City Council Work Session - Draft Zoning Ordinance   11/13/2023

Yes, we are.

It's on my birthday, I'll move.

Yeah, I was going to give him two, in fact.

Sorry, James.

No, we're all good.

We haven't actually started yet.

Okay.

I couldn't hear anything, so I was trying to get on there.

Sorry about that.

So, James, I'll talk about this, but there were just little Scriveners there.

Just a couple of sections of text got dropped.

So, this is that, and that's just

Yeah, he's coming over from council chambers.

In the old days, Scriveners used to work with lawyers as sort of what we would now think of as secretaries.

They would get paid by the word.

Okay, well, so it's now time for us to convene in our six o'clock work session.

All right.

Good evening, Mayor Stoke, members of council.

My name is James Freese.

I'm the director of neighborhood development services.

I want to start with a couple of housekeeping measures just to note.

First off, I passed around a sheet right here at the beginning of the meeting that has basically a scrivener's error from the planning commission's

resolution.

The lines that are identified as six and seven were included in one version of that resolution but not in another.

The version of the resolution that was then published and used to form the draft zoning ordinance did not include these lines so it's our intention to include those lines in the draft ordinance that's online but we wanted to highlight them here for you this evening so that you can

and also because when we get to the HAP recommendations, they reference one of these lines.

So tonight we are talking about the Affordable Dwelling Unit Ordinance and all things related there too.

There was a memo in your packets.

I hope everyone had an opportunity to read.

I want to take a moment to introduce the staff that we have available to you this evening to help answer any questions that you may have.

First I'm going to move back to the table.

We have Antoine Williams.

and Madeline Metzler, who are with the Office of Community Solutions.

Madeline is new with the city.

I would say for the last four weeks I've had a sense that this office is really coming Madeline, we try to keep things very light here We know that this is important business, but we do it with a smile Online we have Kyle Talente from RKG Associates And then Senjan Mathon is here representing the Housing Advisory Committee

So to start us off, I'm not going to read this memo to you.

I trust everybody had a chance to take a look at it.

I'll note I provided some background on the idea of inclusionary housing generally.

Just to hopefully not exacerbate confusion, in Virginia inclusionary zoning is referred to as affordable dwelling unit ordinances, so throughout this we refer to this as the ADU ordinance, but think of that as synonymous with inclusionary zoning or inclusionary housing.

I think one of the important notes I want to make here about this is it's considered widely a best practice that if you're seeking to adopt an inclusionary zoning ordinance that you do research into your local market for development, cost of development and those types of things to understand what can your local market bear in terms of an inclusionary zoning requirement.

These requirements represent a substantial cost within a development project and it's important to kind of understand where that tipping point is.

That was the purpose of the study that we had done with RKG Associates and Kyle is here to answer any questions you guys may have on that as we go through that process.

Further, the manual that we have recommends that that study be updated on a minimum of a two-year basis so that we stay in line with the marketplace.

So as a reminder, our AAD rules as proposed require that projects of 10 units or more outside of the residential districts, those are what we refer to as the RA, B, and RC, must provide 10% of the units as affordable to households earning up to 60% of AMI.

and further for rental projects that those be affordable in perpetuity which for purposes of our ordinance is 99 years and for ownership for the first buyer.

Do you mean this whole question to the end?

I'm just going to wrap this up and then we're going to dive into the policy section but I'll pause there and we'll do questions.

So a couple of the key provisions that we're going to be talking about this evening.

One are these equivalency and concurrency requirements.

And then on the equivalency, that's really so that the affordable units are from exterior for the purposes of kind of viewing them from outside, relatively indistinguishable from the market rate units.

We don't want to attach a sigma or recognizable aspect to those units that are the affordable units within a project.

And this goes back to the overall, one of the overall purposes of inclusionary zoning, which is to encourage economically diverse mixed income

communities.

You want that to be a community.

You don't want it to be kind of those people versus everybody else.

And then there's the bonus provisions.

There's two types of bonus provisions within this ordinance.

One is for the majority of the district within the city where the flat requirement is 10% of units and 60% of AMI.

For an additional two stories, that can be dropped down to 50% of AMI.

Then there's the bonus units within the residential districts.

Those are the ones we're familiar with in the RA district that you can get up to six units on a lot if 100% of the bonus units are affordable.

And then in the RB and RC, it allows for up to 12 units, again, with 100% affordability on those bonus units.

So that's our ordinance as it is presented in the draft.

Of course, there's more details than that.

So the inclusionary zoning requirement is the 10%.

If you build above 10 units, you've got to include 10 units or more at 10%.

And I understand the bonus piece for the residential, I guess I had forgotten the bonus piece for

You said it's two stories?

All at 50% of AMI.

Those are just the bonus units, not the...

Yeah, yeah, okay.

Okay.

I guess we'll talk more about the financial piece as far as whether those will actually get built.

I guess that's sort of a $60 million question, but some amount of money, dollar question.

One other piece that I had was, so the

The 99 years guaranteed affordability, that's like the best standard that we know of to follow?

I mean, it seemed like if we did 30 or 50 years, we might actually get more housing out of it.

So this might be a great question for me to toss over to Kyle.

So Kyle, I'll give you a second to get ready to answer that question.

But what I do know from kind of looking at this is that, and it's in that report that I shared, their analysis showed that about 30 percent of inclusionary zoning ordinances adopted nationwide go for the in perpetuity.

And the idea is to not always be chasing additional units.

Sure.

I think you actually I think you already answered your question is once you once you go beyond the traditional financing term and hold period for an owner, then it really it whether it's 30 years, 50 years, 99 years from a financial perspective doesn't really matter as you're trying to model it out.

So, to James's point, is the reason why many communities, at least many of the communities that we work with, go for as long as they can, and legally I believe in Virginia 99 years is the most you can do, is to try and preserve affordability.

In projects like, for example, housing tax credits, where it's a minimum 15 years after the 15 year window expires, then you're trying to negotiate to maintain those units as affordable

And frankly, it costs the community more in terms of dollars to get another commitment of time.

Thank you.

And then related to that is the homeownership piece of things.

And I know that Hack has done some work about what that would look like.

And I guess the concern people have is that the first family demonstrates their need for affordable housing, gets sort of a sweetheart deal that they can then sell on, I mean,

So there's probably a time to be talking about this later, but I'll hand this around as well, which is the copy of the hack comments that were finalized today as well.

You saw a draft earlier, and it's largely the same with a couple of nuanced changes.

We can't help you anymore.

You're done.

Oh man.

So admittedly there is the commentary that's in the

The comments you got from staff around that are, can you hear me all right through the mic?

The comments are somewhat in tension with the HACC's original recommendation.

And so in an attempt to sort of reconcile, we'll hopefully try to find a middle ground between what the staff recommendation is and the staff's goal.

we provided an updated some updated language and so if you look on the last page page 3 under change 422C1A subsection A subsection 3

I'll just read it out loud just to make it simple to hopefully answer the questions.

But for sale of affordable dwelling units must be sold to a qualifying purchaser who earns up to 80% of the area median income.

And that 80% is a change from the Planning Commission's 60%.

I can explain why if necessary.

So, if I may, I'll come back to that in one moment.

Back to the 99 year, and originally the Planning Commission language

had 99-year flat out for both rental and home ownership.

