Meeting_Body
REVISED
PLANNING AND PROGRAMMING COMMITTEE
APRIL 19, 2023
Subject
SUBJECT: STRATEGIES TO STREAMLINE AND ACCELERATE AFFORDABLE HOUSING
Action
ACTION: APPROVE RECOMMENDATIONS
Heading
RECOMMENDATION
Title
CONSIDER:
A. RECEIVING AND FILING a report back on strategies to accelerate affordable housing within Metro joint development; and
B. ADOPTING the Joint Development 10K Acceleration Strategies included as Attachment A.
SOLIS AMENDMENT: Provide a report in 120 days on opportunities to designate housing units, produced by the Metro joint development program or other appropriate mechanisms, for Metro workforce housing.
For the purposes of this amendment, Metro workforce housing is conceptually defined as housing affordable to and designated for individuals hired to perform work in essential roles for Metro transit system operations, maintenance, and/or construction.
The report should (1) propose a refined definition for Metro workforce housing based on local workforce needs and relevant research and (2) assess the feasibility of a pilot Metro workforce housing program.
Issue
ISSUE
At its February 2023 meeting, the Board of Directors (Board) approved Motion 2023-0125 by Directors Bass, Hahn, Najarian, Mitchell, Solis, and Krekorian requesting staff report back at the April meeting on a strategy to achieve 10,000 new housing units by 2031. The recommended strategies reduce the timeline for new joint developments from an average of 10 years to an average of five years.
Background
BACKGROUND
In response to the countywide housing affordability crisis, the Board adopted an updated Joint Development (JD) Policy in June 2021 with particular focus on affordable housing. The Board further established a ten-year goal of completing 10,000 housing units, at least 5,000 of which will be income-restricted (the 10K Commitment) by 2031.
Staff obtained a $1,600,000 grant in July 2021 from the Southern California Association of Governments (SCAG) to complete an in-depth consultant analysis of Metro’s JD process and opportunity sites. The consultant developed recommendations to overcome existing hurdles to project delivery without sacrificing community input and quality projects. The recommendations were informed by review of development policies held by other agencies, discussions with key stakeholders, and interviews with JD staff, and build on input received through months of engagement for the JD Policy update including a virtual town hall, online surveys, and internal and external working groups.
The consultant team interviewed a wide range of developers including those that have responded to previous Metro solicitations and were selected to advance into negotiations; those that submitted but were not selected; for-profit and non-profit; small and large; local and national; as well as community-based development organizations (CBDOs) with specific ties to local neighborhoods or cultural communities. CBDO interviews were specifically focused on ensuring that new streamlined processes are as accessible and equitable as possible. Collectively, this feedback helped inform the JD 10K Acceleration Strategies that are included in Attachment A and discussed herein. The feedback received to date and additional outreach will continue to influence the standard operating procedures that will guide project and program implementation.
In October 2022, staff also launched the Metro Housing Lab, a pilot program serving as a proving ground for housing innovations that deliver units faster and cheaper by piloting innovative projects in housing design, finance, and construction. The Housing Lab is also pursuing Community Land Trust strategies in support of more equitable outcomes.
Discussion
DISCUSSION
The Joint Development 10K Acceleration Strategies center on equity and community engagement while accelerating the delivery of housing. Staff have identified a preliminary list of sites that are suitable for development and will be available in the timeframe required to meet the 2031 deadline (the 10K Site List). Those sites are listed in Attachment B and are subject to change based on further due diligence with Metro departments and stakeholders, including local jurisdictions. Six of the twenty sites identified are located in Metro Equity Focus Communities (EFCs), and another seven are adjacent to an EFC.
Recent changes to the State's Surplus Land Act (SLA) stipulate specific processes for disposing of publicly owned properties in order to prioritize such property for affordable housing. All sites developed in support of the 10K Commitment will comply with the SLA. Each site will be designated to be either a 100% affordable project or a mixed-income project with at least 300 units and at least 25% affordable units (or such criteria that is consistent with certain prescribed uses of publicly owned properties that qualify for streamlined compliance as set forth in the Act, as amended from time to time). As required by SLA, a future Board resolution would declare the properties “exempt surplus,” and the resolution would be delivered to the State of California Department of Housing and Community Development (HCD).
