Does Normal Have an Affordable Housing Problem?

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The Normal Town Council approved plans for the first phase of an 85-unit apartment complex east of AMC’s Starplex Theater on Monday.

Town staff said students are the target market for the new development, but future phases could also prove suitable for couples and families.

“The Park” may be in a different league than “The Lodge,” the Willow Street apartment community with clubhouse, pools and fitness center currently building its second phase of luxury units with monthly rates starting at about $750 per person.

Still, renters will likely pay more for the new construction featuring townhome-style units and amenities like a 27,000-square foot park and Constitution Trail connection.

Public discussion of Normal’s housing landscape has resurfaced somewhat since the Town announced plans to extend its Uptown Tax Increment Finance (TIF) District.

Town council members approved the extension May 8 following a public hearing on the proposal. While just two Normal residents addressed the council, both voiced concerns the Town and the TIF program weren’t doing enough to create more affordable housing in Normal.

AdaptBN’s Breanna Grow sat down with Town Planner Mercy Davison and Vasu Pinnamaraju, executive director of the McLean County Regional Planning Commission, to discuss how the two organizations are working together to identify and address the community’s housing needs.

Read the full conversation below (Editor’s note: the following interview has been edited for length and clarity):

Normal’s comprehensive plan addresses housing, with some issues being the overabundance of some types of housing and a lack of affordability. When were these problems first identified, and how long has it been on your radar?

VP: “These probably have been on people’s radars for a while. I am fairly new; this is my fifth year in the community. When I first came on board we started working on Bloomington’s comprehensive plan first. We had some participants from The League of Women Voters who were doing a study at that time regionally trying to identify some issues. That group first had identified some issues on affordability for low-income housing.

It was obvious that we could not address housing issues for Bloomington and Normal separately. Early on it was established that we have an issue, and it needs to be addressed at a regional level.”

MD: “I’ve been here for 17 years and it’s been mentioned multiple times. It’s hard to say which times seemed like it was a more prominent issue. I think when the opportunity is there, the advocacy groups that care about affordable housing find a way to get their message out that we need to care about affordable housing. And the comprehensive planning process was a great opportunity for that. I don’t think there’s a new affordable housing issue in this community, I think it’s been fairly consistent for a while.”

VP: “People say affordable housing as if it’s all defined; that definition is so nebulous. Affordable housing is different for different income groups and different physical abilities and so on. We are still in the process of, ‘Now that we know that there is a gap, let’s really get down deeper to define it more.’ So we think we have an understanding, but we know we need to do more.”

What demographics of residents are we talking about here?

VP: “Low to moderate income. And when we say low to moderate income, again, definitions, we need to be careful...people mostly think that when we say median income, we just look at census median income. Median income for households and median income for families are two different definitions. HUD’s (U.S. Department of Housing and Urban Development) definition of low to moderate income, they take 30-60% AMI (area median income).”

MD: “And for the most part communities defer to the HUD guidelines.”

VP: “And our CDBG (Community Development Block Grant) funding is tied to those.”

(The 2018 income limits for the Bloomington HUD Metro Fair Market Rent Area, which encompasses McLean County, are available on the department’s website.)

The housing portion of Normal’s comprehensive plan identifies an overabundance of Normal of single-family, standalone homes. How was this problem created?

MD: “It developed pretty much in concert with the expansion of State Farm over the last 25 years. It’s mostly been on the East Side, mostly similar types of housing built in pretty large areas. So one neighborhood might have 300, 400, 500 houses that are all pretty similar in price and size, so it makes for a pretty stratified housing arrangement throughout the East Side.

So that was a successful strategy -- developers were building and State Farm was growing. They could rely on State Farm employees to purchase those homes because it was a generally convenient location, and people were coming here from different parts of the country, and that's where everyone was going. So it was a system that kind of perpetuated itself. That’s just the common lore, I’ve never studied it but I would have to assume it’s correct. State Farm did grow a lot in the last 25 years, up until the last few years, and that’s when our population growth happened.”

VP: “If you look at other communities throughout the U.S., you will find this elsewhere as well, especially for growth within the last 2-3 decades; that is not uncommon at all.”

MD: “The style is very similar: detached, single-family homes on a decent-sized yard -- replicate, replicate, replicate.”

