INTRODUCTION

The City has been involved in two projects for several months that will affect multiple zoning districts citywide. There will be substantial changes to neighborhoods as a result.

The “Use Standards and Table” project involves changes to the Use Table component of zoning.  The Use Table establishes which uses (e.g., office, apartments, retail) can exist within each zoning district, and what restrictions apply to those uses.  For example, the Use Table establishes whether apartments or offices can exist in a single family zoning district.

The “Large Homes and Lots”, project discussed herein, changes the number of dwellings per lot in the RR, RE, RL-1 and other single-family zoning districts.

Some aspects of these two projects overlap.

On May 28th 2019, the City Council held a study session to consider the changes under these two projects.

This document, developed by The Peoples League for Action Now (PLAN)-Boulder County, summarizes and explains the most significant elements of the “Large Homes and Lots” project under consideration by City Council. For questions, contact advocate@planboulder.org

An accompanying document, Use Standards and Table Project – Impacts From Proposed City Code Changes,” discusses the Use Table changes in the Opportunity Zone and their application citywide.

GENERAL CONCLUSIONS–Use Table Changes for RE, RR, RL-1 and
Other Single-Family Zoning Districts

It is the opinion of PLAN-Boulder County that the changes proposed as part of the “Large Homes and Lots” project constitute upzoning – that is – elements of the zoning change enable more intensive development within zoning districts that are affected by this project.

Why
Council has given a variety of justifications for upzoning.

Council has said it’s about affordability. But Council has consistently and assiduously avoided adopting measures that would enhance percentages of permanently affordable housing yielded from new development or redevelopment despite the value and additional profits Council creates for property owners with changes that increase the things they can do with their property.

Council has said it’s about the environment – that we need to densify. This is the “let’s grow/consume our way to sustainability” approach. But Council consistently resists adopting meaningful measures like size caps on large houses, despite the vast resources they consume.

Effect
These changes will effectively upzone large areas of the City without calling it upzoning, and so far these proposed changes are under the public’s radar. 1,628 lots in the RE, RR and RL-1 zoning districts will be affected.

The direction emanating from Council mostly supports speculative developers harvesting the profit from Boulder’s neighborhoods. Council displays callous disregard for retention of lower to middle income families and little consideration toward the people most directly affected – those living in the subject neighborhoods.

Be Honest
If the City wishes to pursue densification for affordability and environmental purposes, then it should achieve those objectives rather than merely paying lip service to them and it should pursue those objectives transparently, by directly engaging the people most directly affected.

The powerful market forces that create the housing affordability challenges in Boulder are unlikely to abate. The underlying economics are that Boulder is a highly desirable market and there are plenty of deep-pocketed buyers who want to live here. In order to counter these market forces, City Council needs to employ more powerful mechanisms. Just building more of everything – the supply side economic approach that hasn’t worked over the past 40 years – won’t alter the underlying economics of deeper and deeper pockets queuing up to live here. Limiting the tools the City employs to the same set that it has employed for the past 20 years hasn’t changed the paradigm. City Council continues to employ the same approach but expects a different outcome.

Be Bold
Council needs to be bolder. Demand permanent affordability in return for upzoning. Push the envelope – implement rent control and deed restrictions in return for development entitlement expansions engendered in this upzoning.Don’t make entitlement expansions by-right. It gives away the only leverage the community has to make substantial headway with respect to housing affordability.

Council should articulate a clear goal for these and future zoning changes. A good start would be to state: When changes to the use of property enable a greater range of uses and development potential that result in increased value of affected properties, most of that value SHALL be captured for the community’s benefit in the form of housing that is permanently affordable to lower to middle- income households. And the residents who will be affected by the changes SHALL be part of the decision-making.

Plan
These code change projects are occurring in isolation of where the City’s population is currently (108,500) and where it is projected to be in the near future relative to the current population planning target of 103,000. The impacts of more people are more traffic congestion, parking, taller buildings and how they affect views to the foothills, wear and tear on open space, and eroding levels of services for City provided facilities and services in the face of greater demands. The essence of planning is that it is done to guide growth and land uses according to where you want to be at some specified point in the future. That isn’t happening with these projects, or generally.

The manner in which Council is pursuing this project is the opposite of planning.

Respect
It is striking that there has been no substantive discussion of a Neighborhood Planning process despite most of this Council having professed strong support for neighborhood concerns and Neighborhood Planning in their election campaigns.