In March 2023, the Federal Transit Administration (FTA) issued guidance intended to provide clarity on an asset disposition option under the National Defense Authorization Act (NDAA) for fiscal year 2022. Under the new provision, FTA may authorize the transfer of land acquired with Federal assistance, but no longer needed for the originally authorized purpose, to a local governmental authority, non-profit organization, or other third-party entity if, among other factors, it will be used for transit-oriented development and includes affordable housing. The new rules do not change the process and FTA requirements for Joint Development but signal the federal government’s shared commitment to making land available for transit oriented development and affordable housing.
Request for Qualifications for Bench of Developers
Currently, each joint development site is procured separately, which lengthens the amount of time for delivery and requires extensive staff time. In order to improve the delivery process, staff propose to release a request for qualifications (RFQ) to establish a bench of developers, including CBDOs, eligible to propose on the 10K Site List. The RFQ would require proposer teams to submit their experience and credentials but would not require site-specific visioning or analysis. Metro would reserve the right to supplement the bench at its discretion, if necessary, and additional sites would be issued under future solicitations to ensure that developers continue to have an opportunity to participate.
Metro would kick off the 10K Commitment effort with a regional community meeting housing education event, an industry forum for affordable and mixed-income developers and building partnerships events designed to increase participation among Metro Small Business Enterprises (SBEs), Disadvantaged Business Enterprises (DBEs), Disabled Veterans Business Enterprises (DVBEs), and Minority and Women Business Enterprises; community-based organizations (CBOs); and CBDOs. CBOs could partner with developers (including CBDOs) on proposals to add local knowledge, organizing, outreach or other expertise to the team. The RFQ will be distributed to the HCD list of interested developers as required by the SLA, as well as the Metro JD interest list, and the development community at-large to ensure competitive opportunity for all interested developers.
The SCAG grant has also funded a community engagement consultant that is undergoing an effort to specifically engage CBDOs. The working definition of a CBDO is a non-profit housing developer with a commitment to a specific community and a stated intention of generating community scale outcomes including but not limited to building wealth, increasing economic stability, improving health, and advancing equity. The consultant is vetting this definition through interviews with CBDOs and is creating a database of potential CBDO partners which will include information on geographic areas of service and mission focus. Any CBDO will be eligible to propose on the Bench RFQ and outreach efforts will encourage CBDOs to apply. The RFQ application will be straightforward, and the evaluation criteria will award points for experience with community-serving projects.
The shortlisted bench of developers would be approved by the Board and subsequently invited to respond to focused, site-specific requests for proposals (RFPs) with clearly defined development criteria specific to each site. The RFPs would be informed by discussions with local jurisdictions and include community criteria for development; communities would have the opportunity to comment on developer proposals at an open house convened during the selection process.
In total, refinements to the solicitation process are anticipated to result in at least six-months of time savings for each site.
Focus Community Education and Engagement
JD staff are working with an outreach consultant and Metro’s Community Relations and Marketing teams to create targeted messaging around the regional housing crisis and how the 10K Commitment addresses it. Outreach will begin at a regional level and will continue at site-specific levels in preparation of the RFP for each site.
Metro will engage with communities on a site-specific basis so that the parameters for influencing a project outcome are clearer from the outset. Advanced site analysis will be performed by Metro to inform that discussion with communities. As discussed above, JD sites will be pursued either as a mixed-income project with at least 300 units and at least 25% affordable units or a 100% income-restricted project. In advance of community dialog, staff would perform market and demographic analysis, and land use research to establish the number and affordability level of units that are likely to be realized at the site. Rent levels would be informed by Neighborhood Area Median Income to help ensure housing will be accessible to existing community members, and outreach would be conducted to local community members for housing opportunities in new units.
Communities would be able to focus input on community needs which may be addressed in the building design, ground floor uses, surrounding open space, landscaping, and other amenities-aspects of the projects that are most flexible and able to support community interests. This focused outreach approach will result in significant time savings and allow direct conversations between the developer and the community to begin sooner in the process.
Consistent with the updated JD Policy, the process would allow communities to provide input into the criteria for selecting a development team/proposal. In addition, Metro would share developer proposals for each JD site with the public at community open houses.
Local jurisdictions will continue to have land use authority, providing opportunity for community input and approvals through each phase of the local entitlement process.
