Atherton City Council
September 20, 2023

Staff Report – Feasibility Study, Marketing Firm, Lobbyist FIrm SEPTEMBER 20, 2023

legislative information and correspondence assistance, but not lobbyist support. The current RPPG agreement is a monthly retainer that costs approximately $26,000 per year.

FISCAL IMPACT
If the Council were to direct staff to move forward with all options above, the initial top end cost would be anticipated at $117,000 ($75,000 BAE, $30,000 Tripepi-Smith, net $12,000 Gonsalves & Son). Going forward, retaining the lobbyist assistance only would represent an additional annual cost per year of $12,000 (assuming we replaced the current RPPG agreement).

There would need to be a budget amendment to accommodate any or all the above options.

Individual contracts would be within the Task Order or signature authority of the City Manager and would be sole source or amendments to existing agreements for additional tasks.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal Area F – Be Forward-Thinking, Well-Managed, and Well-Planned

POLICY FOCUS
Policy discussion for the Council is on whether the Town needs a Feasibility Analysis to assist with the Town’s assertions regarding development feasibility in relation to land cost; and whether the Town should engage a lobbyist and marketing firm to assist the Town with its 6th Cycle Element.

PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders –to include, but be not limited to, media outlets, school districts, Menlo Park Fire Protection District, service provides (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission

ATTACHMENTS

1. ULI Bay Area – Multi-Family Real Estate 101 – Prepared for San Jose (November 2022)

2. Seifel Memorandum – Cost of Residential Development – Prepared for San Jose (October 2022)

3. PowerPoint – Cost of Residential Development – Prepared for San Jose (November 2022)

ULI Bay Area
Multi-Family Real Estate 101
Prepared for the City of San Jose
November 1, 2022

About Urban Land Institute
(ULI)
▪ The mission of ULI is to shape the future of the
built environment for transformative impact on
communities worldwide.
▪ What ULI San Francisco does:
▪ Provides a forum for sharing of best practices
▪ Creates opportunities for young professionals to
develop skills and build relationship
▪ Organizes and conducts meetings.
▪ Directs outreach programs
▪ Administers UrbanPlan program
▪ Conducts Technical Assistance Panels Page 266 of 460
3 30% Professional Services
27% Financial
27% Developers
12% Public
4% Other
Our Members

ULI SF Public Agency
Offerings
4 ▪ Technical Assistance Panels (TAPs): Industry experts volunteer to assist on specific public issues.
▪ UrbanPlan for Communities: An immersive workshop
for public officials. With Legos!
▪ Development Fundamentals: A series of courses
designed for public sector staff.
▪ Housing Opportunities Consultations: A one-on-one
“test-fit” advisory session for public agencies.

Libby Seifel

SEIFEL CONSULTING
President & Founder
Eric Tao
L37
Managing Partner
Drew Hudacek

SARES REGIS
Chief Investment Officer
Todays Presenters

Purpose of the Training
What are our goals and
purpose?
What do YOU hope to
get out of this?

Agenda for the Presentation

1. Developers’ view of Risk and Return

2. Multi-family costs and valuations

3. What policy levers can you pull?

ULI Bay Area
Chapter 1
Risk & Return

Residential – Rental
• Multi-Family Apartments
• SRO’s
• Single Family for Rent
• Mobile Homes
Chapter 1 - Risk and Return

Market forces are outside of the
control of developers
The market decides what
works…not us, not you
Chapter 1 – Risk and Return

Chapter 1 - Risk and Return
Risk
Return
However, the market is competitive
(even if not entirely efficient), so
trade-offs must be made.

A universal truth of all investment is that capital strives to generate the highest return for the least amount of
risk

How investors label their pools of Money
Risk
Return
Core Plus
Core
Value Add
Opportunity
Chapter 1 - Risk and Return

How real estate food groups line up
Risk
Return
Industrial
Apartments
Office
Hospitality
Land Speculation
Chapter 1 - Risk and Return

Apartment development is inherently risky
What risks are
developers
really taking?
Entitlement
Political/
Community
Environmental
Construction Financing
Market
TIME
Other

Developers are the “movie producers” of real estate
We bring together the opportunity
We put together
• The team
• The money
• The experience and know-how
Chapter 1 - Risk and Return

ULI Bay Area
Chapter 2
The Cost of Producing Multifamily Housing

November 1, 2022 17
The capital “stack” represents all the money it takes to build a building Total
Project
Costs
Developer Equity
Investor Equity
Total Project
Value
Debt
Chapter 2 – The Cost of Multifamily Housing

November 1, 2022 18
When things go well…
Total
Project
Costs
Debt
Dev Equity
Investor
Equity Total Project
Value
Debt
Dev Equity
Investor
Equity
Chapter 2 – The Cost of Multifamily Housing

November 1, 2022 19
Total
Project
Costs
Debt
Investor Dev Equity
Equity
Total Project
Value
When they don’t…
Debt
Dev Equity
Investor
Equity
Chapter 2 – The Cost of Multifamily Housing

November 1, 2022 20
Total
Project
Costs
Debt
Investor
Equity
Total Project
Debt Value
Dev Equity
Chapter 2 – The Cost of Multifamily Housing
When we see a financial crisis…

November 1, 2022 21
Chapter 2 – The Cost of Multifamily Housing
Fees & Exactions
Construction Financing
Other Soft Costs
Land
Hard Costs
What makes up the Costs of Multifamily Housing?

• Every fee or exaction local government requires, raises costs • IF the market is good, development can move forward with new projects. • Local government can require new fees, amenities, parks, affordability, infeasible uses, too much parking, etc. until the project stops penciling.
• IF project costs go up and rent and values don’t… projects die. • Bull markets are short… development cycles are long.
• Don’t miss the window!
Chapter 2 – The Cost of Multifamily Housing

Development
Feasibility
101 - Start

Development Feasibility Framework
Developer Margin/Return
Other Soft Costs
Construction Financing
Hard Construction Cost
Government Fees
Land
Supportable Cost
Developer Margin/Return
Project
Value
Land Cost or Residual Land Value Page 288 of 460
The value of land is tied to:

The rights
associated with
the land
The liabilities
associated with
the land

Residual Land Value
Difference between potential value and
projected development costs without land
(including target return on investment)
Residual Land Value Calculation
Potential Value
Less: Projected Costs without Land
Residual Land Value

Photo credit: www.sanjose.org
Multifamily Apartment Development
• 10% to 15% on-site affordable
• Ground floor retail (street frontage)
Existing Retail Property
• Commercial property with existing retail
• Purchase/sale price of $6 million
Proposed Building Characteristics
• 7 stories with 2 story podium
• Ground floor retail + parking garage

Residual Land Value – Sensitivity Analysis
Four initial scenarios evaluated individually:

1. Base affordable– 10% on-site below market rate (BMR) units

2. Offsites/fees increase by $20,000 per unit

3. Construction costs increase by 10%

4. Alternative affordable– 15% on-site BMR units
28

Initial
Sensitivity
Analysis
ResultsIndividual
Scenarios
Residual Land Value Under Four Independent Scenarios

Residual Land Value – Sensitivity Analysis
Additional fifth scenario evaluated (along with combined scenarios):

1. Base Case affordable housing – 10% on-site BMR

2. Offsites/fees increase by $20,000 per unit

3. Construction costs increase by 10%

4. Alternative affordable housing – 15% on-site BMR

5. Parking reduction for housing and ground floor retail 30

Impact of
ground floor retail
and its parking
plus residential
parking?
Surface Podium Partially
Below
Grade
Below
Grade
(1 level)
Below
Grade
(2+levels)
Illustrative Parking Cost Per Space

Results of
Combined
Sensitivity
Analysis
Residual Land Value Under Base Case and Five Scenarios Page 296 of 460 Is there still a project and land deal?
Sensitivity Cases (individual requirements):

1. 10% On-site BMR Deal

2. Offsites/City fee increases by $20,000 Deal*

3. Construction costs are 10% higher Deal*

4. 15% On-site BMR Deal*
*Combined Sensitivity Analysis NO Deal

5. Combined with significant parking reduction Deal

ULI Bay Area
Chapter 3
What can policy do?

Chapter 3 – What can policy do?
A. Lower Costs
B. Increase Revenue
C. Increase Certainty
We are in a housing CRISIS! Do not let
perfection be the enemy of the good

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees
• Lower utility connection fees

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees
• Lower utility connection fees
• Lower percentage of onsite affordability

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees
• Lower utility connection fees
• Lower percentage of onsite affordability
• Real estate tax abatement

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees
• Lower utility connection fees
• Lower percentage of onsite affordability
• Real estate tax abatement
• Help lower construction costs

Chapter 3A – Lower Costs
Options to Lower Costs
• Lower or flexible parking requirements
• Eliminate retail or other uses in the wrong places
• Lower park fees and park requirements (especially for affordable housing)
• Lower processing fees
• Lower utility connection fees
• Lower percentage of onsite affordability
• Real estate tax abatement
• Help lower construction costs
• Consider costs of sustainability reach goals

Chapter 3B – Increase Revenue
Increase revenue?
• Allow higher income targets for affordable housing

Chapter 3B – Increase Revenue
Increase revenue?
• Allow higher income targets for affordable housing
• Provide housing funding/subsidies
• Example: Rental housing voucher programs

Chapter 3B – Increase Revenue
Increase revenue?
• Allow higher income targets for affordable housing
• Provide housing funding/subsidies
• Example: Rental housing voucher programs
• Transfer taxes

Chapter 3B – Increase Revenue
Increase revenue?
• Allow higher income targets for affordable housing
• Provide housing funding/subsidies
• Example: Rental housing voucher programs
• Transfer taxes
• Limit effect of rent control on new development

Chapter 3C – Increase Certainty
Streamline development approval and processing time
Entitlement certainty is the most valuable

Chapter 3C – Increase Certainty
Pave the way for Office to Housing + Shopping Center to Housing conversions?
This will take some creativity!

Chapter 3C - Increase Certainty
Downtown Redwood City Example
• 20 years of work
• CEQA lawsuit clearing
• Economy took off
• Downtown transformed in 5 – 7 years.
• And more development is planned
Pave the way to development with CEQA led by City

ULI Bay Area
Thank You!

Nevada V. Merriman
November 1, 2022

AFFORDABLE HOUSING FINANCE

MidPen Housing
Real Estate Development:
• 8,500 affordable homes;
• 800+ units under construction in
2021
• Raised over $1 B for
development of affordable
housing since 2010
Property Management:
• 120+ properties; 17,000
residents. <1% vacancy
• 68+ properties in Silicon Valley
Resident Services:
• Workforce Development
• After School Literacy
• Older Adults Health and
Wellness
• Permanent Supportive Housing Page 318 of 460
Housing Affordability Gap in Silicon Valley
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Extremely Low Income Very Low Income Low Income
Affordability Ranges
Income required
to afford
median 2 BR
rent
55

Affordable Housing Finance Overview
Why doesn’t the market produce Affordable Housing?
It Doesn’t Pencil
Affordable (aka below market) rents, comparatively high expenses • Depress first mortgage loan proceeds
• Limited cash flow – limited cash on cash return
Bridging the Gap - How do we make it pencil?
• Equity generated from the sale of Low Income Housing Tax Credits – 4% and 9% • Soft (aka deferred payment) loans
• Grants
56

Typical Capital Stack - Simplified
11%
30%
18%
23%
7%
13%
3%
3% 60%
30%
1%
Perm Debt City $ County $
1%
Other Public $ Tax Credit Equity General Partner Equity 9 % CREDIT 4 % CREDIT

Typical Capital Stack – Not So Simple
11%
8% 30%
11%
3%
11%
6%
8%
4%
4%
3%
5%
4%
60% 4%
30%
1% 1%
Perm Debt AHP
Federal $
City Source 1
Other Public
City Source 2
Tax Credit Equity
County Source 1
GP Equity
9 % CREDIT 4 % CREDIT

Timeline - Project

P R E D E V E L O P M E N T

1. Developing
the Project
Concept

2. Assessing
Project
Feasibility

3. Funding
Assembly

4. Contruction
and Lease Up 5. Operations
Construction Starts
Site Identified/Secured
3-5 YEARS
1-2 YEARS 55+ YEARS
Source: LISC Bay Area

Kiku Cro ssing , San Mate o

Orig inal De sig n
5 storie s
164 units
1:1 p arking
$825k / unit TDC
With AB 1 7 6 3
7 storie s
225 units
1 : .73 p arking
$758k / unit TDC

Ne w State
To o ls
Pub lic
Sector
Flexib ility
Fe e s
Stre am line d
Financing
De nsity b onus le g islation
allowe d for 61 ad d itional
units with no ad d e d
p arking
Ce rtainty in the syste m
shorte ne d the time line ,
lowe ring e scalation
conting e ncie s and
inte re st rate risk
Imp act fe e d e fe rral until
p e rm conve rsion, saving
ap p . $350k, or $1.5k /
unit
Pe rmit and p lan che ck
fe e waive rs, saving ap p .
$2M, or $8.7k / unit
Sup p orte d off-site
p arking to re d uce costs
of re q uiring p od ium
p arking
Allowe d concurre nt
construction of two
structures to reduce
construction time , saving
ap p . $2M, or $8.7k / unit
Sup p orte d innovative
p roje ct structure ,
includ ing a De sig n-Build
contracting ap p roach
Inte rnal champ ions
she p he rd e d the p roje ct
throug h d e sig n re vie w
and p e rmitting
Re vise d income targ e ting
from initial RFP, cre ating
fle xib ility in a comp e titive
financing e nvironme nt

Thank You!
Nevada V. Merriman
[email protected]

STUDY SESSION: 11/1/22
TO: HONORABLE MAYOR FROM: Nanci Klein
AND CITY COUNCIL Jacky Morales-Ferrand
SUBJECT: SEE BELOW DATE: October 11, 2022
Approved Date
10/20/22
SUBJECT: STUDY SESSION: COST OF RESIDENTIAL DEVELOPMENT IN SAN JOSE

PURPOSE
The purpose of the Study Session is to provide City Council with a report on the Cost of Residential Development. The report is comprised of two sets of analyses produced with the help of a consultant that evaluates the total cost of residential development in San José for market-rate and affordable housing.

OUTCOME
The report provides an analysis of the cost to construct new market-rate and affordable housing in San José under current economic conditions. City Council will hear a presentation from a panel from the Urban Land Institute, as well as an affordable housing developer, on the basics of residential development financing and receive a presentation from staff on the findings of the updated report on the Cost of Residential Development.

