photo by: Nikki Wentling

At a public meeting Thursday, May 11, community members were asked to place stickers next to 21 different city services, indicating whether they wanted each service to receive lessened, equal or more funding than it has in the past. Affordable housing was one of the categories receiving the most votes to get more funding.

Editor’s note: This is the third story in a five-part series exploring the shortage of affordable housing in Lawrence, which is designated through national health rankings as a “severe” problem in Douglas County. We’ll cover the attention that issue has received in the past year and what measures city leaders and others are proposing, moving forward, to improve it. Read the rest of the series here.

Lawrence knows it has a housing problem.

City officials, the chamber of commerce, Realtors and a slew of nonprofits have acknowledged it. And so have the data.

The city’s housing forecast for 2016, compiled by Wichita State University’s center for real estate, reported slow single-family housing construction in the past five years — likely to continue this year — and a tightening inventory of available homes.

photo by: Nikki Wentling

A charge of permitting activity for single-family homes in Lawrence from 2011 to 2015, and a projection for 2016, compared with national averages. The 2016 forecast is less than half of the levels seen in the early 2000s, according to a report put together by Wichita State University.

As the inventory diminishes, prices will increase, the forecast states.

That — along with college students’ demand for housing and a looming “gray tsunami” of seniors living on a fixed income — stresses the market of “workforce housing,” said Rebecca Buford, executive director of the Lawrence Community Housing Trust. Workforce housing is generally defined as costing between 50 and 120 percent of an area’s median income.

“What that does is make it harder for someone to have a selection of what we call ‘starter homes,’ your first home with your first job, where you have your first kid,” Buford said.

According to U.S. Census data from 2009 to 2013, about 28 percent of households in Lawrence with mortgages, and 57 percent of renters, are already “cost burdened” meaning more than 30 percent of their monthly gross incomes goes toward housing payments.

The American Institute for Economic Research, which recently named Lawrence a top small metro for seeking employment after college, also tells its readers: “…the city does not have the most favorable economic conditions. Rents are high for a small city and average earnings are the second lowest on our list.”

Lawrence knows the problem; it’s one that exists nationwide. And as the city begins working on solutions, it’s faced with big questions — chiefly about it’s newly created affordable housing trust fund.

First, where will money for the fund come from? How much should go into it in 2017? And for what will it be used?

‘The most challenging part’

In Boulder, Colo., a portion of city property taxes goes to the city’s housing assistance program.

Savannah, Ga., pays into its housing trust fund directly from its general fund.

A few California communities use some of their transient occupancy tax dollars, which is an amount applied to hotel bills — what Lawrence calls transient guest tax.

Many of the approximately 470 municipalities in the U.S. with housing trust funds gather revenue for it from fees charged to developers, according to the Housing Trust Fund Project.

Mary Brooks, director of the Housing Trust Fund Project through Center for Community Change, helps cities, counties and states to establish housing trust funds. Brooks brought her expertise to Lawrence City hall in 1998, when the then-City Commission talked about the idea of creating a housing trust fund.

That idea came to fruition in 2000, when commissioners passed an ordinance establishing the fund. At the time, the city deposited a one-time payment of $500,000 from the general fund.

From 2002 to 2007, $10,000 was deposited each year from the general fund. But a dedicated source of revenue was never decided upon.

Back in 1998, Brooks told commissioners,” The hard part is where you are right now, trying to find the money.” She said Lawrence needed to submit itself to the task and make it a priority.

Eighteen years later, Lawrence is having the same conversation. And Brooks is echoing the exact same message.

“I never go into a community and they say they have money to put into affordable housing,” Brooks said. “It’s always a bump in the road. But I’ve never worked in a community where, if they looked seriously enough for an alternative revenue source to address affordable housing, that they have been unable to find one.”

“We find revenues to do the things we want to do.”

City Manager Tom Markus has noted that in addition to other tools, such as the proposed affordable housing requirement for residential developments receiving incentives, a dedicated source of revenue is necessary to make a change.

