNITS UNITS UNITS
Tier 1: 50%-809% AMI 15% 15% 15%
Tier 2: 110% AMI 0% 2.5% 5%
Total 15% 17.5% 20%

Newton IZ Requirements for Ownership Projects

Ownership Projects: Number of Inclusionary Units Required

Tier Level 7-16 17-20 21+
UNITS UNITS UNITS
Tier 1: 80% AMI 15% 10% 10%
Tier 2: 110% AMI 0% 5% 7.5%
Total 15% 15% 17.5%

Ownership Projects: Number of Inclusionary Units Required

EFFECTIVE January 1, 2021

7416 | 1720 | 2499 | 100+
Tele UNITS | UNITS | UNITS | UNITS
Tier 1: 80% AMI 15% | 10% | 10% | 10%
Tier 2: 110% AMI o% | 5% | 75% | 10%
Total 15% | 15% | 175% | 20%

Aligning Policy and Housing Outcomes

Rental Registry

Phase in Rental Registry and Inspection Process

Issues/Opportunities Addressed:

Timeframe for Action: Rental Registry Process - Mid Term

The creation of a rental registry is an important step in
identifying rental units and holding property owners
accountable for violations to city ordinances and codes.
Without a robust rental registry, the City may lack the
necessary information to identify owners and tenants,
quantify the number of rental units, track property

turnover, and ensure compliance with all residential codes.

A rental registry is, generally, a low-cost way for a city to
track and regulate rental units. The component pieces of
establishing a rental registry are enacting the local
ordinance, defining the registration parameters, delegating
responsibility to administer the program, establishing a
registration fee which covers administrative costs, and
determining the type and severity of penalties for non-
compliance.

Enacting a local rental registry will require working with all
community stakeholders to gain the requisite buy-in
including property owners and tenant rights groups. Since
landlords would be most impacted by this ordinance;
collaboration and consultation on the part of the City is
critical. The City should design the property registration
ordinance in a way which benefits all parties involved and
ensures it not too onerous. A vote by the Board of
Aldermen would be needed to enact the ordinance.

Nashua Housing Study - 68

The rental registry could be designed as a yearly
process whereby landlords register their property at
the start of the City’s fiscal year. This would give
landlords a deadline to comply with city regulations
and allow the City to establish the administrative
procedures to process annual registrations. The
registration process should be designed to be
completed either online or via paper. An online portal
could be linked to a database, while paper-based
registration forms could be processed by City staff
and entered in the database. The City should request
basic information about the property owner,
tenant(s), property location, property status
(rented/vacant), and contract rent.

The responsibility of administering the rental registry
could be given to the Code Enforcement Department
as this department actively monitors real estate
activity across the city for code violations. Currently,
the City Code Enforcement staff is made up of three
officers and one manager who investigate code
violations and issue tickets. Based on conversations
with City staff, capacity in the Code Enforcement
Department may need to be increased to meet the
added demands of a rental registry.

ASSOCIATES INC

The City should ensure the rental registry fee covers the
costs of administering the program, these include hiring
of any additional staff or investment in a rental registry
web portal. To determine the requisite fee, the City
should quantify the annual cost of providing services
related to the rental registry and compare that to the
number of rental units to determine a flat annual fee.
The City could also vary the fee based on unit type, for
instance charge a higher fee for single-family units, while
charging a lower fee for multi-family units.

The failure to abide by the property registration rules
would result in a fine determined by the City. Some
municipalities levy high fees for non-compliance, Boston
for example levies a fine of $300 per month for each
unregistered unit. Punitive fees can help encourage
compliance with the ordinance. The net fees collected,
after accounting for administrative costs, from both the
rental registry program and from non-compliance could
be placed into a city directed housing fund which helps
lower-income landlords address housing deficiencies
and addressing code violations.