EXECUTIVE SUMMARY
There have been two previous iterations of the report on the Cost of Residential Development, in 2018 and 2019. There are two parts to the updated report with one analyzing the cost of new market-rate residential construction and the other looking at the cost to construct new affordable housing. The market-rate report assesses the financial feasibility of hypothetical high-density multifamily developments in different areas of the City. Unlike previous reports that showed projects were feasible in certain areas of the City, the results from the 2022 report show that development is extremely challenged in all areas of the City. No scenarios assessed in the report were shown to be feasible. According to the City’s consultant, Century | Urban, construction costs, including the cost of materials and labor, have increased approximately 17% since the start of the COVID-19 pandemic and continue to be the most significant barrier to new housing

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

construction. The recent experience in the City aligns with the report findings in that only two large multifamily projects started construction in 2021 and 2022. The affordable report identifies significant barriers to affordable housing related to increased costs of construction and financing.

BACKGROUND
In December 2017, City Council directed staff to convene a City Council Study Session to discuss the aggregate impact of the fees and policies the City imposes on housing development and construction. The goal of the Study Session was to provide context and background for upcoming development-related items to be considered by City Council.

On April 26 and May 1, 2018, City Council held Study Sessions on the Cost of Residential Development in San José that provided an overview of the current conditions of the local real estate market and residential development. Members of the Urban Land Institute provided a detailed summary of development financing and the impact of various City costs and policies, including fees and taxes, on the viability of projects. Keyser Marston and Associates provided a detailed report including a conceptual pro forma analysis for market-rate residential development based on the current market conditions in San José. The results of this analysis in 2018 showed that new residential development was unlikely in many parts of San José based on the economic conditions. The most likely area for new residential development was in West San José where rents were at a level to yield sufficient return to make residential development feasible.

Development in Downtown and North San José had some potential, but returns were marginal and were potentially insufficient to attract the necessary investment to finance new development.

This first report and Study Session came as the staff was developing the Housing Crisis Work Plan that was initiated by Mayor Sam Liccardo’s September 2017 memorandum entitled “Responding to the Housing Crisis.” This memorandum identified numerous items to address the housing crisis and proposed the goal of 25,000 housing units – 15,000 market-rate and 10,000 affordable. Further, the memorandum, as approved by the City Council, directed staff to identify which items could be incorporated into existing work efforts and those that would require more resources. Following this prioritization work, staff developed the Housing Crisis Work Plan that was approved by City Council on June 12, 2018. The initial Housing Crisis Work Plan included an ongoing work item to update the Cost of Residential Development report on a regular basis so that staff and City Council continued to understand the current market conditions impacting the ability to deliver on housing goals.

On November 5, 2019, staff presented an update on the Cost of Residential Development to City Council. This report found similar results as the 2018 study suggesting that development remained feasible in West San José. Development in Downtown and North San José was again marginal and did not obtain a sufficient return to attract investment. Other areas of the City returned a negative value and were not possible. The most significant barrier to new housing was the cost of construction based on the analysis in the 2019 report.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

The 2019 report also included an additional analysis prepared by Keyser Marston and Associates on affordable housing that looked at the average costs of construction of affordable units in San José. The report utilized data reported to the State of California by those projects receiving tax credit financing and compared the costs of producing units in San José opposed to other cities in the State.

On November 5, 2019, City Council also received an update on a newly prioritized work item called the Universal Development Fee. At this meeting, staff proposed a new approach named the Development Fee Framework that would align City residential fees and taxes under common elements to make their collection and calculation easier to understand for the development community and the public. This work would also help allow fees to be more easily compared to one another and assessed within the total cost of development.

Entering 2020, staff intended to provide regular updates on the Cost of Residential Development in conjunction with its continued work on the Housing Crisis Work Plan. However, this work was delayed by the COVID-19 pandemic in March 2020. In 2021, staff conducted a Request for Proposal and selected a new consultant to perform the work required to update the report.

Century | Urban was selected as the consultant and the work to update the report with the consultant was initiated in early 2022.

ANALYSIS
The continued updates to the Cost of Residential Development report are an important tool to understand the barriers to new housing construction. In particular, the updates provide a more detailed understanding of the factors both outside and within the City’s control that impact the feasibility of residential development. These factors can contribute to the City’s ability to deliver on its housing goals. As was the case in previous iterations, the analysis from the most recent report continues to paint a bleak picture for future residential development in San José.

Construction costs, despite a brief pause early on in the pandemic, have continued to rise significantly and remain the biggest barrier to housing development in the City. This is a factor that the City has limited control over. On the other hand, City fees and the approval process for new development are areas within the City’s control to change and add to the cost to initiate construction.

New housing development for both market-rate and affordable housing is dependent upon private capital investment. From the start of the process, a developer will compile data based on estimated costs balanced against the estimated income that a new project will generate once completed. This model is referred to as a development “pro forma.” It is created individually by a developer early in the development process and is refined as the project moves along in the process. The pro forma is an important part of the decision-making process as the model will show whether the proposed project is both financially feasible and a worthwhile investment for private capital. The data and assumptions included in a specific pro forma for market-rate

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

development are typically treated as proprietary to that particular developer or investor and are not shared with the City or the public.

I. Market-Rate Residential Cost of Development Study
As was the case in previous iterations, this new report is based on conceptual prototypes. These prototypes do not represent specific projects, but rather reflect the typical characteristics of development that have occurred in the City in recent years. The prototypes used in this update are largely unchanged from the previous reports. In general, they remain reflective of the types of development the City has seen for new multifamily housing. In addition, keeping the prototypes consistent allows for an easier comparison of the results of this study to those of the previous studies.

The report looks at market-rate for-sale and rental multifamily housing development in three different prototypes: a five-story low-rise building, a seven-story mid-rise building, and a 22- story high-rise building. It is important to distinguish these types of development as each requires a different type of construction, which means different materials are used in the construction of the buildings. These material types affect the cost of construction. In general, the types of construction become more expensive the higher the building height. These prototypes are analyzed in several different submarket areas.

This report, as were all previous reports, is focused on high-density housing rather than lowdensity housing. The City has a significant inventory of lower-density housing such as singlefamily homes that account for the vast majority of its current residential land uses. The long-term strategy outlined in Envision San José 2040 General Plan is to provide opportunities for highdensity housing to maximize the number of new units to meet the City’s housing goals.

Through these conceptual prototypes, the consultant, Century | Urban, created a development pro forma that analyzes each prototypes feasibility based on the current market conditions. The prototypes and the associated assumptions are detailed in the report prepared by the consultant and included in Attachment A – Strategic Real Estate Advisory Services.

Defining Residual Land Value
The report uses the residual land value to show project feasibility. Residual land value refers to the amount of value remaining to purchase land once all other costs have been accounted for to complete the construction. These costs also include an expected return on investment for the developer consistent with industry standards. A positive residual value indicates the development could pay up to a specific price for land and still be considered feasible. A residual value that is zero or negative indicates a development that is infeasible as there is no remaining value to purchase land.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Results Demonstrate Market-Rate Housing Development is Not Feasible in Any Area The results from the report are included in Table A and Table B below. To summarize, all prototypes show significant negative residual land values. This means that even before accounting for the purchase of land, the cost to construct the building is infeasible. The residual values shown are on a per-unit basis. The locations are based on the Development Fee Framework / Inclusionary Housing Ordinance submarket areas.1 Downtown is a subsection of the Central area and South and East is composed of multiple areas in the southeast part of the City. Not all prototypes were tested in all locations and cells on the table without values indicate locations that were not tested.

Results are based on conceptual prototypes and not on specific projects. The report provides a macro view of development feasibility in the City. This does not necessarily mean that individual projects will not start. Specific projects may have unique circumstances that enable them to move forward in the current conditions.

Table A: Residual Land Values for Market-Rate Rental Housing by Size and Location (per unit)
Rental Low Rise
(5 stories)
Mid-Rise
(7 stories)
High-Rise (22 stories)
Prototypes
/ Location
Central
West
Downtown
North
($270,000) ($350,000)
($230,000)
($510,000)
($390,000)
($440,000)
($320,000) ($490,000)
South and East ($272,000)
Table B: Residual Land Values for Market-Rate For-Sale Housing by Size and Location (per unit)
For Sale Prototypes /
Location
Low Rise (5 stories) High-Rise (22 stories)
South and East
Central and West
Downtown
($410,000)
($320,000)
($520,000)
Estimated Land Costs
The consultant also submitted a land cost estimate based on location to provide context to the residual land values. Land prices estimated by the consultant (Table C) range from $25,000 up to $85,000 per unit, depending on the geographic area.
1 Map: https://csj.maps.arcgis.com/apps/webappviewer/index.html?id=8518bc095ae54f4ea025d7743c650881

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Table C: Land Cost Estimates by Geographic Area
Land Prices South &
Per Unit
Low
High
East
$40,000
$65,000
Central
$40,000
$65,000
West
$65,000
$75,000
North
$25,000
$85,000
Downtown
$25,000
$85,000
Sensitivity Analysis Shows Construction Cost Remain a Barrier to New Development The consultant also conducted a sensitivity analysis (Exhibit C in the report included as Attachment A to this memorandum) that looked at the impacts of various changes to multiple factors. For example, the sensitivity analysis included a 5% increase or decrease in rental rates, a 5% increase or decrease in construction costs, etc. In all scenarios analyzed the residual values did not shift to positive values that indicate feasibility. In all cases, the per unit residual values remained at significant negative levels. The largest improvement in feasibility was with a 5% reduction in construction costs. This analysis further shows the significant challenges faced in the current economic conditions for new market-rate construction and reinforces the major hurdle of construction costs.

Report Highlights Increasing Construction Costs and Interest Rates as Rents Fluctuate The findings of this updated report reiterate the extremely challenging environment for the new construction of market-rate housing at the present time. Past studies in 2018 and 2019 showed that development was challenging in many parts of the City, but there were places such as West San José where development was feasible. However, this is no longer the case, and conditions have continued to decline since the last report in late 2019.

Several factors contribute to the continued decline in development feasibility. Construction costs, including the cost of materials and labor, have increased significantly since the start of the pandemic. During the pandemic, materials could be difficult to find. According to the subconsultant, TBD Consultants, who provided the construction cost estimates for Century | Urban, construction costs have increased by 17% in the region since the start of the pandemic through the second quarter of 2022. Since 2014, the total increases in construction costs have been 76%. The increases in costs can also be shown through the cost to construct a unit over the three reports in 2018, 2019, and 2022. The chart below (Chart 1) tracks the costs of the mid-rise prototype in West San José.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Chart 1: Cost of Development for Mid-Rise in West San José Mid-Rise Cost Per Unit in West San José
$800,000
$700,000
$600,000
$500,000
$400,000
$779,000
$580,900
$557,000
2018 2019 2022
At the start of the pandemic in March 2020, there was a sharp decline in rents. San José rents started to trend positive in early 2022 and only surpassed pre-pandemic levels in spring 2022.

According to the most recent data from the Apartment List, San José rents are approximately 5% above March 2020.2 This limited rent growth has not been sufficient to match the increases in the costs of construction over the same period.

Additionally, in 2022, interest rates continue to increase as a result of the actions of the Federal Reserve to address inflation. These rates impact the cost to finance new construction for both market-rate and affordable developments. The volatility of the current market and increased uncertainty of the economic outlook moving forward also create additional challenges.

According to some developers interviewed by staff as part of this process, these conditions have led investors to wait rather than invest now.

Report Findings Validated by Building Permit Data
Recent building permit data on large multifamily projects that started construction from 2020 to 2022 supports the results of the report. The data for building permits is the most useful to understand the current environment as the issuance of building permits aligns with the start of construction. The start of construction means that a project has been able to obtain financing.

Planning approval, also referred to as entitlement, is not a good indicator of whether a project will move forward, or when it will move forward. Entitlements can be speculative in nature and done in advance of market conditions that will support the construction. Table D below shows the projects and number of units for market-rate projects over 50 units that obtained building permits in recent years.
2 https://www.apartmentlist.com/research/national-rent-data

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Table D: Building Permits for Market-Rate Residential Development 50 Units or More The Taft 130 units
77 units
366 units
(477 S. Market St.)
2020
Sparta505
(505 E. Santa Clara St.)
Winchester Ranch
(585 S. Winchester Blvd.) 2021
2022 Bascom Station
(1350 S. Bascom Ave.) 566 units
1,139 units
Chart 2 below shows building permits issued since 2015 for projects with 50 or more units. The downward trend in market-rate multifamily began prior to the pandemic but declined even more sharply since 2020. In the near term, based on this data and the results from the report, it is likely that this trend will continue.

Chart 2: Market-Rate Residential Development 50 Units or More Over Time Multifamily Development 50+ Units | 2015-2022
2389 2500
2000
1500
1000
500
2167
1187
2015
1155
2016
1097
566
366
207
0 2017 2018 2019 2020 2021 2022
Units Obtaining Building Permits

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

City Fees and Taxes
There are a variety of costs added to development directly from the City. There are fees associated with entitlement and permitting. These costs are service fees from the Planning and Building Divisions, Public Works, and Fire Departments’ developmental review and represent less than one percent of the total cost of per unit. These fees pay directly for staff and the cost to the City to process and review the project. There are also fees associated with public improvements such as sanitary sewer connection fees or street frontage improvements, among others. The largest component of City costs added comes from construction taxes, parkland in lieu fees, and inclusionary housing in lieu fees. Construction taxes, in general, fund transportation infrastructure among other things and are assessed based on the valuation of the new building. Parkland obligations for residential development can be satisfied through the dedication of improved or unimproved land, payment of an in lieu fee, or a combination of both.

Parkland in lieu fees can also be reduced through the contribution of private recreation space.

Fees and taxes shown in the report include a reduction based on average levels of credit.

Similarly, the City’s inclusionary housing requirements can be fulfilled by development through the delivery of affordable units in a new development or payment of an in lieu fee.

Based on the data in the report, these costs represent from 5% to 10% of the total costs to build a unit (Table E). These numbers are marginal compared to the overall cost of the unit; however, they still add costs and contribute to the level of infeasibility. Reduction of these taxes and fees to zero dollars would improve feasibility, but would not fundamentally change the outcome of the analysis. Importantly, such elimination would also significantly reduce City resources necessary to support transportation infrastructure and related grant matching requirements, renovate and create new park infrastructure, and support affordable housing. It is important for staff and City Council to continue to understand the cost implications of all policy decisions in the near term that could add additional costs to new housing development or decrease potential future revenues that would otherwise support day-to-day City infrastructure. Any added costs would further contribute to the infeasibility of new market-rate construction.