Commissioners will discuss a revenue stream during its 2017 budget talks this summer, he said.

“That’s probably the most challenging part,” Markus said. “We have to look at, ‘OK, if we dedicate this much money, where is it coming from? And is it taking money away from something else? And are you willing to make that decision?’ That’s a real policy decision on the part of the commission.”

Developer fees

In 2015, city commissioners were able to negotiate money from developers for the affordable housing trust fund. A development group led by Doug Compton and Mike Treanor gave $75,000 to the fund when the commission approved industrial revenue bonds for the group’s apartment project at 800 New Hampshire St., the old Pachamamas building.

Industrial revenue bonds give an exemption to developers on sales taxes for construction materials. The $75,000 was about what the city would miss out on in sales tax revenue because of the bonds.

Currently, the trust fund contains little more than $78,000, most of which is the $75,000 payment from developers of the Pachamamas project.

The city was anticipating receiving another approximately $100,000 this year from the expansion of The Eldridge hotel. In October, when the City Commission voted to approve industrial revenue bonds for the project, Commissioner Stuart Boley negotiated for developers to rent a public parking lot at Seventh and Vermont streets for $8,000 monthly, with a maximum of $120,000.

The funds were to go to the city’s general fund and be made available to the housing trust fund.

Before Boley’s negotiations, The Eldridge had offered to pay $6,720 total in parking fees for the lot.

After consulting Kansas City-based law firm Gilmore & Bell, the city is recommending not moving forward with those types of negotiations in the future.

Instead, city officials are proposing charging an “origination” fee to developers when their industrial revenue bonds are issued. That proposal is included in a packet of potential changes to policies that govern Lawrence’s economic development incentives.

Lawrence does not currently charge origination fees for IRBs, but other cities — such as Lenexa, Olathe and Shawnee — do.

“Origination fees are something that we’ve never charged, but it is a way to be able to support other goals,” said Lawrence Economic Development Director Britt Crum-Cano at a review of the incentives policies earlier this month. “The current City Commission is interested in affordable housing, and this would be one way funds could be raised to meet a goal like that.”

The proposed fee would be one-tenth of a percent of the bonds being issued. In the case of the Pachamamas project, $7.8 million in industrial revenue bonds was issued. The origination fee would’ve been $7,800.

The city would not apply the fee to nonprofits or for developments creating primary jobs or adding affordable housing.

Brooks said fees on developers were a popular stream for affordable housing nationwide, but the trick, she said, is whether there is enough steady development to create good revenue for the fund.

She said other cities have charged fees on developers who are building office or commercial space, which creates a workforce needing affordable housing. Other communities have charged fees on those tearing down buildings or converting housing structures to other uses.

“Developers don’t like it, which won’t be anything new,” Brooks said. “But there probably isn’t any source that’s used more at the local level.”

Using guest tax to fund affordable housing is a new idea, Brooks said.

Taxing short-term rentals

In January, Chicago Mayor Rahm Emanuel introduced an ordinance to regulate –and tax — the house-sharing service Airbnb to fund affordable housing. Brooks said other cities are having the same discussions.

Through services like Airbnb and Rent Like a Champion, Lawrence homeowners rent their residences on a short-term basis.

The practice is a violation of city code, but Lawrence Planning and Development Services Director Scott McCullough said in November that the city likely wouldn’t do anything about it until it hears complaints. Thursday, McCullough confirmed the city hasn’t been working on regulating it.

On Friday, there were upwards of 70 rentals in Lawrence listed on the Airbnb website. They ranged in price from $20 per night to $700.

San Francisco and Portland, Or. have partnered with Airbnb to collect occupancy taxes. Chicago is set to vote on its crackdown of Airbnb this week.

In Lawrence, a six percent tax is applied to hotel rooms. The newest use of that money is a grant program for events and programs that boost tourism.

‘This needs to be done’

Finding the source of revenue for an affordable housing trust fund is “hardest” with cities, Brooks said, “because their revenue streams are a little tighter.”