In particular, we know that there are multiplicity of home ownership methodologies.

One of those is the community land trust.

And in that context, 99-year permanent affordability works just fine.

But we also know there are other types of home ownership, like the habitat model.

If it had stayed as the Planning Commission language was originally written, Habitat would no longer be able to build in the city and do its Habitat homes by the way that they do things.

So what we're trying to do is to try to thread the needle to allow for a multiplicity of homeownership options.

Now the 99 year, so we're including the 99 year piece and the first right refusal.

One thing in particular that we chose to remove is that on the first resale, so let's say for example, somebody buys a subsidized home, whether through Habitat or some other mechanism.

When they decide to sell, if and when they decide to sell, the city would have a first right refusal or non-profit.

If at that time the city or the non-profit chose not to exercise that first right refusal for whatever reason, didn't have the funding, didn't decide it was the right choice, it would sell then at market value to whoever purchased it.

When that person, if and when they sell, it would trigger their first right refusal again.

So it would give a second bite of the apple in case the city or the non-profit decided they wanted to take an opportunity there.

The fundamental distinction is that the reasons that there are different flavors or styles of homeownership is around the balance point between prioritizing wealth creation for the individual versus wealth preservation for the community.

and Community Land Trust is on the side of the community benefit with some shared benefit with the homeowner.

The Habitat model is more on the benefit to the individual homeowner and a little bit less on the community benefit.

So if I may, I have a couple questions.

So the concern that staff is expressing is just about the long-term affordability of the ownership model.

But in what I'm hearing, there isn't any long-term affordability in the ownership.

Correct, so in the case of a community land trust, there would be an additional layer of protection around affordability because of the land trust model.

Because the land trust would continue to own the land, the homeowner would own the property, the improvements upon the land,

When there's a land trust involved.

and you stated that Habitat would not be able to use their model in the city where this ordinance passed.

So I don't want to speak directly on behalf of Habitat since that's not my organization.

Nonetheless, Dan has said essentially thus, including at the meeting this morning,

Their model privileges wealth creation for the individual.

And they have their own right of first refusal process that they have with any home buyer.

They have a 40 year baked in, whether they're in the city or anywhere else, they have a 40 year baked in first right of refusal.

But they would still buy it at market rates.

Effectively.

They would find, they would resubsidize it in order to be able to resell it at an affordable rate to some other future homeowner.

Correct.

So when Habitat goes and buys a property on the second flip, let's say, they can still, in virtue of their model, buy down the amount as they work with another person, another buyer, to get into the house.

So this ordinance only applies to the units that are required as part of an affordable dwelling unit project, a project that has affordable dwelling units in it under this ordinance.

The exception I can foresee as a possibility to that is that in certain circumstances Habitat has worked with private developers and Habitat homes are effectively the private developers mandated equipment to meet the affordable dwelling unit requirements.

So they become in a departure.

They essentially get the land at a reduced rate where they get some additional subsidy from the private developer.

And I assume it would still be the same as Habitat's existing model with the right of first refusal were after

Can we just restate that question?

The way that they're currently structured, that's correct.

But they would be fine with having the city having a 99-year first right of refusal on that property,

which they themselves may take advantage of at some point in the future as a proxy for the city or the city itself.

Really this is emulating what Habitat does already.

So it was my understanding that with these type of purchases,

and getting loans for it that some of the stumbling blocks and maybe PHA and others have overcome this was the bank said, you know, they're really concerned about the ownership of the land and writing up the deeds or, you know, things like that.

So, if I'm understanding the question properly, there are, you know, in the last year I've had probably three banks reach out to us from a past, from somebody who Piedmont Housing has worked with historically with a down payment assistance.

They've come up for sale.

They have a deed restriction for a first right refusal on there.

They come to us.

We evaluate, does it make sense for us to consider exercising that first right?

And in this current market, it hasn't recently because the cost is just too high.

But at least we had that glimpse at it before it went to the market.

And we had an opportunity.

And so that would be essentially the process of exercising it.

So when the attorney came to us or the attorney

The attorney came to us, we essentially said, no, we're not going to exercise it, here's our written signature on that, and they moved on.

So I'm thinking about some things that maybe now the city that we own, so I'm thinking about the properties that we purchased from Dogwood, I guess we did in partnership with the Housing Authority.

whether by oversight or whatever chose to stick with 50%.

80% is the consistent national measure for home ownership affordability that it's up to families who make up to 80% of the area median income.

and the reason that the HACC is continuing to reaffirm that 80% is the right number is because there are a number of state and federal housing subsidies that we would potentially be at risk of not having access to because we'd have a different AMI threshold.

So we want to keep the door open as much as possible.

And in an informal conversation I had with Mr. John Sayles earlier today, he was not able to attend the HACC meeting directly, but he called me to just reaffirm he wanted to see it also at 8% because he has staff that if the threshold were 60%, he would have staff who would be above that income level but fit in that 60% to 8% band and wants to figure out how to help them to be homeowners in the future as well.

So this is specifically about homeownership?

This is specifically homeownership, yeah, thank you for asking that question because Ms.

Joy had a similar question.

And I know the answer to this that was discussed, but I think it's worth at least referencing tonight.

And one of the things brought up is

I don't want to again speak on behalf of Dan here, but I will do my best, which is anytime there is a subjective opportunity for interpretation around flexibility, not knowing who that person is going to be at that given time just bears risk around whether it's going to be achievable or not in the future.

So having it hard-coded makes the most sense.

and frankly not having to then utilize someone's time to get exceptions every time.

It's already hard-coded.

I'm not tracking.

What was it that you were asking, Michael?

I know one of the arguments is that what was included about the zoning administrator having flexibility is already a policy answer to the problem.

There's not an additional need to hard code it in because that's an avenue.

But I know at the meetings I think the lack of trust is a barrier there.

And I don't want to minimize that.

I mean, there's a long history there.

Lack of trust between whom?

The inability to predict what an interpretation long run by whoever the housing administrator is 10, 20, 30, 50 years in the future.

Currently or moving forward or past or all of the above.

All of the above.

Okay.

I don't see having a hard-coded rumor as a problem.

Yeah.

I think one of the purposes of this process is to eliminate the

For what it's worth, most of the points that were outlined in James' text are things that we had already been discussed within the hack.

This is one where we haven't had the chance to really dig in, so you're recognizing

some, not friction, but just like we haven't had the chance to coordinate our aligned language.

So what you're seeing is our proposed language out of the hack without having had a chance, frankly, to run it by James before this meeting.

So this is contravening what the Planning Commission was putting forward in terms of the... This is a change.

So staff's concern from the beginning has been that

understand what is our policy direction?

What is our objective?

And there is a, you know, we're faced with a decision point here with regards to is our primary objective with this portion of the ordinance with regard to ownership units creating a wealth building opportunity or is our primary objective to create a long-term sustained ownership

affordable ownership opportunity.

And those are very different options, and either one is perfectly legitimate.

So people with the second, can I counterpoint that a little bit, James?

Sure.

Which is our position actually is not either or, it's both and.

So, yes and no.

So, at the beginning, when a house gets subsidized and put into a model, whether that's the habitat or the community land trust, at that point you have a bifurcation, you have a split.

