The City of Boise started rolling out one of the biggest tools in its toolbox to develop affordable housing: its own land.
Later this year, developers expect to break ground on an affordable apartment complex at the corner of Franklin Road and Orchard Street with more than 200 units with up to three bedrooms each. The city partnered with Utah-based company J. Fischer to develop. The City of Boise will own the land, while J. Fischer – a private, for-profit company, will build and finance the project.
This development is the first of several projects underway in the City of Boise’s new affordable housing land trust. This model, which is found nationwide, uses publicly-owned land to encourage private developers to build housing with reduced rents. The process gives the city a say in who develops the parcel and what the final product will look like.
This is one of several initiatives Boise is spinning up to try and address rapidly rising rents in the City of Trees. City Council discussed an incentive for developers to build units for “extremely low-income” residents and it passed a Housing Bonus Ordinance to build denser units than allowed if they build affordable units or on transit corridors. The city can combine programs like this with the housing land trust.
How does it work?
Affordable housing land trusts can take many forms, but they all have the same general underlying mechanism. In order to bring cost down for developers, the trust maintains the ownership of the land itself and then leases it out to developers at a low cost. By not selling the land, it keeps costs down for the builder so the trust can build affordable units and the trust maintains the control to dictate the rents, design and any other aspects of the project the trust chooses.
Boise’s Grow Our Housing Program Manager Leon Letson, who is overseeing the land trust, said the land trust model appealed to Boise because it gave the city long-term control over these projects. For example, the lease on the Franklin & Orchard project is 50 years.
“I think we’ve identified the value of land in the current development market and in particular the value of the potential for tax abatement of land,” Letson said. “Those are both attractive aspects that get developers to the table.”
In Boise, the city is working on purchasing properties on major transit corridors and close to other services and then putting out requests for proposals from developers looking to build affordable housing on them. The project at Franklin and Orchard, which was acquired by the city under former Mayor Dave Bieter for housing development, is the farthest along.
The city of Boise also built a similar 134-unit project mostly for renters making 60% of the area median income and below on Fairview Avenue in 2019, called Adare. The City of Boise owns the land and leases it to the developer and its construction was funded from a variety of sources including Boise’s urban renewal agency, cash from the city and low-income housing tax credits from the U.S. Treasury.
Other properties the city has begun the process of purchasing include a portion of the Hillcrest Shopping Center, an office building on the western edge of downtown Boise and the former site of Smoky Davis on State Street. None of these other projects have started the community engagement process or had a request for proposals go out.
What about the property taxes?
The land underneath Franklin and Orchard, and any other land trust projects going forward, will not be on the tax rolls because it’s publicly owned. This is an incentive to help bring developers in who can build projects with lower rents, but that doesn’t mean these projects won’t pay any taxes in the city.
Boise is structuring its land trust so the developers will not have to pay taxes on the land, but they will still pay taxes on the building itself. Typically when public entities purchase land it means the tax burden is shifted to other payers, but city officials say the land trust will not have this effect. This is because possible improvements, like a new apartment building on a previously vacant property, are valued at roughly 15 times the value of the land.
The land under Franklin & Orchard is valued at roughly $1.8 million, which is a tiny slice of the $59 billion of total taxable value in Ada County. By the city’s estimates, the building planned for Franklin & Orchard is valued over $30 million, according to City Spokesman Seth Ogilvie.
To compare, the roughly $15.5 million in tax breaks for Micron Technology Inc. cost the average Boise taxpayer with a $350,000 home an extra $54.18 in 2020.
“The land only represents a small piece and by going through this type of project we’re increasing the amount of taxes that are paid into different programs, not only the city of Boise but also those other agencies that make use of property taxes,” Letson said.
City says dense development lowers costs
Every new development brings more people in need of sewer, trash, police and fire. But even though these multi-family projects Boise is hoping to build will bring more neighbors than a development of single family homes, city officials say they won’t strain resources.
Franklin & Orchard is paying the City of Boise impact fees, but Ogilvie said the city plans to evaluate that for later land trust projects. If the fees are waived, then the missing revenue will be replaced in the city’s budget from a pot of money allocated for the Grow Our Housing program, which comes out of the general fund.
But how expensive developments are to serve goes beyond impact fees. Letson said the goal for the housing land trust is to develop these denser projects on infill lots, close to the urban core to make it cheaper for the city to serve the projects. Plus, he said building denser, multi-family projects means the improvements to the land will be valued higher than single family homes and will bring in more tax revenue to support the people who live there.
“We are specifically targeting areas that can support higher density development, places with transit and higher density services,” he said. “You only have so much land in city limits and if we keep sprawling out with single family development we’re not going to be making efficient use of the land we have.”