So this was a model that worked for a number of years, but --

MD: “It worked for developers. For the private sector it was a model that worked. They were profiting. They were selling what they built at the price they wanted to sell it at. I think from the community’s perspective, a lot of places are looking back at the last 30 years and asking, ‘Is this working for us as a community?’ Because the reality of providing services to that kind of geographic spreading of people is inefficient. So that’s the question, and that’s where having things develop in a slightly more compact way, the dollars and cents of it would work a lot better.”

VP: “And also if you tie it back to other visions within the comprehensive plans, being able to walk and bike to denser places is much easier. Places that provide various amenities and facilities within walking, biking and transit distance are much healthier for the most part than what we have. Our current development patterns just don’t enable that.”

How does cost and affordability tie into this? What is the impact on the residents?

MD: “I’m not a real estate expert. I can say though from the interactions I have with a lot of developers, they have been coming back to us in the last 2,3,4 years saying they want to change their style a little bit too. They’re already looking at downsizing some of their lots, looking for a little more density. So it’s not all coming from the government side pushing developers to change their ways, developers are also seeing changes in consumer preferences, and then just the number of units that are out there.”

VP: “And then if you look at the number of permits pulled for new units, they have gone down tremendously. That’s just overall decline in demand for newer units. And the price for existing homes is either stable or rising, when new homes are just not as popular as they used to be.”

MD: “As far as affordability...if affordable housing is built in an area that does not have access to multiple forms of transportation and (is) in the sprawling area, by its very nature it will not be bikable because it will be too far from where you need to go. Even if you’ve magically designed an amazing trail, which almost never happens, you still have too far to go. And then there’s also not going to be bus service because the density of the residential units does not support a bus going out there.

So any sort of residential development that is far from a lot of ways to get around, even if it’s affordable just by the price tag per month, it’s going to affect your transportation budget. As a family, that can be devastating. If your transportation budget is now 30-40% of your income, that’s a real problem because you have to have at least one car, it has to be well-maintained, it has to have gas, insurance -- car ownership is incredibly expensive. So that’s a real factor for people when they look at housing. They need to look at the transportation that’s available...all the money’s coming from the same pot.”

Normal’s comprehensive plan also mentions the Town has already approved 4,000 new residential units through annexation agreements; can you explain the significance of that?

MD: “It is remarkable when you look at the number of units that we’ve approved on paper that haven’t been built yet...whether they’ll ever be built or when is a question, but we’ve essentially approved enough housing that would serve the next 20 years of our projected development. And we don’t know that developers will even want to build what’s been approved...There’s just not a lot of demand to build anything at this very second.

And the point in raising that was also to say, there would be no reason to go out and annex even more land. In theory there is no reason why we should expand beyond what we’ve already committed to. This development was coming in so fast for so many years that I am sure that nobody had any real idea of how many units were approved on paper, because we never had a chance to stop and take a breath. It was just humming along, developers were coming along, we were approving plans.”

The 2015 Uptown Housing Study noted the Town could add around 1,000 units in the Uptown area; can you explain how the Town arrived at that number?

MD: “It was the demand and the space -- the way they calculated it was very complex and proprietary, so the firm that did it, they had this formula to figure out what they thought in-migration was going to look like and out-migration, looking at demographic trends, what age groups we’re looking at; and so that was an estimate of [a certain number of units over a certain time period]. They projected this, and of course, it would be a denser type of housing, attached townhomes up to multi-story condos.”

VP: “They did not talk about this resulting from population growth as much as population movement, from people wanting to live closer to an amenity like Uptown. The demand for a certain geography is what drove that, not so much overall population growth. While they did take into account the overall growth, I think a big part of that study really delved into the demographic profile of the community and the type of people who want to live closer to an amenity like this.

What was your takeaway from that study? Were you thinking about parcels or agreements needed to help make this happen? In other words, is this a goal, in your mind?

MD: “Yeah, I’d say it’s a goal, and Uptown 2.0 is, of course, a long-term plan. Right now the only property we have under our control is just about 6 or 7 acres in the Uptown South area. And that area does show some residential development, but as far as plans go, it just shows basically a couple of boxes, probably multi-story, more condo-style. But the housing study talked about a variety of styles, whether some garden apartments, some loft style -- really no detached single family [units], but pretty much a range of options.