So, if you're doing a community land trust home, it's already made the decision that the community land trust structure is going to prioritize long-term preservation of a home.

and so in some ways that model that model already works with the previous the staff language and the planning commission language but if instead we also want to keep the door open for the habitat model which then 20 years or some other some other entity that does an affordable homeownership unit 20 years from now it would be a decision point and when somebody decides to sell it would be a decision point for the city or its proxy

I was just gonna, I mean, I'm generally,

I'm generally not a fan of trying to predict what circumstances are going to be 20 or 30 or 40 years down the road and insisting now that everybody is going to have to comply with that.

I want to make sure that we are upholding the values behind the decision.

It's really hard to make a decision now that we can be sure is going to be the right decision some years down the road.

So I think maintaining that flexibility

consistent with the underlying values is a way to do it.

So I think that at least for the foreseeable future, I see, you know, the two passive ownership, you know, primary path is, you know, thinking about the homes that we saw on prospect through the community land trust.

through that's part of PHA.

I certainly see that as someone who, you know, I think that was a problem and he's like, I don't have the capacity to fix these up.

I want to,

you know give it to the organization that will be able to have some community good and I think y'all did a great job with that you know making them very affordable even some people that have been pushed out or within the last few years has given them an opportunity to come back and purchase but I also see that the habitat model is a you know for the next 20 or 30 years they're going to be down in Southwood but they still get

plots here and there in the city.

And I see that as a model too.

So whatever, because I'm getting confused now, whatever one of those models allows us to do to work with both of those and or in both.

You can confirm that the land trust model is still an option under this proposal?

Yes.

Yeah, and then there's a requirement that at the point of sale there has to be a right of first refusal at market rate.

Does that preclude the land trust model?

I was a little concerned about the market rate language in particular being in the ordinance because it does preclude, also precludes the option of somebody saying, I actually want to provide this unit back to my nonprofit benefactor in the hopes that somebody in the future will be able to take advantage of this.

So we're taking that option away by putting that language in the ordinance.

Are we not?

So, to jazz.

So, yeah, it doesn't make more sense in some respects to have market rate than you manually guess.

But the idea here is to convey the arm's length regular transfer and the agreed upon price between buyer and seller and whatever obligations they have.

But you don't want to put language like that in an ordinance.

And so that's what the market rate means.

That's the advance.

But I know that putting market rate in the ordinance itself creates, now I have to define market rate, which will take another 40 pages to get through all of it.

Yeah, I get that.

So, yeah, that might belong better in the manual.

Not that I understood everything that Phil just said.

But to your point, James, that nuance had not occurred to me the way that it's currently phrased.

Yeah, so the main thing we're hoping for councils to get just a sense of your direction

I'm supportive of what you've described here, and I think that maybe some more

You could just list them as options.

You know, one possibility is the land bank model.

One is just, is it fee simple?

Is that the term?

The whole thing goes?

Yeah, I just want to be 100% sure that there's nothing that inadvertently precludes or disincentives the land trust model.

That's something I definitely would not support.

I do think as a policy direction, I do think we should be moving towards

for 99 years and a land trust model, particularly because that is a newer, less utilized model for us here in Charlottesville.

I know Habitat's national organization, I think in their strategic plan, calls on affiliates to either create or partner with the land trust.

They're very first Habitat homes ever in Georgia use the land trust model.

So I don't think they're even necessarily against each other, although I do know

Certainly a lot of affiliates aren't exclusively using that, and I think there's room for both.

So, Mr. Freese, when they're discussing the land trust model prior to the discussion, you pointed out two avenues, one with regard to

Home Ownership as it relates to building wealth.

Yes.

Well, the land trust model creates sustained affordable ownership options.

Okay.

The studies have also, and I think you would concur on this, the studies have also shown there is a wealth building opportunity with the land trust model.

Okay.

And I think it's like a philosophical question of did 10 families get to build 80%

Wealth of the value of the home, whereas one family get 100% of it.

Those are arbitrary, but philosophically, kind of what actually has the biggest impact.

I understand it leads you to the land trust model, but so we're looking at ownership requiring 99 years or not.

I think the best policy would be 99 years.

I understand where we're coming from and

I think I'm outvoted there and that's fine, so I can live with this language.

All right, is that where we land?

Redsville, 99 years, ownership at first buyer.

We're saying not first buyer, but in our language, we exclude the first buyer.

Okay, got it.

Yeah.

Got it.

Yeah.

Great.

Where every, I'm sorry, the first time it comes in the market, nonprofits or the city have first order of refusal

The tax recommendation is that it's in purpose.

I support that.

During that 99-year period.

Correct.

Correct.

but at the end of 99 years you either have to start over or it's gone.

I'm not going to worry about that.

I will be working on that.

Okay.

Okay.

Everyone needs a job so now you have a job.

All right, so the next policy issue we raised, and each of these kind of track with the recommended changes from the Planning Commission, just to understand where these are coming from.

The next one is about flexibility and design standards and concurrency.

And again, the notion there is generally we want these units to be indistinguishable, generally speaking, from the market rate units within a project.

But the Housing Advisory Committee and others have pointed out there may be instances where we want to have some flexibility in there, so we built in some flexibility within the ordinance.

We just wanted to check in with council and make sure you all are comfortable with that flexibility as provided for.

So the flexibility really gets down to appliances and finishes.

Appliances and Finishes, and then this language here that is provided to you, which is why it was important that we found the error and the emission.

And if I may,

as a request from the HACC, specifically.

And the HACC's recommendation is based on practitioner experience, particularly for single family developments, again, going back to the example of Habitat, say, being a partner with a market rate developer

and if they're doing 20% of the units of the total development as affordable concurrency between what the habitat units are and the market rate units, if you hit a 20%

If you're doing that concurrency, you start to break their funding model effectively because part of what makes those 20% units of those units work from Habitat's perspective is that they're able to sell the lots at a higher value because they know they're going to be building higher end homes that allows them to cross subsidize into the Habitat homes.

Now, there still needs to be sort of a, the proposal includes a minimum threshold of a percentage of units.

You know, we don't want a situation where, you know, if you do one unit, one affordable unit, you then gain the lack of the break-in contingency.

But that was one example.

And then the other example comes from the LIHTC sector.

Current, the previous language had said that the units had to be scattered within a development, if you're doing, let's say, rental.

LIHTC, I can't do that.

Virginia Housing, I have to have a separate building structure effect.

I can't finance it if they're integrated into market rates.

So if, for example, on the Cherry Street development, Cherry Avenue development, if instead of it being all LIHTC, if instead we were going to do, we discussed the idea of doing half market rates and half affordable, if we had done that and the ordinance were in place as had previously been written,

I couldn't build it.

Only when we have separate buildings can I finance it through Virginia Housing.

That's not true in every state.

Some housing finance agencies approach that differently, but the way Virginia Housing does it, I have no choice.

So wanting to prevent this inadvertently, that language inadvertently getting in the way of good development.

So, yeah, I will be supportive of this, but I, you know, because of some issues that we're dealing with now, I'm real leery of the using different appliances and things like that.

And the distinction, I totally hear you.

I think there's, the language in the manual, correct me if I'm wrong, still mandates effectively, even if there is differences in appliances, still new, still high quality, still meeting the same basic benchmarks.

Like if they're Energy Star on one, they have to be Energy Star on the other.

