MDI
Community Housing
Action
Plan
January 2004
Prepared by the
Mount Desert Community Trust and
the MDI Tomorrow Housing Work Group
With Technical Assistance from
John Ryan, Consultant
Amherst, MA
[To be completed at a later date)
Introduction
The Mount Desert Community Trust (MDCT) and the MDI Tomorrow Housing Work
Group offer the following Community Housing Action Plan to
address the island’s year-round, resident housing needs over the next several
years. We believe there is a housing crisis on Mount Desert Island
that threatens the core values and effective functioning of our community life.
Many of us have been talking about addressing the housing problem for
years. We have recently completed
an extensive study to understand the scale and nature of the problem and
potential solutions we might best employ. It
is time for concerted and coordinated action!
The following document lays out a broad course of action over the next
several years. It provides goals
based on our needs. It offers
manageable approaches to meeting those goals, and specific actions to get the
ball rolling. This will require a
concerted effort on the part of all sectors of our island-community.
It is in our common good to make that effort.
It will support our economy, protect the value of our homes, and improve
the quality of life on MDI for all who live here.
We have two hopes for those who read this plan.
Formally, we hope that each town’s Board of Selectmen or Town Council
will support this plan as a common blueprint for action. More importantly, we
hope that as our fellow islanders read this plan, each person will look for
those individual actions he or she feel can be most effective and lend support
and effort to those actions. We
know that this is a formidable undertaking.
We know that many of the approaches involve risk, costs and controversy. We understand that not all of these approaches may succeed.
But mostly we know that we have to try and we need everyone’s support.
What
Do We Mean by “Community Housing?”
MDI needs to develop a core of housing that does not trade on the open
market, but is preserved to meet essential community needs.
This is what we are calling community housing.
Right now and even more so in the years ahead, we will need this housing
to ensure that our teachers and police officers, our EMT drivers and nurses, our
plumbers and our municipal officers are still living here among us.
Community housing is the hope we can offer our children, our neighbors,
the ordinary hard working citizens all around us who no longer have any chance
of buying a home or even securing safe, affordable rental housing.
Community housing is a mix of existing housing and newly constructed
homes and apartments. Community
housing needs to be for residents with a range of incomes, from those who are
barely surviving to others of us who might need no help if we lived in another,
less expensive community. Community
housing gives local preference to those who already live and work here, and
those who have demonstrated their commitment to contribute long-term to the life
of this place. Community housing
balances the need for housing that remains affordable long-term and a
homeowner’s aspirations to earn a return on their housing investment.
Community housing also aspires to meet the community’s high standards
of quality, design and sensitivity to the land as a precious community resource.
Why
Is This Housing Needed?
The MDI Tomorrow Housing Group recently completed an extensive assessment of the housing needs on MDI. What the study underscored was just how quickly and how thoroughly the cost of housing on MDI has outpaced the incomes of local residents and workers who do not already own their home. The following summarizes just a few of the key findings of this study:
§ Housing and land prices on MDI have appreciated dramatically in the last three years. The median sales price for a home on MDI rose 83 percent, from $152,000 in 2000 to $265,000 in 2003. Land has appreciated even faster. The median cost of a building lot is now $95,000. In 2000, a quarter of all homes sold for $110,000 or less. In 2003, the least expensive quarter of homes sold largely between $165,000 and $198,000, with only seven MLS sales for under $150,000. In 2000, about 35 percent of local renters could hope to purchase a starter home. Today, the number has dwindled to about 15 to 20 percent. An affordability gap that was just over $30,000 in 2000 between what a median-income renter could afford and what a starter home cost is now at least $85,000. In all, the average MDI worker currently faces a situation where median home prices are 77 percent higher than for the state as a whole and average wages are 27 percent lower. This imbalance between high housing and land costs and low wages lies at the heart of the island’s housing dilemma, as MDI residents are increasingly competing with buyers from higher income areas.
§
Jobs
are growing faster than housing.
From 1996 to 2003, the island’s employers added 1,283 new year-round jobs.
During the same period, the island towns added only about 450 new year-round
housing units. More and more island workers are being forced to find their
housing off-island.
§
The
market has shifted.