So what we’ll need to do is -- we can always focus on what we own already. We can always buy more property, although it’s not in any short-term plan. We don’t have the funding for that. But if a developer came along and had a certain chunk of property under their control and wanted to work with us, we at least have an idea of what we’d like to see there.  So it’s very helpful in that way. If we have any skin in the game like we would be able to dictate the style of housing and what not, we have the Uptown 2.0 plan to show us, ‘Here are some options that this community is lacking right now.’”

Is there any way the Town can take charge of and incentivize the kind of development it’s looking for?

MD: “Sure, if money were no object, there would be all sorts of incentives to get exactly what we want. So you have to look at the financial tools you have available, whether that’s TIF in the Uptown area or other sales tax incentives. It’s pretty project-specific. And right now there is no one project that’s just on the books where we have a strategy, where we have a developer in mind. Really it’s all kind of quiet.”

And that’s due to developer interest being low?

MD: “I don’t know. It certainly isn’t a top priority among staff right now to make something happen on the south side of the tracks. And I think we have identified budget issues that are a part of that.

We are in a period of recalibrating all sorts of staff initiatives and what the council wants. I mean, if we wanted to we could go out tomorrow and issue a RFP (Request for Proposals) and say, ‘Hey world, we have 3 acres, we want some residential housing.’ I don’t think we’re in a position to do that right now because of financial and staff resources. But that would be something we could do. We’ve done it before -- we did it for the One Uptown Building.”

So what is that financial situation keeping the Town from doing so now?

MD: “The budget we just went through -- some positions were eliminated, our sales tax revenues aren’t where we hoped they’d be, and all our major revenue streams are a little bit flatter than we’d like, so that just has a major impact on our operations.”

VP: “There are a million tools out there, we just have to think about what might work for a community like this. I’m not saying that these are things we’re going to propose or move forward on. I’m going to use some examples like, say, inclusionary zoning -- if developments were all going forward like they were before, requiring x percentage of units be built as affordable units, and [that they] continue to function as affordable units.

Those are two different pieces in which you would need enforcement to make it happen. To put it simply, let’s just say a development of 100 units would require 20 of them to be under certain income guidelines. That would be part of a zoning requirement. And then you would have tools in place, meaning as part of your property, you would be working with your assessor to make sure your properties are not continuing to be assessed higher so that the affordability piece is lost. When the property is transferred from one owner to the next, you want to make sure that it’s continuing to stay affordable. That’s a tool that is used in communities that are growing.

Housing trust funds are another example where on new market-rate housing developments there is a tax that goes into a special fund called a housing trust fund, and those are used to provide incentives. There are many other tools out there. Those are the two that immediately come to mind.

There are a couple of things I want to point out that we are already proud of. The BN HOME regional housing study that the Town, City of Bloomington, MCRPC and Bloomington Housing Authority were all part of, that study is done. And instead of putting it on a shelf, we all said, ‘Okay, what’s next?’

So now there is this intergovernmental staff team (including representatives from the Town, City
Of Bloomington, MCRPC, BHA and PATH) coming together and identifying opportunities for collaboration, whether it’s through CDBG planning or essentially facilitating dialogue with the state and federal agencies to say, ‘How can we make sure when developers from our community are sending applications for affordable housing, what can we do in preparation for those applications to be successful?’ Because we recognize our incentives are limited here, so we want to take advantage of any incentives that are out there.

MD: “[BN HOME] is the first time this community has ever done anything like this too, collaborated on an actual study of housing.”

VP: “First time in 50 years. In the 70s there was one.”

MD: “Very few people pick their housing in this community based on whether it’s in Bloomington or Normal. They pick maybe based on school district, but that crosses boundary lines too, or just basically what can they afford in a house that they like in a neighborhood that they generally like...this whole town functions as one place.

When you look at the housing study, BN HOME, it basically says this community does not have a major affordability problem. Looking at the general rates that you pay to live in this community among all income levels, it's fairly affordable.

What the study didn’t do and didn’t have funding and resources to do is to look at those units that are affordable and see what kind of condition they’re in. So there are some units in Normal and Bloomington that are affordable, but do you want to live there? Do you feel safe living there? We don’t know the answer to that.

I’m not saying there’s actually a massive problem, but it’s not so black and white. You can look at the dollar amounts and maybe it’s affordable, but maybe it’s untenable for other reasons.”

Go Further: Read “Landlord v. Tenant,” a special investigative series from GLT exploring low-income rental housing in Bloomington-Normal.