Table E: City Taxes and Fees on a Per Unit Basis
City Impact Fees and Taxes (rental)
Construction taxes
Parkland in lieu fees
Inclusionary housing in lieu fees
Total City impact fees and taxes
% of total unit costs
Range Per Unit
$6,400 - $6,800
$9,800 - $20,800
$21,000 - $49,600
$37,200 - $72,000

5.5% - 10.2%
II. Affordable Housing Cost of Development Report
Century | Urban prepared a report for the City regarding the recent impact of market conditions on the cost and feasibility of constructing affordable housing included in Attachment B – Affordable Housing Development Cost Study. The purpose of this study was to understand the changes in the cost of developing affordable housing within the City, the funding sources used to

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

pay for such costs, and the unique attributes of affordable housing that contribute to its higher construction costs.

The study compared the cost of developing affordable housing in San José to similar costs in other large California cities. This study evaluated the period from June 2019 to December 2021 for 15 projects in San José and 27 projects in other cities that received tax credit allocations during this time period. These projects ranged in height from four to 13 stories and proposed a “Non-Targeted” or “Special Needs” housing type. Non-Targeted projects are projects with a geographic set aside rather than a target population set aside. Special Needs developments target individuals and families who are homeless or at risk of homelessness and need permanent affordable housing and supportive services. These types of developments provide supportive services to assist an individual or family retain their housing, improve their health status, and maximize their ability to live, and, when possible, work in the community.

The study showed that the average cost per unit for all San José projects was 15% higher than the average cost per unit for other city projects, and notably, the average cost per unit for Special Needs projects in San José was 24% higher than the average cost per unit for Special Needs projects in other cities.

Table F: Summary of Comparison of Total Development Costs per Affordable Unit San José
Projects
$615,100
$700,100
$609,900
Other City
Projects*
$535,100
$564,900
$574,200
All Projects San José Cost
Difference
All Projects 15%
Special Needs
Non-Targeted
$561,400
$612,000
$586,500
24%
6%
*This refers to the 27 projects in other cities studied in the report.

The findings summarized below outline the challenges and major cost factors that impact affordable housing developments in light of recent economic and market fluctuations, and demonstrate why the cost of affordable housing is more expensive in San José than in other cities.

General Trends
Escalation of Construction Cost
Similar to the findings from the market-rate report, construction costs have been a significant challenge for affordable housing development. Annual construction cost escalation averaged between 7% and 8% from 2014 to 2020. Construction costs, for affordable units, increased at a lower rate in early 2020 due to the slowdown of construction activity during the pandemic.

However, costs have increased by 6% annually over the past two years.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Increase in Cost of Financing
The recent increase in interest rates in response to high inflation has had a significant impact on affordable housing development costs. Multiple funding sources, typically between five to six sources, are required to finance these developments and can take on average two to three years to acquire as federal and state sources offer only one application round each year. This exposes the development to higher risk in terms of interest rate fluctuations as the borrower can only lock rates in at the close of financing following a tax credit allocation.

Affordable housing developments provide deep affordability to residents resulting in lower rental income. Increases in interest rates drive up the cost of loans from banks creating gaps in the overall financing for the development. This pushes developers to seek larger commitments from lenders willing to provide debt with lower interest rates, typically government lenders including the state, county, and the City.

City of San José vs Other Cities
Deeper Affordability levels
San José developments provide deeper affordability, with approximately 40% of San José projects setting aside 50% or more units for extremely low-income households, in comparison to approximately 29% of other cities’ projects. Development costs for extremely low-income buildings are higher as shown in Chart 3 below. Total development costs consist of many components including land or property acquisition costs, direct construction costs, and indirect soft costs such as architectural/engineering costs, and local development fees.

Chart 3: Average Development Cost Extremely Low-Income (ELI) Buildings Compared to All Buildings

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Higher Direct Construction Costs
Direct construction costs represent approximately 70% of total construction costs and have been increasing by 6% annually. The cost of labor and materials to construct buildings, site improvements, and parking are higher in San José when compared to other cities. A shortage in the construction labor market and prevailing wage requirements applicable to San José projects result in higher direct construction costs for these projects. There is a significant cost difference for Special Needs projects in San José compared to other cities.

Table G: Total Direct Construction Costs, Average Per Unit San José
Projects
$425,200
$487,800
$422,700
Other City
Projects
$364,800
$359,100
$424,200
All Projects San José Cost
Difference
All Projects 17%
Special Needs
Non-Targeted
$384,700
$403,900
$423,700
36%
0%
Higher Impact Fees
Cities impose impact fees and taxes, such as parkland in lieu fees, on new development to fund the infrastructure needed to support new housing. These charges can support important local services, such as schools, parks, and transportation. San José’s impact taxes and fees are higher and averaged $12,100/unit versus $7,800/unit in other cities.

A current work item in the Housing Crisis Work Plan is to assess reducing the construction taxes charged to affordable housing developments. Staff intends to return in early 2023 with recommendations for City Council action. As part of this work effort, staff will seek to understand how San José construction taxes compare to other jurisdictions.

Higher Financing Costs
Affordable housing projects are financed through multiple financing sources. Financing costs represent approximately 7% of San José projects and other city projects total development costs.

Financing costs between 2020 and 2021 increased by approximately 7% for San José projects and approximately 8% for other city projects.

San José projects averaged approximately six funding sources per project. Each additional funding source potentially adds costs due to extended timelines and/or operational requirements.

This layering of capital is causing long delays, which can add significantly to hard costs in a fastrising construction cost environment.

As projects become more complex, affordable housing developments also experience higher soft costs such as increased legal and consultant fees as well as syndication costs associated with financial consultants needed to manage multiple funding streams and partners. In addition, public

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

funding in California can be highly fragmented creating a need to coordinate between state, county, and local funding sources.

Chart 4: Financing Costs Per Affordable Unit
Lower Federal Equity Pricing
Affordable housing projects raise capital to fund development costs through investor equity, referred to as tax credit equity. An investor receives credits over a 10-year tax credit compliance period. As the amount of tax credits available for allocation is fixed each year, the pricing of tax credits directly affects the number of units that can be financed through public funding sources.

A lower tax credit price requires more state and local subsidies to fill financing gaps.

Some City of San José projects received equity pricing as low as 0.88 cents to the dollar in 2020- 2021. Equity investments are a significant source of funding at the conversion phase when the construction is complete and equity capital is injected into the project to take out the senior lender construction loan balance. When equity pricing and investment equity are lower, the

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

development has to take out higher permanent loans from private and public lenders, which places a strain on cash flow due to higher financing costs.

III. Strategies to Mitigate the Cost of Development in San José The City has explored strategies and tools to mitigate the cost of development in San José. The section below highlights concepts being explored to stabilize or bring down the overall cost of both market-rate and affordable development.

Development Fee Framework
The Development Fee Framework is intended to better align the most significant fees and taxes paid by residential developers to allow for easier calculation and administration. To do this, the Development Fee Framework is a set of common elements and practices that guide future fees or changes to existing ones. The outcome of this work is also intended to make it easier to assess the overall cost and impact of fees and taxes within the entire cost of a unit and project. This will allow staff and City Council to better understand the implications of any future decisions regarding fees and taxes. Developers will also benefit by being able to estimate fees and taxes more quickly when creating their pro forma.

Staff continues to work toward the implementation of this concept in the Housing Crisis Work Plan. A major component of this implementation will be the adoption of a formal City Council Policy and other changes to memorialize the components of the Development Fee Framework.

Staff anticipates bringing forward this work in fall 2023.

Potential Impact of New Construction Methods
There are two alternative construction methods growing in consideration due to their potential to reduce the time and cost of construction – modular construction and mass timber.

Modular Construction
In modular construction, major components of construction occur offsite and then these components, or modules, are assembled onsite. The potential advantages of this method are to lower the cost of construction with less built onsite and reduce the total time of construction.

In preparation for this report and the Study Session, staff spoke to a developer pursuing modular construction for an approved multifamily project in San José. The developer shared that it expected modular construction to save approximately 10% to 20% on construction costs.

Additionally, the developer anticipated reducing its construction timeline from 42 months to 30 months. However, the sharp overall increases in construction costs have impacted the developer’s project as well. Even with the 10% savings in construction costs, the project is proving challenging in the current market. There can also be obstacles on the financing side where capital may prefer traditional routes due to familiarity and predictability.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Mass Timber
The other alternative construction type is mass timber. This type of construction uses specially engineered wood products, including cross-laminated timber, that allow for greater heights above what is typical for other types of wood construction. The tallest mass timber structure, recently completed in the City of Milwaukee, is a 25-story, 284-feet residential building. In this case, the key benefit was time savings versus cost.3 However, there are also environmental benefits to this type of construction.

Staff will continue to follow the development and implications of these new construction methods in future updates to the report on the Cost of Residential Development. Staff believes this is important in order to understand what role the City could play in facilitating these types of construction.

Other Policy Considerations
The work outlined in the Housing Crisis Work Plan and the strategies and policies being proposed as part of the updated Housing Element are intended to address areas that the City controls. There are many important strategies proposed in the draft Housing Element, but there are two, in particular, to highlight that is intended to help speed up the approval of new housing development. Reducing approval timelines by moving to a ministerial process is one area within the City’s control that could help lower costs, the other is to provide advance CEQA clearance for Urban Villages.

City Ministerial Infill Approval Ordinance
This strategy would allow housing projects meeting specific criteria to be approved without a hearing through a ministerial process. Projects utilizing this new process would not be subject to CEQA review, as ministerial approvals are not defined as a “project” under the CEQA statute.

This streamlined process would greatly reduce approval timelines. This approach would require additional CEQA analysis to study and disclose potential project-related environmental impacts when policies such as General Plan updates or Urban Village plans are adopted.

CEQA Analysis for Urban Villages
By conducting program-level CEQA analysis for approved Urban Village plans the City could shorten the approval processes for new projects. This approach could reduce the amount of environmental analysis an individual project has to conduct and has been a successful component of the City’s Downtown Strategy.
3 “World’s Tallest Mass Timber Tower Completed in This Great Lakes City” https://product.costar.com/home/news/424172533

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

City Council will be discussing the Housing Crisis Work Plan at its November 15, 2022 City Council meeting. This will be an opportunity to further discuss strategies and policies associated with the City’s housing goals.

CONCLUSION
The updated report on the Cost of Residential Development shows that the cost of construction remains a significant barrier to the construction of new market-rate housing. Unlike in previous versions of the report, none of the prototypes assessed were shown to be feasible under current market conditions. The results of the report are confirmed based on the low level of new multifamily construction in San José since 2020.

The affordable housing cost study identifies significant barriers to financing and building affordable housing developments and the need for more subsidized support. Total development costs for affordable housing continue to have material consequences for the supply of new affordable housing at a time when San José lacks enough affordable housing to meet residents’ needs, with a severe shortage of adequate, affordable housing for extremely-low-, very-low-, low-, and moderate-income households.

EVALUATION AND FOLLOW-UP
Staff plans to regularly update the report on the Cost of Residential Development as part of its ongoing work on housing policy. The next update is anticipated in fall 2023. At the November 15, 2022 City Council meeting, there will be several significant housing policy items relating to this report, including updates on the Housing Crisis Work Plan and on North San José planning as well as recommendations on the future of the City’s High Rise Residential Program. The report will further inform many other future policy discussions.

CLIMATE SMART SAN JOSE
The recommendation in this memorandum has no effect on Climate Smart San José energy, water, or mobility goals.

PUBLIC OUTREACH
In developing this report, staff and the consultant held multiple meetings with housing developers with experience in San José and other organizations interested in housing policy. The first meetings were held on April 18 and 22, 2022. At these meetings, the City’s consultant, Century | Urban, reviewed its assumptions prior to completing its analysis for comments and feedback.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

A draft version of the report on the Cost of Residential Development (see Attachment A) was released on September 22, 2022. Additional meetings with developers and housing organizations were held on September 29, 2022. A draft version of the Cost of Affordable report (see Attachment B) was published on October 6, 2022. A meeting with affordable housing developers will be held the week of October 17, 2022, to review the findings of the report and seek their input. This memorandum will be posted on the City’s Council Agenda website for the November 1, 2022, City Council Study Session.

COORDINATION
This memorandum has been coordinated with the City Attorney's Office, the Department of Planning, Building, and Code Enforcement, and the City Manager’s Budget Office.

COMMISSION RECOMMENDATION/INPUT
No commission recommendation or input is associated with this action.

COST SUMMARY/IMPLICATIONS
There are no costs associated with the City Council’s acceptance of this report. Any future recommendations related to potential modification of development fees and taxes for the City Council’s consideration will include an analysis of impacts on both housing development and City services.

CEQA
Not a Project, File No. PP17-009, Staff Reports, Assessments, Annual Reports, and Informational Memos that involve no approvals of any City Action. /s/ /s/

JACKY MORALES-FERRAND
Director, Housing

NANCI KLEIN
Director of Economic Development and
Cultural Affairs
The principal author of this memorandum is Jerad Ferguson, Housing Catalyst. For questions, please contact email [email protected] or (408) 535-8176.

HONORABLE MAYOR AND CITY COUNCIL
October 11, 2022
Subject: Report on the Cost of Residential Development

Attachments:
• Attachment A – Strategic Real Estate Advisory Services by Century | Urban • Attachment B – Affordable Housing Development Cost Study by Century | Urban

Attachment A
Century | Urban
Strategic
Real Estate
Advisory Services
Conceptual Feasibility Analysis
Presented to:

City of San Jose
August 19, 2022
235 Montgomery Street, Suite 1042 | San Francisco, CA 94104 | 415.786.2875 | www.centuryurban.com Page 346 of 460

FINANCIAL PLAN REVIEW
TO: City of San Jose, Office of Economic Development
FROM: Century Urban, LLC
SUBJECT:

DATE:

Conceptual Feasibility Analysis
August 19, 2022

CONFIDENTIAL AND PRIVILEDGED
Summary
The City of San Jose, Office of Economic Development (the “City”) has engaged Century Urban, LLC (“Century | Urban”) to prepare a conceptual feasibility analysis for five residential rental and sale development prototypes. The analysis is intended to update conceptual prototype feasibility analyses prepared in 2018 and 2019 and to provide a perspective on the general development economics of high-density residential development in the current market. The prototypes are analyzed across a range of City submarkets, projects sizes, and construction types, among other factors.