Invest in Making Sites Development-Ready
Some JD sites are encumbered by existing infrastructure, parking, environmental conditions, and/or lack basic infrastructure necessary for development. Metro can significantly accelerate the delivery of housing by conducting demolition and environmental remediation; upgrading basic site infrastructure; and constructing replacement parking without waiting for the solicitation of a developer. Though this requires upfront Metro investment, the expenditure would reduce development risk and increase the value of the property. The investment in site readiness will reduce developer lead times by as much as two years. The Cost Center Manager and Chief Planning Officer would be responsible for budgeting for anticipated site preparation costs in future years subject to funding availability and annual programming, noting some costs may be eligible for grant funds and/or creative forms of public financing.
Standardize and Streamline Exclusive Negotiation Agreements (ENAs)
The longest phase of the joint development process is the negotiations phase. Currently, once a developer is selected, staff seek Board authorization to enter into an ENA with the selected developer. Once the Board has approved the selection and the ENA is executed, the developer initiates developer-led outreach, refines the project design, secures entitlements, negotiates Joint Development Agreement (JDA) and Ground Lease terms with Metro, and identifies financing sources to construct the project. Recent changes in state and local laws and policy designed to accelerate the delivery of affordable housing near transit have significantly shortened the time required to secure project entitlements. Thus, the opportunity exists to accelerate the remaining tasks to be completed during the ENA phase.
Staff will standardize ENA, JDA and Ground Lease documents to establish a level playing field, minimize negotiation time, and provide clarity, certainty and mutual accountability for both Metro and developers. The standardized ENAs would only be entered into within a menu of Board-approved terms and with qualified developer partners approved by the Board.
The Board would be notified of developer selection, project proposals, and other significant project milestones on a periodic basis. In addition, the Board and the public will have access to a real-time online dashboard, to be launched this summer. Once the project entitlements are in place, staff would return to the Board for approval of terms for a JDA and Ground Lease.
Collect ENA Fee (in place of deposit)
Currently, staff ensure that certain Metro costs incurred as a result of reviewing project designs and document are reimbursed by tracking, reporting and invoicing costs to the developer. Going forward, staff will require a flat fee from developers based on upon historical and projected costs to cover Metro’s costs throughout the term of the ENA. This will relieve staff of the administrative burden and time required to track expenditures of developer deposits. Any extensions to the term of an ENA will require additional fees.
Simplify Design Review
Metro’s current process for reviewing the design of proposed projects is time-consuming for both staff throughout the agency as well as developers and their architects. The process creates the opportunity for subjectivity and communication and coordination challenges among legitimate, competing interests. Under the streamlined process, design criteria would be objective and specifically articulated in RFPs. Communities would provide input into architectural style at the RFP and developer selection phases, and designs would be subject to local entitlement processes. Metro design review would be limited to the areas of design that directly impact Metro facilities and patrons. A checklist of design requirements would clarify requirements to developers, inform Metro review, and streamline internal distribution resulting in quicker review times.
Establish Interdepartmental Task Force
Staff would establish a Program Charter that would identify and empower a task force of dedicated department representatives charged with expediently and decisively resolving design and construction issues as they arise which can result in significant time reductions. At a minimum, Program Management, Operations, Customer Experience and Planning departments would all serve on the task force. The task force could ensure that the criteria for development are clear at the outset and could continue to coordinate as the design progresses into construction, to ensure the protection of Metro infrastructure and the safety of Metro patrons.
Resource Joint Development to Meet Targets
Given the influx of sites and the acceleration of delivery required to meet the 10K Commitment, the existing staff and consultant resources will be insufficient to achieve the Board mandate and produce the housing units required. Staff will request additional headcount through the annual budget process beginning with the upcoming FY24 budget request.
Housing Lab Update
In addition to, and in support of, the 10K Commitment, the Metro Housing Lab has been set up to simultaneously pilot non-traditional approaches to construction, finance, design and operations of both permanent income-restricted housing. Since its launch last year, the Housing Lab has undertaken the following:
• Selected a Senior Fellow to serve as the Lab’s principal investigator.
• Outlined a Community Land Trust (CLT) strategy that will include recommendations to support the formation of CLTs and recommendations to pilot the conversion of naturally occurring affordable housing to a CLT.