With home and land prices no longer affordable to most
local workers, the market is accelerating the shift of the island to a
seasonal and retirement community. From 1990 to 2000, seasonal homes accounted
for slightly less than half of the net growth of homes on-island. The potential
exists for that segment of the market to snowball. Realtors report that in the
past two years, 60 to 70 percent of all purchases have gone to seasonal and
retired buyers moving here from off-island. More importantly, the size of the
wealthy, aging baby-boom population is huge; wealthy 50years and over households
represents one of the fastest growing population segments nationwide. With
“first-tier” regional resort areas now approaching and surpassing the $1
million median price level, Mount Desert Island could easily be on the next
frontier. The pressure from the segment of the population interested in and able
to buy into resort communities offering a high quality of life is only just
beginning. The oldest baby-boomers are 55 and the youngest are in their early
40s. The wealthiest 10 percent of this age group will be driving the ownership
housing markets in resort communities like MDI for the next twenty years.
§
Remaining
a renter grows more challenging as well.
From 1990 to 2000, the number of MDI renters paying at least 35 percent of their
income for rent grew by 82 percent compared to just a three percent increase for
the state as a whole. In 2000, 36 percent of all island renters paid this high a
portion of their income for rent. The struggle for stable year-round housing
affects even the relatively well-paid post-doctorate positions at the Jackson
Laboratory. As a growing population of young adults raised on MDI start new
households and as existing renters find few homes available to purchase, the
stress on the current rental market will grow.
Key
conditions are in place for these escalating price trends to continue. Given
high land costs and zoning limitations, new year-round housing will likely
continue to grow at less than one percent annually. Jobs, however, are likely to
grow at more than twice that rate, as Jackson Labs expands and as more wealthy
residents require service workers for longer periods of the year. Given the
types of jobs created, wages will continue to rise much more slowly than housing
prices. Right now, a family with two average-earning workers makes about
$42,800/ year and can afford the carrying costs on a home of about $153,800.
Today, they experience roughly a $45,000 gap between what they can afford to buy
and the cost of a home at the lowest quartile of all sales. Following these
trends to 2010, the “affordability gap” for that average two-worker family
will be in the $120,000 range. By 2010, 75 percent or more of all housing
transactions could be to seasonal and retired
residents.
If
market forces alone prevail, the stage is set for a gradual “hollowing out”
of the island community. Historically, about five percent of the year-round
population leaves the island annually. That rate of exodus could rise as long
time renters give up hope of buying and as the established “50-something”
residents become 60-somethings and cash out on their housing investment. At the
projected cost of housing, local working households will not be able to afford
to buy the homes of those who leave. A growing market of seasonal and retired
buyers does exist to buy these homes at prices unaffordable to the working
community. Following current trends to 2010, seasonal homes may account for 35
percent of all housing on the island, up from 28 percent in 2000. Retired
residents may occupy another 20 percent of the stock compared to 18 percent in
2000. Off-island commuters would make up 50 percent of the workforce compared to
35 percent in 2000. At this rate, MDI will be a noticeably different place by
the end of the decade. The effects of this will become increasingly apparent to
residents at the workplace, in the shops and supermarkets, and in the priorities
of the community as expressed in Town Meeting.
Those
displaced by the continuation of current trends will essentially be those who do
not already own their homes. This includes an estimated 250 to 350
moderate-income, long-term renter households who feel they “missed their
chance” for homeownership when prices escalated so quickly. It includes a
significant number of essential community workers who have moved off-island to
find affordable housing. It also includes the roughly 800 current teenagers who
will be looking to start their own households in the next decade as they enter
their twenties.
Who
Will This Housing Serve?
