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HomeMy WebLinkAbout2021 02-01 CCM Work SessionMINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA WORK SESSION FEBRUARY 1, 2021 CALL TO ORDER The Brooklyn Center City Council met in Work Session called to order by Mayor Mike Elliott at 6:30 p.m. The meeting was conducted via Zoom. HOUSING STUDY DISCUSSION Mayor Elliott stated the City of Brooklyn Center is at a critical junction in housing development, and embarking on development of multi -family housing, which is critical to the future of the City. He added housing is a very real crises throughout the country, as record numbers of people experience displacement and unemployment. He stressed the importance of creating housing people can afford, keeping kids in their schools, and creating the stable foundation for a thriving community. City Manager Curt Boganey stated, at the City Council's last meeting, Community Development Director Meg Beekman gave a presentation on various housing policies, and work that has been done by the City Council and City Staff over the last several months. She added City Staff hopes to get City Council feedback and direction regarding mixed income policies or actions, and how to preserve affordability in Naturally Occurring Affordable Housing (NOAH). Community Development Director Meg Beekman stated the purpose of this meeting is to review specific policies — inclusionary or mixed income housing, and the creation of new legally binding affordable units, as well as a NOAH preservation program. She added City Staff has researched other NOAH programs extensively, specifically in St. Louis Park, Minneapolis and Brooklyn Park. She noted many local metro area cities have similar programs. Ms. Beekman stated a NOAH preservation program is more complex than a mixed income policy. She added the City would be leveraging a State law, known as 4D, that would allow existing multi- family properties with 20% or more of their units set aside at 60% AMI or less to apply for a special reduced property tax classification. She noted State law does not allow cities to implement rent control as a stand-alone policy, so rent controls are introduced through voluntary programs, incentives, and deed restrictions. Ms. Beekman requested City Council consideration of what additional information is needed to frame programs and policies moving forward, identify initial goals, limitations and levels of affordability, as well as what percentages of units to set aside, and at what Area Median Income (AMI). She added she has provided the Minneapolis and St. Louis Park programs, which are almost identical, to show what an actual program looks like once it is in place. 02/01 /21 -1- Mayor Elliott stated Ms. Beekman mentioned that State law does not allow cities to do rent control. He added he saw in the news recently that the City of Minneapolis is going through the process of establishing rent control. Ms. Beekman stated Minneapolis has been out in front in terms of housing policy, and City Staff can keep an eye on their rent control policy. She added she would not be surprised to see further action by Minneapolis. She noted there are aspects of the State statute that are not clear. Mayor Elliott stated the news report indicated that the Minneapolis City Council seeks to protect renters from evictions. He added State law requires that cities seek authority from voters, so Minneapolis City Council would be required to submit to the Charter Commission. Ms. Beekman stated that is something City Staff can look into, but she is unable to offer an opinion on this issue. Councilmember Ryan stated, regarding the 4D program, City Staff is probably aware that there are legislative bills proposed at the State level that would change the classification rate for eligible rental properties from .75% to .25%, potentially creating a significant property tax shift from apartments to other property classes, which would have a significant impact on homestead property taxpayers. He added he believes that should be watched carefully, if the City Council decides to go in the direction of a 4D property tax reduction program for apartments. He noted that would be a way to increase the number of affordable units in Brooklyn Center. Ms. Beekman agreed, adding that legislation will have a fairly significant financial impact on the community. She added, in Brooklyn Center, there are currently 471 units under the 4D program, which will increase to 741 units upon completion of Sonder House. She noted the average discount, in terms of property taxes, that each unit sees will be $600-800, so that is a discount to rental property owners but a cost to other property owners in Brooklyn Center. Councilmember Ryan stated organizations in local government have suggested that there should be some kind of circuit breaker mechanism, whereby significant property tax shifts would result in the City at least partially being made whole, so the property tax shift does not fall on homeowners. Councilmember Ryan asked whether the property tax classification "residential" includes both single family rentals and homestead properties. Ms. Beekman confirmed this, adding the residential tax classification is single family dwellings and probably 4 units and under. Councilmember Ryan stressed the importance of a high level of participation in preserving affordable housing so the program can be successful. He added single family homes that are rental units would be excluded due to the 4-5-unit threshold for eligible properties. Ms. Beekman stated the program can decide which properties are eligible, and the program prepared by City Staff is 5 units or more. She added the City of Minneapolis operated their program for a year, and then revised it to include single family units. She noted, in Brooklyn 