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HomeMy WebLinkAboutHousing Presentation FINALPowerPoint Presentation WorkforceHousing Envision Madison Findings “The present economic research finds that business wants talent, but talent wants place—so more businesses are relocating to places. When drilled further the research finds Missing Middle Housing is the fastest growing preference because it has the ‘place’ quality talent seeks. Hence development of Missing Middle is now recognized as a housing AND economic development strategy.” — James Tischler, Michigan State Housing Development Authority Based on income levels, Idaho ties with Montana and Hawaii for the lowest affordability in the nation [for housing], according to the National Association of Realtors. 64% of a single earner’s wages go toward a median home’s mortgage in Madison County San Diego County, California (68%) Los Angeles County, California (66%) Same Affordability As… $408,000 Median Home Price in Madison County $408,000 Income needed $100K+ Median Home Price in Madison County Salary at $60,000 = $200,000 home $205,000 – 815 sqft $205,000 – 856 sqft $406,900 – 1649 sqft $499,000 – 2899 sqft My Experience 7.74% If home prices are stable, rates need to fall to 3.55% in order to be back to historical average. If prices grow 5%, rates need to fall to 3.16%.  If prices stay the same but incomes increase 5%, rates need to fall to 3.95%  A mortgage rate that stays around 8% means median home prices need to fall by 35%, to $265,000. If rates stay at 8% and prices at current levels, income needs to increase by 63%.  If home prices are stable, rates need to fall to 3.55% in order to be back to historical average. If prices grow 5%, rates need to fall to 3.16%.  If prices stay the same but incomes increase 5%, rates need to fall to 3.95%  A mortgage rate that stays around 8% means median home prices need to fall by 35%, to $265,000. If rates stay at 8% and prices at current levels, income needs to increase by 63%.  If home prices are stable, rates need to fall to 3.55% in order to be back to historical average. If prices grow 5%, rates need to fall to 3.16%.  If prices stay the same but incomes increase 5%, rates need to fall to 3.95%  A mortgage rate that stays around 8% means median home prices need to fall by 35%, to $265,000. If rates stay at 8% and prices at current levels, income needs to increase by 63%.  If home prices are stable, rates need to fall to 3.55% in order to be back to historical average. If prices grow 5%, rates need to fall to 3.16%.  If prices stay the same but incomes increase 5%, rates need to fall to 3.95%  A mortgage rate that stays around 8% means median home prices need to fall by 35%, to $265,000. If rates stay at 8% and prices at current levels, income needs to increase by 63%.  If home prices are stable, rates need to fall to 3.55% in order to be back to historical average. If prices grow 5%, rates need to fall to 3.16%.  If prices stay the same but incomes increase 5%, rates need to fall to 3.95%  A mortgage rate that stays around 8% means median home prices need to fall by 35%, to $265,000. If rates stay at 8% and prices at current levels, income needs to increase by 63%.  “Nationwide, the small detached house has all but vanished from new construction. Only about 8 percent of new single-family homes today are 1,400 square feet or less. In the 1940s, according to CoreLogic, nearly 70 percent of new houses were that small.” Building Home-value Equity "Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership," said Nadia Evangelou, NAR senior economist and director of real estate research. "A two-fold approach is needed to help with both low affordability and limited housing supply. It's not just about increasing supply. We must boost the number of homes at the price range that most people can afford to buy." “The present economic research finds that business wants talent, but talent wants place—so more businesses are relocating to places. When drilled further the research finds Missing Middle Housing is the fastest growing preference because it has the ‘place’ quality talent seeks. Hence development of Missing Middle is now recognized as a housing AND economic development strategy.” — James Tischler, Michigan State Housing Development Authority Only about 2,000 duplexes were constructed in 2022 in the U.S. What are the characteristics of Missing Middle Housing? Marketable Density vs Scale House-Scale Buildings Lower Perceived Density Lower Perceived Density Twin home Twin Home Duplex: Stacked Fourplex: Stacked Courtyard Building Cottage Courts Mansion Apartment Townhouses Multiplex (Medium) Triplex Stacked What’s the next step? Phase 1 - Education and Analysis Phase 1 - Education and Analysis Phase 2 - Integration Phase 2 - Integration Utilize Form-Based Code Phase 2 - Integration Phase 2 - Integration Phase 2 - Integration Phase 3 - Establishing