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Northampton Housing Buildout Analysis 12.10.2015NORTHAMPTON HOUSING BUILD-OUT ANALYSIS December 10th, 2015 ATTN: Wayne Feiden, FAICP, Hon. WMAIA Director of Planning and Sustainability City of Northampton 210 Main Street, Room 11 Northampton, MA 01060 PREPARED BY: Agora Partners 10866 Wilshire Boulevard, Suite 225 Los Angeles, CA 90024 12 Vestry Street, 7th Floor New York, NY 10013 © Massachusetts Office of Travel & Tourism AGORA PARTNERS | 3 TABLE OF CONTENTS Introduction Page 5 Part 1: Zoning Analysis Pages 7-13 Part 2: Market Analysis Pages 15-23 Part 3: Development Analysis Pages 25-35 AGORA PARTNERS | 5 INTRODUCTION The City of Northampton is strongly encouraging new housing in and around downtown Northampton and downtown Florence, and generally in its two most urban residential zoning districts. Both the Sustainable Northampton Comprehensive Plan and a series of recent zoning changes – all unanimously approved by the Planning Board and City Council – send a clear message that the City wants to encourage new housing to support a more walkable city, and to counter-balance the long-term trend towards fewer people per dwelling unit. At the same time, the City is committed to ensuring that new housing enhances, rather than detracts from, existing neighborhoods. The City hired Agora Partners with three goals in mind: 1. First and foremost, to support the development community, considering both existing and potential developers, by helping to identify the housing market niches that might lead to successful investments; 2. Gain a market perspective of what additional steps the City could consider to further encourage such housing; 3. Quantify, in certain sample sites that provide an insight to two target zoning districts, the buildout that the market is likely to drive, as opposed to the greater buildout sometimes allowed by zoning. Northampton’s recent zoning changes impact residential development going forward, as do other City policies, regulations, and external market forces affecting development potential. At the core of assessing and understanding the implications of such changes, Agora Partners aims to provide analysis from an entrepreneurial planning and development perspective, seeking to review zoning policies and procedures and identify opportunities to encourage new development. The City of Northampton Housing Build-Out Analysis is based on Agora Partners’ current understanding of Northampton’s market demand and market trends, coupled with its zoning policies and procedures. The analysis does not constitute a legal analysis. The following recommendations are based on research compiled through a review of public planning documents, interviews, market analysis, and other such sources that are subject to change. Also posed are a series of questions to be addressed and/or discussed further in light of these recommendations. AGORA PARTNERS | 7 PART 1: ZONING ANALYSIS Summary Part 1: Planning Analysis of the City of Northampton Housing Build-out Analysis is a review of the current zoning designed to understand allowable housing density, including a review of approvals, parking, use and dimensional regulations, open space, and design standards. As per discussions with Wayne Feiden, Director of Planning and Sustainability for the City of Northampton, this review is limited to the Urban Residential B (URB), Urban Residential C (URC), and the Central Business (CB), General Business (GB), and Neighborhood Business (NB) zoning districts. Agora Partners’ analysis of planning regulations and policies for URB, URC, and business zoning districts is based on review of the following materials: • City of Northampton Zoning Ordinance and supporting tables: • Table of Dimensional and Density Regulations • Table of Use Regulations • Table of Use and Dimensional Regulations URB • Table of Use and Dimensional Regulations URC • Use and Dimensional Regulations CB • Design Guidelines Manual: Downtown Northampton Central Business District • Summary of the Massachusetts Building Code Appendix 120.AA, ‘Stretch’ Energy Code The recently passed zoning amendments designed to increase density in the URA (not part of this study), URB, and URC districts represent a positive step toward accommodating and diversifying the housing mix. This potential density, however, is still subject to regulation and approvals. From the perspective of a developer not accustomed to operating in Northampton, generally, and in the vicinity of downtown, specifically, these layers nevertheless infer a protracted timeline for approvals and, as such, increased assumed risk. Our findings are detailed below. Approvals Site Plan Approval The City of Northampton Site Plan Review requirements, procedures, and approval criteria are clearly presented and defined to promote the health, safety, and welfare of the community. Like most communities, this effort needs to be consistently calibrated with development goals and requirements in order to maximize community benefit and minimize development hardship. Under Site Plan Approval, uses are allowed by-right, but the Planning Board will work with the developer on all the details of the site, from traffic mitigation, to sidewalk and lot layout, landscaping, and other site issues. Excluding single-family homes, any residential project with more than 2,000 square-feet of gross floor area (GFA) must proceed through Site Plan Approval. This square footage threshold is quite low, and likely applicable for the vast majority (if not all) of multi-unit projects. AGORA PARTNERS | 8 While land use is as-of-right, the imposition of Site Plan Approval at this threshold does not lend itself to associating most multi-unit uses as “as-of-right” in the non-Massachusetts, more global understanding of the term. If the City wants to encourage more density, the square footage thresholds triggering Site Plan Approval should be higher to more closely align with the uses allowed in different zoning districts. While site plan approval (without a special permit requirement) means that a developer is guaranteed a permit, the process can add up to three months to the development timeline and create some uncertainties as to development costs. If this approach does not meet city objectives as a citywide change, we would recommend considering different square footage thresholds based on desired density in the respective zoning districts, or an easier review process. One approach is requiring administrative (staff) site plan approvals for smaller projects (e.g. projects up to 5,000 square feet). This alignment would provide greater predictability on timelines and approvals, which would in turn support this type of development activity. Ultimately, the goal in this provision should be to provide some level of certainty for developers in this process. It is not our intention to promote carte-blanche development rights, and we are mindful of the City’s desire to promote quality development. Regardless of square footage, Site Plan Approval is also triggered by residential use type in the following zoning districts (limited to our study of business and Urban Residential B and Urban Residential C zoning districts): Neighborhood Business (NB) • Multifamily dwellings not exceeding three stories Urban Residential B (URB) • Townhouses with six or fewer units Reuse of historic educational or religious building for residential use, live/ work space Urban Residential C (URC) • Reuse of historic educational or religious building for residential use, live/work space These generally appear to be reasonable regulations based on the intended characters of each zoning district, with some more specific observations noted in subsequent sections of this document. Lastly, the distinction between requirements, procedures, and approval criteria for intermediate projects (new construction or additions of between 2,000 and 5,000 square feet of gross-floor area (GFA), excluding single- family dwellings) and major projects (new construction or additions of 5,000 square feet or more of GFA) appears to be minor, primarily related to stormwater and traffic studies. As such, we would question the necessity of making this distinction as it pertains to residential projects. Special Permits As with Site Plan Approval, Special Permits also support community wellbeing. While the City of Northampton Site Plan Approval requirements, procedures, and approval criteria are more extensive and detailed in their expectations, the Special Permit criteria serves to reinforce the qualitative aspects of harmonious community development. Because many projects requiring a Special Permit often require Site Plan Approval, the relationship established is constructive and intuitive. In our findings, it appears as though the following types of multi-unit residential projects require a Special Permit in the following business and residential zoning districts: PART 1: ZONING ANALYSIS AGORA PARTNERS | 9 Neighborhood Business (NB) • Detached accessory dwelling unit (ZBA) • Two-family dwellings (Planning Board) • Townhouses (Planning Board) • Multifamily dwellings exceeding three stories (Planning Board) Urban Residential B (URB) • Detached accessory dwelling unit (ZBA) • Any multifamily or townhouse project creating 7 or more units (Planning Board) Urban Residential C (URC) • Detached accessory dwelling unit (ZBA) • Any multifamily or townhouse project creating 7 or more units (Planning Board) The Planning Board may issue a special permit changing frontage, lot depths, setbacks, building coverage, and open space, but not other dimensional requirements for a residential lot within any residential (R) district, subject to conditions which are defined to integrate the project within its immediately surrounding context. At the same time, however, the special permit granting authority may impose any applicable conditions of the Special Permit as it finds reasonably appropriate. From the perspective of a developer not accustomed to