The conceptual analyses’ findings indicate that residential development economics are challenging under current market conditions. Since the last analysis was prepared, the prices of construction materials and labor have increased significantly, and many construction materials are not easily available on pre-Covid construction timelines. Meanwhile, a combination of the COVID-19 pandemic, volatility and devaluations in equity markets, and expansion of remote work have impacted the demand for urban residential living.

The analyses conclusions are not intended to imply that every residential development is equally challenged in San Jose. Actual projects may differ from the prototype assumptions and may be less challenged.

Analysis Qualifications
The analysis referenced in this memorandum utilizes prototypical projects representing highlevel average or median project types and high-level project assumptions prevalent at the time the analysis was prepared. Though there may be similarities, prototype projects do not correspond to any actual specific project or the actual economics of any particular development.

While prototypes were designed to represent actual or median projects, any given actual project PAGE 2

may reflect different costs, rental rates, sale prices, or other details driven by the circumstances of that project such as its sponsor, history, site conditions, contractor, business plan, and/or other factors. Moreover, the criteria and assumptions utilized in selecting and analyzing the prototypes may be specific to the time during which the analysis was prepared and the research was conducted. Research was conducted and data was gathered for this report during the first quarter of 2022. Appropriate assumptions for the prototypes will likely evolve over time as market conditions change.

Legislative Background
This conceptual feasibility analysis has been prepared to analyze whether construction of Private Construction Projects within the residential Subcategory of Use is Financially Infeasible as specified in Section 14.10.310 of the San Jose Municipal Code, which specifies that A) the City Council must make a determination whether a fee or tax reduction is not a Subsidy, supported by findings, following a public hearing; B) the Council’s findings must be based on evidence presented at the public hearing including a study on whether relevant Private Construction Projects are Financially Infeasible; and C) the financial feasibility study must be performed by a qualified consultant retained through the City’s normal procurement process. The study must address a specific set of issues (see Exhibit F), and preparation of the study will include the opportunity for stakeholder input. The Council is also directed to use reasonable efforts to conduct the required public hearing within 90 calendar days following completion of the study.

Capitalized terms used in this paragraph are defined in Chapter 14.10 of the San Jose Municipal Code.

Construction Types
The residential development prototypes to be analyzed fall into three common residential construction types: Type V, Type III, and Type I. Each of these construction types has multiple subtypes and requirements specified by building code, but in general, the lower the construction type number, the greater the fire-life-safety requirements. • Type V construction refers to a building type in which the interior and exterior structural materials of the building are permitted to be “combustible”. This means that wood may be used as a core structural material in the building’s design including for framing, walls, floors and roofs. Wood-framed building is often used for single-family homes, as well as smaller apartment and retail buildings. Wood frame construction is often lower cost than other construction methods.
• Type III construction refers to a building in which exterior walls are “non-combustible” but other elements (framing, floors, ceilings) may be designed with combustible materials such as wood. Walls are typically constructed from concrete block, precast panels, or other PAGE 3

non-combustible materials. This type of construction is generally used in larger apartment buildings, schools and other medium-sized commercial buildings. • Type I construction refers to a building in which all structural materials are noncombustible. In a Type I building, walls, floors, and roofs are constructed with materials such as concrete and steel. This construction type is generally utilized with high-rise residential and commercial buildings and tends to be the most expensive of the three construction types.

In addition to limiting construction materials for each building type, the International Building Code and most local building codes also limit the maximum height and building stories for a project depending on its construction type.

The three construction types utilized in the prototype analysis are intended to reflect a range of building types and sizes developed by residential developers in the City.

Prototypes
The prototypes reviewed in this conceptual analysis are based on prototypes previously analyzed in 2018 and 2019 to allow comparison to these prior analyses and are intended to represent a range of residential development projects.

Building Heights/Density
For rental prototypes, the analysis includes a Type V project of five stories with a density of 65 units per acre, a Type III project of seven stories with a density of 90 units per acre, and a Type I project of 22 stories with a density of 350 units per acre. The for-sale prototypes include a Type V project of five stories with a density of 50 units per acre and a Type I project of 22 stories with a density of 350 units per acre.

Prototype Building Height and Density
Prototype Size
Rental/Sale
Construction Type
Height/Stories
Density/Acre
Low-Rise
Rental
Type V
5 Mid-Rise
Rental
Type III
7 High-Rise
Rental
Type I
22 Low-Rise
Sale
Type V
5 High-Rise
Sale
Type I
22 65 90 350 50 350
Two versions of the Type I rental and sale prototypes were analyzed – one version, which reflects standard City requirements for payment of an inclusionary in-lieu fee and construction taxes, and a “waiver” version, which reflects a waiver of payment of the inclusionary in-lieu fee and 50% reduction of select construction taxes.

Submarkets
PAGE 4

The prototypes were reviewed and applied in submarkets including “South & East”, “Central”, “West”, “North” and “Downtown.” The City provided boundaries to guide the geographical definition of each submarket. Century | Urban researched each prototype and submarket to estimate the property income, expenses, sales prices, costs, fees, and land cost assumptions appropriate for the prototype or submarket.

Prototype Submarkets
Prototype Size
Rental/Sale
Low-Rise
Rental
Mid-Rise
Rental
High-Rise
Rental
Low-Rise
Sale
High-Rise
Sale
Construction Type Type V Type III Type I Type V Type I
Central, West, South & East, South & East, Central, West, Central North Submarkets North, Central & Downtown
Downtown West, North
Average Unit Sizes
The prototypes assume an average unit size of 900 net square feet for all rental prototypes, 1,150 net square feet for the Type V sale prototype, and 950 net square feet for the Type I sale prototype. Assumed building efficiencies ranged from 78% to 80% resulting in average gross square feet per unit of 1,125 to 1,438.

Prototype Unit Sizes and Efficiencies
Prototype Size
Rental/Sale
Construction Type
Avg Unit Size Net SF
Efficiency
Low-Rise
Rental
Type V
900
Mid-Rise
Rental
Type III
900
High-Rise
Rental
Type I
900
Low-Rise
Sale
Type V
1,150
High-Rise
Sale
Type I
950
80% 80% 78% 80% 78%
Avg Unit Size Gross SF 1,125 1,125 1,154 1,438 1,218
Parking Ratios
Assumed parking ratios are 1 per unit for the Type V and Type III rental prototypes, 0.8 per unit for the Type I rental prototypes, and 1.1 per unit for the Type V and Type I sale prototypes.

Prototype Parking Ratios
Prototype Size
Rental/Sale
Construction Type
Parking Ratio
Low-Rise
Rental
Type V

1.0 Mid-Rise
Rental
Type III

1.0 High-Rise
Rental
Type I

0.8 Low-Rise
Sale
Type V

1.1 High-Rise
Sale
Type I

1.1 PAGE 5

The prototypes described above are summarized in Exhibit A. To allow comparison to prior analysis, the prototype assumptions are consistent with prototype assumptions used in prior analysis with the exception of the efficiency factors for the Type V rent and sale prototypes in the South & East submarket, which have been reduced from 85% to 80% to be consistent with the other Type V prototypes.

Assumptions
Assumptions for the conceptual analysis, which are detailed in Exhibit D, include the following:
❖ All prototypes except Type I rental and sale prototypes assume above-grade structured parking. Type I prototypes assume below-grade structured parking. ❖ Project construction timelines are estimated to range from 20 to 30 months. ❖ Inclusionary requirements are assumed to be fulfilled through the payment of the in-lieu fee, which in the case of “waiver” scenarios is assumed to be waived as discussed below. ❖ Construction is assumed to be open shop.

Development Costs
Development costs include “hard costs”, which represent the labor and materials associated with building construction, and “soft costs”, which represent costs related to items such as architecture and engineering, financing, City fees, insurance, property taxes, overhead, legal, accounting and marketing.

As noted above, development costs for a given project may vary by project design, size, location, construction type, site specific conditions, and other factors. For this analysis, an average project with a flat or relatively flat site and no unusual environmental, soils, infrastructure, or off-site conditions is assumed.

Although this analysis reflects a specific point-in-time, construction costs in the San Francisco Bay Area have increased significantly over time and will likely continue to change. The sensitivity analysis described below reflects the effect on feasibility of changes in development costs.

Hard Costs
Building hard costs were estimated separately from parking hard costs, which varied based on the type of parking assumed in each prototype.

PAGE 6

Building Hard Costs Per GSF (excluding parking)
Size Type Rental
$393
$447
Sale
$420
NA
Low-Rise
Mid-Rise
High-Rise
Type V
Type III
Type I $502 $535
Parking Hard Costs Per GSF
Size Type
Type V
Type III
Type I
Parking Type
Above-grade
Above-grade
Below-grade
Rental
$97
$101
$240
Sale
$100
NA
Low-Rise
Mid-Rise
High-Rise $245
The assumptions utilized for prototype hard costs were generated by a cost estimating consultant. Total hard costs also include a 5% hard cost contingency.

Soft Costs
Soft costs are estimated by soft cost category for each prototype as further detailed in Exhibit D. In total, soft costs equated to 30% to 39% of hard costs and ranged from approximately $110 to $175 per gross square foot depending on the prototype1. Variations in soft costs among the prototypes of the same construction type are driven primarily by the range of City fees, particularly parkland and inclusionary in-lieu fees, which vary by submarket.

Soft Costs as a % of Hard Costs - Rental Prototypes
Size Type South & East Central West North Downtown
Low-Rise Type V 31% 39% NA NA NA
Mid-Rise Type III
Type I
NA
NA
37%
35%
37%
35%
32%
31%
NA
High-Rise 34%
Soft Costs as % of Hard Costs - Sale Prototypes
Central &
Size Type South & East West
33%
NA
North Downtown
Low-Rise Type V 31% 33% NA
High-Rise Type I NA NA 30%
Average Soft Costs Per GSF
Size Type Rental
$115
$132
Sale
$117
NA
Low-Rise
Mid-Rise
High-Rise
Type V
Type III
Type I $158 $143
1 Excluding “waiver” scenarios.

PAGE 7

The tables above do not include the Type I “waiver” scenarios in which 50% of Building and Structure (“B&S”) and Commercial, Residential, Mobile Home Park (“CRMP”) construction taxes and 100% of inclusionary in-lieu fees are waived.

Further detail regarding development cost assumptions is provided in Exhibit D.

City Fees
City fees for each prototype are estimated based on the prototype’s location and size, among other factors. City fees include the following:
• Construction taxes, which include the following six categories: B&S; CRMP; Construction Taxes; Residential Construction Tax; Strong Motion Instrumentation Program Assessment (“SMIPA”); and Building Standards Administration Special Revolving Fund (“BSARSF”). The latter two categories are collected on behalf of the State. The amounts of these taxes are calculated based on a percentage of building construction valuation or on a per unit basis. The “waiver” scenarios for certain Type I prototypes analyze the potential effect of waiving 50% of the B&S and CRMP taxes addition to the inclusionary in-lieu fee described below.

Parkland In-Lieu Fees, which are assessed for each prototype project based on its location. All prototypes are assumed to receive a 25% parkland fee credit based on the provision of onsite open space.
•
•
•
School Fees (ranging from $2.13 to $3.48) are assessed per residential gross square foot based on the applicable submarket location and school district.

At the time of this analysis, the City is in the process of revising its traffic fees. As a result, estimated traffic fees have not been included in the analysis. As part of the traffic fee revisions, the City is defining centrally-located “growth areas” where new development may not be assessed traffic fees based on vehicle mile traveled (“VMT”).
•
•
Inclusionary In-Lieu Fees are assessed per square foot depending on the project size and submarket location. The “waiver” scenarios for certain Type I prototypes analyze the potential effect of waiving this fee in addition to the construction taxes described above.

Other City planning and building permit fees are assessed based on project size, number of units, and other factors. These fees include the costs of the City’s land use and site plan approvals, planning review, and building department fees, among other fees.

The total City Fees per unit for each prototype are estimated to be in the ranges shown in the table below. Further detail is provided in Exhibit D.

PAGE 8

Approximate
Total City Permits & Fees Per Unit Range
Construction Taxes
Parkland In-Lieu Fees
School Fees
Planning/Building Fees
Inclusionary In-Lieu Fees
Total Fees
$6,400 to $8,000
$9,800 to $21,000
$2,400 to $5,000
$2,800 to $7,000
$21,000 to $50,000
$45,000 to $81,000
Rental Rates
For the rental prototypes, Century | Urban conducted research regarding the effective rental rates at properties similar to each prototype in each applicable submarket. Effective rental rates reflect actual in place rental revenue taking into account concessions or other deductions. As an example, at the time of this writing, asking rents at one Class A Type I project were among the highest in the market but the project was also offering eight weeks of free rent. As a result, the project’s effective rents are substantially lower than the project’s asking rents and lower than the asking rents of other projects.

Based on this research, the following effective monthly rental rate assumptions for each prototype and applicable submarket, shown on both a per rentable square foot and per unit basis, are utilized in the conceptual feasibility analysis.

Rent Per
SF/Month South &
East Central
$3.35
West
NA
$4.15
$4.15
North Downtown
Type V
Type III
Type I
$3.05
NA
NA
NA
$3.30
$3.30
NA
NA
$3.75
$3.35
$3.35
Rent Per
Unit/Month South &
East Central
$3,015
$3,015
$3,015
West
NA
$3,735
$3,735
North Downtown
Type V
Type III
Type I
$2,745
NA
NA
$2,970
$2,970
NA
NA
NA $3,375
The City also requested analysis of the effect on Type I “waiver” scenarios of requiring that 5% of total onsite units be affordable to households earning no more than 100% of Area Median Income (“AMI”). Based on an assumed unit mix, the estimated average affordable rent at this AMI tier was $3.86 per square foot or $3,471 per unit per month.

PAGE 9

This rental rate is higher than the estimated market rate rental rates for all Type I prototype submarkets with the exception of the West submarket. As a result, the analysis of a 5% onsite affordability requirement was conducted only for the West submarket.

Sales Prices
Estimated sale prices for the for-sale prototypes are based on research regarding comparable sales of units at recently-built projects in the prototype submarkets. Similar to rental rates, sales prices vary across submarkets and product types.

The tables below summarize the assumed average sales prices on a per-square-foot and per-unit basis based on the research conducted.

Average Sales Price PSF
Type V
South & Central &
East
$585
NA
West
$700
NA
North Downtown
$630 NA
Type I NA $725
Average Sales Price Per Unit South & Central &
East
$672,750
NA
West
$805,000
NA
North Downtown
Type V
Type I
$724,500 NA
NA $688,750
Brokerage commissions, warranty reserves, and sales costs are subtracted from gross sale proceeds to estimate net sale proceeds for each prototype.

