Affordable housing incentives see support

A proposal targeting the development of more affordable housing received support Monday with a key question: "Will it work?"

“I like everything you are proposing,” Rochester City Council President Randy Staver told Community Development Director Cindy Steinhauser. “I just would like to have some assurances that this would work.”

Steinhauser, who presented the proposal during Monday’s council study session, said the question will be part of future discussions with developers, bankers and others connected to building housing.

“I wasn’t comfortable starting to shop around these concepts until I felt like there was some level of agreement on the part of the city council,” she said.

The proposed policy offers three potential incentives designed to build housing for people whose incomes put many homes and apartments out of reach. While the city, county and state have helped build a variety of homes in Rochester for households earning 60% of the area median income, Steinhauser said a gap exists for lower-income brackets.

A 2018 housing study indicated a third of Rochester’s households earn 30% to 55% of the area median income. With an area median income of approximately $70,000 for an individual in the city, it means a third of residents are earning approximately $21,000 to $36,000 a year.

“We really want to focus on the lower and very-low housing bracket,” Steinhauser said.

The proposed policy would offer a mix of financial incentives, fee reductions and other perks to developers committed to providing housing affordable to lower-income brackets.

Projects catering to families earning 30% of the area median income could receive direct financial incentives of $200 per unit, with a $6,000 cap. Projects aimed at households earning 50% AMI would receive half the benefit.

The housing developments, whether a group of single-family homes or an apartment complex, could also qualify for reduced fees, including sewer fees and application and permit costs.

Projects aimed at the 30% AMI households would see fees cut in half, while the higher targeted bracket would provide a 25% cut.

Steinhauser said it hasn’t been determined how the reduced revenue would be covered by the city, but council members said it shouldn’t be passed to other developers.

“We can’t just steal from the top to give to the bottom,” said council member Shaun Palmer.

Steinhauser said the city likely has two options: Either consider it a loss of potential revenue, or find another city fund to support the program as an investment in affordable housing.

In addition to financial incentives, Monday’s proposal included the potential for expedited project reviews and inspections to save developers costs associated with delays.

Council members encouraged Steinhauser to go further, including the possibility of reducing costs associated with dedicating land or funds for city parks near housing developments.

“I have gotten feedback that those are heavy sometimes for someone trying to build affordable housing,” said council member Patrick Keane.

Rochester Mayor Kim Norton said looking at options is acceptable, but she urged caution to ensure the change doesn’t create affordable housing without easy access to city parks.

She also cited a need to ensure the affordability remains sustainable.

Council member Michael Wojcik agreed, citing concerns that single-family homes built with the incentive might not be affordable for the next owner. He suggested finding incentives that provide long-term affordability.

“Let’s figure out how we can provide more awards for development patterns that are more sustainable,” he said.

Steinhauser said she and city staff will start talking to developers and others about the proposal, as well as researching other potential incentives and impacts, with plans to return to the council later this summer or early fall.