02/01 /21 -2- Center, single family properties are the largest source of larger unit rental properties and they serve a subsect of the market that are not served by multi -unit rental properties. She stressed the importance of including single family as well as multi -family properties. Mayor Elliott stated he did not take Roll Call at the beginning of the meeting. He noted Councilmember Graves was on the call at the beginning of the meeting. ROLL CALL Mayor Mike Elliott and Councilmembers Marquita Butler and Dan Ryan. Councilmembers April Graves and Kris Lawrence -Anderson did not respond. Also present were City Manager Curt Boganey, Community Development Director Meg Beekman, and City Clerk Barb Suciu. HOUSING STUDY DISCUSSION (CONT'D) Mayor Elliott asked whether there are other strategies to consider besides NOAH preservation. Meg stated, in response to housing needs, it will be necessary to take a multi -faceted approach, and use a variety of policy decisions, for the housing policy to be effective. She added this includes the creation of affordable inclusionary or mixed income housing policies can influence how public subsidy is utilized, how zoning can be encouraged that allows for higher density land use and makes affordable housing more feasible. Meg stated a preservation program for Naturally Occurring Affordable Housing (NOAH) would incentivize existing property owners to stabilize units at affordable rents. She added Brooklyn Center has a successful rental licensing program to ensure that properties are maintained, which is another tool to help stabilize units. Meg stated the City can work with rental property owners who intend to sell their property, particularly buildings with 40+ units, to encourage them to sell to non-profit, affordable buyers who will maintain affordability of the units. Meg stated tenant protection ordinances and programs ensure that tenants are being adequately protected. She added this should be a multi -faceted approach, and the housing study should provide recommendations regarding best practices and policies moving forward, especially those that have been effective in other communities. She noted she would recommend getting the policies working in the community, and then going back to adjust them if necessary. Mayor Elliott stated all of these policies — preservation strategies, 4D programs, tenant protections, and affordable housing creation - have been implemented in other communities but they have not been successful. He added the City of Minneapolis implemented a variation of these policies, including rent control, because these policies have not gotten them where they need to go. He asked whether it is possible to ensure the effectiveness of these policies. Mayor Elliott stated Brooklyn Center should have a good understanding about the impact of these programs in communities where they have been adopted, and whether they have moved the needle 02/01 /21 -3- in terms of housing affordability. He added the housing crisis suggests that they have not. He stressed the importance of knowing whether these actions will have an impact. Ms. Beekman stated the best answer, as with all policies and programs, is to have clear goals, and to measure outcomes against goals, and make adjustments along the way. Ms. Beekman stated Minneapolis recently published a report on their 4D program, which is a 10- year program requiring a minimum of 20% of units remain affordable to households making 60% of the Area Median Income (AMI), and rent increases on tenants limited to less than 6% annually. Larger increases are allowed when there is a unit turnover, and 2+ units are required for a building to be eligible. Benefits include reduced property tax liability; targeted energy efficiency programs; and $100 per unit grant and assistance to cover administrative costs for property owners. In terms of outcome, they have had about 1200 units rolled into the program. Ms. Beekman stated this is an example of how to measure whether or not the program is effective. She added it is difficult to measure whether the program helps people stay in their units, but rent stabilization is clearly the intention of the program. She noted City Staff have heard from residents regarding the number of times their rent increases, and non -renewal of leases for no reason. The 4D program does not address those issues, but benefit can be seen over time through rent stabilization and mitigation of displacement. Mayor Elliott stated rent projections for the next 10 years are required if the programs are to be implemented, to provide baseline data. He added this will make it possible to set measurable goals and choose programs and approaches. He noted many of these programs will require an investment of taxpayer dollars. Councilmember Graves joined the meeting at 7:21 p.m. Councilmember Graves stated the 4D program options are appealing to her. She added Ms. Beekman reviewed potential policy components at the City Council's last meeting that she did not totally understand, related to funding for common areas or energy improvements. Ms. Beekman stated that discussion was specifically related to NOAH, of which the key components are applicability; affordability requirements; affordability period; and eligibility. State statute requires incentives to meet state eligibility criteria. The City of Minneapolis implemented a 4D program, which provides a grant capped at $1,000 per property. The City of St. Louis Park is capped at $6,000 per property. The higher the incentive, the more business owners will enter the program. Ms. Beekman stated next steps would be to identify the framework, get direction from the City Council, and then talk to landlords to determine what incentives will attract people to the program. She added the way it's written right now is $1,000 per