Bozeman City Commission to consider resolution updating Affordable Housing Ordinance cash-in-lieu system

BOZEMAN — The city commission in Bozeman is set to review a resolution on Tuesday night that aims to update the city's Affordable Housing Ordinance with new rates for the cash-in-lieu of affordable units system. 

The AHO, originally updated last year, incentivizes developers to include affordable units in their buildings by allowing them to construct taller buildings or provide less parking in exchange for providing units at below-market rates. You can read more about other incentives here. 

A notable feature of the ordinance is the cash-in-lieu system, which allows developers to opt for cash payments to the city instead of constructing affordable units themselves. The new resolution the city commission is considering will establish the rates for these payments. 

David Fine, the city's economic development manager, explained the calculation process for these cash payments is based on the difference between the market rate and affordable rate, and includes unit sizes. 

"You can take that gap and calculate essentially what's called the affordability gap method. And that's where, where this number comes from," Fine said. 

According to the text of the resolution, developers could pay between $200,000 and $300,000 per unit instead of offering the units at affordable rates. 

Fine elaborated on the flexibility this system provides, saying, "If a developer is doing a project and their obligations under the affordable housing ordinance are just a handful of units, I think that's a time where cash really makes a lot of sense." 

The funds collected from developers are used by the city to subsidize more affordable units on a larger scale. A successful example is Westlake Heights, where the city combined federal financing with $2 million of its own subsidies to create over 200 units offered at below-market rates. 

"It's a case where they can provide cash to the city. The city can make that cash go further. And it can be a net gain both the developer and the city really a win-win," Fine said. 

The city commission plans to consider this resolution during their meeting on Tuesday night at 6 p.m.