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City staff propose capped performance grants for workforce housing to limit long‑term exposure
Summary
Housing Director Ruthie Hill and Housing Development Manager Sharon Shaw told council staff will align the Attainable Workforce Housing Performance Grant Program with House Bill 352 (including a 30‑year restrictive covenant) and proposed a 'not to exceed' cap based on assessed value, a 97¢/$100 tax rate and 3% annual escalation, illustrated with a 175‑unit example.
Ruthie Hill, director of Housing and Neighborhood Preservation, told the Virginia Beach City Council on June 9 that staff proposes changes to the Attainable Workforce Housing Performance Grant Program to conform with recently enacted state legislation (House Bill 352) and to add a ‘‘not to exceed’’ cap on long‑term grant exposure.
Hill said House Bill 352 requires that jurisdictions record a restrictive covenant on properties receiving performance grants to preserve affordability for up to 30 years, and staff therefore must update the city policy and application to incorporate statutory definitions, designate a local officer to accept applications and change certain timeline dates to align with the law.
Hill described the program as a partnership with the Virginia Beach Development Authority (VBDA) that incentivizes new‑construction, multifamily rental housing rented to households at or below 80% of area median income (with higher incentive for units at 50% AMI). The program is performance‑based and funded by incremental real‑estate tax revenues generated by the development rather than an upfront city cash outlay.
Housing Development Manager Sharon Shaw explained the proposed ‘‘not to exceed’’ calculation: staff would estimate a comparable assessed value per unit for similar projects, apply the city’s current real‑estate tax rate (97¢ per $100 of assessed value), and escalate assessed value at 3% per year over the grant term to compute a cap to be included in the grant agreement. ‘‘So that's why we chose 3%,’’ Shaw said, noting underwriting assumptions for income and expense trends informed the choice.
Staff walked through a numerical example: for a 175‑unit, all‑affordable development with an assumed $124,000 assessed value per unit (total $21.7 million), first‑year taxes at the stated rate would be about $210,490. Using the 3% escalation and deducting base taxes each year yields a not‑to‑exceed amount of approximately $9.4 million over a 30‑year period, or about $1,800 per unit per year. Staff showed sensitivity cases in which 5% annual appreciation would produce roughly $13.5 million over 30 years while 2% growth would yield about $8 million.
Council members asked clarifying questions: staff confirmed the proposed changes would not affect grants already approved, that the grant stops if a property ceases to meet workforce‑housing requirements, and that no additional city operating subsidy is required up front. Multiple council members described the program as effective and urged staff to proceed with the proposed cap and application alignment.
Hill and Shaw asked for council guidance to move forward with the policy updates; council members generally supported advancing the proposal and asked staff to prepare final language for future action.