Developer Return
Developers require a return on their investment in order to undertake the risks involved with a development project. The required return for a specific project may vary based on the project’s specific characteristics, as well as market/economic conditions including specifically capital market conditions. The prototype feasibility analyses include an estimate of the return that developers would require to proceed with project development.

For the rental prototypes analysis, the required return is estimated using a Return-on-Cost (“ROC”) metric. This return metric is commonly used for rental projects. The appropriate target ROC is established based on a project’s perceived risks, which include the uncertainty of project costs, schedule, revenues, and economic conditions upon completion. The target ROC assumed for the rental prototypes is 5.25%.

PAGE 10

For the sale prototypes analysis, the required return is estimated based on a Profit Margin metric. Like the ROC for rental projects, the Profit Margin metric is commonly used for for-sale projects, and the appropriate target Profit Margin is based on the project’s perceived risks. The target Profit Margin used for the sale prototypes is 20%.

Land Costs
Land costs are estimated based on research of comparable land sale transactions in each submarket. Land sale prices vary substantially even within each submarket and are affected by location, topography, site and soil conditions, parcel configuration, neighboring uses, access, noise, entitlement and permit status, among other factors. The estimated land costs per unit for each submarket are summarized in the table below.

Land Prices Per Unit South &
East Central
$40,000
$65,000
West
$65,000
$75,000
North Downtown
Low
High
$40,000
$65,000
$25,000 $25,000
$85,000 $85,000
The land costs per unit shown in the table above are compared to the estimated residual land values for the applicable prototypes in each submarket, as further discussed below.

Feasibility Analysis
To evaluate the potential feasibility of each prototype, Century | Urban prepared an analysis to estimate each prototype’s residual land value and then compared that residual land value to the estimated market price of land in each submarket based on comparable land sale transactions.

The residual land value represents the amount that a developer estimates that it can pay for a development site and still achieve its target return. If the residual land value is greater than the market price of land, then this is an indication that new development projects are feasible, land for development is more likely to transact, and new projects are more likely to be developed. If residual land value is less than the market price of land, then this is an indication that new development projects are not feasible, land for development is less likely to transact, and new projects are less likely to be developed.

The example shown in the chart below demonstrates the concept of residual value for three individual units in three hypothetical projects. In this example, a unit can be sold for $100. In example 1 (on the left), the hard costs, soft costs and target developer return required to build the unit total $75. In this case, the remaining “residual land value” is $100 (sales price) minus $75 (total development cost, developer return, and sales costs) = $25 per unit. If the developer were to pay more than $25 a unit for land, then the total cost to build would exceed $100 and the PAGE 11

developer would not recover its costs or receive its target return. Therefore, in example 1, new development is likely to occur in a market where land can be purchased for $25 per unit or less.

In example 2, shown in the middle, total development cost, developer return, and sales costs are $84 and residual land value is $100 (sales price) minus $84 = $16 per unit. This example reflects that as development costs increase, the price a developer can pay for land decreases (from $25 per unit in example 1 to $16 per unit in example 2) assuming that sales prices remain constant. In example 3 on the right, the total development cost, developer return, and sales costs of $110 exceed the sale price per unit, which results in zero or “negative” residual land value. In this scenario, development is unlikely to occur.

Feasibility Results
The conceptual feasibility analysis indicates that none of the prototypes support positive estimated residual land value in any of the submarkets. These results suggest a challenging environment for ground-up residential development projects similar to the prototype projects in the selected submarkets. The conceptual feasibility assumptions and resulting residual land values for each prototype are shown in Exhibit B.

PAGE 12

As noted above, the “Waiver” scenarios in the tables below reflect a waiver of 50% of certain construction taxes and 100% of inclusionary in-lieu fees for Type I rental prototypes. The “Type I – Waiver Affordable” scenario in the table below reflects a 5% of total units at 100% AMI onsite affordability requirement, which as mentioned above was only analyzed for the Type I rental prototype in the West submarket.

Residual Values Per Unit - For Rent
Submarket
Type V
Type III
South & East
($261,000)
NA
Central
($257,000)
($338,000)
($498,000)
($436,000)
West
NA
($216,000)
($376,000)
($314,000)
North
NA
($317,000)
($476,000)
($446,000)
Downtown
NA
NA
($432,000)
($369,000)
Type I NA
Type I - Waiver NA
Type I - Waiver -
Affordable NA NA ($316,000) NA NA
Residual Values Per Unit - For Sale
Central &
West Submarket South & East North Downtown
Type V
Type I
Type I - Waiver
($394,000)
NA
($307,000)
NA
($369,000)
NA
NA
($518,000)
NA NA NA ($479,000)
Macroeconomic Context
The economy in the San Francisco Bay Area is generally strong and features low unemployment, a large and diverse range of employers, and significant demand for housing by prospective renters and homebuyers at a variety of income levels. Despite these positive forces, housing development remains challenging. One of the primary challenges is the high cost of construction.

The Engineering News Record (“ENR”) and TBD Consultants publish indices which track construction costs quarterly in the Bay Area. The chart below shows the change in these indices since 2014. Both indices reflect major increases in cost since 2014 and even more significant increases since 2020. Since 2014, the total increase has been 76%. Between the first quarter of 2020, when the COVID-19 pandemic began, and the second quarter of 2022, the latest available data, TBD estimates an increase of 17%. To some extent, these hard cost increases have been offset by rental rate and sale price growth, but construction cost growth has outpaced rental rate and sale price growth.

PAGE 13

Other macro-economic factors have also impacted residential feasibility. Increases in interest rates and borrowing costs driven in part by inflation and corresponding policy reactions have caused a decrease in market transaction volume. In July 2019, Polaris Pacific tracked listings for 1,414 resale condominiums and 804 new construction condominiums in Silicon Valley. In July 2022 there were listings for only 882 resale condominiums and 664 new construction condominiums. In addition, the market values of numerous large publicly-traded Silicon Valley companies have declined significantly since the beginning of the year, affecting household income and wealth, and consequently spending on housing. As of this writing, compared with six months ago, Meta’s value is down approximately 29%, Alphabet’s value is down 18%, Cisco’s value is down 17% and Apple’s value is down 4%.

To be clear, the current market for leasing and sales is relatively steady, but potential rental rate and sale price declines due to the factors discussed above and continued construction cost increases may affect investor and developer perceptions regarding the feasibility of new development projects.

Sensitivity Analysis
As previously noted, the assumptions used in the prototype analysis are based on research regarding current development costs, rents, sale prices and underwriting inputs. However, these PAGE 14

assumptions are intended to reflect average projects and may shift over time as market conditions change.

To provide additional context, sensitivities were prepared to analyze the potential effect of 5% variations in hard costs, soft costs, rental rates, and sale prices by construction type. The results of these sensitivity analyses, which are summarized in Exhibit C, indicate that 5% improvements in hard costs, soft costs, rental rates, and sale prices do not bridge the feasibility gap (see below for explanation of how the feasibility gap is calculated) for any of the prototypes.

The feasibility gap amounts shown in the Exhibit C charts represent the sum of the absolute amount of the estimated negative residual land value per unit for each prototype plus the estimated market cost of land per unit for such prototype. For example, the average projected residual land value for the Type V rental prototypes is approximately negative $270,000 per unit and the estimated market land cost per unit is approximately $52,500 per unit, so the estimated feasibility gap is approximately $322,500 per unit for this prototype. In other words, the residual land value for this prototype would have to increase by $322,500 to yield a residual land value of positive $52,500 per unit that corresponds to estimated market land costs, thereby indicating a potentially feasible project.

The leftmost column in each chart in Exhibit C shows the average feasibility gap per unit for each rental or sale prototype across all relevant submarkets analyzed for such prototype. The columns to the right of this column show the effect on the average feasibility gap of varying hard costs, soft costs, rental rates or sale prices by 5%. For example, for the first Type V rental prototype chart shown in Exhibit C, a 5% reduction in hard costs would decrease the feasibility gap by $30,000 from $310,000 to $280,000.

An additional sensitivity analysis was prepared to review the potential effect of deferring the payment of development impact fees from the commencement of project construction (i.e., upon building permit issuance) to the completion of construction (i.e., upon certificate of occupancy issuance). The effect of this change in payment timing is projected to range from approximately $1,000 to $4,000 per unit depending on the prototype, which does not appear to materially affect feasibility.

Community Review
In connection with the preparation of this analysis, the City invited a group of local developers and a group of local stakeholders to separate virtual meetings to provide feedback regarding draft underwriting assumptions for the feasibility prototypes. Feedback from the meetings was reviewed with the City and is summarized in Exhibit E.

PAGE 15

Conclusions
This conceptual analysis reviewed a set of residential development prototypes to assess the potential feasibility of new rental and sale development projects in the City.

The analysis indicates negative estimated residual land values across the reviewed prototypes and suggests that development of residential projects would be challenging in the current market.

This conclusion is not intended to suggest that every development project in the City is challenged, as projects may have cost structures or target rental rates or sale prices that vary from the prototypes. However, the results do suggest a challenging development environment for projects similar to the prototypes. Even with 5% variations in development costs or rental rates and sales prices, the prototype projects still appear to be challenged.

PAGE 16

Exhibit A
PAGE 17

Exhibit B
San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
South & East
Type V
Rental
Item Amount
900

5.00 65
Average Unit Size (Net Rentable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months
80%
1 20
Construction Costs Per Unit
Hard Costs
Building Hard Costs $442,100
$38,800
$24,000
$505,000
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
$30,300
$24,200
$45,300
$47,200
Soft Cost Contingency $7,400
Total Soft Costs $154,400
Total Hard and Soft Costs $659,400
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.05
$2,750
$170
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$150
$2,770
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$550
$470
Total Annual Operating Expenses Per Month $1,020
Net Operating Income Per Month
Net Operating Income Per Year
$1,740
$20,900
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$398,000
$659,000
($261,000)
Feasibility Gap ($313,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 18

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Central
Type V
Rental
Item Amount
900

5.00 65
Average Unit Size (Net Rentable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months
80%
1 20
Construction Costs Per Unit
Hard Costs
Building Hard Costs $442,100
$38,800
$24,000
$505,000
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$30,300
$25,700
$81,300
$49,100
$9,300
$195,800
Total Hard and Soft Costs $700,700
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.35
$3,020
$170
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,020
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$560
$520
Total Annual Operating Expenses Per Month $1,080
Net Operating Income Per Month
Net Operating Income Per Year
$1,940
$23,300
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$444,000
$701,000
($257,000)
Feasibility Gap ($310,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 19

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Central
Type III
Rental
Item Amount
900

7.00 90
Average Unit Size (Net Rentable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months
80%
1 24
Construction Costs Per Unit
Hard Costs
Building Hard Costs $502,900
$40,400
$27,200
$570,400
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$34,200
$33,600
$80,700
$52,900
$10,100
$211,500
Total Hard and Soft Costs $781,900
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.35
$3,020
$170
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,020
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$560
$520
Total Annual Operating Expenses Per Month $1,080
Net Operating Income Per Month
Net Operating Income Per Year
$1,940
$23,300
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$444,000
$782,000
($338,000)
Feasibility Gap ($391,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 20

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
West
Type III
Rental
Item Amount
900

7.00 90
Average Unit Size (Net Rentable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months
80%
1 24
Construction Costs Per Unit
Hard Costs
Building Hard Costs $502,900
$40,400
$27,200
$570,400
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$34,200
$33,500
$78,100
$52,800
$9,900
$208,600
Total Hard and Soft Costs $779,000
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $4.15
$3,740
$170
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$200
$3,710
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$580
$670
Total Annual Operating Expenses Per Month $1,240
Net Operating Income Per Month
Net Operating Income Per Year
$2,460
$29,600
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$563,000
$779,000
($216,000)
Feasibility Gap ($286,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$65,000
$75,000
PAGE 21

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
North
Type III
Rental
Item Amount
900

7.00 90
Average Unit Size (Net Rentable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months
80%
1 24
Construction Costs Per Unit
Hard Costs
Building Hard Costs $502,900
$40,400
$27,200
$570,400
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$34,200
$32,400
$55,700
$51,500
$8,700
$182,600
Total Hard and Soft Costs $753,000
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.30
$2,970
$170
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$2,980
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$560
$520
Total Annual Operating Expenses Per Month $1,070
Net Operating Income Per Month
Net Operating Income Per Year
$1,910
$22,900
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$436,000
$753,000
($317,000)
Feasibility Gap ($372,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
PAGE 22

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Central
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$47,800
$80,200
$61,400
$11,500
$242,300
Total Hard and Soft Costs $931,100
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.35
$3,020
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,040
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$630
$510
Total Annual Operating Expenses Per Month $1,150
Net Operating Income Per Month
Net Operating Income Per Year
$1,890
$22,700
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$433,000
$931,000
($498,000)
Feasibility Gap ($551,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 23

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Central - Waiver
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$44,600
$27,300
$58,200
$8,600
$180,100
Total Hard and Soft Costs $868,900
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.35
$3,020
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,040
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$630
$510
Total Annual Operating Expenses Per Month $1,150
Net Operating Income Per Month
Net Operating Income Per Year
$1,890
$22,700
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$433,000
$869,000
($436,000)
Feasibility Gap ($551,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 24

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
West
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$47,700
$77,700
$61,200
$11,400
$239,300
Total Hard and Soft Costs $928,100
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $4.15
$3,740
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$200
$3,720
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$660
$650
Total Annual Operating Expenses Per Month $1,310
Net Operating Income Per Month
Net Operating Income Per Year
$2,420
$29,000
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$552,000
$928,000
($376,000)
Feasibility Gap ($446,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$65,000
$75,000
PAGE 25

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
West - Waiver
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$44,500
$24,800
$58,100
$8,400
$177,100
Total Hard and Soft Costs $865,900
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $4.15
$3,740
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$200
$3,720
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$660
$650
Total Annual Operating Expenses Per Month $1,310
Net Operating Income Per Month
Net Operating Income Per Year
$2,420
$29,000
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$552,000
$866,000
($314,000)
Feasibility Gap ($446,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$65,000
$75,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 26