unit capped at $25,000, and it is a matching grant to be used for common space and energy efficiency improvements. Councilmember Graves stated $1,000 per unit seems high, but the understanding is that it is partially because of the lower AMI and longer duration, and the matching program. Ms. Beekman 02/01 /21 4- confirmed this, adding the City might want a lower affordability cap and longer duration, and encouraging improvements without triggering a rent increase for residents. Councilmember Graves stated the City Council discussed other NOAH policy ideas, working in partnership with the preservation program. Ms. Beekman stated the County has a NOAH Preservation Fund that is used to assist when rental properties change hands. She added the program focuses on point of sale when rental properties change hands and encourages property owners to seek out non-profit or affordable buyers, who will maintain the affordability of the units. The County's program provides equity to affordable buyers quickly, so they can compete in the market for purchases. Ms. Beekman stated St. Louis Park has a "Legacy Program", through which rental property owners are asked to commit to sell their properties to affordable buyers. She added this is a more symbolic program, creating value and legacy around the buildings and what they will become. Councilmember Graves stated she is unsure what makes the most sense, and it might be an iterative process based on the market. She added Ms. Beekman indicated that Minneapolis changed some of their initial requirements related to the number of units in a rental property. She noted she feels $1,000 per unit might be a little high, but could be decreased to $800, and the duration decreased, which is just a suggestion. A minimum number of units at 50% AMI sounds good for a starting point. Ms. Beekman asked, in terms of leverage, whether the City Council would rather see longer duration or deeper affordability. Mayor Elliott stated he wants to see affordability for a long time. He added the City has to make choices and has been stuck with these choices for far too long. He noted 60% AMI is still $60,000 per year, and Brooklyn Center's average is $53,000, so even the proposed programs are not much of a solution, although they have the potential to help. He noted there is a limited amount of funding. He asked how far it will get us, and what strategies will work for a limited period of time. Mayor Elliott stated he supports a lower median income and trying to find a way to have it be a meaningful length of time that the units are affordable for. He added the housing crisis is one of the biggest crises in the country, and these ideas have been around for a long time. He noted he had mentioned that Minneapolis is doing rent control. He expressed concern that Brooklyn Center will spend money to implement these programs that will potentially not work, without knowing the outcomes. Mayor Elliott stated he talks to people around the country, and there are other solutions out there. He added Minneapolis is moving to rent control, and no one was thinking of that as a viable solution 2 years ago. He asked what the effect of rent control for Brooklyn Center would be. Mayor Elliott stated the City Council should be proactive about creating affordable options for residents and also people who want to live in Brooklyn Center. He added Ms. Beekman stated that "nearly all" the local housing is affordable. He added he wants a specific breakdown of where 02/01/21 -5- the affordable units are, and what are the percentages by area. He noted that will help create a more complete picture. Mayor Elliott stated the City must create more variety in housing stock and affordable housing; and protect existing affordable housing. He added he is willing to move forward cautiously on NOAH programs, and keep an eye on rent control efforts in Minneapolis to see how that pans out in the courts. He added he is ready to move forward with inclusionary, maybe on a case -by -case basis, and get more clarity around the NOAH policy. He noted he wants to see specific costs related to implementing the different policies, and what are the potential impacts on housing affordability. Councilmember Butler stated she is listening to what others have to say and taking it all in. She added the figures are important to understand what we are committing to. She asked what the timeframe is for the housing study, and what would be the drawbacks of waiting for the housing study before making any decisions. Ms. Beekman stated the housing study will be quantitative and qualitative analyses of the City's housing stock, conditions, current community, and projected growth. Housing policies around the country will be reviewed for effectiveness, and recommendations identified for moving forward with a City-wide housing policy. The impacts of development on housing stock are being reviewed, as well as how to reposition development moving forward. The qualitative portion will be overseen by a Housing Advisory Council that Dr. Lewis has been putting together in the community, and their first meeting is scheduled for February 10, 2021. The Advisory Council will help frame research questions and the scope of the study and provide final recommendations in the fall 2021. Councilmember Ryan stated he is interested in the 41) program despite concerns about difficulties due to tax shifts and burdens on single family homeowners. He added he has the sense that 41) can do the most to preserve affordable housing units and mitigate concerns about displacement. He noted he is concerned that enforcing rent limitations on landlords can create situations where there is a lower return on investment, and landlords may resort to deferred maintenance. He noted, however, as with any public policy choice, as situations and