operating in Northampton, the latitude with which the special permit granting authority may impose potential conditions on a project raises the level of uncertainty regarding the timeline and nature of the approval process, with a potentially broad range of cost implications that a development project may not have previously considered. Unlike Site Plan Approval, Special Permits are discretionary permits, introducing uncertainty into the permitting environment. Key questions to consider regarding approvals: Bearing in mind the Site Plan Approval and Special Permit criteria, what is a realistic timeline to proceed through the entitlements and permitting process? Does variation in the timeline depend more on scale or site location? How much certainty can a developer have that entitlements and permitting will start and end within a certain timeframe? In the spectrum of density, is the City’s predominant intention to promote accessory units and raise density through incremental increases, or encourage new multi-family projects? While both may be desired by the City, the former is more easily accommodated by regulations than the latter. Mindful of the physical constraints of available land in Northampton, coupled with land costs, there may be an opportunity to champion density further through the approvals process. Zoning Permits Section 350-4.4 Zoning permit required, indicates that “it shall be unlawful for any owner or person to erect, construct, reconstruct, or alter a structure, or change the use of lot coverage, increase the intensity of use, or extend or displace the use of any building or other structure or lot without applying for and receiving from the Building Commissioner a zoning permit.” This section does not indicate the purpose of the Zoning Permit relative to Site Plan Approval, Special Permit, and/or Building Permit. The Planning Office has indicated that the Zoning Permit is a one-page application that serves as a single point of entry to assure that applicants receive the same form of review at the beginning of the approval process, and we would suggest clarifying this purpose within Section 350-4.4. PART 1: ZONING ANALYSIS AGORA PARTNERS | 10 Regulations Off-Street Parking For the URB, URC, and business zoning districts, the off-street parking requirements are reasonable. There are no parking requirements for residential units in the Central Business (CB) District. For all other districts, one space for every 500 square-feet of gross-floor area (GFA) is required, up to a maximum of two spaces for any dwelling unit. Exceptions exist for multifamily dwellings for the elderly and people with disabilities, lodging houses, dormitories, SROs, and halfway houses, which require one space for every 1,000 square-feet of GFA, with a maximum of one per dwelling unit. Reductions in parking requirements in all zoning districts except the CBD are considered through Site Plan Approval, with a reduction of up to 20% of required spaces where conditions unique to the use will reasonably justify such a reduction. Section 350-8.6: Shared Parking also allows a greater percentage parking reduction where joint use of the same spaces by two or more uses or establishments is justifiable by virtue of the fact that the uses or establishments generate peak demand at substantially different time periods. We believe this is a proactive provision to support urban development. Additional clarification needed for Off-Street Parking: What is the frequency of requests to alter parking requirements, and how often are requests granted? Is the market view that of too much or too little parking? Accessory Apartments The Zoning Ordinance allows for attached accessory apartments by-right and detached accessory apartments by Special Permit through the Zoning Board of Appeals. Attached accessory apartments must be less than 900 square feet. Only one accessory apartment, whether attached or detached, is allowed per single-family house or house lot. Additional clarification needed for Accessory Apartments: Why is 900 square feet the maximum size of an accessory apartment? This size appears to be the maximum for detached accessory apartments, as well. If accessory structures in URB and URC can be no larger than 1,000 square-feet of lot coverage or 3% of lot area, whichever is greater, why can’t accessory units be larger than 900 square-feet? Is it sufficiently easy to encourage non-real estate professionals to pursue constructing accessory apartments? I.e., has this provision translated to the production of these types of units? Urban Residential B (URB) Use & Dimensional Regulations The URB zoning district allows for single-family, two-family, and three-family dwellings, as well as attached accessory dwellings and zero-lot line single-family dwellings “as-of-right.” Because any construction greater than 2,000 square-feet of GFA requires Site Plan Approval, it is likely that the majority of two-family and three family dwellings in this district will need to proceed through Site Plan Review. In order to avoid Site Plan Review, a two- family dwelling would need an average unit size of 1,000 square feet or less, while a three- family dwelling would have less than 700 square-feet per unit. From a developer’s perspective, proceeding through Site Plan Approval is most likely still worthwhile to afford the additional density. PART 1: ZONING ANALYSIS AGORA PARTNERS | 11 At the same time, it could be valuable to study the existing average unit size in URB zoning districts and determine whether or not it is greater than 2,000 square feet. Since the intention of the zoning district’s use and dimensional regulations is to integrate new development within the overall character of the existing fabric, then clarifying this average could be constructive. Alternatively, the dimensional regulations for the URB district could be applied to create a prototypical two- family and three-family scenario, respectively, and use the square footages of GFA found in these scenarios to inform what triggers Site Plan Approval. For the two-family dwelling, the minimum lot area would be 5,000 square feet. A lot with 50’ frontage and 100’ depth, with a 10’ front setback; 15’ side setbacks; and 20’ rear setbacks would yield a building footprint of 20’ x 70’ = 1,400 square feet. Assuming three stories, the GFA would be 4,200 square feet, or an average unit size of 2,100 square feet. At two stories, the GFA would still be above the Site Plan Approval trigger at 2,800 square feet. For three-family dwellings, the minimum lot area would be 7,500 square feet. A lot with 75’ frontage and 100’ depth, with a 10’ front setback; 15’ side setbacks; and 20’ rear setbacks would yield a building footprint of 45’ x 70’ = 3,150 square feet. Assuming three stories, the GFA would be 9,450 square feet. At two stories, the GFA would be 6,300 square feet. Special Permits are required for detached accessory dwellings per broader regulations. Townhouse projects creating seven or more units also require Special Permits. Since townhouse projects of this scale would also need to proceed through Site Plan Review, it was initially unclear whether or not the addition of the Special Permit is significantly less attractive to developers who are pursuing additional density. Further discussion with the Planning Office indicated the time and cost associated with the Special Permit are very minor, though the discretionary nature of the Special Permit is still a variable that should be strongly considered from the perspective of an outside developer. In other words, any discretionary reviews or approvals introduce uncertainty in to the developer’s process. Recommending fully non-discretionary processes is not the intent of the analysis; however, in light of developers’ aversion to uncertainty, discretionary processes should be carefully reviewed to address intent and effectiveness. Separately, the introduction of the term “zero-lot line single family” and the separate Section 350-10.14: Zero lot line (ZLL) developments, differ from broader usage of the term, which indicates a unit sited on one or more lot lines and typically does not require common ownership of adjoining lots. Development in Northampton’s CB District generally follows the latter definition of zero-lot line development. It is unclear whether the intent of this provision is to promote the broader view of zero-lot line development, or allow property owners with adjoining lots the flexibility to pursue this type of development. Urban Residential C (URC) Use & Dimensional Regulations The URC zoning district allows single-family, two-family, and three-family dwellings as well as multifamily (point of clarification: there is no comma separating “three-family” and “multifamily” in the regulations, though the dimensional regulations seem to indicate that multifamily is allowed in addition to three-family dwellings), townhouses with six or fewer units, attached accessory dwellings, and zero-lot line single-family dwellings. The URC zoning district has greater density than the URB zoning district and some mix of uses, though the character is still predominantly residential. PART 1: ZONING ANALYSIS AGORA PARTNERS | 12 Because any construction greater than 2,000 square-feet of GFA requires Site Plan Approval, it is likely that the majority of two-family and three family dwellings, multifamily, and townhouses in this district will need to proceed through Site Plan Review, with potential exceptions for smaller units as noted in the URB section. Nevertheless, it could also be valuable to study the existing average unit size in URC zoning districts and determine whether or not it is greater than 2,000 square feet. As in the URB district, since the intention of the zoning district’s use and dimensional regulations is to integrate new development within the overall character of the existing fabric, then clarifying these averages could be constructive. The dimensional regulations for the URC district could also be applied to create a