There is a conspicuous indifference on the part of Council as to how their decisions affect their current constituents. Council seems to give greater weight to the interests of the corporations that want to bring much more growth to Boulder than to current residents.

  • Single-family zoning districts are where almost half of Boulder’s families live. Therefore, this project should be a critical election issue. If the majority of new City Council members elected in this coming November’s election support the zoning changes, the next Council will take the election result as a voter mandate to adopt the changes.

Portions of this project will be implemented this summer but even more intense changes will be implemented in 2020. It is crucial for community members to remember: It will be the newly elected City Council that will determine the extent of upzoning throughout Boulder. Community members must register their concerns with the current Council, both now, and again at the ballot box in November.

PROJECT DETAILS

This project makes changes to the RR, RE, RL-1 and other single-family zoning districts that will enable multiple homes on lots in zoning districts that are currently limited to single-family homes. It has two phases:

  • Summer 2019: Proposed changes to RR and RE zoning districts include additional ADUs and the division of existing residential buildings into duplexes and triplexes. It will be implemented under the current Council.
  • 2020: This phase will consider significant changes to the RR, RE, RL-1 and other single-family detached zoning districts, including more extensive permitting of duplexes and triplexes, subdivision of lots, and development of “cottage courts.” It will be executed by the next Council.

PLAN-BOULDER COUNTY INTERPRETATIONS

PLAN-Boulder County has analyzed the study session discussion. Given that it was a study session, it wasn’t always clear what direction was given, but these are our interpretations with respect to the impacts of the proposed changes upon single-family neighborhoods. Single-family residential neighborhoods include zoning districts RL-1, RR-1, RR-2 and RE. Readers should watch for subsequent clarifications from staff, Council and PLAN-Boulder County.

City Council gave the green light to City staff to continue with certain changes that will have significant impacts on single-family residential neighborhoods. It does not appear there is widespread knowledge within affected neighborhoods and zoning districts that changes are being considered, let alone what the changes are and their implications for the affected neighborhoods.

Listed below are the changes, with brief explanations, that PLAN-Boulder County considers to be significant and that we believe the public will be interested in knowing about and expressing their support or opposition thereto.

DETAILS OF IMPACTS

Description
Office space is a key driver of demand for housing and that demand is a key source of upward pressure on housing costs. The City’s zoning allows for a disproportionately greater amount of office building development than residential development. This Code change seeks a better balance between office and residential development in order to mitigate housing demand and its consequences – gentrification and loss of lower and middle-income households.

Buildings dedicated to certain types of office uses are currently NOT ALLOWED in RR-1, RR-2, RE and RL-l zoning districts. RL-1 is where most of the City’s single-family residential zoning is located.

Buildings dedicated to certain types of office uses currently ARE ALLOWED ONLY with a Use Review in RL-2, RM-2, RM-1, RM-3, RMX-2, RH-1, RH-2, RH-4 and RH-5 zoning districts.

Use Review is a public hearing process conducted by the Planning Board that includes testimony by concerned stakeholders, including the public, and a judgment according to specific criteria in 9-2-15-e of the City Code for approval or denial.

What Will Change
Use Review criteria for office uses in certain residential zoning districts will be revised under two sets of criteria:

  1. restrictions on the conversion of existing residential space to office use
  2. circumstances under which office uses can exist in new residential developments

Existing office uses will be grandfathered as non-conforming uses in certain residential zoning districts where new restrictions are implemented.

The proposed changes limit new office uses to 1,000 sf, whereas there is no size limit in the residential zonings districts where they are currently allowed.

Impacts on Neighborhoods
The specifics of these changes are undetermined. But the general concept, to restrict office uses in residential zoning districts, is beneficial in bringing a better balance between job space and residential space.

ISSUE #2
Large Homes And Lots Change: Additional Dwellings On Properties In Some Single-Family Residential Zones

Description
The issue of large houses and their visual impact on neighborhoods was raised by some residents in parts of North Boulder zoned for large lots (RR and RE zoning districts). Concerns were also raised about the loss of lower to middle-income residents when properties were converted to McMansions through speculative redevelopment.

Concerns were raised in the Melody Catalpa neighborhood (RL-1 zoning district) about increasing property taxes and the loss of middle-class residents as properties converted to high-priced replacements through speculative redevelopment.