The same general sizes, what the break allows for is that if you're going to put in, you know, a $5,000 Viking range in a market rate apartment, you don't necessarily want to have subsidy dollars going to subsidize a $5,000 range in the affordable department.

In the apartment, ideally what you want is a high quality, solid appliance there with meeting minimum standards, but not

And so I agree with all that.

That's all true.

What I'll add, though, from practice, from experience, is that outside of the developers who are putting very expensive appliances into their units, the majority of developers are going to do all of their units indistinguishable because, A, it's easier.

I don't have to do specifications for certain units.

But second, what they don't

When you reach a point where a household within an affordable unit, their income rises to a point where they might have to leave the unit, it's easier and better for everyone if they simply can say, all right, that's now a market rate unit and that household can stay in that unit and they can simply redesignate another unit.

You can't do that if you've done dramatically different appliances and finishes.

Yeah, because if you're going to buy a thousand refrigerators, it's going to cost you less if all of them are GE or whatever it is you're purchasing.

But I do feel that there are things that are comparable on either end of the spectrum, but I think that people don't look at that.

They look at the name brand.

They are not looking at, well, if I get this range,

versus that range.

They do the same thing.

They have the same energy efficiency, yadda, yadda, yadda, but this is a name brand and this is something I'm not familiar with.

So let's just say like in a theoretical exam, I understand that argument, but in terms of how it plays out in practice, let's say there's

Development Bill, and then all the units that had argued comparable appliances and they've all conked out within five years.

What, if anything, can the city do?

I see, gotcha.

Well, so we do have ongoing monitoring of every unit, and that's what Antoine and Madeline are both here to answer questions on as well, but each, I believe annually, they're required to recertify their units, and part of that, I don't know, I'll let Antoine speak, I don't know if he's going to inspect every unit, but there's at least a spot and check inspection component to that.

I will say that there will be some level of inspection of an annual basis on each appliance in terms of its performance and consistent with what was produced in terms of marketed to the tenant, right?

Say if there's a tenant changeover or if the tenant decides to renew that

They're essentially getting the same product that was sold to them.

It's not a bait and switch.

So my concern is because, you know, it's like if you can head off problems,

We're not, the monitoring is just, you know, a process if we can avoid them from the beginning that, you know, when they installed, they even installed so that the maintenance of them is more difficult than other units and things like that.

So I think that, I understand that everyone doesn't have to have a Viking and Sub-Zero, that you can have good

Appliances, you can have good appliances and don't have to pay the high cost for it, but I'm also talking about the other things, but we're just, yeah.

So,

Hit it off for the pass.

So, to be clear, these are appliances and finishes.

We're not talking about the difference between mechanical, electrical, plumbing, and EP systems, or anything that would be considered.

So this is, in other words, you might want to just put FF and E.

finishes furniture and equipment is what this would fall into.

Yes.

As distinct from any sort of MEP system that's built into the structure itself.

And maybe that will help your concerns.

Does that make sense, James?

Absolutely, yeah.

Because what we don't want to have happen is have the vice ministers getting at units that

They say that the HVC works the same and everything.

You can go in and control the thermostat, but they're radically different systems.

You know, one's cheaper, one's got a 10-year warranty, one's got a 50-year warranty.

Well, you wouldn't get that on a warranty.

Well, you never know.

Three-year versus 20, but what you all are talking about specifically is FF&E.

Right, and it's not, you know, it's not so much the name brand, but also...

You did good.

Thank you.

I guess the first question I had about this is how does

How does it work if, let's say you've got a batch of affordable units there and just through ordinary wear and pair, a couple of the affordable units, the dishwasher breaks?

but the model that everybody else has got no longer exists.

I assume that's a point where you as, or somebody as an administrator needs to say, this is roughly equivalent, this is fine.

I would hope that it would only be rational, I would think.

The other question, and you had mentioned concurrency, and if we're looking at this language, concurrency doesn't appear there.

I remember the discussion from the Planning Commission meeting.

Yep, and I do as well.

I think you and I were at the same meeting.

Yeah.

The issue of concurrency that was raised with regard to the habitat model, again, was actually for the bonuses in the residential districts, because that's where we would anticipate the habitat model coming into play.

We don't anticipate

that in a larger project and in those in the ordinance that's where the provision on concurrency shows up.

So when a project demonstrates the affordability goals of the comprehensive plan and the affordable housing plan and the intent of this section are meant, the administrator may accept modifications to the equivalency of units and concurrency requirements in 422c standards.

Okay.

All right.

Yeah, I had gone through the list of however many changes there were in my

that I had as a broad matter, the concurrency issue comes up, it seems here, as I've tried to make sure that I understand how the bonus units for affordable units in our ARB and IRC are going to work.

What Sunshine was saying is that apparently you kind of have to be able to say this building would be the affordable building

affordable building underwritten by certain funding mechanisms.

This gets back to, I mean, basically one of the reasons I wanted to have you here was to have you explain how it is that we can get affordable units built in RA, RV, RC.

What's going to have to happen for those to work?

because as far as I can tell, if it takes nine market rate units to subsidize one affordable unit, there's no way three market rate units are going to subsidize three affordable units.

So how does that happen?

Correct me if I'm wrong.

Well, I guess my question is, even though we have to address that question,

Well, I was thinking about it primarily in terms of concurrency, because one of the proposals was, well, okay, you could build the market rate units on one piece of the land, and then you would have the affordable units on another piece of the land, and they might be built separately.

And that was originally, I thought,

what we were talking about.

More recent drafts that we talk about

Blah Blah, maybe that's now possible, but at some point, whether it's this moment, if you've got other things to rather deal with, or if it's half an hour from now, I'd like to understand how it is that it's reasonable to think that we're going to be able to get three affordable units, three market rate units on the same

Anyway, that's it.

Either one.

Let's say hypothetically that I've got my RA lot and I want to build three market rate units and I'm going to already

Before I take my house and divide it up, and then I want to build, I say, you know, it would be a really cool thing if I could build some affordable units in the back.

And at least I remember one conversation I had with you and Dan where you were suggesting a mechanism that I frankly didn't entirely understand, where that could be sort of some sort of ground lease to a non-profit or something like that.

But that would violate the concurrency rules unless we had the freedom in the concurrency rules to waive them.

And it would also, at one point, one of the requirements was going to be that you couldn't have a separate bill

as I understand it to where we can have those in separate buildings and they would at some level be identifiable as these are the market rate units and these are the affordable units simply because they are in different buildings even if they've got the same paint and whatever all else.

But would that be equitable if the market rate units were in one location, even if they're on the same piece of land and the affordable units are in another building?

Well, to be clear, however, in the case of development on our lots, you know, our scale lots, generally speaking, LIHTC is not going to be the mechanism to develop affordable housing on those lots.

Generally speaking, you can do what's called a scattered site development, so it is possible.

and there is precedent in other places outside of Virginia.

There's not really precedent in Virginia for that to be the case.

Again, that doesn't mean it couldn't happen, but it's rare and primarily because LIHTC has a great deal of transactional costs that it's more effective to distribute those costs over a larger number of units than just, you know, three, six, whatever the number is.

Fundamentally, the viability of developing affordable units on our lots is going to be driven by additional necessary subsidy.

We know fundamentally, as you pointed out, that there is a, you know, and as RKG has highlighted, nine units of market rate to subsidize one affordable unit without

Additional Subsidy is kind of the tipping point.