prototypical two-family scenario, three-family scenario, multifamily, and townhouse scenario, respectively, and use the square footages of GFA found in these scenarios to inform what triggers Site Plan Approval. For the two-family dwelling, the minimum lot area would be 5,000 square feet. A lot with 50’ frontage and 100’ depth, with a 10’ front setback; 10’ side setbacks; and 20’ rear setbacks would yield a building footprint of 30’ x 70’ = 2,100 square feet. Assuming three stories, the GFA would be 6,300 square feet. At two stories, the GFA would be 4,200 square feet. For three-family dwellings, the minimum lot area would be 7,500 square feet. A lot with 75’ frontage and 100’ depth, with a 10’ front setback; 10’ side setbacks; and 20’ rear setbacks would yield a building footprint of 55’ x 70’ = 3,850 square feet. Assuming three stories, the GFA would be 11,550 square feet. At two stories, the GFA would be 7,700 square feet. A multifamily project with six units would require a 15,000 square-foot lot area. A lot with 100’ frontage and 150’ depth, with a 10’ front setback; 10’ side setbacks; and 20’ rear setbacks would yield a building footprint of 80’ x 120’ = 9,600 square feet. Assuming three stories, the GFA would be 28,800 square feet. A townhouse project with six units would also require a 15,000 square-foot lot area, though the configuration of the units will necessarily be different. Per regulations the first unit must face the street and have 10’ side setbacks, while the units extending behind the front unit would be side-loaded with 20’ side setbacks. Using an average townhome dimension of 20’ x 40’ yields an 800 square-foot building footprint, for a total GFA of 1,600 square-feet per unit. The project total of 9,600 square feet would be well within the buildable envelope intended by regulations but well above the Site Plan Review threshold. While there are a variety of possible configurations, these numbers are not intended to convey support for dramatically raising the square footage threshold for Site Plan Review. Nevertheless, the numbers should illustrate that the square footages of allowable uses are likely to be much higher than the Site Plan Review threshold, which does hamstring the development process. Special Permits are required for detached accessory dwellings per broader regulations. Townhouse projects creating seven or more units also require Special Permits. As in the URB zoning district, further discussion with the Planning Office indicated the time and cost associated with the Special Permit are very minor, though the discretionary nature of the Special Permit is still a variable that we would strongly consider from the perspective of an outside developer. As discussed previously, discretionary processes should be carefully reviewed to address intent and effectiveness. PART 1: ZONING ANALYSIS AGORA PARTNERS | 13 Central Business District (CB) Table of Use, Dimensional and Density Regulations While not the main focus of our study, we briefly evaluated the CB District, General Business (GB) District, and Neighborhood Business (NB) District as they are proximate to the URB and URC zoning districts. Where URB and URC zoning districts possess some mix of uses, they have predominantly residential characters. Understandably, the business districts are predominantly commercial in character, but also possess a mix of uses. A variety of residential use types are adequately accommodated in these districts, with an emphasis on mixed- use buildings that accommodate work space, retail space, and residential space above the first floor and in the rear of buildings, provided the façade facing the street is commercial. As in our study of URB and URC zoning districts, however, it is likely to assume that the 2,000 and 5,000 square-foot thresholds for Site Plan Approval, in the CB District in particular, would be well below what would otherwise be achievable through dimensional and density regulations. While there is an extensive list of exemptions, it appears as though all new construction in the CB District and along a defined area of West Street are subject to the Central Business or the West Street Architecture Design Guidelines, and that projects will be reviewed by the Central Business Architecture Committee. Projects can proceed simultaneously through Site Plan Review and Design Review. Section 156-6: Central Business architecture permit process, indicates that the Central Business Architecture Committee shall use the “same public notice and timeline requirements for permit applications as is required under the State Zoning Act for special permits” but it is unclear whether this means the process is streamlined. Section 156-6 also indicates that the Committee “shall hold a joint public hearing with the Planning Board or Zoning Board of Appeals, as appropriate, for any project that also requires zoning relief from those Boards.” It is unclear what constitutes zoning relief in this instance of the term. Stretch Energy Code In conversations with area developers and brokers, the implication of increased energy standards is, understandably, increased construction costs. One area developer estimated a 10% increase in construction costs as a result of the Stretch Energy Code, and a local broker indicated that the increased costs bear an additional impact on housing targeted at the affordable (below 80% AMI) and workforce (80-120% AMI) levels. At the higher end of the market, however, the broker indicated that these increased costs have the benefit of an increased market reception. Payback periods for energy savings are short enough that most investor-owned and occupied building projects benefit from the Stretch Energy Code, while the investor benefits are not as clear for building leases where the tenant pays the energy costs. The City is in the process of setting up Rent Rocket, a cloud- sourced web listing of utility charges for rental units, which will add some financial incentive for building owners to make energy conservation investments. PART 1: ZONING ANALYSIS AGORA PARTNERS | 15 PART 2: MARKET ANALYSIS Summary In support of our planning analysis, this market analysis seeks to understand the housing supply currently available (and proposed) in Northampton relative to both housing demand and the City’s aspirations for a sustainable community. The analysis then seeks to compare these demands and aspirations against Northampton regulations to see if they can be accommodated appropriately. The historical depth of our research is limited for two reasons. First, the zoning revisions relevant to our study have only recently occurred. At a broader level, our development approach focuses on identifying prospective gaps in the market that may not be clearly identifiable in present conditions, but are potential indicators of future development trends. While most of our analysis is specific to Northampton, we have included insight from industry best practices and case studies to contextualize and buttress our recommendations. Existing Housing Supply According to GIS analysis prepared by the City of Northampton Planning Department, approximately 45% of Northampton’s land area is classified as residential use. This is overwhelmingly the most dominant land use in the city. Isolating the URB, URC, and business zoning districts, 89%, 81%, and 15% of all parcels in each district are classified as residential, respectively. In terms of lot area, the business zoning district has the greatest mix of lot sizes of the three district types, ranging from less than 5,000 square feet up to greater than one acre, though the amount of residential parcels is limited. The URB district has lot sizes predominantly between 5,001 and 10,000 square feet (39%) and 10,001-25,000 square feet (41%). The URC district has predominantly smaller lot sizes; approximately 24% are up to 5,000 square feet in area; 41% are between 5,001 and 10,000 square feet; and 24% are between 10,001 and 25,000 square feet. The majority of residential parcels include a single-family residential structure, marking the city’s predominant character. According to the 2009-2013 American Community Survey (ACS), there are an estimated 12,267 housing units in Northampton (with a margin of error of +/- 404 units). The majority of these units, approximately 53%, are single-family structures. The mix of multi-family units is fairly well distributed: approximately 12% have two units in a structure; 11% three to four units; 11% have five to nine units; and 13% have ten or more units. Interestingly, 46% of these structures are estimated to have been built in 1939 or earlier, meaning that a large portion of units are approaching one-hundred years old.1 The housing stock is very well maintained with virtually no abandoned structures or blight. Nevertheless, the breakdown of structures according to age indicates nearly all structures – approximately 95% – were built prior to 2000. The majority of units (approximately 63%) have four to seven rooms, with the remaining percentage evenly split between smaller and larger. Approximately 62% of units have two to three bedrooms; 18% have one bedroom, 17% have four or more bedrooms, and only three percent are studio or efficiency units (i.e. do not have a separate bedroom). 