Lawrence City Hall, 6 E. Sixth St., Thursday, July 7, 2016

When residential developers seeking incentives from the city propose affordable housing units for their project, they will now have an exact target to meet.

The city has decided on a model that specifically calculates fair values for Lawrence rentals, and will define what is affordable for each size of unit.

“I think it gives us a quantifying measure, where we can actually look at something, and instead of just subjectively saying, ‘Oh, I think that is or isn’t affordable,’ we can actually tie it to a fixed market rate we have established,” said City Commissioner Matthew Herbert.

The city’s Affordable Housing Advisory Board recommended using the Fair Market Rent model, and commissioners agreed at their most recent meeting to incorporate the recommendation into the city’s new economic development incentives policy.

For example, the fair value rent for a one-bedroom apartment in Lawrence for 2016 is $639 per month, including the cost of required utilities — namely water, electricity and gas, if applicable. For a two-bedroom unit, it’s $835 per month.

A better system

The advisory board was established in July 2015, and the board’s new recommendation replaces another it submitted in October. The previous recommendation said rents needed to be affordable for specific income brackets, but didn’t set exact amounts for rent.

The determining factor for affordable homes or apartments for sale will still be based on whether it is affordable for specific income brackets. For affordable ownership, payments can’t exceed 30 percent of household income for families that make 80 percent of the area median income.

The fair market rent is calculated annually by the U.S. Department of Housing and Urban Development. Shannon Oury, executive director of the Lawrence-Douglas County Housing Authority and a member of the advisory board, said she thinks the calculation is the most accurate one to use.

“It’s based on our local data rather than either Kansas statewide data or national data,” Oury said. “So I think that helps us to make sure that it’s a local number that we’re looking at.”

Before the recommendation was adopted, the advisory board and the City Commission received two affordable housing proposals for residential incentives requests. The Affordable Housing Advisory Board recommended the affordable housing component of both proposals.

Herbert said although it’s unfortunate the fair market rent model wasn’t in effect for those requests, a more specific policy will help guide the commission’s decisions going forward.

“It is by far a better system than we had before, because quite frankly we had no system before,” Herbert said. “We were simply going off of what the Affordable Housing Advisory Board had told us, whether or not they thought it was a good plan, and they didn’t have any measure in place to determine for themselves if it was a good plan. It’s a lot easier to hit an objective when you actually have a target.”

Recap of affordable housing proposals

Though the commission’s decision is based on the project as a whole, the project approved by the commission wouldn’t have hit the affordable housing targets had they been in place. On Nov. 1, the commission voted to provide public incentives for a brewery, restaurant and apartment project in East Lawrence that will offer two one-bedroom apartments at the reduced rate of $840 per month, including utilities.

Based on the project as a whole, the commission voted earlier this month to deny public incentives for a luxury condominium, retail and office project downtown. That project would have offered a one-bedroom affordable condo for about $95,000.

Because there will be a clear target for affordable housing, Herbert said the model will help with perceptions of favoritism.

“That will take any element of, ‘Oh, they denied this project because they just didn’t like the developer, or they approved it because they do like the developer,'” Herbert said. “It’ll take that element out of it, and it will make it to where we can look at the numbers.”

Addressing a ‘severe’ shortage

The affordable housing component of the incentives policy is part of the city’s effort to address a shortage of affordable housing, which has become an acute problem in Lawrence. National health rankings have designated the shortage in Douglas County as “severe.”

Significant portions of renters and homeowners in Lawrence spend more than 30 percent of their monthly incomes on housing, qualifying them as “cost burdened.” The problem is worse for renters, with 57 percent being cost burdened, according to the most recent U.S. Census data. For homeowners, 28 percent are cost burdened.

As part of the new incentives policy, how many units need to be set aside as affordable has also been addressed.

Under the policy, any developer seeking incentives for a project with a residential component will be required to designate a portion of the units as affordable. For residential projects with 4-49 units, at least 10 percent of the units will have to be affordable. For projects with 50 or more units, the requirement is 15 percent.

The city will conduct annual reviews to make sure the agreement is being followed. All affordable housing designations must remain in effect for at least the term of the incentive period, but the policy states that the city “strongly encourages” the applicant to maintain units designated as affordable housing even after the incentive period.

Oury said the fair market rent measure will help with those performance reviews, because the rate is adjusted annually.

“HUD puts this out every single year, so that as we go to measure these incentives going forward, we know we’ll have a measure,” Oury said.

The city’s plan is to provide affordable rental units and first-time homes in scattered sites throughout the city, as opposed to concentrating units in certain neighborhoods. The plan is to do so via new construction as well as the conversion of existing properties. In addition to the set aside requirements for incentives, the city plans to build up its affordable housing trust fund.