So at the scale of a single R lot, generally speaking, you're going to go from three to four to six to whatever it is on like an RA or RNA, whatever it might be, is going to require additional subsidy.

And there are two ways to look at it.

One, but the most likely way, is a partnership with

of Piedmont Housing, Habitat, or some other nonprofit provider, either through a land lease like we discussed previously, where essentially the back portion of the lot might be leased to the nonprofit for a fee so that the homeowner themselves does get some additional revenue, but then that becomes a low-cost land entry point for a nonprofit

to then leverage state and federal resources to deploy and help subsidize and bring those costs down either in a renter or in a home ownership context.

There are state housing dollars that through the Virginia Housing Trust Fund, through home dollars where at that scale of say three or four or five units works.

Like that's a model that gets used regularly in tapping into those resources at the state level.

There is a policy at the federal level, or a law that is on the verge, and has been on the verge for a number of years, so exactly when that will happen is TBD, but it has huge bipartisan support, and essentially would model LIHTC, but into the home ownership spectrum, and that would allow for a tax credit to be deployed on a lot by lot basis, you know, one house at a time.

and that is if I had to put my money on it I would say in the next three years or so we'll see that finally pass and that will unlock what have we been all yearning for which is trying to get home ownership affordable home ownership at scale not just in little piddly tidbits but at scale for opportunities across the country we want to leave that door open

with the allowable increase in density through the R lot, the R zones, in order to leave that possibility to happen.

And connected to that,

Obviously every non-profit is competing against the private sector when you're looking at lots to purchase.

Yeah, that's a fantastic point, Michael.

And frankly, that is the

That idea came out of the Cambridge housing overlay that passed now two or three years ago.

I think it has been now.

I shared that with the Planning Commission when it first passed as that's where the sort of affordable housing overlay concept came and essentially what that does and instead of doing an overall overlay across the entire city Planning Commission and staff chose to take a different direction but the end result is basically the same in the R districts where essentially by allowing a higher density for when you include a significant percentage of affordable

you essentially level that playing field in acquisition cost so whereas a market rate developer can only do two units or three units or whatever the number is but a non-profit whether in partnership with the homeowner as a way to kind of like share the the land lease or just straight out acquisition we can do six or eight

That's for all R. All R's, correct.

Which is why that medium intensity is important, one of the reasons it's important.

I'm just trying to figure out what the likelihood is that any of those are going to get built anytime soon.

I was just going to say it's highlighted on this topic the preservation bonus.

The preservation bonus?

So in the HACC recommendation.

Oh, sorry, I thought you were looking at mine.

Yeah.

Shift off the other topic on this topic.

Okay.

Okay.

So, Ian, on the second page of the HACC document that I handed out,

it highlights it first of all strongly support the new zoning district RNA core neighborhoods fundamentally that is exactly what we are asking for when we made the recommendations for some additional tweaks to that RNA framework the when it went to planning commission on the bonus preservation the Planning Commission

without a whole lot of consideration, but just made the choice to go from, keep the base as one unit per lot by right in RNA, but then bonus preservation went up to two bonus units if the original house is preserved, as opposed to the hack recommendations one bonus unit.

We discussed that at the HAC multiple times and ultimately re-landed back on our original recommendation of one.

And the reason for that is fundamentally these neighborhoods, as we know, already experience the most impacts from gentrification pressures, you know, 10th and Page neighborhoods, the five fills, et cetera.

They already experience gentrification pressures heavily.

We also know from the RKG analysis that the likelihood of acceleration or likelihood of rate of change is highest in these neighborhoods under the new zoning protocol.

When Click and Far went around the neighborhoods a few weeks ago to ask the question of homeowners in Fifeville, Tenth and Page, and Rose Hill,

They asked the question not about specifically one versus two, but they asked the question if we had to err on one side meaning strength and preservation of the neighborhood versus wealth creation on the other side, the strong, vast number of folks were on the preservation.

They are already feeling the intensity of displacement over and over again.

this response the HAC recommendation tries to honor that and keep it at one plus one in this scenario of the one plus one a homeowner who lives there now who might be a low-income homeowner would have the right to then add a granny flat to add a unit to change their home into two units and still allow us for some of that creativity and wealth creation on their own

But by keeping it at one as opposed to two, it also provides a bulwark against speculative developers who would otherwise come in and try to flip to get three units instead of two.

At two, it just becomes less economically viable for them to do it.

We also recognize that whatever gets adopted is permanent zoning.

and we also recognize that in a couple of years when we get to a point of the comp plan revision in 2026, there's an opportunity for revisiting that number and seeing if that's still the right balance at that time.

The goal and hope is that by the time we get to that time frame,

Small Area Plan efforts that James and staff have been looking at for these neighborhoods will have been able to take place so they can make a fully informed choice around what it looks like in the future.

I mean, it's helpful to get it now.

I mean, we've discussed this issue previously in terms of the trade-offs, but I'm still in the space where, particularly in the context of the small area plan to come, I think one bonus unit and airing on that side is preferable.

I think that, you know, it's giving them the opportunity to, you know,

My only thought was I wonder whether you know whether the people who were voting in favor of neighborhood preservation

So I don't have access to that data.

I was going to get to that and this is something that James and I have talked about previously which is and I don't actually know what the status of that is but in general this actually came from James which is the idea that let's say you have a site with two units on it now

You can't redevelop it as a single unit.

You can't go down in density.

Yes.

It's just a net loss.

It doesn't prevent addition of density.

It just prevents loss of density.

That's accurate.

And when we discussed this at the Planning Commission, I expressed my concern, and Sunshine is correct, this was an idea that I originally came up with.

As I thought about it further, one of the things I became concerned about from an administration standpoint is figuring out that point in time of

that unit of preservation, like how am I administrating this?

In particular, if I get into accessory units, how am I tracking the status of an accessory unit, a small unit that somebody has in their basement, how am I tracking that relative to its loss or not over time?

Oh yeah, yeah.

Yeah, so I'm going to say that I believe we took care of the ADU, the affordable housing bonus, I'm sorry, in the residential districts, which was our policy topic on the bottom of page five.

So I'm going to come back to fee-in-lieu and student housing as my final two

Topics?

Page four.

On page four.

Happy to talk about anything else.

So on fee and lieu, fundamentally, in inclusionary zoning ordinances, the fee and lieu generally comes down to one of two

One of two methodologies for calculating fee-in-lieu and I'm going to lean a lot on Kyle during this conversation so I'm going to do a kind of overview of how it works and then Kyle will help me out in everything I get wrong.

So the first method of calculating fee-in-lieu under inclusionary zoning relies on the production cost.

What does it cost to produce a unit?

And the second methodology refers to the increment between the revenue derived from a market rate unit versus the revenue from an affordable unit.

So as you can imagine, the production cost is going to be, every time, a much higher number.

and therefore it incentivizes a development project to provide that unit instead.

If you think about it theoretically, if a project is producing 100 units and then your fee-in-lieu basically requires them to pay the cost of, if they're doing a fee-in-lieu for their 10 required units and that fee-in-lieu is based on the production cost, you're basically saying they have to pay the construction cost of about 100 units plus another 10, right?

So that's definitely expensive.

So that's going to steer your development project towards providing the units on site.