1 The City of Northampton Planning Office has indicated that there may be a recording error in assessor data regarding the age of housing structures, so this may also be prevalent in ACS data. AGORA PARTNERS | 16 Projects in the Pipeline Data supplied by the City of Northampton Planning Office indicates several projects in the pipeline that are anticipated to add to the existing housing stock. Village Hill, arguably Northampton’s best performing development project post-downturn, has several component projects underway, including Christopher Heights, an 83-unit assisted living facility; Moser Street, 26 single-family units; Upper Ridge, a planned 28-unit townhouse residential complex; and Ford Crossing, which includes a planned 75-unit mix of single-, two-, and three-family homes, as well as 16 units of mixed-income housing. Located within a mile of downtown, the neighborhood has a diverse mix of housing opportunities. Outside of Village Hill, the Clarke School redevelopment has approvals for 41 luxury apartments; HAPHousing is building a 75-unit mixed-income development at 155 Pleasant Street; and a 55-unit affordable housing project is also being developed at 256 Pleasant Street. Apart from these projects, most of the approved, under-construction, or planned residential projects are single- family developments outside of a mile of downtown. Emerson Way has approval for 63 units of single family, with 8 affordable units; lot prices range from $95,000 to $190,000, with lot sizes ranging from 9,583 square feet up to 57,935 square feet. Beaver Brook Estates has 25 detached units on common-owned land with currently available lot prices ranging from $86,000 to $185,000 and lot sizes ranging from 7,576 square feet to 50,442 square feet. The Ridge Subdivision has 13 high-end lots2 not on public water or sewer, and Kensington Estates is approved for a 23-lot subdivision. Ownership According to the ACS, the total number of occupied housing units is estimated at 11,538 (+/- 355), with approximately 58% owner-occupied units and 42% renter-occupied. For single-family units specifically, 92% are owner-occupied. Of owner-occupied units, approximately 83% are single-family. Renter-occupied units are more diverse in structure types: approximately 12% of renter-occupied units are single-family; 19% are within two-unit apartment structures; 23% are in three to four unit structures; 23% in five to nine unit structures; and 23% in ten or more unit structures. According to GIS analysis, in the business zoning districts, approximately 19% of parcels are classified as owner-occupied, while 81% are renter-occupied. In the URB districts, approximately 60% are owner-occupied, and 40% are renter-occupied. In the URC districts, approximately 28% are owner-occupied, and 72% are renter- occupied. In other words, most of the downtown, commercial areas, and immediately surrounding neighborhoods predominantly consist of renters, while the next ring of neighborhoods, which are predominantly within URB zoning districts, has a majority of owner-occupied housing. Household Demographics The average household size in Northampton is 2.14. Of the 11,538 total households, approximately 5,725, or 50%, are classified as families, and the average family size is 2.88. Approximately 73% of family households live in owner-occupied housing. According to the Amherst Housing Market Study, regionally, the primary increases in owner-occupied housing were in 1- and 2-person households with decreases in larger (4- and 5person) households, which in turn reflects a decrease of family households (households with dependent children). 2 The City of Northampton Planning Office indicated that the Ridge Subdivision is intended to have high-end lots, but Agora Partners was unable to locate sales data to confirm value. PART 2: MARKET ANALYSIS AGORA PARTNERS | 17 According to the Northampton Housing Needs Assessment & Strategic Housing Plan, population growth in Northampton has been flat since 1950, and is anticipated to remain stable in the foreseeable future. The number of housing units, however, has increased, indicating a reduction in household size. Additionally, there has been an increase in the size of non-family households. According to the Amherst Housing Market Study, which provides a regional snapshot, population and household growth has outpaced job growth. The study indicates that “enrollment growth at UMass has been a driving factor in the pace of population growth in Pioneer Valley through the economic downturn.”3 While the study focuses on Amherst, it nevertheless has relevant and timely indicators for Northampton: • Amherst absorbed almost half (46%) of total in-migrants to Hampshire County between 2000 and 2010, followed by Northampton (22%) and South Hadley (10%). • In non-student-oriented age groups, Northampton generally attracted the greatest numbers. For example, Northampton’s percentage of in-migrants in all age groups between 30 and 74 ranged between 27% and 37%, the highest among all communities. • Northampton also absorbed the largest number of children under 18 (27%). • For those moving out of Amherst between 2006 and 2010, ACS migration data show that about 55% (1,039) of the reported movers stayed close to Amherst. Most moved to Northampton and • Belchertown, as well as Hadley and Leverett. Of this group, 50% were 18-24 and may have moved to a new dwelling while still in school, but some may have graduated and decided to stay local. The 25-29 age group represented 22% of local movers, about half relocating to Northampton.4 Outside of college-age population growth in Amherst, the region’s population growth has been concentrated in the over-55 age group. In Northampton, 42% of the population is 55 years old or older; approximately 20% are under 35 years old; 16% are ages 35 to 44; 21% are 45 to 54. When isolating head-of-households in owner-occupied and renter-occupied units, however, only 20% of householders in owner-occupied units are up to 44 years old, while 59% of householders in renter-occupied units are in the same age group. Approximately 57% of head-of- households in owner-occupied units moved into those units prior to 2000, while 90% of head-of-households in renter-occupied units moved into those units from 2000 onward. The median household income in Northampton as of the 2013 ACS is $57,991. Approximately 18% of all households make between $50,000 and $74,999 a year; approximately 63% of those households are in owner- occupied units. For owner-occupied housing units the median income is $78,269, compared to $33,573 for renter-occupied housing units. Of the approximately 53% of owner-occupied housing units with $75,000 or more of income, 92% have monthly housing costs that are less than 30% of their income. In other words, since households who pay more than 30% of their income for housing are considered cost burdened, the majority of owners are not cost burdened. By comparison, of the approximately 26% of renter-occupied housing units with $20,000 to $34,999 of income, approximately 60% have monthly housing costs that are more than 30% of their income, thereby demonstrating a housing cost burden for lower income households. 3 Amherst Housing Market Study, March 2015. Prepared by RKG Associates. 4 Ibid. PART 2: MARKET ANALYSIS AGORA PARTNERS | 18 Housing Costs & Housing Market A recent article in MassLive5 indicated that the overall median rent in Northampton is $1,400, according to Zillow, a real estate website. A search conducted by Agora Partners on this site on May 20th, 2015, indicated a median rent price of $1,325, according to data through March 31st, 2015. Other sources, including RentNoho and MyApartmentMap indicate average rents for one-bedroom and two-bedroom units to be between $1,200 and $1,300. The Amherst Housing Market Study indicates that the median gross rent for Tier 1 Towns (Northampton, Hatfield, Hadley, Sunderland, Leverett, Shutesbury, Pelham, Belchertown, Granby, and South Hadley) was $872 in 2010, an increase of 33.6% since 2000. At the citywide median income of $57,991, a monthly rent in Northampton of $1,300 amounts to 27% of annual income, which would not indicate a cost burden. However, for renter-occupied households, with a median income of $33,573, a monthly rent of $1,300 amounts to approximately 46% of annual income; a significant cost burden. Viewed from an alternative perspective, households with a $57,991 income can afford up to $1,450 per month in housing costs (including rent and utilities), while households making $33,573 per year can afford up to $839 in monthly housing costs. The latter threshold is approximately 35% lower than the average rent for a two-bedroom unit. While this is an important clarification for housing policy in Northampton generally, for the purposes of our market analysis we are focusing on identifying market-rate opportunities to accommodate demographics that would not be eligible for affordable housing, and development projects that would not be eligible for subsidies. The median home value in Northampton, according to Zillow, is $272,200, also according to data through March 31st, 2015. This value represents a 4.4% increase over the past year, and another 4% increase is anticipated this year. Using a hypothetical case, which itself could vary greatly, and assuming a median home value, a 20% down payment of $54,440 and a 30-year mortgage at a 4.5% interest rate would amount to $1,102 in monthly mortgage costs. Local brokers indicate that the average income in Northampton has historically supported purchasing a home with between $200,000 and $300,000 in value, and that this range has remained fairly stable. While the monthly cost would not be a burden for households making the median income, the down payment may be a barrier to entry for some households. 