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
West - Waiver/Aff
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$44,500
$24,800
$58,100
$8,400
$177,100
Total Hard and Soft Costs $865,900
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $4.15
$3,720
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$200
$3,710
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$660
$650
Total Annual Operating Expenses Per Month $1,310
Net Operating Income Per Month
Net Operating Income Per Year
$2,410
$28,900
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$550,000
$866,000
($316,000)
Feasibility Gap ($446,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$65,000
$75,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 27

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
North
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$46,300
$54,600
$59,900
$10,100
$212,100
Total Hard and Soft Costs $901,000
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.30
$2,970
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,000
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$630
$500
Total Annual Operating Expenses Per Month $1,140
Net Operating Income Per Month
Net Operating Income Per Year
$1,860
$22,300
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$425,000
$901,000
($476,000)
Feasibility Gap ($531,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
PAGE 28

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
North - Waiver
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$44,800
$29,700
$58,400
$8,700
$182,900
Total Hard and Soft Costs $871,700
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.30
$2,970
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$160
$3,000
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$630
$500
Total Annual Operating Expenses Per Month $1,140
Net Operating Income Per Month
Net Operating Income Per Year
$1,860
$22,300
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$426,000
$872,000
($446,000)
Feasibility Gap ($531,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 29

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Downtown
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$47,400
$74,200
$61,000
$11,200
$235,200
Total Hard and Soft Costs $924,100
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.75
$3,380
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$180
$3,380
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$650
$580
Total Annual Operating Expenses Per Month $1,230
Net Operating Income Per Month
Net Operating Income Per Year
$2,150
$25,900
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$492,000
$924,000
($432,000)
Feasibility Gap ($487,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
PAGE 30

San Jose Residential Feasibility Analysis - Exhibit B
Per unit costs rounded to nearest '00; per unit residual values rounded to nearest '000, monthly pro-forma values rounded to nearest '0 Submarket:

Prototype:

Tenure
Downtown - Waiver
Type I
Rental
Item Amount
Average Unit Size (Net Rentable SF) 900
Stories
Density (du/ac)
Efficiency
Parking Ratio
Construction Months

22.00 350
78%
1 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs $579,200
$76,800
$32,800
$688,800
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$41,300
$44,300
$21,300
$57,900
$8,200
$173,000
Total Hard and Soft Costs $861,800
Pro-Forma Per Unit
Revenue
Average Rent Per Square Foot Per Month $3.75
$3,380
$190
Average Rent Per Month
Other Income Per Month
Vacancy / Credit Loss at 5% Per Month
Total Revenue Per Month
$180
$3,380
Operating Expenses
General Operating Expenses Per Month
Taxes Per Month
$650
$580
Total Annual Operating Expenses Per Month $1,230
Net Operating Income Per Month
Net Operating Income Per Year
$2,150
$25,900
Residual Analysis Per Unit
Residual Value
Total Supportable Cost
Total Hard and Soft Costs
Residual Value
$493,000
$862,000
($369,000)
Feasibility Gap ($424,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 31

San Jose Residential Feasibility Analysis - Exhibit B
Per unit cost and pro-forma values rounded to nearest '00, per unit residual values rounded to nearest '000 Submarket:

Prototype:

Tenure
South & East
Type V
Sale
Item Amount
1,150
5 Average Unit Size (Net Saleable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
50 80%

1.1 Construction Months 20
Construction Costs Per Unit
Hard Costs
Building Hard Costs
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
$603,800
$44,000
$32,400
$680,100
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$40,800
$30,300
$63,800
$67,100
$10,100
$212,100
Total Hard and Soft Costs $892,300
Pro-Forma Per Unit
Revenue
Average Price Per Net Saleable Square Foot
Average Price
Sales Costs Including Warranty Reserve
Profit
$585
$672,800
$40,400
$134,600
Total Net Supportable Cost $497,800
Residual Analysis Per Unit
Residual Value
Supportable Cost
Total Hard and Soft Costs
Residual Value
$498,000
$892,000
($394,000)
Feasibility Gap ($447,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 32

San Jose Residential Feasibility Analysis - Exhibit B
Per unit cost and pro-forma values rounded to nearest '00, per unit residual values rounded to nearest '000 Submarket:

Prototype:

Tenure
Central & West
Type V
Sale
Item Amount
1,150
5 Average Unit Size (Net Saleable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
50 80%

1.1 Construction Months 20
Construction Costs Per Unit
Hard Costs
Building Hard Costs
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
$603,800
$44,000
$32,400
$680,100
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$40,800
$30,600
$72,900
$67,600
$10,600
$222,500
Total Hard and Soft Costs $902,600
Pro-Forma Per Unit
Revenue
Average Price Per Net Saleable Square Foot
Average Price
Sales Costs Including Warranty Reserve
Profit
$700
$805,000
$48,300
$161,000
Total Net Supportable Cost $595,700
Residual Analysis Per Unit
Residual Value
Supportable Cost
Total Hard and Soft Costs
Residual Value
$596,000
$903,000
($307,000)
Feasibility Gap ($359,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$40,000
$65,000
PAGE 33

San Jose Residential Feasibility Analysis - Exhibit B
Per unit cost and pro-forma values rounded to nearest '00, per unit residual values rounded to nearest '000 Submarket:

Prototype:

Tenure
North
Type V
Sale
Item Amount
1,150
5 Average Unit Size (Net Saleable SF)
Stories
Density (du/ac)
Efficiency
Parking Ratio
50 80%

1.1 Construction Months 20
Construction Costs Per Unit
Hard Costs
Building Hard Costs
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
$603,800
$44,000
$32,400
$680,100
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$40,800
$30,700
$74,900
$67,700
$10,700
$224,800
Total Hard and Soft Costs $905,000
Pro-Forma Per Unit
Revenue
Average Price Per Net Saleable Square Foot
Average Price
Sales Costs Including Warranty Reserve
Profit
$630
$724,500
$43,500
$144,900
Total Net Supportable Cost $536,100
Residual Analysis Per Unit
Residual Value
Supportable Cost
Total Hard and Soft Costs
Residual Value
$536,000
$905,000
($369,000)
Feasibility Gap ($424,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$85,000
PAGE 34

San Jose Residential Feasibility Analysis - Exhibit B
Per unit cost and pro-forma values rounded to nearest '00, per unit residual values rounded to nearest '000 Submarket:

Prototype:

Tenure
Downtown
Type I
Sale
Item Amount
Average Unit Size (Net Saleable SF) 950
Stories 22
Density (du/ac)
Efficiency
Parking Ratio
330
78%

1.1 Construction Months 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
$651,600
$107,800
$38,000
$797,400
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$47,800
$49,100
$56,100
$73,300
$11,300
$237,600
Total Hard and Soft Costs $1,035,000
Pro-Forma Per Unit
Revenue
Average Price Per Net Saleable Square Foot
Average Price
Sales Costs Including Warranty Reserve
Profit
$725
$688,800
$48,300
$123,900
Total Net Supportable Cost $516,600
Residual Analysis Per Unit
Residual Value
Supportable Cost
Total Hard and Soft Costs
Residual Value
$517,000
$1,035,000
($518,000)
Feasibility Gap ($573,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$25,000
PAGE 35

San Jose Residential Feasibility Analysis - Exhibit B
Per unit cost and pro-forma values rounded to nearest '00, per unit residual values rounded to nearest '000 Submarket:

Prototype:

Tenure
Downtown - Waiver
Type I
Sale
Item Amount
Average Unit Size (Net Saleable SF) 950
Stories 22
Density (du/ac)
Efficiency
Parking Ratio
330
78%

1.1 Construction Months 30
Construction Costs Per Unit
Hard Costs
Building Hard Costs
Parking Hard Costs
Contingency/Other Hard Costs
Total Hard Costs
$651,600
$107,800
$38,000
$797,400
Soft Costs
Architectural and Engineering
Financing Costs
City Fees and Permits
Other Soft Costs
Soft Cost Contingency
Total Soft Costs
$47,800
$47,200
$22,000
$71,300
$9,400
$197,700
Total Hard and Soft Costs $995,100
Pro-Forma Per Unit
Revenue
Average Price Per Net Saleable Square Foot
Average Price
Sales Costs Including Warranty Reserve
Profit
$725
$688,800
$48,300
$123,900
Total Net Supportable Cost $516,600
Residual Analysis Per Unit
Residual Value
Supportable Cost
Total Hard and Soft Costs
Residual Value
$516,000
$995,000
($479,000)
Feasibility Gap ($573,000)
Market Land Cost
2019-2021 Indicative Land Cost - Low
2019-2021 Indicative Land Cost - High
$25,000
$25,000
*Waiver scenarios assume a waiver of inclusionary fees and a 50% reduction in CRMP and B&S Construction Taxes PAGE 36

Exhibit C
Effect Per Unit on Feasibility Gap of Varying Hard Costs, Soft Costs, and Rental Rates by 5% Type V Rental Prototype
Type III Rental Prototype
PAGE 37

Type I Rental Prototype
PAGE 38

Effect Per Unit on Feasibility Gap of Varying Hard Costs, Soft Costs, and Sale Prices by 5% Type V Sale Prototype
Type I Sale Prototype
PAGE 39

Exhibit D
Development Costs
Building Hard Costs Per GSF Rental
$393
$447
Sale
$420
NA
Type V
Type III
Type I $502 $535
Parking Hard Costs Per GSF
Above grade pricing for Type V and Type III, below grade Type V pricing for Type I.

Rental
$97
$101
$240
Sale
$100
Type III NA
Type I $245
Hard Cost Contingency Rental

5.00%
Sale

5.00%
Entitlement Professional Fees
e.g. CEQA-relatled and pre-entitlement prof. fees
City Fees calculated separately
Rental
$500,000
$500,000
Sale
Type V $500,000
Type III
Type I $1,000,000 $1,000,000
Post Entitlement A&E / Prof Fees
of Hard Costs
Rental

6.00%
Sale

6.00%
Insurance
of Hard Costs
Rental

1.00%
Sale

1.50%
Developer Fee Rental

4.00%
Sale

4.00%
Financing
Interest Rate
Loan to Cost
Fees
Rental

5.50%

65.00%

1.00%
Sale

5.50%

60.00%

1.00%
Soft Cost Contingency Rental

5.00%
Sale

5.00%
PAGE 40

Rental Prototype Assumptions
Market Rent Per Unit / Month South & East
$2,745
Central
$3,015
$3,015
$3,015
West North Downtown
$2,970
Type V
Type III
Type I
$3,735
$3,735 $2,970 $3,375
Market Rent Per SF / Month South & East
$3.05
Central
$3.35
$3.35
West North Downtown
Type V
Type III
Type I
$4.15
$4.15
$3.30
$3.35 $3.30 $3.75
Other Income Per Unit / Month
(Incl parking) Type V
Type III
Type I
$167
$167
$185
Vacancy/Credit Loss 5.00%
Operating Expenses Per Unit / Month (not including property taxes) Type V
Type III
Type I
$6,596
$6,688
$7,619
Target Return on Cost
Type V
Type III
Type I

5.25%

5.25%

5.25%
Sale Prototype Assumptions
Market Sale Price PSF South & East
$585
C, W, N Downtown
Type V
Type I
$700
$725
Sales Costs Including Warranty Reserve 5%-6%
Target Profit Margin
Type V
South & East
20%
C, W, N Downtown
20%
Type I 20%
PAGE 41

City Permits and Fees - Rental Prototypes Total fees and per unit fees rounded to nearest '00 Prototype Type V Type V Type III Type III Type III
South &
East
$120.47
$135,500
$53.83
Central
$120.47
$135,500
$53.83
$21,500
$157,100
Central
$120.47
$135,500
$67.97
$27,200
$162,700
West
$120.47
$135,500
$67.97
$27,200
$162,700
North
$120.47
$135,500
$67.97
$27,200
$162,700
Residential Value Per GSF
Residential Value Per Unit
Parking Value Per GSF
Parking Value Per Unit
Total Valuation Per Unit
$21,500
$157,100
Construction Tax Assumptions
Building and Structure
CRMP
Construction Tax
Residential Construction Tax
SMIPA

1.54% of value

2.42% of value
$75.00 per unit
$90.00 per unit

0.01% of value
BSARSF 0.004% of value
Total Construction Tax Per Unit
Parkland In-Lieu Fees
$6,400 $6,400 $6,600 $6,600 $6,600
$13,100
25%
$22,600
25%
$22,600
25%
$20,800
25%
$27,700
Parkland Credit Note 1 25%
Total Parkland In Lieu Fees Per Unit $9,800 $17,000 $17,000 $15,600 $20,800 School Fees Per Residential GSF
School Fees Per Unit
$2.13
$2,400
$3.48
$3,900
$3.48
$3,900
$2.45
$2,800
$2.24
$2,500
Planning and Building Fees Per Unit $5,700 $5,700 $4,800 $4,800 $4,800 Inclusionary In-Lieu PSF
Inclusionary Fee Per Unit
$18.70
$21,000
$43.00
$48,400
$43.00
$48,400
$43.00
$48,400
$18.70
Note 2 $21,000
Total Permits and Fees Per Unit $45,300 $81,300 $80,700 $78,100 $55,700 Note 1
Note 2
Adjustment to reflect assumed amount of parkland provided within project.

Traffic fees currently being revised
PAGE 42

City Permits and Fees - Rental Prototypes Total fees and per unit fees rounded to nearest '00 Prototype Type I Type I Type I Type I
Central
$120.47
$139,000
$89.90
$28,800
$167,800
West
$120.47
$139,000
$89.90
$28,800
$167,800
North Downtown
Residential Value Per GSF
Residential Value Per Unit
Parking Value Per GSF
Parking Value Per Unit
Total Valuation Per Unit
$120.47
$139,000
$89.90
$120.47
$139,000
$89.90
$28,800
$167,800
$28,800
$167,800
Construction Tax Assumptions
Building and Structure
CRMP
Construction Tax
Residential Construction Tax
SMIPA

1.54% of value

2.42% of value
$75.00 per unit
$90.00 per unit

0.01% of value
BSARSF 0.004% of value
Waiver Scenario B&S, CRMP Reduction 50% Waiver Scenarios Only Total Construction Tax Per Unit $6,800 $6,800 $6,800 $6,800 Parkland In-Lieu Fees
Parkland Credit
$22,600
25%
$20,800
25%
$27,700
25%
$14,600
25%
Total Parkland In Lieu Fees Per Unit $17,000 $15,600 $20,800 $11,000 School Fees Per Residential GSF
School Fees Per Unit
$3.48
$4,000
$2.45
$2,800
$2.24
$2,600
$3.48
$4,000
Planning and Building Fees Per Unit $2,800 $2,800 $2,800 $2,800 Inclusionary In-Lieu PSF $43.00 $43.00 $18.70 $43.00
Inclusionary Fee Per Unit $49,600 $49,600 $21,600 $49,600 Note: Inclusionary Fees Waived in Waiver Scenarios
Total Permits and Fees Per Unit $80,200 $77,700 $54,600 $74,200 Note 1
Note 2
Adjustment to reflect assumed amount of parkland provided within project.