Formal Housing Entities Community Land Trust model Phase 3 - Establishing Formal Housing Entities Hailey, Idaho Model Phase 3 - Establishing Formal Housing Entities Utah’s “First-time Homebuyers Assistance Program” (New Construction) Phase 3 - Establishing Formal Housing Entities “Rocky Mountain Housing Fund” Model Phase 3 - Establishing Formal Housing Entities “The present economic research finds that business wants talent, but talent wants place—so more businesses are relocating to places. When drilled further the research finds Missing Middle Housing is the fastest growing preference because it has the ‘place’ quality talent seeks. Hence development of Missing Middle is now recognized as a housing AND economic development strategy.” — James Tischler, Michigan State Housing Development Authority Thank you Good evening City Council and Mayor. I am so excited to present tonight. --- P A U S E --- As part of the economic development department, I spend a lot of my day to day thinking about jobs. Jobs can be created through new businesses, retaining or expanding our community’s existing businesses, or attracting outside businesses to our community. It should be no surprise, this was one of the two focuses of the Envision Madison project. The general sentiment from the study was that there are not enough jobs to ensure economic security for families in our community. A common pattern was that our residents' wanted jobs for their children and grandchildren so that they stay or return to Rexburg. For that to happen, we need quality jobs. Despite some loud voices, the Envision Madison findings demonstrated there is significant support for growth, especially when it provides jobs and a higher quality of life. How might we create those jobs for our community members so that there is improved quality of life for them, their children, and grandchildren? It’s through helping expand Rexburg’s sense of place. Why place? “The present economic research finds that business wants talent, but talent wants place—so more businesses are relocating to places.” Our community needs to have the sense of place that talent looks for. Except we have a problem. *Pause* It’s a housing problem. Here is some national data. In general, it has become significantly more expensive to buy a home compared to renting. ------ We are seeing not just mortgages skyrocket, but rentals as well. Many communities have renters spending more than 30% on not just mortgages, but rent. Even worse, many people are being denied mortgages for having “insufficient income” even though starting a mortgage would be less than their rent payment. Residents of These 3 States Are Paying the Most in Rent | Moneywise https://reventureconsulting.com/ This map helps demonstrate how much more expensive it is to buy a home in the last 3 years. Homeownership is becoming out of reach for the middle class. This graph demonstrates the issue as the income needed to afford a median-priced home has skyrocketed. https://www.cnbc.com/2023/10/25/will-americans-ever-be-able-to-afford-to-buy-a-home-again.html https://www.visualcapitalist.com/median-house-prices-vs-income-us/ Idaho overall is tired with Hawaii for the lowest affordability for housing in the nation. Redfin also ranked Idaho as the most overvalued housing market at 41.87% over. This is exasperated by Idaho being the 2nd worst state for housing shortage, behind just California. Idaho has a shortage of over 42,000 homes. Of course, it’s easy to maybe dismiss this fact, as we all know the Boise market is insane. Let’s look at the local data for our community. Housing market: These top 10 states have most ‘severe’ shortage - Deseret News Most ‘overvalued’ U.S. housing markets: Where Idaho, Utah rank - Deseret News https://www.cnbc.com/2023/07/12/these-states-are-americas-most-expensive-to-live-in.html For Madison County, from 2010 to today, home prices have gone up 109% while wages have only gone up 39%. https://usafacts.org/data-projects/housing-vs-wages?utm_source Bureau of Labor Statistics, Federal Housing Finance Agency; Bureau of Labor Statistics Quarterly Census of Employment and Wages(updated March 8, 2023) Federal Housing Finance Agency Annual House Price Indexes - Counties (Developmental Index; Not Seasonally Adjusted), Annual House Price Indexes - States (Developmental Index; Not Seasonally Adjusted)(updated March 28, 2023   In Madison County, 64% of a single earner’s wages go toward a median priced home mortgage. That is more than double the maximum 30% recommendation from lending institutions. Some lenders how are going up to 50% but we are still outside that range. https://usafacts.org/data-projects/housing-vs-wages?utm_source The data also reveals that Madison County’s affordability is similar to high-cost locations in the United States such San Diego County, California (68%) and Los Angeles County, California (66%). Bureau of Labor Statistics