That’s true in Lawrence, which is currently going through its 2017 budget process and facing a “dire” situation for its general fund, the city finance director has said. He told city commissioners earlier this month that there was no money for new programs, and Markus said Thursday this budget process would be about “belt-tightening.”

But the City Commission has named affordable housing as a top priority. And at a public input session Thursday, at which a dozen or so residents were asked to name priorities for the budget, affordable housing was one of the handful of items to receive the most support.

It’s anticipated that, like in 2000 and again last year, the affordable housing trust fund will get a lump sum in the 2017 budget. How much that will be is unclear.

Brooks says anything less than $5 million would mean Lawrence is “not really serious about this yet.” Justice Matters, a conglomeration of church congregations credited with reigniting the discussion on affordable housing, first suggested $3 million, then cut its ask to $1.5 million for 2017. Markus said it will likely be a “percentage” of that, and the newly created Affordable Housing Advisory Board isn’t going to name a dollar amount.

“I’m not suggesting by a long shot we could provide that much money without serious sacrifice of other services that we provide currently,” Markus said of the $3 million request posed earlier this spring.

The Affordable Housing Advisory Board, established by the City Commission last year, agreed Monday to send a memo to Markus stating the board was “not ready to make recommendations for funding streams” or name an amount of funding for 2017.

City Commissioner Stuart Boley, a member of that board, said the group was “too new” and needed to complete more research before asking for a specific dollar amount.

Because the board isn’t making a specific recommendation, it will be left to the City Commission to decide an amount for 2017.

Shannon Oury, executive director of the Lawrence-Douglas County Housing Authority and a member of the advisory board, suggested altering wording in the memo to Markus. It now states the board wants a “significant” amount of money set aside.

“What we’re trying to say tactfully is, we want the City Commission to make this decision because they have a much better handle than we do on what’s the money available and where is that money,” Oury said. “On the other hand, we need to say ‘zero’ isn’t at all our recommendation.”

“We want to say, in principle, this needs to be done,” said the Rev. Matt Sturtevant, a board member and an organizer with Justice Matters. “Even though, in detail, we don’t have the answers.”

Affordable housing ‘wish list’

City commissioners allocated $200,000 to affordable housing in 2016, $100,000 for a new transitional housing program and the other $100,000 for the construction of affordable homes.

Though the advisory board won’t be naming any dollar amount for 2017, it will work this summer to establish a five-year plan. The plan will be a sort of “wish list,” Sturtevant said, for what the fund should be used for going forward.

The city posted an online survey through Lawrence Listens on Wednesday to gather feedback from community members on what kind of affordable housing services and programs they want to see supported. The survey had 25 responses as of Friday, and it will be online until May 23.

Markus has expressed doubt that, if millions were put into the fund in 2017, the total amount could be utilized.

“I’m not convinced that all of the nonprofits have the capacity to build everything, if you could provide that much money,” Markus said. “Rather than start with the total number right away, we should build that up.”

In response, Buford said: “I think we can handle a lot.”

“The idea that we could immediately build $5 million worth of projects in a year? Yeah, no, no one could do that. And strategically the worst thing that could happen is to get a huge amount of money and not be realistic about the timeline for housing projects. But a portion of that is probably reasonable to work with. And I think the affordable housing advocates understand that your rarely get all that you ask for.”

Brooks said in her experience, she’s never seen a trust fund put together and the money go unused.

“I just do not see it happening,” she said.

She also said receiving the total amount needed to fill the housing gap may be unrealistic.

“If we really calculated what the need was in Lawrence and figured out how much that would cost, we might not get our elected officials to talk to us,” Brooks said.

Completely eliminating the need for affordable housing will never happen, Brooks said, no matter the city’s effort. There will always be seniors, veterans and others on fixed incomes needing affordable housing, as well as people like Kayla Brown, who “had her housing opportunity taken away,” Brooks said.

“It could happen to any of us,” she said. “We’re always going to have people that need affordable housing.”

As a country, she said, “we’ve really ignored this for decades.”