What Will Change
Phase 1 (Summer 2019) will focus on the RR and RE zoning districts, which have larger, more rural lots. The conversion of houses to duplexes and triplexes and the addition of up to two Accessory Dwelling Units (ADUs) are under consideration. No ADU saturation limit was discussed (none currently exists in RR and RE zoning districts).
Phase 2 (2020) will be taken up by the next Council. Changes to RL-1 and other single-family zoning districts are under consideration.

For RL-1 zoning districts, multiple ADUs, the conversion of single-family homes into duplexes and triplexes (on large lots that are at least double the minimum lot size) have been proposed for consideration. For RR and RE zoning districts, allowing more dwellings on a property, such as cottage court or pocket neighborhood developments and also subdivision of lots have been proposed for consideration.

In total, 1,628 lots throughout the City will have the option to be developed more intensively – 623 in the RE zoning district, 110 in RR-1, 59 in RR-2 and 836 in RL-1.

A statistically valid survey and economic feasibility analysis will inform proposed changes. The purpose of the economic analysis will be to establish the economic impacts of various land use changes.

Impacts on Neighborhoods
No clear purpose for this project
There has been no clear problem statement for this project.

  • Is it the appearance of these large houses that is objectionable?
  • Is it that they occupy large lots that could provide more housing units?
  • Is it that they are expensive and restricting their size would contribute to affordability?
  • Is it that they impact existing neighborhood character?
  • Is it that they apparently consume too much energy and other resources?

Various project handouts from the City say all of the above in one place or another; however, different solutions are required to address each one.

Council acknowledged that continued redevelopment of modest houses to McMansions will make land and houses more expensive. Council also acknowledged that the options proposed above would not have much positive affect upon affordability.

This raises the question, what is the purpose of this project? The goals are undefined, the problem is undefined and the solutions are acknowledged to have little impact.

Though the purpose for the changes is not clear, the result is clear – it creates more opportunities for speculators to harvest profits from neighborhoods with no improvement in the permanent affordability percentages yielded from new development or redevelopment.

No clear community benefit resulting from this project
House size reductions would seem to be the most direct and effective way to address scale, resource consumption and costs associated with large houses. However, Council’s direction is against reducing house size but for permitting more dwellings on a property within the currently specified floor area limit. The result? The same amount of oversized building than caused the neighborhood concern that spawned this project, plus 3 times the number of people, cars and traffic.

Council promotes density increases under the guise of “housing diversity” and “affordability,” yet Council can’t bring itself to demand permanent affordability from the upzoning.

Thus, Council’s direction incentivizes speculative development interests over the concerns raised from within the neighborhoods that were the genesis of this project. Council’s direction just redistributes the floor area over more structures but does not preclude a single McMansion on a lot nor does it preclude multiple dwellings in addition to a McMansion on a lot.

Given the Boulder market, unless Council ensures that permanent affordability is the required outcome of this upzoning, redevelopment will result in expensive market-rate housing. This type of redevelopment raises the floor for entry into these neighborhoods. As each property redevelops as a high-end product, it raises the property taxes of surrounding properties, straining the ability of remaining middle-class residents to keep their homes. Also, by incentivizing redevelopment via this upzoning, Council is hastening the displacement of renters who comprise a significant portion of residents in some neighborhoods.

No clear articulation of value capture metrics for permanently affordable housing
Some council members think that more units on a site makes more housing available and cheaper. But cheaper isn’t “affordable” to middle and lower-income households, and “affordable” isn’t affordable unless the affordability is permanent. (See Appendix A) By failing to capture the value from the greater development potential that upzoning creates, the City is squandering an opportunity to make significant strides toward increasing percentages of permanently affordable housing.
Council consistently shirks capturing greater percentages of permanently affordable housing as a community benefit from the value that increased uses and development potential creates. This was the case with the co-op ordinance and the ADU ordinance. It is deplorable, given Council’s argument for these changes is that we need more affordable housing.

If Council is disinterested in capturing permanently affordable housing when they upzone, then what is the purpose of upzoning? Is it just to harvest more development opportunities for speculators? Is it growth for growth’s sake?

Council should articulate a clear goal for these and future zoning changes. A good start would be to state: When changes to the use of property enable a greater range of uses and development potential that result in increased value of affected properties, most of that value SHALL be captured for the community’s benefit in the form of housing that is permanently affordable to lower to middle-income households.