Homeownership
MDI is home to about 350 rental households whose incomes are between roughly 80 and 120 percent of the area’s median income. Another similarly sized group of renters in this same income range now commutes to jobs from off-island. These households represent the pool of first time homebuyers who have consistently purchased 25 to 30 homes each year on the island. They represent a key element of the continuity of community life on MDI. And these are the households who have been priced out of home ownership on the island in the past three years. If MDI is to provide hope for these first time buyers in order to attract and retain essential service workers, there need to be housing opportunities affordable to this group. The following gives a sense of their capacity to purchase housing and the size of the homes they need (as indicated by household size):
Household
Income
Affordable
Home Price Homes
Needed
Over 8 Years
80-100% of Median ($37,600-$47,600) $135,000- $168,500 120
100-120% of Median ($47,000-$56,400) $168,500- $200,000 80
Bedroom Size Homes Needed
Over 8 Years
Two Bedrooms 40
Three Bedrooms 140
Four Bedrooms 20
With its preponderance of lower paid jobs, a large part of the island’s workforce focuses its housing need on reliable and affordable rentals. Roughly 550 island renters pay more than 35 percent of their income for rent. More than 1,000 workers earning less than $25,000/ year commute to the island. In addition, the island is home to nearly 800 current MDI teenagers who will be forming households over the next decade as they enter their 20s. For these groups, homeownership on MDI is at best a distant dream. In order to establish roots in the community, they need year-round rental housing they can afford. By median income and bedroom size based on household size, the demand for year-round rental housing over the next eight years looks as follows:
Household Income Units Needed
By Percent of Median* Over 8 Years
< 60 Percent 120
60-79 Percent 60
80-100 Percent
20
Bedroom Units Needed
Size Over 8 Years
One Bedroom 75
Two Bedrooms 75
Three Bedrooms 50
* Unlike the
U.S. Census that profiles incomes locally every ten years,
HUD determines median household income annually based on household size.
Currently 100% of median income is as follows: 1 person= $32,900; 2
people=$37,600; 3 people= $42,300; 4 people= $47,000; 5 people= $50,800.
Community
Housing Goals
The
following represents the key goals of the MDI Community Housing Action Plan:
Goal #1: Homeownership
Working
together, we will create 25 new homeownership opportunities each year for the
next eight years. By 2012, this would equal 200 new homeownership opportunities
for long-term MDI residents, core community workers, and those with strong roots
in the community who have been priced out of the island’s housing market.
These ownership opportunities will focus on utilizing existing homes and
new construction for households earning between 80 and 120 percent of median
household income (currently between roughly $37,600 and $56,400/ year based on
household size). These community
homes will need to contain permanent deed restrictions that limit the
appreciation buyers receive when they sell their homes. We do this in order to
create a stock of homes affordable for future generations. The following
outlines four broad approaches to meeting this goal:
·
Funding to
“buy down” the high market cost of existing homes for eligible, first time
homebuyers. This “buy down” will need to be funded from private and/or
public sources
·
New
homeownership units built on existing Town-owned and other publicly-owned land
·
New
homeownership units built on land newly purchased through partnerships between a
new, non-profit MDI Housing Office and private developers
·
New
homeownership opportunities developed by the private market through zoning
initiatives including “community housing” overlay zoning, managed growth
priorities for community housing, and targeted development density bonuses
Goal #2: Rental Housing
Working together over the next eight years,
we will create 200 units of permanently affordable, year-round, rental housing
for MDI residents and core workers. This housing will focus on those earning
less than 100 percent of median income. These
rental opportunities will also combine existing housing and new construction. As
with homeownership, the rental goal represents 25 new opportunities per year
over eight years. The focus of our efforts will address several areas:
·
Additional year-round rentals created by the private market through
various public and private initiatives including incentives for renting existing
properties on a year round basis, “community housing” overlay zoning,
incentives to create and convert accessory apartments for year-round rental, and
targeted in-fill density bonuses
·
New units of mixed income, community rental housing that utilize
equity raised through the U.S. Treasury’s housing tax credit program (LIHTC)
·
New year-round employer based housing utilizing a “turn-key”
approach on employer-owned land
· New rental housing for town employees and other island residents that utilizes publicly-owned land
Goal #3: Community Participation
This is an island-wide problem that requires an island-wide solution.