Traffic fees currently being revised
PAGE 43

City Permits and Fees - Sale Prototypes Total fees and per unit fees rounded to nearest '00 Type V Type V Type V Type I
South & Central &
Prototype
East
$120.47
$173,200
$53.83
West
$120.47
$173,200
$53.83
North Downtown
Residential Value Per GSF
Residential Value Per Unit
Parking Value Per GSF
Parking Value Per Unit
Total Value Per Unit
$120.47 $120.47
$173,200
$89.90
$173,200
$53.83
$23,700
$196,900
$23,700
$196,900
$23,700
$196,900
$23,700
$196,900
Construction Taxes
Building and Structure
CRMP
Construction Tax
Residential Construction Tax
SMIPA

1.54% of value

2.42% of value
$75.00 per unit
$90.00 per unit

0.01% of value
BSARSF 0.004% of value
Waiver Scenario B&S, CRMP Reduction 50% Waiver Scenarios Only Total Construction Tax Per Unit $8,000 $8,000 $8,000 $7,600 Parkland In-Lieu Fees Per Unit
Parkland Fees Credit
$13,100
25%
$22,600
25%
$27,700
25%
$14,600
25%
Total Parkland In Lieu Fees Per Unit $9,800 $17,000 $20,800 $11,000 School Fees Per Residential GSF
School Fees Per Unit
$2.13
$3,100
$3.48
$5,000
$2.24
$3,200
$3.48
$4,200
Planning and Building Fees Per Unit
Inclusionary In-Lieu Per GSF
$7,000 $7,000 $7,000 $2,900
$25.00 $25.00 $25.00 $25.00
Inclusionary In-Lieu Per Unit Note 2 $35,900 $35,900 $35,900 $30,400 Note: Inclusionary Fees Waived in Waiver Scenarios
Total Permits and Fees Per Unit $63,800 $72,900 $74,900 $56,100 Note 1
Note 2
Adjustment to reflect assumed amount of parkland provided within project.

Traffic fees currently being revised
PAGE 44

Exhibit E
Developer & Stakeholder Feedback
The City invited a group of local developers and a group of local stakeholders to separate virtual meetings to provide feedback regarding draft underwriting assumptions, which had been developed based on the prior analysis, market research and information provided by the City.

The following feedback was provided by developers and stakeholders during these meetings.

While some topics were mentioned by multiple participants, it was not clear for any given feedback whether the comment was shared by other participants beyond the speaker. Certain changes were made to the analysis as result of the feedback, which are reflected in the analysis described above.
•
•
Type I garages should be more inefficient (e.g., 500 SF per stall) Type III projects should have more density – 125 units per acre or even 180+ units per acre downtown
•
•
•
•
•
•
•
For Type V construction, only seeing 4-story projects
Parking ratio for Type V could be higher
Type III average unit size is currently more like 800 SF instead of 900 SF Type I hard costs should be increased by 7-10% (hard cost estimates in general are low).

Parking costs above grade should be $60,000-$70,000 per stall Pre-entitlement professional fees should be $1 million -$3 million per project 6% for professional fees may be high – overall professional fees including entitlement costs for Type III & V projects should be $20,000-$24,000 per unit A&E costs for for-sale projects should be higher due to liability risk Insurance should be modeled at 2-3% of hard costs
•
•
• Add 1% mortgage broker fee to upfront financing costs (i.e., resulting in total upfront lender fees of 2.0%)
•
•

5.5% construction loan interest rate may be high for today’s market but probably a good over/under number
VMT mitigation expenses can be $2 million for a large project or $2,000-$5,000 per unit in certain areas
•
•
30% parkland credit is too high- should be 20-25%
There should be less variation on rents between North, Central and Downtown submarkets and other income should be the same for all projects Operating expenses for Types III & V projects should be $2,000 per unit higher than shown – for Type I projects operating expenses should be $8,500 to $9,000 per unit For-sale condominiums need to be sold at $1,200 per SF to pencil Target return on cost for Type I projects should be 5.25% (i.e., same as Types III & V) instead of 5.0%.
•
•
•
PAGE 45

•
•
Capitalization rates for Type III should be same as Type I.

Downtown land costs should be higher - $50k per unit or more (e.g., same as West submarket)
• Look at published indexes (e.g., Association of General Contractors, National Homebuilders, California Construction) for potential construction cost data Scenarios with mass timber / pre-fabricated modular construction should be considered Prototype results should be subject to “ground truthing” – comparing results with data from actual projects. In past, certain projects proceeded even though analysis generally concluded that development was infeasible.
•
•
•
•
Can the City utilize numbers from its own projects (separate affordable housing cost study is being prepared)?
The current market is too volatile and dynamic to make any kind of analysis like this useful
•
•
•
•
Assumed 22-story high rise height could be higher
Please review a white paper on parking ratios
Align parking ratios with City policy on required minimum parking Request for sensitivity analysis on various assumptions (e.g., above- vs. below-grade parking)
•
•
•
Is this exercise useful for any type of policy making?
Land costs can vary widely
Should these analyses consider a commercial FAR requirement? PAGE 46

Exhibit F

14.10.310 Financially Infeasible.

A fee or tax reduction applied uniformly to all Private Construction Projects within a specified Subcategory of Use is not a Subsidy if the Council determines, in accordance with the requirements of this Section, that construction of the projects is Financially Infeasible.

A. The Council must make its determination that a fee or tax reduction is not a Subsidy, supported by findings, following a public hearing.

B. The Council's findings must be supported by evidence presented at the public hearing, including a study analyzing whether construction of the Private Construction Projects within the specified Subcategory of Use is Financially Infeasible.

C. The financial feasibility study referenced in Subsection B of this Section 14.10.310 must be performed by a consultant qualified to provide real-estate analytic services.

1. 2.

The City will select and retain the consultant using its normal procurement process.

The required consultant study must address the following issues:
a.
b.
c.

Whether construction of the Private Construction Projects in the specified Subcategory of Use is Financially Infeasible;
The reason(s) for any conclusion that construction of the Private Construction Projects in the specified Subcategory of Use is Financially Infeasible; The anticipated duration of any condition(s) making construction of the Private Construction Projects in the specified Subcategory of Use Financially Infeasible; d. The estimated size of the financial gap between the Private Construction Projects in the specified Subcategory of Use being Financially Infeasible and financially feasible;
e. Options for making construction of the Private Construction Projects in the specified Subcategory of Use financially feasible, including the following:
i. Providing the proposed fee or tax reduction without requiring the payment of prevailing wages;
ii. Providing the proposed fee or tax reduction along with requiring the payment of prevailing wages; and
iii. Any additional options, other than the proposed fee or tax reduction, that would make construction of the Private Construction Projects within the specified Subcategory of Use financially feasible, provided that any such options must comply with all applicable laws and regulations, including the City's current general plan.

3. 4.

Consultant's preparation of the required study will include the opportunity for stakeholder input.

The Council will use reasonable efforts to conduct the required public hearing within ninety (90) calendar days following the completion of the study referred to in Subsections B and C of this Section 14.10.310.
(Ord. 30292)
PAGE 47

Attachment B
Century | Urban
Affordable Housing
Development Cost Study
Presented to:

City of San Jose
September 22, 2022
235 Montgomery Street, Suite 629 | San Francisco, CA 94104 | 415.358.1218 | www.centuryurban.com Page 393 of 460

TABLE OF CONTENTS
INTRODUCTION ....................................................................................................................................3 METHODOLOGY AND APPROACH .......................................................................................................3 Table 1. Summary of Projects.......................................................................................................4 Table 2. List of City of San Jose Projects ......................................................................................5 Table 3. List of Other City Projects..............................................................................................6 GENERAL TRENDS IN AFFORDABLE HOUSING DEVELOPMENT COSTS ..............................................6 Table 4. Year-Over-Year Change in San Jose Project Development Cost....................................7 Affordable Housing Developments Costs by Housing Type............................................................7 Table 5. Summary of Comparison of Total Development Costs per Unit....................................8 Graph 1. Average Development Cost per Unit ............................................................................8 Table 6. Unit Size by Location and Housing Type.......................................................................8 Graph 2. Average Development Cost ELI Buildings Compared to All Buildings .......................9 Site Acquisition Costs by Housing Type .........................................................................................9 Table 7. Summary of Site Acquisition Costs per Unit ...............................................................10 Graph 2. Acquisition Costs per Unit..........................................................................................10 Table 8. San Jose Projects Land Purchase Cost per Unit ...........................................................10 Direct Construction Costs by Housing Type.................................................................................11 Table 9. Total Direct Construction Costs, Average Per Unit ....................................................11 Graph 3. Construction Hard Costs per Unit..............................................................................12 Impact Fees .....................................................................................................................................12 Graph 4. Impact Fees per Unit ...................................................................................................13 Financing Costs..............................................................................................................................13 Table 10. Financing Costs Average Per Unit.............................................................................13 Tax Credit Pricing..........................................................................................................................14 Table 11. Tax Credit Pricing Average by Year...........................................................................15 Share of Development Costs Funded by City Subsidies and Other Sources..................................15 Table 12. City Subsidy Amount Per Unit..................................................................................16 Graph 6. San Jose City Funding per Unit..................................................................................16 Table 13. San Jose Projects Subsidy Amounts Per Unit by Housing Type ...............................16 Graph 7. San Jose Projects Funding Sources .............................................................................17 Table 14. Other City Projects Subsidy Amounts Per Unit by Housing Type...........................18 Affordable Housing Development Costs as Compared to Market Rate .........................................18 Graph 9. San Jose Projects Funding Sources .............................................................................19 Unique Attributes of Affordable Housing that Often Result in Affordable Housing Development Costs Exceeding Market Rate Housing Development Costs .........................................................19 Local Support to Reduce Cost Burden............................................................................................22 PAGE 2 Page 394 of 460

INTRODUCTION
The City of San Jose (the “City”) has engaged Century Urban, LLC (“Century | Urban”) to prepare a study regarding the cost of developing affordable housing within the City, the typical funding sources used to pay for such costs and the unique attributes of affordable housing that contribute to its higher construction costs. In addition, this study compares the cost of developing affordable housing in the City to similar costs in other large California cities. This report is intended to be an update to a similar study completed in October 2019 by Keyser Marston Associates, Inc. (“KMA”).

Since 1989, the City has provided local subsidies to eligible projects to facilitate the construction of affordable housing within its jurisdiction. Over the past 33 years, barriers to the development of affordable housing have increased with escalating construction costs becoming the highest barrier.

According to TBD Consultants, a project and cost management consultant with a strong Bay Area focus, annual construction cost escalation averaged between 7 percent and 8 percent from 2014 to 2020. A slowdown in construction activity in early 2020 lowered the rate of construction cost escalation for a brief period, however, since that time construction costs have continued to ascend with an average annual increase of 6 percent over the past two years. TBD Consultants anticipates that construction cost escalation will continue to exceed historical trends with projected annual escalation between four and a half percent to five and a half percent in 2022 and four and a half percent to five percent for the foreseeable future thereafter. Rising interest rates in response to high inflation may also be indirectly increasing affordable housing construction costs by increasing the cost of borrowing for businesses that produce construction materials. However, a slowdown in construction activity, may result from higher interest rates, which to a certain extent may offset construction cost increases.

This report provides a summary of recent affordable housing construction costs utilizing data from California Tax Credit Allocation Committee applications submitted by affordable housing developers seeking a tax credit allocation. To provide additional context for this data, Century | Urban interviewed two affordable housing developers, one general contractor and one affordable housing development manager. The findings from this research and these interviews are summarized below.

METHODOLOGY AND APPROACH
Century | Urban performed research to identify all projects within the City of San Jose that were awarded a tax credit allocation since the last study was prepared by KMA, which covered projects that were awarded a tax credit allocation through the first funding round in 2019. Thus, this study evaluated the time period from June 2019 to December 2021. 15 projects in the City received tax credit allocations during this time period (“San Jose Projects”). These projects range in height from four to 13 stories with an average height of approximately seven stories. Nearly all San Jose Projects proposed a “Special Needs” or “Non-Targeted” housing type with only one senior housing project.

Non-Targeted projects are projects that pursue a geographic set-aside instead of a target population set-aside. Notably, there were no “Large Family” projects that received a tax credit allocation during PAGE 3 Page 395 of 460
the study period1. Given the unique characteristics of the San Jose Projects, which are largely comprised of more dense buildings with smaller units, research was performed to identify similar projects in other cities in Santa Clara County, Los Angeles County, the City & County of San Francisco and Alameda County by reviewing a listing of projects receiving a tax credit award published by the California Debt Limit Allocation Committee (“CDLAC”). 27 projects (“Other City Projects”) that are comparable in housing type and construction type to the San Jose Projects were identified in these counties. Table 1 below summarizes the projects that were evaluated as part of this study.

Table 1. Summary of Projects
San Jose Projects Other City Projects
Number of Number of Number of Number of
Housing Type
Special Needs
Non-Targeted
Seniors
Projects Units % of Total
45%
Projects Units
1,488
1,252
837
% of Total
9 42%
5 795 13
655 37% 9 35%
1 301 17% 5 23%
Total 15 1,751 100% 27 3,577 100%
The San Jose Projects totaled 1,751 units, with nine projects serving a special needs population such as permanent supportive housing for the formerly homeless, five projects classified as non-targeted housing, which may provide housing to a mix of tenant populations, and one senior housing project.

Seven projects propose five or fewer stories comprising 39% of all units, and the remaining eight projects, comprising 61% of all units ranged from six to 13 stories with a weighted average of nearly seven stories across all San Jose Projects. The Other City Projects totaled 3,577 units with 13 projects serving a special needs population, nine projects classified as non-targeted housing, and five senior housing projects. Nine projects propose five or fewer stories comprising 35% of all units, and the remaining 18 projects comprising 65% of all units ranged from six to nine stories with a weighted average of just over six stories across all Other City Projects.

The CDLAC application for each project was reviewed to obtain development costs for each project.

The development costs shown in each application is based on the project sponsor’s best information available at the time of application submittal and may not reflect the final actual cost of development.