If, on the other hand, your free and blue is based on the difference between the market rate rent and the affordable rent, then that's kind of neutral, right?

It doesn't make any difference.

The developer, at the end of the day, is losing the same amount of revenue, whether they pay that

as a fee or kind of take that loss effectively annually.

So staff's initial approach has been to assume that our objective is to get units in each project to the greatest extent possible and therefore our starting point has been that the fee in lieu would be based on construction costs.

The one exception to that is when it comes to fractional units.

So that's when I run my calculation and I know I got 10% of my units are required to be affordable and I run that number and I come back with the number of I need to produce 4.3 units.

Well what the result of that kind of calculation is it's going to steer developers towards kind of manipulating their numbers to avoid that .3 because if I if I round up if I require at .3 you had to produce an entire unit then that's that's going to be a very expensive unit so I'm going to seek to avoid that as a developer on the other hand if I round it down the city's kind of losing out on some of that affordable housing benefit

So the fee in lieu for a fractional unit kind of hits the sweet spot and basically gives us some return on that without steering developers towards avoiding producing, towards lowering their number of units in order to avoid that fractional unit.

However, the fee we would want to use in that instance is the incremental approach fee, the increment between the market and the market, sorry, the incremental difference between the market rate revenue and the affordable unit revenue because that's neutral.

Just so I understand.

Let me know if I got completely wrong.

We could have like an inclusionary zoning policy where you have the production cost generally, but for a fractional unit it would be the incremental cost.

That's what we'd like to propose.

Okay.

You're a genius.

But you understood it.

Say it.

Well, obviously, you're not going to know exactly what the revenue picture is going to be, but you've got to make a guess at it.

So the production costs and revenue approach, for both of those, we don't rely on the developer providing those numbers.

We calculate those numbers based on the market analysis that our KG has done, and then we provide those numbers, and we say this is what

Yep.

We suggest, RKG usually suggests doing it every year because both construction costs and revenues can change quite substantially.

I believe the policy talks about doing it every two years and we have other clients that do it every two years.

You wouldn't want to let it go longer than that because you want to make sure that those relationships stay current because if you let them go stale, they could skew towards an outcome that you're not looking for.

And so if the goal is to try and if you want to do a payment in lieu of having to develop a full unit, we want construction cost numbers, then you should continue to update that number to make sure it's accurate because if construction costs continue to go up,

then you're incenting them to pay in lieu because it's a lower cost than the actual cost to deliver the unit.

So are there any questions on that proposal as we present it?

So I guess my question is kind of a high-level question is for housing staff.

Is that a yes to both?

He said yes.

You want the unit because the unit is guaranteed.

Yeah, we would want the unit to keep pace with our ambition in terms of our unit goal, in terms of production.

Where it becomes complex and where I would point back to you is the conversation as it relates to fractional units and student housing.

The plan does mention student housing, but

We're not requiring it either way but we're strongly incentivizing them to build it so that by making it the construction by using the construction cost

The other advantage to producing the units, again, one of our goals in this is to produce economically integrated communities.

And we get there if each project is producing units as opposed to giving us money which we're then going to have to put somewhere else and not necessarily going to be able to do so in a way that creates the integrated communities that we're aiming for.

So I'm going to segue to student housing.

Say again.

Huh?

You don't want families having to live among the students.

And generally what we've seen is that that isn't the direction the city has gone.

For the most part, we've done fee-in-lieu.

Now, as drafted, we proposed an approach that would be affordable units for students that would be integrated into an affordable student, I'm sorry, would be integrated into an otherwise market rate student housing project.

and it's based on a model that basically makes that affordability on a per bedroom basis and it's based on a model out of Minneapolis.

The other approach we could take is simply to say that student housing projects are going to do a fee-in-lieu approach as opposed to providing the units.

But if we go the approach of requiring the student projects to do the fee-in-lieu,

then our recommendation would be that we use the incremental approach for that fee calculation because once we're taking away the choice it seems to us that it's better to do the fair kind of the fair is not the right word there but the incremental approach is basically cost neutral since the production one is strongly incentivized towards producing the unit it's a far more expensive approach

So in rough numbers, what are we thinking?

Kyle, do you have that on hand to give us what roughly the construction costs are versus the

I do.

Awesome.

Appreciate it.

How do we, this is maybe a lame question, but how do we distinguish between the student housing?

Yeah.

No, it's actually a very good question.

I thought you were going to say solo cups, but yeah, I got you.

BMWs.

That's how.

Take me back again to why you think in calculating the fee in lieu for the student housing you think we should go in what I'll call the lesser expensive.

No, it's not because of the number of units.

It's because we've taken away the choice.

If we take away the choice to pick one or the other, the production cost, the construction cost approach is just, it's more expensive.

At that point, you're not talking about trying to give somebody an incentive to go one way or the other.

Exactly.

Exactly.

So we use the construction costs to incentivize the unit production.

Because we're not really interested in unit production for student housing.

I think even with the incremental approach, if you look at the average

Fee in lieu for the units.

We've got possibly the largest student housing projects we'll see coming for right before the deadline to avoid having to pay tens of millions of dollars of payment in lieu fees.

That's an aside, but who's paying attention?

But I think I would feel a lot more comfortable in terms of encouraging payment in lieu if it's clarified in our affordable housing strategy that the payment in lieu is on top of and above our existing affordable housing commitment.

That's my biggest concern with it, although if that is clarified, I 100 percent see the logic including and using that incremental

It's not clarified in the plan and I think it would be worthwhile to explicitly clarify that.

Update the affordable housing plan?

Yes.

Right.

It doesn't have a force of law in any event.

If we decided not to do it some year, we don't get thrown in jail.

Because you endorsed the affordable housing plan.

It's good to have things in writing.

There's nothing else you can shame people with it.

So just for clarification, when you said we're taking away the choices, this is just for student housing.

Yeah.

Carl, so you're typing stuff in.

All righty then.

And 180.

No.

It's an average.

So a studio construction cost has an estimate of about 184,000, whereas a three-bedroom has a construction cost estimate of about 547,000.

and so those are the averages for all the different size units we looked at for both what the value gap calculation is and what the average construction is.

I'll just put a pin in this again, Mayor.

You said, whoa, you run those numbers on the projects that are newly in front of us.

That adds up to tens of millions of dollars.

They're offering us two million.

Thank you very much.

185, thank you.

It is the difference between the value of the market rate unit and the value of the income controlled unit.

So if I were to try and sell those units on the open market, the market rate unit would be worth about $185,000 more to a potential buyer.

And so we're basically

capturing what the value creation would be for the property owner in the form of a payment, and in James' point, for a partial unit.

So if you owe me 0.3 units, you multiply that $185,000 by 0.3, and that's what your payment has to be.

The 180, 85, or whatever it is, is effectively, I mean, if the value of the unit is determined by its ability to generate income, then the difference ought to be the present value of that income stream, the difference in the present value of the income streams.

But again, I'll say particularly with just that amendment made to the Affordable Housing Plan, which I know is a separate action, but with that, I understand and agree with the recommendations that have been put forward regarding the student housing.

I don't know if we were going to get there anyway, but I know one of the things in the economic analysis where there were a couple of areas in the city where the inclusionary zoning could be higher than what it is.

That works economically, I think, to go to 15 percent.

So, yeah, it's in the study.