This plan recognizes that it is essential for all four island-communities to
participate actively in the creation of community housing to the best of their
ability. Given the unique characteristics of each community, the approaches to
meeting this overall goal may vary. Some communities may focus on rental housing
to serve a large local workforce; others may target existing properties or
utilization of town-owned land. In addition to maximizing the use of existing
housing, we are encouraging each community to take steps to ensure that at least
25 percent of the town’s new development is community housing. If each
community undertook a share of the overall goal roughly equal to that
community’s share of the island’s overall population, it might look like
this:
·
Bar Harbor
10-12 owners/ yr
10-12 renters/ yr
·
Mount Desert
4-6 owners/ yr
4-6 renters/ yr
· SW Harbor 4-6 owners/ yr 4-6 renters/ yr
·
Tremont
3-5 owners/ yr
3-5 renters/ yr
The
Plan of Action
I. Organizing for Action/ Coordinating the Effort
In
order to meet the challenge of creating 400 units of community housing by 2012,
the island needs to increase its capacity to make decisions, apply resources,
and pursue opportunities wisely. Key organizational steps to develop that
capacity include the following:
1. Create a non-profit MDI Housing Office with a Board of Directors that includes representatives from each town’s government and the MDI Housing Authority; from consumers, the business community, and from community members with real estate development, banking and legal expertise. The MDI Housing Office will have the direct responsibility to meet the goals of this Action Plan.
2.
Ensure that the MDI Housing Office meets all legal requirements to serve
as a vehicle for receiving tax-deductible private donations as well as public
funds.
3.
Publicize the MDI Community Housing Action Plan and request formal
recognition, support or and/ or adoption of the plan by the MDI Housing
Authority and the Boards of Selectmen and Town Council in each of the four
island communities.
4.
Commence an initial fundraising campaign to finance the MDI Housing
Office’s first three years of activity, with the expectation that the office
will finance itself from that point forward from fees generated from its own
development activities. The campaign’s initial goal should be to secure
commitments of $150,000 per year for three years.
The effort will look to island employers, foundations and private
individuals to provide this initial funding.
5.
Hire an Executive Director for the MDI Housing Office. The most important
attributes needed for this position include the ability to galvanize community
support, work with local government, raise the funds needed, and engage the
private development community in working to create the types of housing
identified in this plan.
6.
Identify experienced development partners: in addition to the MDI Housing
Authority who may serve as the primary development partner for the rental
initiatives envisioned in this Plan, the MDI Housing Office should establish
formal or informal partnerships with private developers willing to work with the
Housing Office to fulfill the homeownership goals of this Plan.
7.
Ensure that the Housing Office has the necessary legal authority to
monitor and enforce the covenants that ensure the long-term affordability of
community housing units.
8.
Initiate a program of homebuyer education to prepare prospective
homeowners for acquiring community housing units.
II. Utilizing Existing Housing Stock
This
Plan places a priority on creating as much community housing as possible without
adding to the overall growth on housing on the island.
9.
Design a homebuyer program to “buy down” the market cost of existing
housing for long term residents and core workers.
10.
Devise a program of financial incentives that encourage existing
landlords to convert seasonal rental units to rentals on a year-round
basis. Based on a successful program on Martha’s
Vineyard, this concept recognizes that landlords often earn more revenue renting
for the summer season than they can on a year-round basis. Privately raised
funds provide a means to insure that landlords can earn comparable income
renting year–round where the community need is greatest.
11.
Provide zoning, financial and property tax incentives to make greater use
of accessory apartments and secondary dwellings for rent to year-round
residents.
12.
Explore the concept of a Home Share program to pair older homeowners who
may need assistance with activities of daily life and younger residents who need
affordable rental housing on a year-round basis.
13. Develop
a program to capture “tear down” homes (good quality homes being demolished
to make way for new construction) and reuse these homes on vacant land parcels
as community housing.
III. Land Identification &
Acquisition
This
Plan recognizes the critical role of land availability and price in driving up
the cost of housing beyond the means of moderate-income residents and workers. A
key element of this plan is identifying and utilizing both public and private
land near to the existing utility infrastructure to create new community
housing. Key tasks include:
14.
Prepare an inventory and evaluation of the island’s public and private
land parcels. This evaluation will consider a number of factors including size,
ownership status, accessibility, capacity to handle the infrastructure needs of
cluster development, preservation of open space, limited visual impact, and
capacity to enhance neighborhood character. The evaluation will also look at the
capacity of smaller parcels to provide scattered site development opportunities.