• Confirmed the legal and technical path for providing Metro employee and contractor housing.
• Explored the use of innovative public and private financing mechanisms such as the US Department of Transportation’s “TIFIA” low-interest loan program and Opportunity Zones to broaden the capital sources available to support income-restricted housing development near transit.
Equity_Platform
EQUITY PLATFORM
The 10K Commitment will facilitate the development of affordable housing and market rate housing and other public benefits such as transit investments, first-last mile improvements, community open space, community rooms, and urban greening. Regionally, development of housing for all income levels is essential to alleviating a housing shortage that disproportionately and negatively impacts all categories of disadvantaged communities including Black indigenous people of color, people with low-incomes, people with disabilities, and Transition Aged Foster Youth (TAY). Roughly 1/3 of the homeless in LA are former foster youth between the ages of 16 and 24 years old. Los Angeles County Foster Care is the largest system in the country and foster youth are more likely to become homeless, die or be sex-trafficked than go to college. Acceleration of affordable housing under this strategic plan will increase opportunities to serve at-risk populations such as these.
Affordable housing, which will be delivered as part of the 10K Commitment, directly benefits low-income households. In some instances, delivery of market rate or affordable housing will accompany neighborhood change that may be felt most acutely and negatively by marginalized and vulnerable populations immediately surrounding the project sites. The new recommendations seek to limit the disruptive impacts of new housing such as displacement while delivering new affordable units throughout the County and prioritizing those areas that are most in need. The recommendations build upon a months-long effort to update the JD Policy using extensive outreach and engagement that engaged over 300 individuals. The Policy and recommendations contained herein have been informed by a virtual town hall event, online surveys, internal and external working groups, community-based development organization interviews, and extensive input from staff.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
The recommendations will have no impact on safety.
Financial_Impact
FINANCIAL IMPACT
The recommendations contained within do not have a direct financial impact, however, implementation of the acceleration strategies and fulfilling the 10K Commitment require an investment of resources. Upfront investment in staffing, site preparation, and consultant services will be required, but partially or completely recovered over time with revenue from developer fees and ground lease payments.
Impact to Budget
There will be no impact to the FY2023 Budget. The Cost Center Manager and Chief Planning Officer will be responsible for budgeting in future years subject to annual programming.
Implementation_of_Strategic_Plan_Goal
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendations support Goal 3 of the Strategic Plan: to enhance communities and lives through mobility and access to opportunity by activating several transit-oriented communities with catalytic development projects which will bring housing, jobs, and services to neighborhoods across the Metro system and Los Angeles County at large.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board could defer or deny approval of the recommendations. This is not recommended as it would be unlikely Metro could meet the 10,000-unit mandate by 2031 and it would constrain Metro from contributing to urgent solutions to the regional housing shortage.
Next Steps
NEXT STEPS
Upon approval of the recommended actions, staff will release community education materials on Metro’s strategic plan to fulfill the 10K Commitment. Staff will also continue to perform due diligence to finalize the list of 10K Sites, including additional vetting with Metro departments and external stakeholders, including local jurisdictions.
Continued outreach and an industry forum will inform the release of an RFQ for a bench of qualified developers. The RFQ will be distributed to the Metro JD developer interests list, the development community at-large, and the HCD list of interested affordable developers.
Staff will return to the Board in fall 2023 with the list of recommended developers, the terms of the standardized ENA, the proposed portfolio-wide design criteria, and a resolution declaring sites “exempt surplus land.” Staff will provide periodic updates to the Board as well as to the public via an online dashboard of joint development projects.
Attachments
ATTACHMENTS
Attachment A - Joint Development 10K Acceleration Strategies
Attachment B - Preliminary Joint Development 10K Site List
Prepared_by
Prepared by: Marie Sullivan, Senior Manager, Countywide Planning & Development, (213) 922-2556
Wells Lawson, Deputy Executive Officer, Countywide Planning & Development, (213) 922-7217
Nick Saponara, Executive Officer, Countywide Planning & Development, (213) 922-4313
Holly Rockwell, Senior Executive Officer - Countywide Planning & Development (213) 922-5585
Ray Sosa, Deputy Chief Planning and Development Officer (213) 547-4274
Reviewed_By
Reviewed by: James de la Loza, Chief Planning Officer, (213) 922-2920