conditions change, policies can be adjusted. Ms. Beekman stated Councilmember Ryan's point regarding preservation vs. creation is well - made. She added the cost of creating new affordable housing will be more expensive than preserving an existing affordable unit. She stressed the importance of identifying and leveraging funding opportunities. Ms. Beekman stated there is a lack of resources at the State and federal levels to address these issues. She added communities that adopt these measures will see more units preserved over time than communities that do not. She agreed it is not enough and it would be desirable to have more resources for administering these types of programs. Mayor Elliott asked whether rents at Sonder House will be $1,100/month for a 1-bedroom unit. Ms. Beekman stated she is unsure but agreed to look it up. Mayor Elliott expressed frustration 02/01 /21 -6- that $1,100 is not affordable for many families. He stated he is concerned about how much money will have to be put toward affordable housing strategies over time, and what impact it will have. He added he firmly feels that he needs that information, as well as the results of the housing study, to make any decisions. Ms. Beekman stated a 1-bedroom unit at Sonder will average $970/month. Mayor Elliott asked if Ms. Beekman knows amount of the average mortgage in Brooklyn Center. Ms. Beekman stated she does not have that information. Mayor Elliott stated the cost of renting an apartment in an affordable development is significantly higher than buying a home. He added he cannot underscore enough how costly this is, and people are spending 50-60% of their income on housing. Councilmember Graves stated she agrees that she would like to get recommendations from the housing study to understand the City's housing goals, and especially NOAH and inclusionary housing. She added she likes inclusionary because it can be discussed on a case -by -case basis, one development at a time. She noted she feels more ready to move forward with inclusionary housing than NOAH. Councilmember Graves stated it is important to note the different programs in place for homeowners in Brooklyn Center, including down payment assistance for first time homebuyers who are renters in Brooklyn Center, and a program with funds for home rehabilitation and maintenance at a lower rate. Ms. Beekman stated the City's down payment assistance program is supported by CDBG funding to help renters purchase property. She added a challenge is that there is not a lot of homes for sale that meet affordability requirements due to the current housing market. She noted the housing study will take a look at what the needs are for homeowners as well as renters, what should be the priorities, and how to achieve outcomes. Ms. Beekman stated a large part of CDBG funding goes to the housing rehab program providing funds for low- and moderate -income homeowners to do property maintenance improvements to their properties. She added a program through the Center for Energy and the Environment for homeowners for home improvements at a reduced interest rate. She noted there are multiple different programs that the City participates in to support homeowners, and that is a focus of the housing study. Councilmember Graves stated, thinking about the rent -to -home ownership program, maybe a few could be reserved for someone who wants to stay in the City but upgrade to a nicer home, so they are not displaced. She added have the added benefit of opening up more low-priced homes in Brooklyn Center. Ms. Beekman stated the housing study will help the City Council decide on potential goals and funding sources, and how to ensure that resources are leveraged to achieve the goals. She added potential goals include reducing racial disparities, home ownership and wealth creation, 02/01 /21 -7- Mayor Elliott stated he would support expanding the program to include families that have students who attend Brooklyn Center schools. He added he intends to make that proposal at the City Council's upcoming meeting. Mayor Elliott asked whether there were any members of the public who wished to comment. There were no public comments. Mayor Elliott asked whether Councilmembers have any additional questions or comments. Councilmember Graves stated she would appreciate if Ms. Beekman could pull together information regarding what Brooklyn Center properties are at what AMI's, both rental and single- family homes. Ms. Beekman stated the information is not readily available as that data is not tracked, but she will work on it. Mayor Elliott thanked the meeting attendees. He added Councilmember Graves asked for additional information, and Councilmember Butler wanted to wait to make recommendations until the housing study is complete. He noted he would like further information regarding costs, other options, policies being implemented by other cities, and what will give the most benefit. He thanked everyone for participating in the conversation. ADJOURNMENT Councilmember Graves moved and Councilmember Ryan seconded adjournment of the City Council Work Session at 8:26 p.m. Motion passed 4-0 (Councilmember Lawrence -Anderson did not respond). 02/01 /21 -8- STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss. Certification of Minutes CITY OF BROOKLYN CENTER) The undersigned, being the duly qualified and appointed City Clerk of the City of Brooklyn Center, Minnesota, certifies: 1. That attached hereto is a full, true, and complete transcript of the minutes of a Work Session of the City Council of the City of Brooklyn Center held on February 1, 2021. 2. That said meeting was held pursuant to due call and notice thereof and was duly held at Brooklyn Center City Hall. 3. That the City Council adopted said minutes at its March 8, 2021, Regular Session. City Clerk 02/01 /21 -9-