Albemarle Supervisors briefed on grant program to incentivize creation of below-market units

The Albemarle Board of Supervisors adopted a plan called Housing Albemarle in July 2021 that is intended to increase the number of housing units in the county. That came with a goal of requiring a minimum of 20 percent of new units to qualify as “affordable.” That’s up from 15 percent in the current policy which applies to units that need rezonings or special use permits. 

“At that time, the Board delayed full implementation of the policy until a package of the developer incentives could be identified and approved that would support developer efforts to meet the new goals of that policy,” said Stacy Pethia, the county’s housing policy manager. 

Supervisors have held previous work sessions on how to put together incentives in February 2022 and in May 2022. Out of those came a resolution of intent to amend the zoning ordinance to create an affordable dwelling unit program. Pethia said a work session on that topic will take place later this spring. 

All of this is based on a 2019 study by the Thomas Jefferson Planning District Commission on that assessed the region’s housing needs. 

“In that study it was identified that the county will need a total of 10,070 affordable housing units by the year 2040 to meet the housing needs of current residents as well as projects residents in the future,” Pethia said. 

Of that, Pethia said about 9,000 of those units are needed for households below 80 percent of the annual area median income. That figure is currently $111,200 a year. 

One tool for affordability would be to create a grant program that would be separate from the affordable dwelling unit program. (read the draft) (other materials)

“The grant program is supported by an increase of property tax revenue to Albemarle County generated by an incentivized project, and may be provided to affordable housing projects that achieve one or more of the affordable housing objectives outlined in Housing Albemarle,” reads the introduction to the draft that went before Supervisors on February 1. 

Pethia said such a program is authorized under Virginia code by §15.2-958. Property owners who receive funding are required to designate twenty percent as affordable, with the definition of affordable up to each locality. 

“Housing Albemarle really focuses on rental housing on households with incomes of 60 percent of area median income,” Pethia said. “That is really for a family of four about $88,000.” 

Eligible projects would:

• Have more than ten units
• Be located within the development area
• Provide a minimum of 20 percent of units below market 
• Ten percent of units must be accessible or convertible to Americans with Disabilities Act standards
• Have same building materials in both market rate and below-market units

Anyone who sought to take advantage would need to fill out a form. (draft form)

But what form would the grant take? 

“It would offer a rebate to real property taxes over a ten year period and the amount of those property tax rebates would be equal to one hundred percent of the cost of the water and sewer connection fees,” Pethia said. 

That’s not a low number. The current hook-up fee to the Albemarle County Service Authority is $13,470 per unit. ACSA executive director Gary O’Connell said in an email today that number is likely to increase due to a number of capital improvement projects. 

Under this program, the developer would enter into a performance agreement with the county which would require annual reporting.  Pethia said Chesterfield County has a similar program in place.

“Through their program they have incentivized 114 affordable units since 2019,” Pethia said. “Their program has been currently put on hold because they want to go assess it and reevaluate it and see it how its working and see if they can make any changes to improve it.” 

Supervisor Ned Gallaway expressed concern the grant program may not provide the certainty that developers want to make sure their project can afford the affordability. Too much would depend on the circumstances of each project.

“It would likely always be project specific,” Gallaway said. “You might have somebody that wants the tap fees rebated but you might want somebody else that wants expedited review. Maybe time is more important than something else in that particular case.” 

Gallaway said he would support the project if it could be demonstrated to work, but he was not certain as of this work session. Pethia said this is the beginning of the conversation. 

Supervisor Diantha McKeel said adding this as an option would provide the Board with more information on future rents as elected officials consider rezonings and special use permits. 

“We often have applicants that come before us with developments and we say, well how much are you going to charge for rent, how much is this, and the answer is always ‘we don’t know yet,’” McKeel said. “It seems like to me that we’ll get some clarity around that going forward with this.” 

Gallaway had a concern that a developer might not get enough to cover the cost of providing the units below market. He suggested just providing a tax rebate rather than tie it to a reimbursement for water and sewer connections. 

“My concern would be do this grant program, we have a program come before us and we find out that the water connection fees covered 80 percent of whatever the additional cost is and then we have to provide additional tax rebate or something in addition to that amount to make it flush, to make it even,” Gallaway said. “That’s what we were saying we would do. We’re not going to cover 80 percent of the cost increase. It’s not an incentive program if it doesn’t cover the full cost increase.” 

Deputy County Executive Doug Walker acknowledged there was a challenge in providing certainty, but that every application would be reviewed. 

“And so where that number is could be actually reconciled on a project by project basis,” Walker said. “Getting the proforma, staff analysis, sitting down, penciling it out, and coming up with a recommendation on whether it does, or if it does, at what level, and making that recommendation. That certainly could be a way to try to overthink what I think is the concern.”

Supervisor Ann Mallek said she supported reimbursing tap fees with rebates because it would give the same benefit to all eligible projects. 

“As opposed to something where you have 39 different math scenarios for different builders who have different business models and some can leverage outside money and some are expecting the county to pay for everything,” Mallek said. 

The final question for Supervisors was whether there should be a cap on rebates for a given fiscal year. Supporters all agreed based on an idea it would be difficult to budget properly otherwise. 

A second work session will be held to finalize input from Supervisors before the project goes to a public hearing. That work session will possibly be held at the same time the affordable dwelling unit ordinance is discussed.  The exact schedule? Keep checking the Week Ahead. 

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