5 “Northampton: More affordable housing needed to keep the city diverse, experts say” March 01, 2015; accessed May 27, 2015. <http://www.masslive.com/news/index.ssf/2015/03/northampton_more_affordable_ho.html> PART 2: MARKET ANALYSIS Sales data from the past year, supplied by The Murphys Realtors and analyzed by Agora Partners, offers a more detailed breakdown of the types of homes on the market, the average listing prices, average sale prices, average living area, and average sale price per square foot: Downtown = 01060; Leeds = 01053; Florence = 01062; “Multi-Family” indicates the sale of multiple units The downtown area had the highest sales volume and the highest price points. Unit sizes, however, were fairly comparable between downtown, Leeds, and Florence for single-family and condo units. Subjective input from the developer and broker community in the Northampton area indicates that the downtown area is generally unaffordable for the typical resident. This area is commonly identified as being walkable within a one-mile radius of town center. Isolating sales in Village Hill over the past year yields unique findings: Number of Listings Average List Price Average Sale Price D’town Leeds Florence D’town Leeds Florence D’town Leeds Florence S-F 86 12 81 $403,645 $391,533 $293,330 $395,389 $370,958 $284,980 M-F* 21 1 8 $391,662 $279,000 $358,488 $377,191 $267,500 $351,450 Condo 64 11 8 $224,365 $177,200 $206,100 $220,979 $172,627 $206,125 TOTAL 171 24 97 Average Living Area (SF) Average Sale Price/SF Downtown Leeds Florence Downtown Leeds Florence Single-Family 1,913 1,916 1,615 $208 $186 $179 Multi-Family 2,460 2,524 3,195 $156 $106 $112 Condo 1,131 1,164 1,193 $197 $149 $167 VILLAGE HILL List Price Sale Price Square Feet Cost/SF Average Listing Price Average Sale Price Average SF Cost/SF Single-Family $396,080 $433,931 1,626 $267 $420,985 $495,059 1,968 $253 $480,975 $543,605 2,231 $244 $385,900 $507,641 2,046 $248 Condo $319,900 $365,623 1,320 $277 $343,540 $379,335 1,381 $275 $319,900 $369,619 1,320 $280 $329,000 $370,410 1,310 $283 $449,900 $492,021 1,788 $275 $299,000 $299,000 1,169 $258 PART 2: MARKET ANALYSIS AGORA PARTNERS | 20 The average sales price of a single-family home in Village Hill is approximately 25% higher than the average sale price in the downtown area, which, again, is typically considered the upper end of the local market. The average sale price for Village Hill condos, commanding the highest price per square foot of any unit type in any area, was more than 70% higher than the average sale price in the downtown area. A variety of factors may be attributed to this type of demand. First, the project represents the largest amount of new, market-rate housing stock in the city. Mindful of the relative age of Northampton’s building stock, this may be a simple but important factor. Its emphasis on neighborhood design integrates single-family, multi-family, and condo units, while also incorporating space for commercial office, retail, light industrial, and R&D space. Village Hill is also located within a mile of downtown, and in combination with its energy-efficient, sustainably-minded, quality design and construction, it has a desirable mix of factors to command higher price points. At the same time, members of the broker community indicated that while Village Hill developers anticipated attracting Millennials and Baby Boomers to Northampton from outside of the city, a sizeable portion of Village Hill residents were existing Northampton residents who relocated laterally. From the development perspective, it is hard to identify this type of migration activity as a net “demand,” as it does not necessarily correlate to increased activity for the units these residents left behind. Additional insight from the broker community is necessary to determine whether or not these latter units account for an increased net demand. Additionally, the Amherst Housing Market Study indicates that “the impact of low supply and high demand allows developers to ‘cherry pick’ which market they will serve and effectively forces them to concentrate new development to the high end (over $400,000).” Projects like Village Hill seem to confirm the momentum behind this approach. When isolating residential parcel values within the zoning districts of our study area, a diverse range of residential parcel values also exists in these districts, according to data supplied by the City of Northampton Planning Department. The business districts have the greatest cross-section of residential parcel values: 27% are valued between $0 and 200,000; 35% are between $200,000 and $400,000; 14% are between $400,000 and $600,000, and 25% are greater than $600,000. In the URB districts, 72% of parcels are valued between $200,000 and $400,000, compared to 65% in the URC districts. While the parcels in the URC districts are generally smaller than the URB districts, their values are roughly comparable, further confirming the value of residential properties in proximity to downtown. Qualitative Assessment of Housing Demand In addition to the quantitative analysis of what Northampton residents can afford relative to housing costs and housing values, a variety of sources indicate why residents choose to locate in Northampton. When coupled together, these attributes portray a vibrant mix of potential opportunities for developers that merit further exploration. The Northampton Housing Needs Assessment & Strategic Housing Plan indicates that residents are particularly interested in living in a place with an emphasis on environmentalism and wellness. The Amherst Housing Market Study, while focusing specifically on Amherst, nevertheless has comparable indicators for resident preferences, which include a high value placed on education, good town services, a diverse population, cultural and higher- education amenities, and the scenic environment of “largely preserved natural landscape with viable farms, fields, and woodlands.” PART 2: MARKET ANALYSIS AGORA PARTNERS | 21 Northampton also has the long-established “cultural cool” that has attracted artists, musicians, and creative types to its downtown. One developer interviewed emphasized the “one-of-a-kind” traits of Northampton’s center, noting that arts has been and should continue to be a generator for activity. In her memoir, rock icon Kim Gordon of Sonic Youth described Northampton, where she resides, as being both “rural and beautiful, a small town with the sophistication of a bigger city.”6 The Academy of Music, the first municipally-owned theater in the country, attracts over 50,000 patrons annually, with $2.7 million in annual sales.7 Combined with several live music and performing arts centers downtown, the city is well recognized as an arts destination. More and more people, particularly Millennials, are seeking to live in places where the assets of the city and the landscape are equally (and easily) accessible. The City of Northampton’s Economic Development Director, Terry Masterson, rightfully positions the vibrancy and dynamism of Northampton’s eclectic downtown as an asset, located within ten minutes of Pioneer Valley’s outdoor amenities. A diverse set of transportation infrastructure exists with direct access to downtown, including nearby highway access from Interstate 91, which connects Northampton to Springfield, Bradley International Airport, and the Massachusetts Turnpike; Route 9, which connects to Hadley and Amherst; Amtrak service on the Vermonter line, which operates between Burlington, Vermont and New York City; Pioneer Valley Transit Authority bus service; and the Norwottuk Rail Trail bike path. Relative to housing types, members of the developer and broker community indicate that retirees, an increasingly dominant demographic, are looking for well-designed, high-quality condos. More broadly, the Amherst Housing Market Study reports that settlement trends in the region indicate that renter households are seeking smaller units (loft-style and 1-bedroom units) within the region, a unit type that would be attractive to both retirees, as well as young individuals or couples. Relevant Product Types Based on the factors outlined in the previous sections, we have compiled a list of relevant product types that are worth discussing, with supporting insight from the development perspective. The goal of this section is not solely to portray viable product types for Northampton, but to address the pros and cons of product types that are often discussed when market conditions similar to Northampton are apparent. Accessory Apartments The many potential benefits of accessory apartments are already apparent to the City of Northampton, which allows for attached accessory apartments by-right and detached accessory apartments by Special Permit through the Zoning Board of Appeals. For older residents with larger homes looking for an additional source of income, building an accessory apartment would appear to be an attractive proposition. The Planning Office has indicated that accessory apartments were foreseen to serve three purposes: provide market-rate affordable housing; provide housing to allow the current population to age in place; and to provide space to allow residents to increase their investment in existing homes and in the community. More often than not, homeowners who are compelled to build accessory apartments often keep the units as accessory space for themselves or for guests. More generally, homeowners are not as compelled as developers to identify and act upon the market opportunity inherent in providing smaller, more affordable housing options, nor are they as experienced navigating regulations, the design process, and construction. Costs and sizes of accessory apartments can vary widely; a recent article in Urban Land indicated costs ranging from $50,000 to more than 6 Kim Gordon, Girl in a Band (New York: Harper Collins, 2015) 225. 