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2023.02.21 Workshop Minutes - Approved APPROVED MINUTES CITY COUNCIL WORKSHOP & OPEN PODIUM TUESDAY, FEBRUARY 21, 2023 CITY CENTER 5:00 – 6:25 PM, HERITAGE ROOMS 6:30 – 7:00 PM, COUNCIL CHAMBER CITY COUNCIL: Mayor Ron Case, Council Members Kathy Nelson, Mark Freiberg, PG Narayanan, and Lisa Toomey CITY STAFF: City Manager Rick Getschow, Police Chief Matt Sackett, Fire Chief Scott Gerber, Public Works Director Robert Ellis, Community Development Director Julie Klima, Parks and Recreation Director Jay Lotthammer, Administrative Services/HR Director Alecia Rose, Communications Manager Joyce Lorenz, City Attorney Maggie Neuville, and Recorder Kelsey Engelen Workshop - Heritage Rooms I and II (5:30) A. HOUSING OVERVIEW Jonathan Stanley, Housing and Community Services Manager for the City of Eden Prairie, began his presentation by explaining why it is important for government to get involved in affordable housing. Stanley first stated that this need service is one that is not otherwise provided by the private market without government intervention, particularly when one considers the broad income spectrum which involves a variety of needs and preferences relating to housing. Stanley then discussed the relationship between government and private market in which developers receive government financing in return for providing a guarantee of affordability and quality for a specified length of time. Continuing with the overview of affordable housing, Stanley discussed the negative implications of the term and the stereotypes, often related to race and ethnicity, welfare, or laziness, which have been entrenched in affordable housing. Stanley specifically pointed out the mis-informed notion that it is synonymous with Section 8, and clarified that affordable housing includes but is not limited to Public Housing or Section 8 which are distinct programs. He also clarified that the term ‘subsidized’ housing means there are federal, state, or local funds contributing to a development’s affordability. Stanley explained that housing is considered affordable when a household pays no more than 30% of their income toward rent or a mortgage payment. Households paying more than 30% are considered “cost burdened”, and those paying more than 50% are considered “extremely cost burdened”. However, Stanley pointed out that there is a huge difference between a household paying 30% that earns $30,000 and one that earns $150,000. Because of this key difference, affordable housing practitioners concern themselves almost exclusively with households that are considered low- or moderate-income. City Council Workshop Minutes February 21, 2023 Page 2 As defined by the U.S. Department of Housing and Urban Development (HUD), low-income is a household earning 80% or less than the Average Median Income (AMI); very low- income earning 50% or less of the AMI; extremely low-income earning 30% or less of the AMI; and moderate income earning 80%-120% of the AMI. Stanley displayed graphics of tables which express how household income, factoring in household size, converts into rent costs for affordable housing. The figures are updated annually by HUD and published by the Minnesota Housing Finance Agency (MHFA). Stanley went on to discuss several agencies who run affordable housing programs and distribute funds. Starting with HUD, Stanley explained that the federal agency administers or provides money for Housing Choice Vouchers, “Project-Based” Section 8, Community Development Block Grants (CDBG), Emergency Shelter Grants, Public and Indian Housing, and many smaller programs. HUD also loosely oversees the Low-Income Housing Tax Credit (LIHTC) which is an IRS program. Next, Stanley delved into the roles of MHFA. He explained that this state agency allocates LIHTCs; receives state appropriations for development and rehab; buys thousands of first- time homebuyer loans annually; conducts the MF and SF Coordinated or “Super RFP” that distributes $150M-200M; monitors and oversees ta huge portfolio of HUD-funded properties; and advocates for housing-friendly statutes. The Metropolitan Council provides Grants to Cities who participate in the Livable Communities Act Programs, runs HCV for most of the region, and sets the “Regional Allocation of Affordable Housing Need”. Eden Prairie’s Fair Share is 1,408 affordable units by 2030. Stanley bluntly stated that this figure is impossible given the resources available but indicated that the City does the best they can to get work toward that goal. Stanley then broke down regional roles of Hennepin County and City of Eden Prairie. Hennepin County administers and distributes CDBG County-wide and the Affordable Housing Incentive Fund (AHIF). The county also oversees the Continuum of Care, which is for long-term homelessness and receives special program funds on a formula basis. Eden Prairie provides Tax Increment Financing (TIF), uses its own CDBG allocation and Pooled TIF to fund SF Rehab and First-Time Homebuyer programs. The City has provided grants for Rental Assistance and is able to issue Housing Revenue Bonds to support developments. Mayor Ron Case asked about the out-of-state firms which buy up single-family homes. Discussion ensued about the presence of absentee landlords in affordable housing and the struggle that some tenants have in addressing issues or need for repairs due to an inability to get in touch with their landlords. City Council Workshop Minutes February 21, 2023 Page 3 Councilmember Kathy Nelson inquired about requirements of regular and scheduled inspections of rental units with concerns regarding safety