Quarterly Census of Employment and Wages(updated March 8, 2023) Federal Housing Finance Agency Annual House Price Indexes - Counties (Developmental Index; Not Seasonally Adjusted), Annual House Price Indexes - States (Developmental Index; Not Seasonally Adjusted)(updated March 28, 2023) United States Census Bureau American Community Survey - DP04 | Selected Housing Characteristics(updated September 15, 2022) Freddie Mac 30-Year Fixed Rate Mortgage Average for 2022 in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis(updated Mar 23, 2023)   So what is our Median Home Price in Madison County? just over $400,000 To afford this home, one would have to make $100,000+ Rexburg’s cost of living provide a significant obstacle for people to buy homes. In fact, the consulting firm DCI found in their 2022 annual report on talent that the top 3 factors for relocation are related housing cost and availability. So we can’t let ourselves believe that our children and grandchildren will stay or move to Rexburg when they can’t afford homes here. *Pause* A few months ago we had a large tech firm from Utah seriously considering relocating to Rexburg. Despite paying their employees 6 figure salaries, when they saw Rexburg’s housing prices, they backed out. https://www.realtor.com/realestateandhomes-detail/36-N-3rd-W_Rexburg_ID_83440_M16612-97148?from=srp-list-card https://app.hubspot.com/documents/19924342/view/522930434?accessId=004dc3 Let’s say you are looking to buy something below the median home price. What would you be able to buy if your annual salary was 60,000? A 200,000 dollar home. Both the National Association of Realtors and the National Association of Home Builders have spoken about how serious this problem is. The National Association of Realtors have said the middle-income buyer can afford to buy less than a quarter of listings. And the National Association of Home Builders have said that about 73 percent of all U.S. households, cannot afford a new home at (the current $425,786) median price point https://www.nar.realtor/newsroom/us-housing-market-needs-more-than-300000-affordable-homes-for-middle-income-buyers https://finance.yahoo.com/news/much-house-afford-60-000-185410012.html How Missing Middle Housing Can Boost Livability, Attainability - Multi-Housing News (multihousingnews.com) I bought a home in January. Despite a reasonable paying, stable salary job, and a great credit score, I barely qualified for one of the lowest priced homes in Rexburg. My 2 bed 1 ½ bath townhome was almost half the amount of a median priced home in Madison County. It’s hard for me to even imagine being able to afford a median priced home in Rexburg. Critics of the current housing market say “Just wait till interest rates go down.” Well… This graph from the Federal Reserve shows the interest rates for the last 50 years. If you add up all these averages from the last half century you get A 50-year average interest rate of 7.74%. I do not think we should count on 2% interest rates again to solve the housing crisis. Our children and grandchildren will not be able to live in Rexburg if there is no housing. An employer is not going to want to move to Rexburg if there is no homes for their employees. The National Association of Realtors does a really good job tracking housing affordability. Using their data, the following scenarios demonstrate how tough it is to return to the affordability average over the last 35 years. https://www.cnbc.com/2023/10/25/will-americans-ever-be-able-to-afford-to-buy-a-home-again.html What only make things worse is we are only building large homes. ““Nationwide, the small detached house has all but vanished from new construction. Only about 8 percent of new single-family homes today are 1,400 square feet or less. In the 1940s, according to CoreLogic, nearly 70 percent of new houses were that small.”” https://www.nytimes.com/2022/09/25/upshot/starter-home-prices.html Here is an example of what the starter home use to look like. The starter home is becoming nonexistent today. How are we going to provide jobs for our family, friends, and community members, when the starter home is disappearing, and home costs are the same as Southern California and Hawaii? Rexburg is unfortunately part of a nation-wide trend where the size of homes have grown, while the average family size has shrunk. Lot sizes doesn’t really effect home values: https://www.federalreserve.gov/econres/notes/feds-notes/trends-in-upsizing-houses-and-shrinking-lots-20171103.html In fact, only 11% of new homes in the US have 1 or 2 bedrooms while over half of household are only 1-2 people. http://www.flintlocklab.com/ https://www.strongtowns.org/journal/2023/7/10/small-is-beautiful-this-developer-targets-a-neglected-housing-market?apcid=006331c6509ba127ab8f7e01&utm_source=incrementalhousing This map also helps demonstrate our housing situation. We are among the higher end of states