15.
Pursue
specific land development projects utilizing land owned by each of the four
towns, the Jackson Laboratory, as
well as land owned by private individuals.
16.
Work in partnership with Maine Coast Heritage Trust to provide housing in
conjunction with appropriate conservation projects.
IV. Municipal Initiatives to
Create Community Housing
This
Plan’s zoning initiatives seek to shift the focus of new development to
community housing without increasing the rate of overall housing growth on the
island. The MDI Housing Office should coordinate a review by key municipal
offices and of key zoning and enforcement measures that can produce needed units
of community housing. Specific
efforts include the following:
17.
Develop incentives
that give priority to the development of community housing within
each town’s overall growth goals.
18.
Create a Community Housing Overlay Zone in each community for
developments that provide a minimum (25-50%) of permanently affordable units.
19.
Provide for
flexible development of Community Housing that promotes the clustering of homes
on smaller lots and provides increased density provided the developments further
community housing goals.
20.
Provide targeted development density bonuses that promote
permanently affordable community housing units.
21.
Support local efforts to expand the drinking water and wastewater
treatment capacity critical to achieving community housing goals. This
initiative seeks to ensure that the priority for sewer hook-ups as well as for
emerging technological alternatives goes to community housing initiatives.
V. New Rental Initiatives
22.
Identify an entity capable of working with Jackson Laboratory to provide
a model “turn key” rental housing development on Jackson Labs land.
23.
Pursue the development of a 25 to 30-unit family rental development
utilizing the Low Income Housing Tax Credit program. The MDI Housing Authority
may be the most likely development entity to pursue this initiative.
VI. Key Financing Sources
We
envision the new MDI Housing Office coordinating the efforts of public and
private sources to create the revenue needed to fund these initiatives without
increasing the burden on existing property taxes. Private funding is critical to the success of this plan. With
private funding, the island community’s can exercise the greatest freedom of
action and control over who lives in the housing created. Specific efforts
include the following:
24.
Develop a bonding initiative earmarked specifically for the purchase of
private land and infrastructure improvements needed for the creation of
community housing, provided such bonding does not directly affect local property
taxes.
25.
Explore legislative options such as a dedicated sales tax or transfer tax
to fund repayment of bonding issues and to support other community housing
initiatives.
26.
Evaluate the potential for subjecting summer vacation rental property to
a local sales tax and dedicating a portion of those funds to repayment of
municipal bonding and other community housing initiatives.
27.
Evaluate the option of assessing impact fees on residential properties
above a certain price or size threshold.
28. Explore
the feasibility and applicability of the state and federal funding sources to
specific initiatives aimed at increasing community housing. These sources might
include: Low Income
Housing Tax Credits, Community Development Block
Grants, various HUD Housing Programs (HOME, Section 202, etc.), Maine housing
development programs, tax increment financing, and state housing bond issues.
Where
Will the Subsidy Come From to Bridge this Affordability Gap?
Currently the gap between what local housing costs and what buyers and
renters can afford averages roughly $50,000 per unit. In order to bridge that
gap, it will take roughly $20 million to create a core of 400 community housing
opportunities over the next eight years. That translates into $2.5 million per
year in combined support. That support may come in a variety of ways: donation
of land; private, corporate and foundation donations; public funding; borrowing;
and development incentives. Again, the focus is on private funding in order to
maximize the island’s freedom of action to serve the core workforce. The key
contributors to this revenue stream include the following:
PRIVATE CONTRIBUTIONS
·
Private
Fundraising from Employers, Foundations and Individuals
·
Corporate
Land for Employee Housing
·
Private Land
and In-kind Donations
LOCAL FUNDS
·
Town and
other Public Land
·
Dedicated
Tax Revenues
·
Bonding/ Tax
Increment Financing
STATE & FEDERAL FUNDS
·
Housing Tax
Credit Equity
·
Federal HOME
and CDBG &
Other State and Federal Funds
Moving
This Action Plan Forward from Here
The
attached Table A provides a listing of each of the proposed Action Plan items
with a recommendation of who should take responsibility for moving that item
forward, what priority it should have, who should help, and when the action
should start and be completed.