Neighborhood character
Single-family neighborhoods are low density, which creates a quiet, low traffic, low parking competition environment that many people seek. Boulder offers residents the opportunity to choose from a multitude of zoning districts with various densities that support different lifestyles. PLAN-Boulder County does not see the need to eliminate lifestyle options purportedly for “housing diversity” when the diversity already exists. These proposed changes in fact create a less diverse set of options by converting single-family areas to multifamily. This is an imposition of Council’s values and preferences on what constitutes almost half of the City’s households. It is clear from their housing choices that almost half the City’s households have different housing preferences.

No transparency to this project
The upzoning is being achieved through very non-transparent methods. Permitting more units while continuing to call the zoning Rural Residential, Rural Estate or Residential Low Density-1 is deceptive. It would be more honest to just state an intent to change neighborhoods to Medium Density Residential or Low Density Residential-2; though, being more forthright about the naming of zoning districts still does not address the fact that the measures that Council shuns, are the measures that would support their purported reasons for unzoning.

While staff has held workshops and online surveys, there has been no direct outreach to affected neighborhoods or any attempt to employ neighborhood planning. Letters from most RR and RE residents are opposed to all of this. “Why can’t you just leave us alone?” says one.

Council has failed to take seriously the poor quality of public outreach to those most directly impacted. Given the strenuous opposition arising from within affected neighborhoods, Council sends a message that staff’s work has been satisfactory and that neighborhoods’ concerns don’t matter.

Economic analysis
The planned economic analysis for Phase 2 (2020) should include comparisons of the cost to build a single-family house, a duplex, and a triplex, and the cost difference between those housing types and how affordable they are at several points along the household income spectrum. It would be useful to identify how many units would be required on a given lot in order for them to be affordable to households at 50%, 80% and 100% of Area Median Income. PLAN-Boulder County has done a preliminary analysis evaluating these elements (See Appendix A).

Analyzing the problem this way provides a complete picture of the costs and challenges involved in achieving affordability and a precise understanding of the measures required to achieve it. It will identify the affordability gap for the various housing types and the level of public funding required to span it, or the level of density required to diminish it, or a combination of both. Otherwise, City Council is just shooting in the dark, making land use changes with some nebulous but unfounded expectation that the changes will have any meaningful result.

Though Council has discussed “conversion” of existing houses into duplexes and triplexes, the reality is that houses are not readily adaptable to separated apartments without major reconfiguration, at which point, developers will likely opt to scrape the existing structure and replace it with a structure tailored to a plex configuration. Realistically therefore, creation of duplexes and triplexes, will entail new construction.

APPENDIX A

PLAN-Boulder County has done a preliminary economic analysis of the affordability outcomes resulting from the creation of duplexes, triplexes and quadplexes (City Council has only discussed duplexes and triplexes but quadplexes were included in this analysis to better understand how density increases might affect housing affordability.) The study area was the Newlands neighborhood.

Conclusions
Though Council has discussed “conversion” of existing houses into duplexes and triplexes, the reality is that houses are not readily adaptable to separated apartments without major reconfiguration, at which point, developers will likely opt to scrape the existing structure and replace it with a structure tailored to a plex configuration. Therefore, creation of duplexes and triplexes will realistically entail new construction. The cost of construction (Chart 1), independent of land cost, is so high that even when the land is free, a 50% AMI four person household won’t be able to afford an 837 sf quadplex (Chart 4).

Quadrupling the density won’t even enable an 80 % AMI four person household to buy a home (Chart 2). For a 1,116 sf triplex, the City would have to subsidize $2,169 per month ($26,033 per year) to span the affordability gap.

A 100% AMI household can only afford an 837 sf quadplex and they would need more than $142,000 for a down payment and closing. In order to afford a 1,675 sf unit, the City would have to subsidize $2,248 per month ($26,971 per year) to span the affordability gap (Chart 2).

A 50% AMI four person household can’t even buy the land under a duplex, let alone the home (Chart 3).

WITH FREE LAND, an 80% AMI four person household can only afford an 837 sf unit and they would need to raise $78,694 for a down payment and closing (Chart 4).

If the City were to promote creating 1,000 duplex housing units at 1,675 sf that would be affordable to 100% AMI four person households, each unit would require $26,971 of annual subsidy for 30 years.  That would be or $26,971,000 each year – for 30 years.  With approximately 42,200 households in Boulder, that would be a $639 average annual cost per taxpayer household paying that subsidy for 30 years.

