Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

When it comes to creating more affordable housing in Lawrence, two questions will soon come to the forefront: Who pays and how much?

City leaders agree the lack of affordable housing in Lawrence is a problem, and coming months will determine how much local property owners, shoppers, developers or visitors might pay toward fixing it.

It’s a question that could be answered, in part, at the ballot box.

“If the voters have a chance to weigh in on it, that will really help us come to some determination as to how the community feels about this issue,” said Vice Mayor Stuart Boley, a member of the city’s Affordable Housing Advisory Board.

If approved by the City Commission, the renewal of the citywide .55 percent sales tax will likely go in front of voters this year. The advisory board and City Manager Tom Markus are recommending devoting .05 percent of the sales tax to affordable housing.

The shortage of affordable housing is an acute problem in Lawrence, and national health rankings have designated the shortage in Douglas County as “severe.”

In addition to sales tax revenue, the advisory board is recommending four new funding sources: a voter approved bond issue, a fee allowing developers to “up-zone” density of a property, voluntary donations via utility bills, and transient guest tax revenue from short-term rental company Airbnb.

Shopping for affordable housing

The .55 percent citywide sales tax, which is in addition to the 1 percent general city sales tax, generated $9.7 million last year. If not renewed by Lawrence voters, the taxes will sunset in March 2019.

As currently laid out, nearly all of the .55 percent sales tax supports infrastructure and transit, with .05 percent allocated specifically for transit expansion.

The .05 percent is currently generating about $1 million annually. Markus is recommending reallocating those dollars to affordable housing should voters choose to renew the tax. Part of the consideration is that sales tax is regressive because it disproportionately affects people with lower incomes.

“I think as a revenue source, it’s kind of a way to reinvest — for those that may be more income challenged — back into something that could benefit the population that is impacted the most by the regressive nature of that tax,” Markus said.

For next year, the city’s capital improvement plan allocates $350,000 toward affordable housing, so the approximate $1 million from sales tax would significantly increase the city’s funding for affordable housing. Though the funding increase is less than what some advocacy groups requested, Markus said he thinks that amount is reasonable.

“They’ve been looking for a steady stream,” Markus said. “I just think that that amount is realistic, reasonable and I think it creates the possibility to leverage those funds with other state, federal, private funds to start to really seriously address affordable housing.”

“And at the same time, I don’t think it’s so much that the public should feel opposed to that kind of a commitment,” Markus continued. “So, I’m hopeful that the public sees it that way as well, and we start to address that issue throughout the community.”

The advisory board voted unanimously to support the funding recommendations, but Boley said that he recognized that renewing and repurposing part of the sales tax is a “tough sell.” He noted that the city’s overall sales tax rate of 9.05 percent is high, as is the city’s reliance on sales tax revenue. For those reasons, Boley agreed that how sales tax is used is key.

“The impact of sales tax on people who live on fixed incomes and who live in poverty is very significant,” Boley said. “So to take an increment of this sales tax and turn it around and use it to help out with folks who are in those categories is really significant, especially because we’re charging sales tax on groceries.”

Assistant City Manager Casey Toomay, the city liaison to the board, said that allocating the .05 percent to affordable housing will likely have its detractors, as others are also asking for those funds. She said topping that list is funding requested for sidewalk maintenance and bicycle and pedestrian improvements.

Other potential funding sources

The advisory board spent months discussing potential funding sources for the city’s affordable housing trust fund, eventually narrowing the options down to five new revenue sources. The recommendation was submitted to the City Commission this month and will be discussed at a future work session.

Toomay said the plan is to schedule that discussion once the advisory board has the results of a new housing analysis, which should be complete this year. The recommendations include multiple funding sources, and are as follows:

• Sales tax: Ask voters to renew the .55 percent citywide sales tax but repurpose the .05 percent sales tax that will no longer be needed for transit expansion to affordable housing.

• Voter approved general obligation bonds: Seek approval to obligate a specific, dedicated amount of debt to support affordable housing. The commission could also redirect bonds from other projects identified in the city’s Capital Improvement Plan.

• New transient guest tax: Direct guest tax funds collected from online short-term rentals such as Airbnb to affordable housing. Short-term rentals aren’t currently permissible under city code, but are under review by the commission. The state began collecting the city’s transient guest tax on Airbnb rentals this year for remittance to the city. It’s anticipated that about $26,400 annually will be collected.

• Voluntary donation: Establish a way for residents to make a voluntary donation to affordable housing as part of paying their utility bill.

• Pay for density: Establish a policy requiring any residential or commercial project requesting up-zoning to pay a per unit fee that would go toward affordable housing. The project would still go through the regular public land use entitlement process.

The recommendation also notes the board supports continuing to provide economic incentives for affordable housing projects. The board also expressed support for a new policy that would automatically waive certain development and permitting fees for affordable housing projects.

Paying for density

One of the more discussed recommendations was the density fee, which the board modified to affect fewer projects. In its final form, the fee would only affect projects in which a developer wants to increase the density beyond that established by the city’s current zoning districts.

For example, that would include a property zoned single family that a developer proposes to “up-zone” to multifamily, according to Scott McCullough, director of planning and development services.

“Essentially, any request to zone a property to a district that allows for more units would be required to pay into the housing trust fund,” McCullough said via email.

Advisory board member Tim Stultz, who represents the Lawrence Home Builders Association, said that he thinks the recommendation for an up-zoning fee is an acceptable solution and will hopefully encourage higher density developments.

“The way you increase affordability is to increase density too,” Stultz said. “The more units you put per acre, you’re naturally going to make them more affordable because your ground cost is going to go down on a per unit basis.”

However, Stultz said such a step would need to be part of a multisource funding system and in combination with other goals of the advisory board, such as the goal to decrease other development costs.

“It’s a communitywide problem that’s got to be attacked from numerous different directions,” Stultz said. “And quite frankly, the cost associated with fixing affordability needs to be spread across the community too. One certain segment shouldn’t pay for that.”

Further discussion

Toomay said once the City Commission indicates which options it is interested in pursuing, city staff will further investigate how those recommendations could be implemented.

Boley said that all the recommendations are challenging in their own way and that ultimately the commission will have to decide which funding sources to pursue further.

“Everything has a barrier to accomplishing, but that’s why we’re here, is to take on those barriers and see what we can make happen,” Boley said.

The possibility of reallocating a portion of the citywide sales tax will be the first recommendation to come in front of the City Commission. Toomay said the sales tax renewal — and how it will be allocated — will be part of the commission’s work session agenda June 13.