and livability of affordable housing units. Fire Chief Scott Gerber and City Manager Rick Getschow confirmed that units are subject to inspections in which all important safety points within the rental are checked to ensure safety requirements are met. City Attorney Maggie Neuville added that landlords are also required to have local management who can be contacted and who can physically be there to assess issues when needed. Stanley moved on to provide a brief introduction to various programs. Public Housing is funded by HUD but run by local Public Housing Agencies (PHAs). Eden Prairie does not have a PHA but has a small portfolio of SF public housing units overseen by Metropolitan Council. About 1.2 million people nationwide live in this housing which is considered last resort. Housing Choice Voucher or Section 8 Voucher is the largest single affordable program and is funded by HUD. The voucher is given to low-income households who then place the voucher with participating landlords. The program is optional for landlords and tends to have huge waitlists. Project-Based Section 8 differs from the Voucher program in that the subsidy is tied to the property and unit such that any eligible low-income family can apply to the building. Eden Prairie has three of these where HUD provides 70% rental assistance: Edendale, Briar Hill and Prairie Meadows. Stanley continued by breaking down Low-Income Housing Tax Credit (LIHTC). Stanley explained that when MHFA awards tax credits, they go to the developer, but it does not have sufficient tax liabilities to realize full value. Instead of using it, it sells the credits to investors who provide the funds the developer needs to build the project now rather than realizing tax credits over time. Community Development Block Grants (CDBG) are typically used for single-family rehab and first-time homebuyer loans because of strict rules and income limits. Stanley pointed out that it is not the most useful tool for housing as it cannot be used for new construction. Tax Increment Financing captures the newly created tax revenue, or incremental tax revenue, generated by a new development. TIF districts can be just a single building’s boundary or an area. It must pass a ‘but for’ test that says the development would not have been feasible ‘but for’ the City subsidy. Recent examples in Eden Prairie include The Ellie and Greco/Golden Triangle Housing. Stanley stated that different programs are intended for and geared toward different AMI levels, all based on the assumption that a given household pays no more than 30% of income City Council Workshop Minutes February 21, 2023 Page 4 toward housing. Stanley also explained that different programs have different rules and affordability terms. Stanley moved on to provide a closer look at Eden Prairie, starting by looking at permitting ups and downs over time for new housing units. In the early 2000s a lot of building occurred but dropped off during the recession; building has been on the upswing with considerable progress in the last five years, though the types of units have shifted away from single-family units due to overall land development. A breakdown of Eden Prairie housing types showed that 53% is made up of single family detached homes; 27% is multifamily; 19% is townhomes, single family attached; and 1% is duplex, triplex, and quad housing. Looking at American Community Survey data, Stanley discussed the cost burden problem in Eden Prairie, explaining that 14% of homeowners and 40% of renters are experiencing cost burden meaning that they are paying more than 30% of their income on housing. Stanley presented the available rental stock by income and expressed the particular need for increase in the share of affordable rental units for the less than $35,000 income group. Stanley discussed the Housing Task Force commissioned by Eden Prairie, and the successful actions taken. First, Stanley explained the Inclusionary Housing Ordinance which results in around 25% affordability and requires affordability in most multifamily developments receiving City subsidy, or needing a Comprehensive Plan change or Planned Urban Development (PUD). The Housing Task Force created an Affordable Housing Trust Fund which is a flexible account exclusively for affordable housing activities and has a potential for State match of funds. Stanley also pointed out the attention on preservation of Naturally Occurring Affordable Housing (NOAH), and the Action Plan that is in progress to attempt to maintain this housing in Eden Prairie. Stanley broke down the main local funding tools and budget for various programs including Transit-Oriented Development, NOAH Preservation, CDBG, TIF, and Community Land Trust (CLT). Wrapping up, Stanley discussed Eden Prairie’s progress toward reaching 1,408—the city’s Fair Share of Affordable Housing. Breaking down the affordable units in the city’s multi- family housing projects, Stanley presented the difficult task ahead of them to attempt to meet the goal by 2030. From the last ten or so projects, 19% are affordable units overall. Councilmember Narayanan brought up the difficult financial issues that can arise from individuals ‘graduating’ from affordable housing, and the inherent complications for individuals unable to ever ‘graduate’ from the need for affordable housing. City Council Workshop Minutes February 21, 2023 Page 5 Mayor Case brought up the implications for the city and its residents of meeting or not meeting the 2030 goal. Discussion ensued around options for progressing toward the 2030 affordable housing goal. Open Podium - Council Chamber (6:30) I. OPEN PODIUM III. ADJOURNMENT