7 Terry Masterson, “Academy of Music Economic Impacts” September 23, 2014. PART 2: MARKET ANALYSIS AGORA PARTNERS | 22 $400,000 for an accessory unit, with sizes ranging from 300 to 1,000 square feet on average.8 Therefore, while this type of unit should be accommodated by regulations, it is not a primary means to accommodate the type of identified demand. Micro-Apartments Micro-units – generally identified as being smaller than 400 square feet – are being constructed in globally competitive cities where significant demand and cost constraints exist. The residents who choose to live in micro- units are making distinct sacrifices in domestic space so that they can live on their own, without a roommate; live closer to work and/or entertainment; and/or live in new construction with contemporary amenities that they would most likely not have access to in other units they could afford. The first generation of micro-apartments in New York City are between 260 and 360 square feet, and are leasing at $2,000-$3,000 a month.9 As a reference point, these unit sizes are comparable to the size of an average hotel room. The demand for micro-units of the kind found in New York City and Boston may be very limited in and around Northampton. However, smaller, studio-sized units that start at 450-square feet are a more comfortable size that could be worthwhile to explore and, likely, has been analyzed to some degree by local developers. Passive House, Living Building, or “Regenerative” Units As a very sustainabilitly-oriented and progressive city, current and prospective Northampton residents may find units designed to Passive House10 standards attractive. Passive House focuses on creating a high-quality, energy efficient building envelope. Similar to the Living Building Challenge,11 these design and construction approaches are oriented toward achieving net-zero or net-positive energy. These approaches are part of an increasingly strong thread of sustainability known as regenerative design, which seeks not only to improve the quality, efficiency, and sensitivity of building design and construction, but to use buildings as a means to restore environmental resources. Insight from the local development and broker community has indicated that construction costs associated with environmentally-minded design are typically 10% higher than standard construction, which makes this type of product difficult to pencil for market segments apart from high-end residential. The City may wish to consider density bonuses, expedited approvals, or some combination of these incentives, for this type of design in order to support the creation of units that are more reasonably priced. The benefits of this type of design are largely felt by the occupant, not the developer, though long-term maintenance savings may be felt by both in a rental building. 8 “Rethinking Private Accessory Dwellings” March 06, 2015. Accessed May 27, 2015. <http://urbanland.uli.org/planning-design/rethinking-private-accessory-dwellings/> 9 “Home Shrunken Home: New York’s First Micro-Apartments, Prefabricated in Brooklyn.” February 20, 2015. Accessed May 27, 2015. <<http://www.nytimes.com/2015/02/22/realestate/micro-apartments-tiny-homesprefabricated-in-brooklyn.html?_r=0>> 10 Passive House Principles can be reviewed in brief at the following web address: <http://www.phius.org/what-ispassive-building-/the- principles> 11 For more information about the Living Building Challenge, visit: <http://living-future.org/lbc/about> PART 2: MARKET ANALYSIS AGORA PARTNERS | 23 Townhomes, Cottage-Style Units, Small-Lot Subdivisions These types of units work effectively to lower the cost of land on a per-unit basis. In these scenarios, homebuyers/ renters give up yard area in exchange for a more affordable unit. A developer would deliver a new, smaller product at a lower price point than market rate, though sales and rentals are at a higher price per square foot. Buyers and renters do not make decisions on a per-square-foot basis; they determine what they can afford in total and review their options based on gross purchase price. Prospective Development Strategies A longstanding tradeoff when selecting a residential unit pits larger units of lower quality against smaller units of higher quality. Currently, buyer and renter trends appear to be more toward the latter and less toward the former. Site location is also a factor, among others, but for the purposes of our study, we are focusing on neighborhoods within one-mile of downtown, which have roughly comparable land values. Based on a variety of sources, it is apparent that higher-end residential units within a mile of downtown represent Northampton’s current market strength. Village Hill, with quality design and construction, is a signal of this strength. Smaller units with the same quality design as Village Hill, located closer to downtown, may command similar prices, for a higher per-square-foot price. From a developer perspective, this difference would appear to be a competitive advantage. At the same time, there are apparent gaps in the market for lower-income and workforce housing segments. Because we are focusing on identifying market-rate opportunities, there does appear to be a market for smaller units at lower price points to accommodate the workforce population, both for-sale and rental. Based on the transient student and faculty populations, there is also an opportunity to provide more rental housing. The ability for these types of projects to pencil, based on land values and other factors, is the subject of the third part of our study, Development Analysis. That section analyzes the development potential of select sites given market and policy constraints and opportunities. Policy Recommendations Following Market Analysis As this market analysis relates to the City of Northampton’s policy efforts, we would echo our recommendations from Part 1: Planning Analysis. We believe that it is highly important for the City to actively champion projects that support the vision and aspirations of the City. Where possible, the City should reduce regulatory barriers to project approval and expedite the review process for projects that advance the City’s goals for community growth, with particular consideration for the necessity and procedure of the Special Permit process. With regards to the City’s prospective planning efforts, our development analysis aims to shed light on particular development prospects in and around downtown, which will further clarify our policy recommendations. Taken together, the Planning and Market Analyses identify opportunities to investigate development potential in the URB, URC, and business zones. PART 2: MARKET ANALYSIS Prototypical URB Property Prototypical URB Property Lyman Estate © Bing Maps AGORA PARTNERS | 25 PART 3: DEVELOPMENT ANALYSIS The Development Analysis identifies potential near-term, mid-term, and long-term opportunities on sites that would be eligible to absorb new housing through a combination of GIS analysis, field observations, and discussions with the City of Northampton Planning Office, bearing in mind two fundamental questions: what makes a certain property attractive to a developer, and how can the City of Northampton better position properties as a result of these findings? When reviewing potential opportunity sites together with the Planning Office, the first point of observation is that there seem to be very few City-owned sites that would provide meaningful development opportunities in the near- term. As a result, public-private partnerships become harder to structure, unless the City is willing to buy land. Beyond public-private partnerships, development activity requires willing sellers who are able to put properties on the market at reasonable prices. From our development perspective, there are several factors used to identify potential opportunity sites. These include: • Degree of visibility/high-profile property – to what extent does the site provide a landmark development opportunity by virtue of its location? • Neighborhood catalyst – to what extent can a site within a particular neighborhood serve to jumpstart development activity around it? How can the site serve as a gateway to the neighborhood, or a center? • “Test” project – to what extent can a site offer flexibility and latitude to test a new product type within its context? • Level of constraints – to what extent do infrastructure, environmental conditions, and regulations hinder development on the site? To provide a snapshot of development potential in Northampton, the following sites were identified to study in greater detail, and are illustrative of other investment opportunities that could arise: 1. Prototypical URB property – duplex/3-family A prototypical lot of 5,000 square feet or greater, testing what type/amount of density can be feasible and attractive from a developer’s perspective in the URB Zoning District. 2. Shaw’s Motel property – 87 Bridge Street (URC) This property would be characterized as a high-profile site. After years of standing as an eyesore along one of Northampton’s gateway corridors, this could be a prime redevelopment site. The property was on the market for over two years, and currently has an asking price of $1.6 million and recently sold. 3. Lyman Estate – Fort Hill (URC) This property could serve as both a high-profile and a catalytic project. In the same manner as Village Hill, this site has the potential to serve as a model for large-scale development in the vicinity of downtown Northampton. Community involvement will be an integral factor in the property’s development, and the opportunity is currently unparalleled in the city. Smith College, the current owner, will be putting most of the property on the market in the near future but they have not yet announced their timeline. AGORA PARTNERS | 26 While the intent of the study is not to provide site plan and unit designs, a typical developer approach to determine development feasibility is useful in assessing costs, revenues, and margins for development. With that in mind, following are scenarios based on market and site assumptions which are themselves based on market snapshots and estimates of costs to build. Important considerations for development analysis of potential opportunities in Northampton include: • The conclusions reached below do not constitute investment recommendations and are not intended to provide thorough financial pro forma analysis as would be required by lenders, investors, and other interested parties. • Assumptions are based on the information available at the time of analysis and are subject to fluctuations and site-specific variations. This includes costs, revenues, timelines, and other factors subject to market swings. • Formal site planning and design was not conducted. Rather, general assumptions and layouts were made to ascertain initial feasibility. • Land residual values are based on assumption that land accounts for approximately 25% of total development cost. This is an approximation only, as land values