Staff's recommendation at this point is given that we have a two-year look back each time.

I don't agree with that, but I understand.

For a certain number of them, yep, we may.

But it would require us to redraft this to differentiate different sections of the city.

We'd have to establish borders for that.

There would be a bunch of additional things we would need to do.

I can restate it.

The RKG analysis was looking at the feasibility of our affordable housing requirement and determined that for a lot of the city it works at 10% of units at 60% of AMI.

They said in downtown in particular you might be able to achieve 15% of units at 60% of AMI.

and Kyle might speak to this further, but I think part of our concern there is there's a bunch of other variables at play that particularly the cost of construction as you get into the taller buildings.

We're concerned about how that plays into this given the fact that we are generally seeking the taller buildings downtown.

I don't know.

No, I think

So the points for and against were very well made.

There is an opportunity from a financial perspective because revenue generation is higher downtown, so they probably could support more.

But I also think the point is that let's get our feet underneath us.

And you don't necessarily have to wait two years.

You may wait two years for the whole thing, but you can always revisit that at any time.

And if you're like, well, you know what, we changed our mind, there's a way you can go and look at that sooner.

Well, I still think it's unfortunate anything that gets built in those feasible districts that 5% will never regain.

That's all I have.

We're happy to answer any other questions.

We are.

We're actively updating the manual.

And at a certain point, it's really helpful to have this conversation to help us complete that work.

And let me note on the manual.

So the manual is something that after you guys adopt the zoning ordinance itself, then we're going to come back with that manual as well as an overall procedures manual, probably in the January timeframe for your adoption.

Because both manuals have to be adopted as well, this manual and the procedures manual by counsel.

I don't know, but I had a couple of other questions and I may sidetrack us a bit.

And this is something I've talked about before, and I still think it is something that we ought to be talking about more, in large part because of the way that we sold this whole project to folks a couple years ago when we talked about in RA zones we would have house-sized buildings and maybe mansion-sized buildings in RB.

and the question is, okay, what is a house-sized building?

I'm trying to figure out what we can do that would put some, and I'll go back to right now the way things are drafted in an RA zone, you could have a 9,000 square foot building.

without any bonuses, anything, 9,000 square, gross floor area, because you can have a 3,000 square foot footprint, and you can have three floors.

I don't know if anybody would say that a 9,000 square foot building is a house-sized building.

It's actually 50% larger than the largest house that exists in the city of Charlottesville today, according to some work that Rory Sultzner put together.

So what I have suggested is that 4,500 square feet would be a way And this also gets to another point, which is that we've talked about wanting to make sure that we don't somehow create an incentive to have more McMansions

which is the way that folks in Northern Virginia seem to have been evolving their house design considerations.

And so my thought, and I've expressed it before, is that we ought to have a limit of let's say 4,500 square feet for a gross floor area in an RA zone.

and come up with an appropriate, I'd suggest maybe 6,000 square feet, which is just a little bit lower than the largest building, the largest single residence in Charlottesville.

And right now you have 9,000 square feet in RA, you could have 10,500 square feet in RB, and you could have 12,000 square feet in RC.

And I think virtually anybody who was

A building of those sizes would say, that's really incompatible with our notion of a true residential neighborhood.

And interestingly, you have a 9,000 square foot building in RA only allowing six units, and then you've got six 1,500 square foot dwelling units in there.

Very quick rule of thumb, two-bedroom is 1,000 to 1,200, three-bedroom is 12 to 15.

So, I mean, the 1,200 square foot for three bedroom apartments falls within that range that I suggested.

The two bedroom, one of the things that's different, perhaps, around the units that we do is that

Litex requirements mandate two bathrooms as opposed to many market rate units which only have one bathroom.

And not that that's a huge amount of square footage, but it does change the layout overall in a way that is potentially commensurate with that.

I was thinking about an example of a building that I'm familiar with because my son owns it up in Massachusetts.

It's a two over two over two staff townhouse arrangement and they're all three bedrooms and they're all thousand square feet and it's plenty of room and

I'm looking at these, it's hard to call them design constraints if you talk about a 9,000 square foot building, it's not really a constraint at all.

But I'm looking at these kinds of things and I'm thinking one of the reasons why buildings can be less expensive is if they're not as big.

and I wonder if there is a way not only for the units that we're trying to designate as affordable but for other folks who just don't want to spend as much money on their rent whether we could in essence try to give an incentive to have smaller units

So I see your point.

I mean, there's a little bit in my mind of, you know, it feels like we're trying to

You know, tell the market what it needs to provide.

It seems like the market's not going to provide something that big because, you know, it just wouldn't make any sense financially.

The whole house size.

That's file.

The whole house-sized commitment, I mean, I wasn't a part of that conversation then, and I don't know what agreements were made.

I respect the fact that homeowners would like

to live in areas that didn't have enormous buildings in them.

And if we're putting these large numbers that were not really expected to ever be built, then we're creating banks that's not of any value.

And so I guess I would be interested in... I would be interested in...

Who are the people that helped us do all this?

RHI & Co.

Studio?

RRPG

There is, well, just in the sense that there's, I think, as the rules have evolved through

When we knew her sort of spitballing at the beginning, you were using numbers like 1,500 square feet.

is that we want to have six 1,500 square foot three bedroom apartments in a 9,000 square foot RA lot.

That's huge.

I would think that would be disturbingly huge.

And I would think that it would be inconsistent with the idea of an RA zone.

And if we're going to look at RB and say we can have a 10,500 square foot building, I mean, that's basically eight times, it's almost eight times 1,500.

So you don't have so much of a problem with the RBC in terms of the medium intensive residential in terms of

Again, when we were talking about this two years ago, and we were talking about a house-sized building as a way to say to people, you're not going to have huge apartment buildings

right next to you in your RA lot, your RA neighborhood or your RB neighborhood, we used the phrase house-sized building to describe what we wanted in an RA lot.

and we used the phrase, somebody used the phrase to have a note on this, mansion size for RB.

I think the research that Rory did, he produced a

the thing that I think all of us got at some point was a document that shows that the largest single family residence in Charlottesville is about 6,400 square feet and that at 4,000 square feet you're talking about maybe only 20, 25 buildings of that size in the entire city and we're talking about basically legitimizing

is twice or one and a half times the largest building currently existing as a single family residence in literally every lot in the city.

And to me, when we were talking to people, when I was talking to people, I was trying to convince them that the future land use map that we adopted two years ago was not going to be as heinous as they were afraid it was going to be

I relied on the notion that it's going to be a house-sized building.

It's not going to look and feel significantly different from the way that your neighborhood feels and looks now.

You can walk down the street, you're going to see a building that may be a little bit bigger, but it's not going to be, and the example I've always used is, I think it's

on Booker Street that there's this monstrosity that somebody built that's thousands of square feet larger than anything anywhere around and that was sort of the exemplar of what we did not want to enable and yet here we are we're going to be enabling buildings that would be larger even than that on every residential lot in the city.

and that concerns me because I don't think we ought to have an ordinance that permits something that we agree we don't want.

But the answer of... So, yeah, so you mentioned a lot, I guess a lot of the foundational work was done before we got on, so where did the...

Yeah, I mean, it's just a little concerning.

I hear what you're saying, Lloyd, and I don't disagree that it is concerning that the Planning Commission has been

cranking this for two years are, you know, and these are the numbers they've been working with.