where it takes a decade to save for a home downpayment. If you scrap together 500 dollars a month, it would take you 13 years to save for a downpayment. https://www.axios.com/local/seattle/2023/06/27/home-downpayment-washington-state-saving Thinking about all these conditions in our community, how does someone build equity? The National Association of Realtors recently spoke on the housing market: "Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership," said Nadia Evangelou, NAR senior economist and director of real estate research. "A two-fold approach is needed to help with both low affordability and limited housing supply. It's not just about increasing supply. We must boost the number of homes at the price range that most people can afford to buy." Let’s not keep people from being able to building wealth. Home ownership should definitely be a part of America’s Family Community. So let’s make sure we build more homes and homes people can buy. What do those homes look like? *** P A U S E *** I’ve spent the last the better part of a year understanding the housing problem and how Rexburg should move forward. I’ve outlined we have a housing problem, so what can we really do about it? I’ve put together a 3-phase plan to combat the housing crisis. To understand the 3-phase plan, we need to understand what MMH is and understand the difference between density and scale. https://www.nar.realtor/newsroom/us-housing-market-needs-more-than-300000-affordable-homes-for-middle-income-buyers James Tischler continues: “When drilled further the research finds Missing Middle Housing is the fastest growing preference because it has the ‘place’ quality talent seeks. Hence development of Missing Middle is now recognized as a housing AND economic development strategy.” Missing Middle Housing is one of the most promising solutions for community. It will help ensure a sense of place while making housing attainable for the middle-class. It is the housing types between traditional detached single-family houses and large apartment complexes. Missing middle housing is a very traditional housing style and was very popular prior to the end of WWII. We talked about building equity a moment ago, and it was fascinating to learn that historically missing middle housing were the housing types that both provided high-quality living while enabling people “to build equity, and to move up the social ladder.” This need is even higher when someone making 75,000 cannot even afford the median costing home in our community. Housing construction never really recovered after the 2008 recession. This is partially why there is such a shortage in housing in the United States. You can see missing middle housing was hit the worst in the blue line in the graph. https://www.bloomberg.com/news/features/2023-08-26/duplex-triplex-construction-nears-record-lows-despite-us-housing-crisis?utm_source=Opticos+Design Bloomberg points out just how little MMH is being built out where of the 368,000 multifamily units built outin 2022 about half of them had buildings with 50 units or more, and 88% of the 386,000 had 20 units or more. Just 2,000 duplexes were built in 2022. https://www.bloomberg.com/news/features/2023-08-26/duplex-triplex-construction-nears-record-lows-despite-us-housing-crisis?utm_source=Opticos+Design Here is that concept visualized showing how MMH is shrinking by looking at the number of units in buildings that are constructed. https://www.bloomberg.com/news/features/2023-08-26/duplex-triplex-construction-nears-record-lows-despite-us-housing-crisis?utm_source=Opticos+Design What are the characteristics of missing middle housing? Well, they are marketable, they create community, and they require simple construction techniques and codes. https://missingmiddlehousing.com/about/characteristics Why are they marketable? MMH allows people of all ages to live in a community near amenities while not being restricted to a large condominium or apartment building. “Buyers and renters of these housing types are often trading space (housing and yard square footage) for place (proximity to services and amenities).” It’s important I think to note that the largest generation of workers in the United States are Millennials. Gen Z are also coming of age and beginning to flood into the labor market. And for our generation of baby boomers, America’s largest generation, many of which retired before or during the pandemic, many will want to downsize. But we don’t build small homes! MMH is going to play a part for them as well. I mentioned as we introduced MMH that we need to understand the difference between density and scale. This is going to be key for the community, Council, the Planning and Zoning Commission, and staff to understand if we want to tackle the housing crisis and reintroduce the traditional MMH types. In making housing decisions, we often get caught up in a discussion of density. But