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Sunday, July 30, 2006

K2: Count us in for inclusionary housing Others are skeptical of new ordinance

Julian Pecquet
From the Tallahassee Democrat

When city leaders decided to pressure developers into constructing homes people like teachers, firefighters and police officers could afford, the outcry from builders was immediate.

But almost a year after the controversial inclusionary housing ordinance went into effect last October, city planners say they're not seeing the predicted surge in developments in areas where the ordinance doesn't apply.

Instead, several developers are working with the city.

The ordinance has drawn attention to Tallahassee as a statewide pioneer in trying innovative ways to meet a shortage of affordable housing. And compliance is a source of pride for at least one developer.

"We will have what we feel is the first true mixed-income development in town," said David Wamsley, the CEO of K2 Urbancorp, which is set to build 10 inclusionary units as part of its 99-unit Evening Rose project at Capital Circle Northeast and Mahan Drive. "We're potentially looking at even doing more."

Still, many builders remain opposed to the ordinance. It provides incentives to developers but mandates that developments of 50 or more units in the more expensive parts of town price 10 percent of the units just below $160,000.

Either that, or the developers pay fines ranging from $10,000 to $25,000 per unit not built.

"We're still against the mandated ordinance," said Jerry Edmonston, the executive officer of the Tallahassee Builders Association, which is challenging the ordinance in court. "We have no problem if folks want to jump into this, but this ordinance is just forcing it on us."

The association's complaint is that the ordinance amounts to the government taking value away from private property.

Edmonston added that the ordinance was bad for builders and buyers because it adds to the cost of homes at a time when state legislation is about to start adding thousands of dollars to the cost of each unit. The state law, passed last year, mandates that roads and schools be available for residents of new developments, or that the developers help pay for those services to win approval for new construction.

But across the state, communities are looking closely at Tallahassee's ordinance, the first in the state, according to city officials.

"Almost every city and county south of I-4 is looking at some sort of inclusionary-housing ordinance," City Attorney Jim English said. "Everybody's feeling the same crisis."

Proponents point to Evening Rose as proof that the ordinance doesn't hurt builders' bottom lines.

"The part of it that people seem to keep on missing," said City Commissioner Allan Katz, "is if we didn't have this ordinance, it would be almost impossible to do those deals."

Wamsley said the city rushed his project through the permitting process, cutting the time by perhaps 30 percent.

"When you're paying tens of thousands of dollars a month of interest on land," he said, "that really begins to add up."

Add to that incentives such as lower fees for road projects, less required green space and higher allowable densities, he said, and the deal made sense. He added, however, that the inclusionary housing units were easier to build at cost in urban projects like his, which combines several price ranges and retail space, than in cookie-cutter suburban developments.

K2 has also reaped the positive publicity of being the first development to be built under the ordinance (two others, Piney-Z and The Hermitage in Bull Run are in earlier permitting stages). The city recognized the developer at a groundbreaking recently, and Wamsley said a national land-use publication also had interviewed him.

Still, the question remains whether the ordinance will help create enough work-force housing for Tallahassee.

John McIlwain, the senior resident fellow for housing at the Urban Land Institute think tank in Washington, D.C., said there are hundreds of inclusionary zoning ordinances - "in more varieties than there are of Ben and Jerry's ice cream," on the books or in the making across the country. The one in Montgomery County, Md., has been around for 35 years.

That's not to say everyone thinks they're a good idea.

Randall Holcombe, a professor of economics at Florida State University, said the answer to affordable housing lies in leaving market forces alone.

"The price of everything is determined by supply and demand," he said. "When you raise the cost to developers," they could end up building less, "and you reduce the supply of housing."

The end result could be a few $160,000 homes but an increase in the price of every other house in Tallahassee, Holcombe said. Instead, he suggests allowing higher densities throughout the city.

But market forces alone might not achieve another stated goal of the city's ordinance: moving lower-income residents into higher-end developments.

"It's to get a good distribution of housing types throughout the city," said Roxanne Manning, the chief of land-use planning for the city-county planning department.

McIlwain said legal action against such ordinances usually fails, if there are enough incentives along with the requirements. He added that the ordinances can slow down an already cooling housing market if they are too restrictive.

And, he said, they need to be accompanied by other policies, such as land trusts set aside by nonprofits specifically for affordable housing, if they're to have a real impact.

"It is not the solution to affordable housing," he said. "It should only be considered to be one tool because it doesn't fill the need."