I don't know why this wouldn't have arisen sooner.

I appreciate that.

My suggestion, at least, to move us forward is we're meeting tomorrow as a team to prep for your meeting on the 29th.

and I appreciate getting everybody's identified locations for potential changes back.

So I'm just going to add this as a discrete topic on the 29th agenda so that Code Studio can explain exactly why, you know,

How they arrived at the code of where it is today in terms of specifically, you know, why is there essentially an allowance for a up to 9,000 square foot building to be built in RA and kind of how that works.

I know part of the answer has to do with just footprint and trying to retain, on the footprint side, flexibility for whether someone's doing more of something that's single story versus multi-story, right?

So in that reason, you want to load your footprint.

But can we consider something that is essentially a gross square foot limit?

Sure.

And I'm trying to dumb it down in my own head to understand the conversation myself.

So basically the conversation is kind of

building footprint and how people interpret that as being house-sized versus square footage where the building footprint may be something, but because of height, the square footage is larger and that... Well, I think that's where we're arriving at 9,000 square feet is you take the footprint and you multiply it by... Right, so basically it comes down to how much you consider...

I'm not a fan of a 3,000 square foot footprint building in RA either, but I don't care how we get to where we get to this or what I would regard as the upper limit of the size of the building, but I can imagine

why you would want to have a 3,000 square foot footprint and have it not look heinous.

But when I think, again, I come back, Booker Street House is just so huge compared to everything else on that street.

You go, that's crazy.

And not just me talking about it, but again, that was the way the entire plan was being sold to us, as you will be given a set of dials that you can tweak, and you can

The one dial that I think is missing is the gross floor.

That's what I was saying.

It's going to be a long meeting.

Yeah.

Well, we didn't guess.

Okay, there was one other reason while we got Kyle here.

Kyle, one of the issues that I've been sort of struggling with, and maybe I shouldn't be bothering, but I am, is we've got one set of analyses from you all and one set of analyses from the first consultants of sort of a rate of expected change analysis.

Can you explain?

The approaches are very similar.

When you're looking at something like the rate of change analysis, there's not a lot of wiggle room from an assessment perspective in terms of the methodology that you use.

You're trying to understand what that new development

is worth in terms of an acquisition cost, and then comparing that against what the values of the existing properties are, and then trying to make a determination of what is the likelihood that someone's willing to sell that property for that asking price.

Obviously, if it's an investor, you know, once you hit a certain investor percentage threshold, usually 15%, 20%, 25%, you know, they're going to be interested in selling because that's what they're looking for out of the property.

A homeowner is a little bit more sticky, particularly people who've owned their home for a long time and they're very rooted in the community.

You know, even when you're offering, you know, it could be 50-60% more than what it's worth, you're not going to get a linear decision because people have personal preference and choice that are weighing into it and they may not be interested for a myriad of reasons in terms of leaving their home.

So I say all that to say is the HRNA's methodology and our methodology was similar.

I don't think, I think our responses came out consistent because for the, for that analysis, the difference between the created value from new development and the existing value, those, that relationship was pretty close.

And so as a result, we came with pretty close answers.

I can't say exactly how they did it internally because they didn't provide that information either in the presentation or at least it wasn't shared with us.

Okay, the other question I had was, and I'm trying to find the page of your report that talks about this, the number of lots that you had identified as likely to change in a given year, I think that was either to go to

an apartment building of up to 10 or 12 units or some other increased density.

I'm trying to remember where the line is that talks about it as to how many more of those parcels are likely to turn over as the 10 to 12 unit apartments versus the

sort of the duplex, triplex kinds of things.

Oh, I see what you're saying.

So I doubt any of them will be duplexes because duplexes only deliver two units.

And from a financial feasibility perspective, that's not going to create valuation differences.

I think if I'm understanding your question more directly, I think in certain areas, it is more likely to go to an ownership model than a rental model because the ownership creates greater value.

That's on page

32, and you can see that the land value, for example, in Area A is substantially greater to someone looking to build condo-style development, either like traditional vertically stacked condos or townhomes, as opposed to a rental where it's flipped for Areas B and Areas C and D, where the rental actually creates a greater valuation because of just the price point differences in those different areas of the city.

So maybe the answer is to be found on page 32, but is your assumption here that you're replacing what is there with the maximum number of units, 3, 6, or 8?

And you have not attempted to look at sort of the individual lots or even generalizations about the topology of the lots.

Yes.

Yeah.

One of the things that was not

And one of the things that RHA had done, and I don't remember the details of it exactly, but they had some way of looking at it and saying there are a certain number of lots that would be large enough, have enough road frontage to be able to do some things

and part of their analysis was looking at the physical at least again in very gross in a very gross sense a very general sense like some of the physical characteristics of the lots and that's one of the reasons why I was it was intrigued to see

I think the difference is market viability.

When I'm looking at their report,

I think that we use a more conservative rate of change like a conversion number than they did and as a result it accounted for their, the net number.

I will say that when you look at our analysis compared to their analysis they're saying about 189 units of annual turnover and if you sum up the numbers on pages 36, 37, and 38

We're looking at more in the ballpark of 280 so we do have a higher net parcel turnover year over year which could be answered by you know the fact that they looked at the physical limitations and possibly

Yes.

We were recognizing the fact that we didn't look at the physical constraints and understood that there needed to be some level of accounting for that.

I say that not to be fussing at you, but just to understand what's going on, that if we take the 20% away from your total, you get down to about 220, which sounds an awful lot like they're 190.

And that, again, is it?

Well, and for me, it helps even because I see you using different methodologies.

If you come up with sort of a similar number, it encourages me to have a little more confidence in the numbers.

If you had come out with wildly different numbers, I would be concerned.

And so one of the arguments that I get into with some of my friends about all of this is they're trying to tell me, no, you're not going to see that relatively restrained scenario.

You're going to see development going wild.

And I take a little bit of comfort from the fact that the two different analyses both come out in a similar place.

Yeah, and I can't say I'm terribly surprised by that.

I don't know who these friends of yours that you're speaking to are, sir, but, you know, I understand the concern.

And do your numbers here, I think I recall seeing someplace that

Your numbers were basically good for five years, but not for 10 years or something.

Well, we are trying to be respectful of the fact that market conditions are going to change, and we can't really project how.

And so we are comfortable with saying this is likely something that's going to happen in the short term, and a five-year period is reasonable.

But it's a complete lag situation.

If you will, to try and say beyond that.

I mean, if we would have thought five years ago from today, would we have had the same conclusion?

All of our calculations are based off of those current market projections.

So with the fact that interest rates have gone up, we build that into our model that then helps us back into what the new value of those properties would be to a purchaser looking to build six or eight or four or three units.

And so all of that information was built into our model.

I think we pulled all that information as of

probably August, I would say, is reasonable.

Yeah.

Well, since none of it is something we could hold anybody to anyway, I'm not terribly concerned.

I just wanted to be able to have that greater sense of reassurance about the

the general sufficiency of the calculations.

Other counselors?

Well, I appreciate that.

I guess I was the only one.

Thank you very much.

Nothing important.

I was just going to continue the conversation.

I apologize.

I guess we're good here.

Thank you very much.

Anything else, James?

Okay.

Having nothing further to do, we're adjourned.