density cannot be the only way to plan for housing. Often, when people talk about density they are often talking about scale. MMH helps ensure this concept of scale. So, what exactly are we talking about when we talk about scale? Scale can be two options, house scale or block scale. The size of a house or the size of a block. Many people worried about density are worried about block scale buildings, not house scale buildings. MMH types “have small- to medium-sized footprints, with a body width, depth and height no larger than a detached single-family home.” This concept of “scale” creates a lower perceived density even though densities are higher. Take a look at these two different scale buildings. On the left is a block-scale building, and on the right is a house scale building. But they essentially have the same densities! “Due to the small footprint of [MMH] types and the fact that they [can be] mixed with a variety of building types even on an individual block, the perceived density of these types is usually quite low—they do not look like dense buildings.” I want to pause here because this point is important. A lower perceived density is key to helping preserve the small town feeling that Rexburg residents often seeks. I’m not saying that we shouldn’t have block-scale building. They have their place. However, MMH types would be a win-win for many people of differing opinions. Keep this point in your mind as we review some example in a moment. So let’s look at the types of missing middle housing. Keep in mind that point we mentioned earlier about house-scale buildings that provide a lower perceived density. This is significant…. Note how these fourplexes to not appear like the fourplexes that are an eyeshore to neighborhood, the typical commercial box style. It is possible to build housing types with multiple units that blend in with traditional neighborhoods. Let’s continue this concept in this missing middle housing type Courtyard Buildings. This missing middle housing type is completely missing from Rexburg. Cottage Courts are small, detached homes, or cottages, that face a common green way. As review this housing type, this about how meaningful it would be to have this housing in Rexburg. Let’s continue this concept in this missing middle housing type Courtyard Buildings. Finally, we have townhomes Larger multiplexs stacked triplexs House-scale missing middle housing types will allow us to help preserve the small town feel that our community wants, while helping bring our town closer together in terms of friendship, and lower housing costs so that we can provide the place that job seekers are looking for. I love how planner Victor Dover points out how the Density, lot size, and land use are all the same, for these two examples are the same, but most everyone would agree they’d rather live at the top one. So, what’s the next step? I’m recommending a 3-phase approach: - Phase 1: Education and Analysis - Phase 2: Integration - Phase 3: Establishing Formal Housing Entities Phase 1 is about education and analysis. Mainly, how do we plan for missing middle housing? The Economic Development Department and the Planning and Zoning department is recommending we work with the planning form Opticos. First, we’d like to bring 1 or 2 of their staff to Rexburg to help us understand MMH with a variety of stakeholders. That would cost around $15,000. This is key as we need to make sure we understand MMH and generate the buy-in across the community to effectively implement this Second, is their MMH Scan that analyzes Rexburg’s policy documents and zoning regulations to identify existing or potential barriers to MMH and some recommendations for implementation. This analysis is $45,000. Phase 2 is about implementation. Phase 2 has 3 parts. First, we should look at implementing the concept of scale instead of density into our planning and zoning documents, strategies, and decisions. This is something that could definitely be tackled internally. Second, we should create a pilot project or two that shows proof of concept to developers. Although there is demand for house-scale missing middle housing, it might be difficult to contractors to see it done in Rexburg. My recommendation is that would create some cottage court housing or mansion apartments. Third, we should create a house-scale form-based code. In addition to the form-based code that we have in the downtown, we can create some form-based code specific for residential neighborhoods. This new addition of form-based code would encourage house-scale building for missing middle types. The form-cased code takes into consideration the way different buildings interacting with other building and the street. Notice the difference in the types of buildings constructed under form-based code compared to conventional zoning. They’re house scale! Why this distinction? – “Conventional zoning creates multifamily