This is the key issue – if Boulder wants to upzone to make housing affordable, in order for it to actually be affordable to relatively high-income households earning over $100,000 per year, each taxpayer household must be willing to pay over $600 per year for those 1,000 subsidies – for 30 years.

At best, increasing density will do nothing for low and moderate-income households without significant public subsidies. Increasing density only benefits households earning over $100,000.  But as more and more expensive housing is built and as more and more wealthy people buy it, affordable housing becomes more expensive because the AMI floor is raised.

At some point (like now) even the low and moderate-income people that the affordable housing program is intended to serve, won’t earn enough to afford affordable housing.

AMI rose 10% in 2018.  In other words, Boulder’s AMI is rising much greater than wages for people already living here that qualify for affordable housing.

Moreover, if these units end up being rented out by their purchasers, then landlord profit will be added to the ownership costs and of course rents will go up each year according to the market; whereas, a mortgage is fixed.

So why would City Council continue to promote increased density under the guise of creating affordable housing when the outcome is working against the stated purpose of the change?

This analysis establishes clearly that the proposed upzoning cannot provide affordable housing, even for an 80% AMI household, without a public subsidy. 

Data Basis
The charts below illustrate “affordability” when upzoning to duplexes, triplexes or quadplexes in single-family neighborhoods.  The values in the chart are based on the Newlands neighborhood.

In 2018 there were seven old houses sold in Newlands that were typical of scrapes – the houses had no intrinsic value – the value was entirely for the land. The average sale price/sf of the properties was $162.

A common Newlands lot size is 50 x 125 or 6,2501 sf. Based on the average cost/sf above, a 6,250 sf lot in 2018 would have been expected to sell for about $1,000,000 which was in fact, the case.

The presumption in the analysis is that current floor area limits would continue to apply. That would allow 3,350 sf of dwelling for a 6,250 sf per lot. A 3,350 sf structure can accommodate two 1,675 sf duplexes, three 1,116 sf triplexes or four 837 sf quadplexes.

This is a conservative estimate because it presumes that by increasing the number of units, the pro-rated land value per unit would fall proportionately.  In reality, the pro-rated land value won’t fall in proportion to the density increase – it will fall less.

Construction costs are based on $300/sf. The cost to produce the structure (excluding land but including developer profit) is $373/sf.

  • The construction cost and developer profit used in the analysis suggests a minimum dwelling unit sale price of $675/sf including land costs.
  • Seven Washington School condominiums sold in 2018 for an average price of 647.63/sf.
  • “The Balsam” condominiums under construction are currently selling for about $1,000/sf.

Developer Profit is 20%.

Mortgage rate is 4.25%.

Operating cost – utilities, insurance, maintenance and property tax, is included.

The affordability factor used is the convention – 30% of income.

Area Median Income (AMI) is based on Boulder County. For perspective, middle income is considered to be between 80% and 150% of Area Median Income (AMI).  AMI is $108,600.

1 Lot size in this study is based on a common Newlands lot size though the zoning change would apply to an RL-1 lot twice the minimum lot size of 7,000 sf. The small lot was chosen to illustrate the affordability outcome on a small lot with small units. For a lot twice the RL-1 minimum (14,000 sf) there would still be the same number of units but they would be larger and even more expensive.

For example, a 14,000 sf lot would be able to have 4,500 sf of floor area which would be three 1,529 sf triplexes rather than the 1,116 sf in the study model – 37% greater. The dwelling costs would also be about 37% greater for each type of unit in the model and the land costs would be 100% greater.

Chart 1: Unit creation cost

Chart 1: Unit creation cost

Chart 2: Affordability of dwelling and land and down payment/closing cost relative to household income

Chart 2: Affordability of dwelling and land and down payment/closing cost relative to household income

Chart 3: Affordability of Land and down payment/closing cost relative to household income

Chart 3: Affordability of Land and down payment/closing cost relative 
to household income

CHART 4: AFFORDABILITY OF DWELLING UNIT (NO LAND) AND DOWN PAYMENT/CLOSING COST RELATIVE TO HOUSEHOLD INCOME

CHART 4: AFFORDABILITY OF DWELLING UNIT (NO LAND) AND DOWN PAYMENT/CLOSING COST RELATIVE TO HOUSEHOLD INCOME