can vary widely based on market fluctuations, developability, seller motivations, and many other factors. Significantly higher land values will impair development potential. Similarly, lower land values will increase developer margins, thereby making opportunities more desirable. • Analyses of potential development opportunities are made on an all-cash basis due to the very significant fluctuations that can occur in the debt and equity markets. Prototypical URB Property Without identifying a particular site, development analysis of what can be considered a prototypical URB property presents a snapshot of physical development opportunity that can then yield a land residual value to be compared against market land values. Using both a 5,000 square foot (50’ x 100’) lot, as well as a 7,500 square foot (75’ x 100’) lot, two- and three-family development scenarios are assessed. Results of an assessment of both a two- family and three-family stacked flat development on URB-zoned property results in returns that are less than market rate. Shaw’s Motel At a total of 0.73 acres located at a relatively prominent location, Shaw’s Motel is envisioned as infill townhomes with private, direct-entry garages with side-by-side parking. Using the same URC density of 17 units per acre, the Shaw’s Motel site incorporates twelve townhome units with sufficient lot area to incorporate private yards. As analyzed based on varying assumptions, the site presents viable development alternatives owing to higher sales value based on location and product type. Stacked flat configurations would likely yield similar results to that of the prototypical URB property referenced above. Additional density is allowed for projects that incorporate some affordable housing, an option that the City strongly encourages. PART 3: DEVELOPMENT ANALYSIS AGORA PARTNERS | 27 Lyman Estate The Lyman Estate, although approximately 31 acres in total, contains roughly 15 acres of developable land. Of those 15 acres, further deductions include: • 5 acres – 30% load factor for roads, sidewalks, irregular lots, etc. • 3 acres – Smith College preschool • 1 acre – Neighborhood park, as per zoning Using the typical URC density of one unit per 2,500 square feet of lot area, or just over 17 units per acre, the 6 acres of developable land accommodate a development plan of 76 units in a mix of garden apartments, townhomes, and single-family dwellings with surface parking, extensive landscaping and other residential amenities. The surface parking configuration will reduce development costs, and the landscaping and other amenities will create a community feel while taking advantage of the larger overall site through opportunities for shared open space. Given its large site area and resulting unit count, the development could be suited for a larger, institutional-type developer. There is some concern as to absorption rates, especially if a for-sale strategy is employed. Conclusion As the following pages demonstrate, there is variation in the type of development opportunities in Northampton based on size, location, product type, and price point. Existing zoning regulations engender different product types, as evidenced by the three case study properties. This reinforces the overall question of how to best serve the development community. Given the range of sizes and, therefore, required investment amounts, opportunities exist for smaller local builders, as well as larger institutional-type developers. That said, opportunities for the latter may be much more limited in terms of numbers due simply to the low inventory of sites large enough to reach critical mass for such entities. Overall, market realities dictate the need for profit margins to expand, either through lower development costs or higher revenues, most notably on smaller properties. Because development land values are tied to allowable density, unit counts and development character should remain anchored to overall community vision. That said, there are some economies of scale, whereby higher densities can drive down development costs on a per unit basis. Again, however, that is likely to be reflected in land values. Approvals timelines are reasonable, and as long as timelines and fees are kept reasonable relative to overall development costs, they are not a significant hindrance. In presenting itself as development friendly, provided established guidelines are respected by the development community, the City of Northampton will position itself favorably relative to other municipalities. The city itself can do little to effect market economics, aside from creating an environment where people – residents, businesses, and visitors – want to be. Presenting larger-scale opportunities as development-ready will attract larger firms. Likewise, curating an environment of predictability and fairness will also attract smaller-scale developers. PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS PROTYPICAL URB 2‐FAMILY Lot Type URB Lot Area 5,000                      Lot Dimensions 50' x 100' Setbacks Front 10                           Side 15                           Rear 20                           Envelope 1,400                     Using setbacks above, buildable dimensions are 20' x 70' Unit Type Stacked flats Unit Size 1,000                      Unit Dimensions 20' x 50'Allows for surface parking Unit Count 2                              EXPENSES Hard Costs 140,000                $70.00Assumption per gross square foot Parking 10,000                   $2,500Budget amount for four surface parking spaces Soft Costs A&E 14,000                   10.0%Assumption as proportion of hard costs Permits & Fees 40,000                   $20.00Assumption per gross square foot Legal 15,000                   Budget amount Accounting 5,000                     Budget amount Insurance 4,536                     1.0%Assumption as proportion of completed value Marketing 10,000                   Budget amount Property Taxes 4,536                     1.0%Assumption as proportion of completed value Miscellaneous 9,307                     10.0%Assumption as proportion of soft costs Site Work 25,000                   $5.00Assumption per square foot of land General Contractor 20,803                   7.5%Assumption as proportion of hard & soft costs; includes Gen'l Conds Contingency 22,364                   7.5%Budget amount as proportion of development costs Development Fee 8,014                     2.5%Proportion of development costs Development Cost 328,559                 Per Unit 164,279                 Per Net SF 164.28                    Land Residual 82,140                   25.0%Assumption as proportion of development cost TOTAL COST 410,699                 AGORA PARTNERS | 28 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS PROTYPICAL URB 2‐FAMILY REVENUES Rental Gross Income 34,800                   $1,450Based on market rents for similar units Vacancy 1,740                     5.0% Expenses 3,480                     10.0%Individual utility meters Net Operating Income 29,580                    Yield on Cost 7.20%Including land Value 453,560                6.0%Capitalization rate, less 8% sales cost Profit 42,861                   10.44% For Sale Gross Revenue 400,000                $200Based on market comparables for downtown condos Sales Costs 32,000                   8.0% Net Revenue 368,000                 Margin (42,699)                ‐10.40%Including land TIMELINES Acquisition & Design 3months Approvals 6monthsAssuming Site Plan Approval required Construction 12months Absorption Rental 1monthsAssuming 2 units/month For Sale 4monthsAssuming 0.5 units/month IRRs Rental 1.76% Year 0 (133,329)               Expense: Land purchase + 50% soft costs Year 1 (277,370)               Expense: Hard costs + 50% soft costs Year 2 29,580                   Revenue: 100% NOI Year 3 397,580                Property Sale + 100% NOI For Sale ‐8.01% Year 0 (133,329)               Expense: Land purchase + 50% soft costs Year 1 (277,370)               Expense: Hard costs + 50% soft costs Year 2 368,000                Revenue: 100% Unit Sales AGORA PARTNERS | 29 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS PROTYPICAL URB 3‐FAMILY Lot Type URB Lot Area 7,500                      Lot Dimensions 75' x 100' Setbacks Front 10                           Side 15                           Rear 20                           Envelope 3,150                     Using setbacks above, buildable dimensions are 45' x 70' Unit Type Stacked flats Unit Size 1,400                      Unit Dimensions 20' x 70'Allows for surface parking Unit Count 3                              EXPENSES Hard Costs 294,000                $70.00Assumption per gross square foot Parking 10,000                   $2,500Budget amount for four surface parking spaces Soft Costs A&E 29,400                   10.0%Assumption as proportion of hard costs Permits & Fees 84,000                   $20.00Assumption per gross square foot Legal 15,000                   Budget amount Accounting 5,000                     Budget amount Insurance 6,280                     1.0%Assumption as proportion of completed value Marketing 10,000                   Budget amount Property Taxes 6,280                     1.0%Assumption as proportion of completed value Miscellaneous 15,596                   10.0%Assumption as proportion of soft costs Site Work 37,500                   $5.00Assumption per square foot of land General Contractor 38,479                   7.5%Assumption as proportion of hard & soft costs; includes Gen'l Conds Contingency 41,365                   7.5%Budget amount as proportion of development costs Development Fee 14,823                   2.5%Proportion of development costs Development Cost 607,723                 Per Unit 202,574                 Per Net SF 144.70                    Land Residual 151,931                25.0%Assumption as proportion of development cost TOTAL COST 759,654                 AGORA PARTNERS | 30 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS PROTYPICAL URB 3‐FAMILY REVENUES Rental Gross Income 52,200                   $1,450Based on market rents for similar units Vacancy 2,610                     5.0% Expenses 5,220                     10.0%Individual utility meters Net Operating Income 44,370                    Yield on Cost 5.84%Including land Value 628,006                6.5%Capitalization rate, less 8% sales cost Profit (131,648)               ‐17.33% For Sale Gross Revenue 840,000                $200Based on market comparables for downtown condos Sales Costs 67,200                   8.0% Net Revenue 772,800                 Margin 13,146                   1.73%Including land TIMELINES Acquisition & Design 3months Approvals 6monthsAssuming Site Plan Approval required Construction 12months Absorption Rental 2monthsAssuming 1.5 units/month For Sale 6monthsAssuming 0.5 units/month IRRs Rental 5.71% Year 0 (237,709)               Expense: Land purchase + 50% soft costs Year 1 (521,945)               Expense: Hard costs + 50% soft costs Year 2 44,370                   Revenue: 100% NOI Year 3 817,170                Property Sale + 100% NOI For Sale 1.31% Year 0 (237,709)               Expense: Land purchase + 50% soft costs Year 1 (521,945)               Expense: Hard costs + 50% soft costs Year 2 772,800                Revenue: 100% Unit Sales AGORA PARTNERS | 31 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS SHAW'S MOTEL Lot Type URC Lot Area 31,799                   Two parcels ‐ motel (0.36 acres) and houses (0.37 acres) Lot Dimensions 175' x 175'Approximate; irregular shape Setbacks Typical URC setbacks Front 10                           Side 10                           Rear 20                           Envelope Varies Unit Type Townhomes Unit Size 1,850                     Does not include 440 sf attached garage Unit Dimensions 20' x 38'Three story with side‐by‐side direct‐entry private garage Unit Count 12                           EXPENSES Hard Costs 1,665,000             $75.00Assumption per gross square foot Parking ‐                         $0Included in hard cost Soft Costs A&E 166,500                10.0%Assumption as proportion of hard costs Permits & Fees 444,000                $20.00Assumption per gross square foot Legal 15,000                   Budget amount Accounting 5,000                     Budget amount Insurance 40,957                   1.0%Assumption as proportion of completed value Marketing 10,000                   Budget amount Property Taxes 40,957                   1.0%Assumption as proportion of completed value Miscellaneous 72,241                   10.0%Assumption as proportion of soft costs Site Work 158,994                $5.00Assumption per square foot of land General Contractor 196,399                7.5%Assumption as proportion of hard & soft costs; includes Gen'l Conds Contingency 211,129                7.5%Budget amount as proportion of development costs Development Fee 75,654                   2.5%Proportion of development costs Development Cost 3,101,831              Per Unit 258,486                 Per Net SF 139.72                    Land Residual 775,458                25.0%Assumption as proportion of development cost TOTAL COST 3,877,289              AGORA PARTNERS | 32 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS SHAW'S MOTEL REVENUES Rental Gross Income 313,200                $2,175Based on market rents + 50% premium for size and type upgrade Vacancy 15,660                   5.0% Expenses 31,320                   10.0%Individual utility meters Net Operating Income 266,220                 Yield on Cost 6.87%Including land Value 4,095,692             6.5%Capitalization rate, less 8% sales cost Profit 218,404                5.63% For Sale Gross Revenue 6,105,000             $275Based on market comparables for Village Hill Sales Costs 488,400                8.0% Net Revenue 5,616,600              Margin 1,739,311             44.9%Including land TIMELINES Acquisition & Design 3months Approvals 6monthsAssuming Site Plan Approval required Construction 12months Absorption Rental 3monthsAssuming 4 units/month For Sale 6monthsAssuming 2 units/month IRRs Rental 22.45% Year 0 (1,172,785)            Expense: Land purchase + 50% soft costs Year 1 (2,704,503)            Expense: Hard costs + 50% soft costs Year 2 266,220                Revenue: 100% NOI Year 3 5,882,820             Property Sale + 100% NOI For Sale 32.06% Year 0 (1,172,785)            Expense: Land purchase + 50% soft costs Year 1 (2,704,503)            Expense: Hard costs + 50% soft costs Year 2 5,616,600             Revenue: 100% Unit Sales AGORA PARTNERS | 33 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS LYMAN ESTATE Lot Type URC Lot Area 261,360                6 acres of developable land ** Lot Dimensions 700' x 2,500'Approximate; irregular shape Setbacks Typical URC setbacks Front 10                           Side 10                           Rear 20                           Envelope Varies ** Lyman Estate is 31 acres in size. Roughly 15 acres are deemed developable. Of those 15 acres, further deductions include:           ‐ 5 acres ‐ 30% load factor for roads, sidewalks, irregular lots, etc.           ‐ 3 acres ‐ Smith College preschool           ‐ 1 acre ‐ neighborhood park, as per zoning UNIT MIX TOTAL UNITS =76 Unit Type Garden apts.Multiple buildings with extensive landscaping and amenities Unit Size 1,300                     Gross square footage accounts for 25% of total project area Unit Dimensions Varies Allows for surface parking Unit Count 25                          Based on 17 du/acre on 1.5 acres of developable land Unit Type Townhomes Unit Size 1,850                     Gross square footage accounts for 35% of total project area Unit Dimensions 20' x 38'Three story with side‐by‐side direct‐entry private garage Unit Count 25                          Based on 17 du/acre on 1.5 acres of developable land Unit Type Single‐family Unit Size 2,000                     Gross square footage accounts for 40% of total project area Unit Dimensions Varies Based on lot configuration and street orientation Unit Count 26                          Based on typical lot size of 5,000 sf over 3 acres of developable land EXPENSES Hard Costs 9,708,750             $74.25Average cost per square foot across entire development Garden apts.2,600,000             $80.00Assumption per gross square foot; includes amenities Townhomes 3,468,750             $75.00Assumption per gross square foot; includes amenities Single‐family 3,640,000             $70.00Assumption per gross square foot; includes amenities Parking 125,000                $2,500Budget amount for garden apt. surface parking (2 spaces/du) Soft Costs A&E 388,350                4.0%Assumption as proportion of hard costs Permits & Fees 2,615,000             $20.00Assumption per gross square foot Legal 100,000                Budget amount Accounting 50,000                   Budget amount Insurance 250,000                1.0%Assumption as proportion of total development cost, incl. land Marketing 100,000                Budget amount Property Taxes 250,000                1.0%Assumption as proportion of completed value Miscellaneous 375,335                10.0%Assumption as proportion of soft costs Site Work 2,613,600             $10.00Assumption per square foot of land; includes landscaping General Contractor 1,243,203             7.5%Assumption as proportion of hard & soft costs; includes Gen'l Conds Contingency 2,064,599             7.5%Budget amount as proportion of development costs Development Fee 739,815                2.5%Proportion of development costs Development Cost 20,623,651            Per Unit 271,363.83            Per Net SF 157.73                    Land Residual 5,155,913             25.0%Assumption as proportion of development cost TOTAL COST 25,779,564            AGORA PARTNERS | 34 PART 3: DEVELOPMENT ANALYSIS NORTHAMPTON DEVELOPMENT ANALYSIS LYMAN ESTATE REVENUES Rental ‐ GARDEN APTS. ONLY Gross Income 500,250                $1,668Based on market rents for similar units plus 15% premium Vacancy 25,013                   5.0% Expenses 100,050                20.0% Net Operating Income 375,188                 Yield on Cost 5.86%As proportion of gross area, including land Value 7,128,563             5.0%Capitalization rate, less 5% sales cost Profit 720,640                2.80%As proportion of gross area, including land For Sale ‐ TOWNHOMES & SINGLE‐FAMILY Gross Revenue (TH)12,718,750           $275Based on market comparables for Village Hill Gross Revenue (SF)13,000,000           $250Based on market comparables for Village Hill Total Gross Revenue 25,718,750            Sales Costs 1,543,125             6.0% Net Revenue 24,175,625            Margin 4,803,983             24.8%As proportion of gross area, including land TOTAL NET REVENUE 31,304,188            TOTAL MARGIN 5,524,623             21.4% TIMELINES Acquisition & Design 6months Approvals 12monthsAssuming Site Plan Approval required Construction 12months Absorption Rental 3monthsAssuming 8 units/month For Sale 9monthsAssuming 6 units/month IRRs Rental 2.49% Year 0 (1,794,710)            Expense: Land purchase + 50% soft costs Year 1 (3,406,580)            Expense: 50% hard costs + 50% soft costs Year 2 (1,131,595)            Expense: 50% hard costs + Revenue 20% NOI Year 3 225,113                Revenue: 60% NOI Year 4 375,188                Revenue: 100% NOI Year 5 6,384,425             Property Sale + 100% NOI For Sale 11.93% Year 0 (5,425,546)            Expense: Land purchase + 50% soft costs Year 1 (7,748,657)            Expense: 50% hard costs + 50% soft costs Year 2 (153,533)               Expense: 50% hard costs + Revenue: 25% unit sales Year 3 12,087,813           Revenue: 50% unit sales Year 4 6,043,906             Revenue: 25% unit sales AGORA PARTNERS | 35 PART 3: DEVELOPMENT ANALYSIS 10866 Wilshire Boulevard, Suite 225 | Los Angeles, CA 90024 | (310) 663-3534 12 Vestry Street, 7th Floor | New York, NY 10013 | (919) 414-4815 www.AgoraPartners.com