zones that typically allow much bigger buildings – both taller and wider – than Missing Middle types. This also encourages lot aggregation, often leading to large suburban garden apartment buildings. The end can be an awkward juxtaposition of these very different residential environments, often with abrupt transitions in form and scale. Missing Middle types can successfully bridge these two environments, if allowed. Conventional zoning codes often fail to regulate building size and form in proportion to lot sizes, that can lead to awkward relationships between neighboring properties. Form-based standards avoid such incompatibility by regulating building forms, massing and transitions.” Missing middle housing will help preserve the small town feel we look for while also providing housing that can actually be bought by the middle class. There are a few more solutions we can talk about in addition to form-based code. An example of this can be found in both Utah and California where density is not a good regulatory tool. In Utah, the Utah League of Cities and Towns found that where cities just tried to use density as they machanic for housing, they just saw large homes on smaller lots that discouraged housing for the middle class. https://www.deseret.com/utah/2023/11/14/23960661/housing-market-crisis-utah-audit-shortage-growth-trouble-bubble/ You end up with tall skinnies like this which are common in California. Phase 3 is about establishing a formal housing entities for Rexburg. There are a couple of different strategies these entities can take. The first is a land trust model where the housing entity owns the land while the homeowner owns the improvements. Utah just set appropriated $5 Million to establish this type of program. https://www.deseret.com/2023/12/5/23987961/utah-gov-spencer-cox-wants-35000-starter-homes-built-new-budget-affordable-housing-olympics --------- A shared equity homeownership model allows income-qualified homebuyers to buy quality homes at below market value. The CLT retains ownership of the land while the buyer owns the improvements, thus reducing the cost of the home. The home’s future value is restricted by the ground lease, which establishes a model for permanently affordable homes. At sale, the homeowner takes possession of the improvements only, and signs a 99-year ground lease. This document ensures that the homeowner will have full rights to use their land, restricts the resale price, and sets the expectation that the future buyer will also be income qualified The next model is being done in Hailey, Idaho. This program is for locals buying a home that work in Blaine County. The City provides the local housing trust a 20% of purchase price, zero interest deferred loans, overall reducing the cost of the home and not requiring payment on the second loan until the house is sold again. https://haileycityhall.org/2023/09/locals-only-housing/ https://www.ktvb.com/article/news/local/new-program-helping-blaine-county-workers-afford-homes/277-2447b502-98ac-438b-8cb3-a115ccb6b712 https://haileycityhall.org/2023/09/locals-only-housing/ The next option is a program that started in Utah this last year. This state creating housing entity is providing zero interest, no payment loans up to $20,000 for first time homebuyers to purchase starter homes. This is similar to what Hailey, Idaho is doing, except this is only for new construction. https://utahhousingcorp.org/homebuyer/programs/sb240 Another housing program in Utah is the Rocky Mountain Housing Fund.   This program provides, say a school teacher, a down payment and a better interest rate even if their credit is a little lower.   This program has a 50/50 equity split. So as we end… --------   When the mortgage payment is lower then the rent payment, which is common for their program participates, the difference is put into a custodial savings account to help the participant keep a 6-month reserve to cover unexpected housing costs. https://rmhf.net/  These new duties begin Tuesday for Waldrip, who made affordable housing a priority during his two terms as a state lawmaker from 2019 to 2023 and is a partner with the Rocky Mountain Homes Fund, a first-of-its-kind nonprofit that puts lower income families on a path to home ownership. https://www.deseret.com/2023/12/5/23987961/utah-gov-spencer-cox-wants-35000-starter-homes-built-new-budget-affordable-housing-olympics Remember… business want talent, but talent wants place. I want to avoid ending up with something like this, which is really a parking lot with some apartments in it. We want something like this, that has place and is house scale. What I don’t want is in 10 years when people talk about “the housing crisis” people don’t say “which one” not sure if people are talking about the 2008 one or the one that grow out of the pandemic. We can make sure there is both housing and jobs for our children and grandchildren. Thank you.