Aligning Policy and Housing Outcomes
Rental Unit Inspections

Phase in Rental Registry and Inspection Process

Issues/Opportunities Addressed:

Timeframe for Action: Inspection Process - Long Term

Over time, RKG recommends that the rental registry be
combined with a regular inspection requirement to
ensure all rental housing in Nashua is code compliant
and safe for residents. The RKG Team recommends
the City require inspections every 3 years, or every 10
years for units that retain the same tenant, whichever
is longer. The City will likely need additional code
enforcement staff and more comprehensive tracking
software to monitor compliance and progress on
rehabilitation projects to accomplish this. As identified
in the previous recommendation, the registration fee
is intended to cover these increased costs to the City.
Further, the City should ensure there are penalties for
landlords that fail to register for the program, are
repeat offenders to code compliance violations, and
fail to complete required repairs in a timely manner.
That said, the City will need to strategize about how to
administer initial violations under the program to
avoid potentially overwhelming both landlords and the
contractors that serve this market. RKG recommends
the City consider a longer grace period for a first
inspection (i.e. six months rather than a standard of
three months).

Nashua Housing Study - 69

In coordination with addressing the impact of
requiring rehabilitation efforts to gain code
compliance, the City could consider creating a stand-
alone repair program for code compliance for
landlords that can income-verify tenants. The City’s
new rental rehabilitation program could serve as a
vehicle for providing funding to landlords who cannot
afford to address code compliance violations on
their own. Creating and capitalizing the rehab
program most likely will increase compliance while
enabling landlords to retain lower rents despite the
repair costs. The City could add to the existing
funding with any remaining registry and inspection
fees.

Any financial assistance to landlords should require
a minimum commitment to affordability. The City
could create a sliding scale for how much a landlord
can receive based on the income level of the verified
tenant and location in the City. The City could
establish bonuses or offer forgivable loans (with a
minimum 5-year commitment) for serving lower
income households (i.e. under 50% AMI) or in
neighborhoods with greater housing condition
issues. Revenues from the rental registry could be
used to assist landlords with income verification.

ASSOCIATES INC

Concurrent with the proposed policy and program
changes to protect tenants, the City should directly
engage with landlords through a landlord roundtable to
discuss policy and program development and
implementation. Simply put, the City should be
proactively soliciting feedback from those directly
impacted by these new/revised approaches to better
understand and address challenges/issues that
currently exist/may arise due to new approaches to
addressing housing needs. Listening to the concerns
of landlord during the policy/program development
process can address potential impacts before
finalization and build buy-in through two-way
communication and coordination. The Landlord
Engagement Forum should include a diverse mix of
landlords (i.e. small and large landlords, racially
diverse, investors from different areas of the City,
student landlords...) to help identify market changes
that affect existing/proposed policies

Aligning Policy and Housing Outcomes

Registry and Inspections

Phase in Rental Registry and Inspection Process

Case Study — Rental Registry, Burlington, VT

The Code Enforcement Department has the responsibility
of maintaining an annual apartment registry of
approximately 10,000 rental dwelling units, billing and
collecting rental unit registration fees, inspecting rental
housing units, enforcing minimum housing standards,
issuing certificates of compliance to landlords, and
funding tenant and landlord advocacy services. The City
requires landlords to submit a rental registration
application annually.

Individual rental property owners must provide their name,
address, date of birth, phone number, email, and military
status (active or not). For properties owned by a
corporation, partnership, or LLC, these entities are required
to provide the official name, principal business address,
date of incorporation, phone number, email, and military
status of the corporation president and general partners.

To ensure more robust compliance with both property
registrations and code enforcement, the city has a
requirement that if the owners of a rental property are not
located within Chittenden County, they are required to
have a designated local property manager.

Nashua Housing Study - 70

The fee schedule for rental property owners is as
follows. New rental property owners must pay a
one-time $50.00 Transfer of Ownership Fee if the
property was previously registered as a rental and
will continue to be so. This is for transferring
records from the previous property owner to the
current property owner and should be included
when registering the property. Additionally, annual
rental registration fees are billed in February every
year and due by 01 April. The fee is $110.00 per
rental units, and $80.00 for properties which are
owner-occupied duplexes.

ASSOCIATES INC

Recommendations

RECOMMENDATIONS
INVEST IN NEW AND EXPANDED HOUSING PROGRAMS

RKG

Nashua Housing Study - 71

New and Expanded Housing Programs
Rehabilitation Programs

Expand Rental and Owner Rehab Programs

Issues/Opportunities Addressed:

Timeframe for Action: Short to Mid Term

The City of Nashua currently offers two separate
residential rehabilitation programs through the City's
CDBG Housing Program. The first is an owner-occupied
Housing Improvement Program (HIP) which provides 0%
interest loans to correct code, safety, health, or
accessibility issues. Examples of eligible activities include
roofs, electrical, plumbing, wheelchair ramps and more.
The loans are up to a maximum of $40,000 for the first
unit and $5,000 for each additional unit. Eligibility for the
program is restricted to owner-occupied properties, the
owner must be of low-moderate income (at or below 80%
of AMI), and the structure cannot contain more than four
units.

The City also began offering a rental rehab program to
assist landlords with correcting serious code, safety,
health, or accessibility issues. This program is targeted to
addressing critical structural needs such as roofs, heating,
and structural code deficiencies. The loans are up to a
maximum of $20,000 for the first unit and $5,000 for each
additional unit. Eligibility for the program is restricted to
owners who DO NOT reside at the property, tenants must
be low-moderate income, and the structure cannot contain
more than 8 units. Property owners must contribute 10%
of the total contractual cost as well.

Nashua Housing Study - 72

Given the estimated rehabilitation needs of property
just in the Downtown area alone (estimated at $12
million), these two rehabilitation programs are of
critical importance to improving and maintaining
higher quality affordable housing across the City.
Currently the City is funding between 4 and 13 units
per year with average loan amounts between $8,500
and $15,900. The program is funded through the City’s
annual allocation of federal CDBG funds which is good
use of those funds, but the flexibility of those funds
can create competing priorities potentially lowering the
amounts available for rehab. CDBG funds, along with
many federal funding sources, have been shrinking
leaving entitlement communities with less money.
Relying on these funds alone may leave the City with
fewer dollars for not only the rehab programs, but
other City programs and priorities too.

Keeping this programs in place and making them
financially sustainable over time should be a priority
for the City. One way to do that is to find ways to either
leverage other funding sources or find ways to require
payment of the loan over time to build a revolving
source of capital.

ASSOCIATES INC

The City should convert the current deferred home repair
loan programs into a 0% amortizing loan program, which
will allow the City to leverage additional resources before
properties turn over — expanding the pool of capital that can
support further home repairs. Other programs that have
converted from home repair grants or deferred loans to
repayable loans have proven to have similar demand levels
and higher productivity while still serving very-low, low, and
moderate-income level households. The City may also
consider charging a small interest rate (1%-2%) for
moderate income households and 0% for low to extremely
low-income households.

The City could also consider using the Affordable Housing
Trust as a leveraged funding source to pair with CDBG,
Bond Funds, philanthropic grants, and private capital to
deploy more resources in a consistent manner for home
repair programs. Coupling the rehab programs with
owner/investor education and conversations around the
long-term affordability of units could be helpful in early
identification of property sales or conversions of affordable
units to market rate. Early identification of these issues
could help the City approach other funders such as local
banks looking to use Community Reinvestment Act (CRA)
funds to keep units affordable over time.

Board of Aldermen Page 10
December 13, 2016

Alderman Clemons
| am not going to support that and the reason is that we live in a time when we should be respectful of other

peoples’ wishes as far as their gender identity goes and to me this is an attempt to put an identity on a
particular individual and | am not going to support it.

Alderman Moriarty

Roll call.

A viva voce roll call was taken which resulted as follows:

Yea: Alderman Deane, Alderman Cookson, Alderman Dowd, 12
Alderman Caron, Alderman Siegel, Alderman Schoneman,
Alderwoman Melizzi-Golja, Alderman McGuinness, Alderman LeBrun,
Alderman Moriarty, Alderman O’Brien, Alderman McCarthy

Nay: Alderman Wilshire, Alderman Clemons, Alderman Lopez 3

MOTION CARRIED

MOTION BY ALDERWOMAN MELIZZI-GOLJA FOR FINAL PASSAGE OF O-16-017 AS FURTHER
AMENDED

Alderman Cookson

| noticed that one of the changes which impacts the chairman of the Infrastructure Committee is that the
chairman of Infrastructure used to be vice Chair and is now just a...

President McCarthy

There was no vice chair and that’s one of the things that the ordinance addresses.

Alderman Cookson

So the chairman of the Budget Review Committee is now serving as vice chair of this committee.
President McCarthy

Correct.

Alderman Cookson

| am wondering what the difference is. Why Budget versus Infrastructure? What was your decision making
process in determining who was the vice chair of the committee?

President McCarthy
| didn’t put the amendment in, Alderwoman Melizzi-Golja did.
Alderman Cookson

| thought these were your suggestions.

R-16-013
Endorser: Alderman-at-Large Daniel T. Moriarty
AUTHORIZING PENNICHUCK CORPORATION AND PENNICHUCK EAST UTILITY, INC.
TO ENTER INTO A LONG TERM LOAN WITH COBANK

NEW BUSINESS — ORDINANCES

O-16-004
Endorser: Alderman Benjamin Clemons
EXTENDING HOURS OF SALE OF ALCOHOLIC BEVERAGES BY ON-PREMISES LICENSEES

Q-16-005
Endorser: Alderman David Schoneman
REMOVING THREE PARKING SPACES ON LOWELL STREET FROM THE PERMITTED
OVERNIGHT ON-STREET PARKING PROGRAM

PERIOD FOR GENERAL PUBLIC COMMENT

REMARKS BY THE MEMBERS OF THE BOARD OF ALDERMEN
Committee announcements:

ADJOURNMENT

New and Expanded Housing Programs
First Time Homebuyer Program

ASSOCIATES INC

Reintroduce First Time Homebuyer Program

Issues/Opportunities Addressed:

Timeframe for Action: Short Term

Downpayment and closing cost assistance helps low- and moderate-income
families overcome one of the most common barriers to homeownership—
accumulating sufficient savings to make a downpayment and pay for closing
costs on a mortgage.

Assistance can be offered in a variety of forms, including as a grant, a no- or
low-interest amortizing loan or a deferred loan in which repayment is not due
until the resale of the home. The assistance is often provided by a local
housing agency, a nonprofit organization or a state or local housing finance
agency, sometimes through a participating private lender. Program details
differ across jurisdictions, but in general borrowers must fall within income
and home purchase price limits and must comply with other eligibility
requirements, including being a first-time homebuyer, using the home as a
primary residence, and completing a homebuyer education course and/or
participating in housing counseling.

The City of Nashua did offer a first time homebuyer program using federal
HOME dollars which creates some challenges in housing markets with rapidly
rising purchase prices. HOME funds are limited to properties at or below 95%
of the median area purchase price and there must be resale provisions
established which safeguard the property's continued affordability or
recapture all or part of the HOME subsidy investment. This tends to favor a
forgivable loan structure often treated as a second mortgage which can
require partnership with a bank.

Nashua Housing Study - 73

RKG recommends the City of Nashua revisit the feasibility of offering first time
homebuyer assistance in the form of downpayment assistance and closing cost
assistance. These two barriers to homeownership are becoming more acute as
home prices continue to escalate year over year making it more difficult for
households to purchase homes for the first time and have some ability to move
from rental to ownership housing.

The City will need to evaluate the type of program they would like to offer and the
most effective way to fund that program. There are several approaches to
structuring an assistance program, which include:

A lump sum grant which avoids the longer-term administrative costs of a loan
and tracking and processing repayment. These are most effective for small
assistance amounts of less than $5,000.

A forgivable loan which requires the homeowner to meet milestones such as
living in the home for a period of time before the loan is partially or completely
forgiven.

A low- or no-interest rate loan which could require repayment over a certain
period or at sale or refinance of the home. Establishing some level of repayment
could also help recapitalize the loan fund over time and serve more households.
A shared-appreciation loan which is typically used for high downpayment
assistance amounts ($15,000-$25,000) where when the home is sold the City
would have the loan repaid in full plus a percentage share of the home
appreciation.

Recommendations

RECOMMENDATIONS
EXPANDING PARNTERSHIPS

RKG

Nashua Housing Study - 74