However, applicants must demonstrate readiness to proceed with construction within 180 days of an award. As such, the final actual project development costs would not be expected to vary significantly from the development costs shown in the CDLAC applications.

Provided below is a list of the projects that were analyzed in this study. Construction cost detail by project are provided in Appendix A, Table 1 and Table 2. 1 Refer to https://www.treasurer.ca.gov/ctcac/programreg/2022/20220720/2022-Regulations.pdf for housing type definitions.

PAGE 4 Page 396 of 460
Table 2. List of City of San Jose Projects
Project Name Housing Type Total Units Number of
Stories
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
Special Needs
Special Needs
Special Needs
Special Needs
Special Needs
Non-Targeted
Non-Targeted
Special Needs
Special Needs
Non-Targeted
Non-Targeted
Special Needs
Special Needs
Non-Targeted
Seniors
130
80 79
80 91
224
115
46 94
82 87
87 108
147
301
1,751
5 7
5 9
8 13
6 5
4 5
8 7
5 4
6 Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
15 Projects
PAGE 5 Page 397 of 460
Table 3. List of Other City Projects
Total
Units
Number of
Stories
Project Name City County Housing Type
Villa Oakland
Fruitvale Transit Village Phase 11B
Citrus Crossing
Vermont Manchester Family
Residency at the Entrepreneur
Santa Monica & Vermont Apartments
Brine Residential
6th and San Julian
Vintage at Woodman
5th Street PSH
Oakland
Oakland
Glendale
Alameda
Alameda
Special Needs
Non-Targeted
Seniors
Special Needs
Special Needs
Special Needs
Special Needs
Special Needs
Seniors
Special Needs
Non-Targeted
Non-Targeted
Special Needs
Special Needs
Non-Targeted
Special Needs
Special Needs
Non-Targeted
Non-Targeted
Non-Targeted
Non-Targeted
Seniors
95 6
181
127
118
200
187
97 5
5 7
9 6
5 6
5 8
5 7
6 5
7 6
7 9
9 6
6 7
5 6
5 6
5 Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
Los Angeles
94 239
149
98 152
121
90 181
92 63
131
130
146
96 258
137
48 102
80 165
Hope on Hyde
Hollywood Arts Collective
Ingraham Apartments
Corazon del Valle II
Pasadena Studios
Nadeau
78 Haight Street
Balboa Park Upper Yard
681 Florida Street
833 Bryant Apartments
53 Colton
Panorama City Los Angeles
Pasadena
Unincorp.

Los Angeles
Los Angeles
San Francisco
San Francisco
San Francisco
San Francisco
San Francisco
San Francisco
San Francisco
Santa Clara
Santa Clara
Santa Clara
Santa Clara
San Francisco
San Francisco
San Francisco
San Francisco
San Francisco
San Francisco
San Francsico
Cupertino
Ocena Views
4840 Mission Street
Westport Cupertino
Sango Court
Kifer Senior Housing
Agrihood Senior Apts
27 Projects
Non-Targeted
Seniors
Special Needs
Special Needs
Seniors
Milpitas
Santa Clara
Santa Clara
3,577

GENERAL TRENDS IN AFFORDABLE HOUSING DEVELOPMENT COSTS
In this section, the analysis results are presented, along with a discussion of the major cost drivers that have led to significant increases in the development costs of projects utilizing Low-Income Housing Tax Credits (“LIHTC”) since the prior study was completed.

Several studies have pointed to the high and rising costs of LIHTC development in California. One such study prepared by the Terner Center concluded that the average cost per unit of 9% LIHTC new construction projects in California increased from $425,000 per unit to $480,000, per unit between 2016 and 2019, an increase of approximately 13 percent. Costs in the Bay Area have increased faster than the state in general. According to discussions with developers and a general contractor active in the Bay Area, costs have increased by an average of five to six percent per year over the past 10 years. This is consistent with the San Jose Projects evaluated. As shown in Table 4 below, the average year-over-year change in total development cost was approximately 6 percent in each of 2020 and 2021. For 2019, the Virginia Street Studios project, which is a senior housing project PAGE 6 Page 398 of 460
and not representative of project types in subsequent years, was excluded. Furthermore, the Terner Center study also cited that cost per square foot has risen even more dramatically at an estimated rate of approximately 30 percent during the same time period. In recent years, the average unit size has been declining, resulting in a higher increase in construction costs per square foot as compared to per unit.

Table 4. Year-Over-Year Change in San Jose Project Development Cost Average
Building
Stories
Wtd. Avg. Total
Development Cost
per Unit
Number of
Projects
% Change Prior
Year Year
2019
2020
2021
1 7
7 8
5 8
$602,400
$635,600
$672,600
NA
6%
6%
This increase in costs has material consequences for the supply of new affordable housing as increased public subsidies are needed to fund higher development costs at a time of unparalleled demand for public subsidies. Since approximately 2019, annual demand for 4% tax credits has exceeded annual tax-exempt bond capacity, which determines the amount of tax credits available each year. Prior to 2019, California allocated between 85% to 90% of its annual tax-exempt bond capacity and any excess was carried forward to future years. According to a recent Affordable Housing Finance article, California’s 4% tax credit program is currently oversubscribed by 2-to-1, a significant shift since 2019.

The study conducted in 2019 by KMA found that total development costs for affordable housing projects located in the City averaged approximately $523,000 per unit for projects serving a special needs population. The total development costs for special needs housing type projects evaluated as part of this study averaged approximately $700,100 per unit, which represents a significant increase over the development costs listed in the prior study. While some of this cost differential can be attributed to a higher proportion of Single Room Occupancy units in projects evaluated by the KMA study, current development costs show a clear trend in increased per unit costs. Multiple factors driving these cost increases are discussed below.

Affordable Housing Developments Costs by Housing Type
As summarized in Table 5 and Graph 1 below, total development costs for the 15 San Jose Projects analyzed averaged approximately $615,100 per unit. Special needs projects had the highest per unit cost of over $700,000; non-targeted units averaged approximately $609,900 per unit; and the sole senior housing project averaged approximately $402,200 per unit. This compares to the average per unit cost for Other City Projects of approximately $535,100 for all housing types; approximately $564,900 for special needs projects; $574,200 per unit for non-targeted projects; and $423,500 for senior housing projects. Average cost per unit for San Jose Projects were 15 percent higher than average cost per unit for Other City Projects, and notably, average cost per unit for special needs projects in the City were 24 percent higher than average cost per unit for special needs projects in other cities.

PAGE 7 Page 399 of 460
Table 5. Summary of Comparison of Total Development Costs per Unit San Jose Projects Other City
Projects
All Projects San Jose Cost
Difference
All Projects
Special Needs
Non-Targeted
Seniors
$615,100
$700,100
$609,900
$402,200
$535,100
$564,900
$574,200
$423,500
$561,400
$612,000
$586,500
$417,900
15%
24%
6%
-5%
Graph 1. Average Development Cost per Unit
While in the prior study, higher development costs for San Jose projects were partly attributable to a difference in average building height with projects in San Jose averaging more stories, this does not appear to be the case for projects in this study as 61% of units in San Jose Projects are in buildings with six or more floors compared to 65% of units in Other City Projects. Unit size also does not appear to be a cause of this differential as Table 6 below shows that units in San Jose Projects are on average smaller than or approximately equal in size to units in Other City Projects.

Table 6. Unit Size by Location and Housing Type
San Jose Projects Average
Unit Size
Other City Projects
Average Unit Size
All Projects
Special Needs
Non-Targeted
Seniors
496
542
441
NA
557
572
431
510
A review of affordability levels shows that San Jose Projects have deeper affordability, with approximately 40% of San Jose Project units located in buildings with 50% or more units set aside for extremely low-income households, which are defined as households earning no more than 30% of area median income (“ELI Buildings”). In comparison, approximately 29% of Other City Project units are located within ELI Buildings. Development costs for ELI Buildings were higher as shown in the graph below. The higher percentage of units within ELI buildings in San Jose as compared to PAGE 8 Page 400 of 460
other cities is one of several factors that may explain the cost differential between San Jose Projects and Other City Projects. A detailed discussion regarding other potential factors, which may be driving the cost differential, is provided on page 17 below.

Graph 2. Average Development Cost ELI Buildings Compared to All Buildings Total development costs consist of many components including land or property acquisition costs, direct construction costs, and indirect soft costs such as architectural/engineering costs, local development fees, as well as other fees (e.g., legal fees, appraisals, and insurance). Provided below is a breakdown of development costs by key categories.

Site Acquisition Costs by Housing Type
Land costs can vary significantly across affordable housing projects as some projects may benefit from contributed land, others may ground lease land and others may pay fair market value for land.

Land acquisition costs reported in tax credit applications include the land purchase price or capitalized ground lease amount, demolition costs, site improvements, and associated legal and financing costs. In general, reported land acquisition costs for projects across the state remained largely flat since the end of the recession in 2015 through 2020; however, site acquisition costs have been declining over the past two years as increasing construction costs have forced developers to rely on land contributions or ground leases with minimal ground rent. Land acquisition costs for projects in the City declined from the prior study’s average of $68,0000 per unit to a current average of approximately $39,000 per unit. Similarly, land acquisition costs declined for projects in other cities from the prior study average of $86,000 per unit to a current average of approximately $42,000 per unit. All projects in the City in the prior study included land acquisition costs in their tax credit applications. Five of the San Jose Projects in this study did not include land acquisition costs in their development budgets. Excluding projects with no site acquisition cost, the average site acquisition cost per unit for San Jose Projects was approximately $52,000. There were eight Other City Projects PAGE 9 Page 401 of 460
with no reported land cost. For projects that reported site acquisition cost, the average site acquisition cost per unit was approximately $57,000 per unit.

Table 7. Summary of Site Acquisition Costs per Unit
San Jose Cost
San Jose Projects Difference
$38,800
Other City Projects
$42,200
All Projects
All Projects $41,100
Special Needs
Non-Targeted
Seniors
-8%
$51,900 $60,300 $57,400 -14%
$26,200 $20,500 $22,500 28%
$31,600 $42,400 $39,600 -25%
Graph 2. Acquisition Costs per Unit
Of the ten San Jose Projects with land acquisition costs, two projects, Bascom and Alum Rock, were acquired through a ground lease while the remaining eight projects were acquired through a fee simple purchase and sale transaction. Excluding all other land acquisition costs and focusing solely on direct land cost, the average land cost per unit for San Jose Projects with reported land costs was approximately $42,500 per unit.

Table 8. San Jose Projects Land Purchase Cost per Unit
Application
Year
Land Cost per
Project Name Unit
Mariposa Place
Bascom
Total Units
2021
2021
2021
2021
2020
2020
2020
2020
2020
80 79
$68,800
$69,000
$36,100
$30,100
$85,000
$70,100
$52,300
$42,500
$14,600
Algarve 91
McEvoy 224
Gallup and Mesa 46
1020 N 4th 94
Arya 87
Alum Rock 87
Immanuel-Sobrato Community 108
PAGE 10 Page 402 of 460
Virginia Street Studios 2019 301 $31,600
Total 1,197 $42,500
Direct Construction Costs by Housing Type
Direct construction costs primarily consist of the cost of labor and materials to construct site improvements, parking, and buildings. Direct construction costs represent the largest portion of overall development costs comprising approximately 69% of total development costs for San Jose Projects and 70% of total development costs for Other City Projects. According to a Terner Center study, direct construction costs increased by 40 percent between 2012 and 2020 and saw average increases of 5-6% per year over the past 2 years.

San Jose Projects direct construction costs exceed Other City Projects direct construction costs when comparing all housing types. However, as Table 9 illustrates, this difference is driven by a significant differential in the direct costs of special needs projects. Direct construction costs for special needs projects in San Jose exceeded direct construction costs for special needs projects in other cities by 36%. Review of available data did not definitively indicate what factors may be driving this cost differential, but one potential factor is market area cost differences. Per discussions with a general contractor active in the Bay Area, both material and especially labor costs are significantly higher in the Bay Area than in other markets. A shortage in the construction labor market and prevailing wage requirements applicable to San Jose Projects result in higher direct construction costs for these projects. Out of 14 San Jose Projects with available prevailing wage data, only two did not report the use of prevailing wage in their tax credit applications.

Table 9. Total Direct Construction Costs, Average Per Unit Other City
Projects
$364,800
$359,100
$424,200
$286,200
San Jose Cost
San Jose Projects Difference
$425,200
All Projects
$384,700
$403,900
$423,700
$280,600
All Projects
Special Needs
Non-Targeted
Seniors
17%
36%
0%
$487,800
$422,700
$265,000 -7%
PAGE 11 Page 403 of 460
Graph 3. Construction Hard Costs per Unit
Impact Fees
Cities impose impact fees on new development to fund infrastructure needed to support new housing. These charges can support important local services, such as schools, parks, and transportation. San Jose imposes fees on new residential development including an Affordable Housing In Lieu Fee, a Park Impact In-Lieu Fee and area plan specific fees. The Affordable Housing In Lieu Fee is not applicable to affordable housing projects. Deed restricted residential units that meet the City’s affordable housing guidelines qualify for a 50% credit towards the Parks Impact InLieu Fee, which can range from $8,000 to $41,600 per unit depending on the neighborhood. In addition, the City may waive impact fees for projects in select cases. Of the 15 City Projects evaluated in this study, 10 projects included impact fees in the tax credit application budget averaging approximately $12,100 per unit. Of the 27 Other City Projects, 24 projects reported impact fees in the tax credit application budget averaging approximately $7,800 per unit, a 54% increase over San Jose Projects. Provided in Graph 4 below, is a comparison of impact fees per unit by San Jose Projects and Other City Projects by county.

PAGE 12 Page 404 of 460
Graph 4. Impact Fees per Unit
Financing Costs
Increased complexity in financing affordable projects results in added development costs for affordable housing projects. Financing costs include capitalized interest during construction, origination fees, bond issuance costs, tax credit syndication costs, and financing legal fees. Due to the multitude of funding sources required to finance affordable housing projects, financing costs represented approximately seven percent of San Jose Projects and Other City Projects total development costs. Furthermore, financing costs between 2020 and 2021 increased by approximately 7 percent for San Jose Projects and approximately eight percent for Other City Projects.

Table 10. Financing Costs Average Per Unit
Application Year San Jose Projects Other City Projects
2019
2020
2021
$30,700
$40,900
$43,600
$39,500
$34,800
$37,600
PAGE 13 Page 405 of 460
Graph 5. Financing Costs per Unit
Tax Credit Pricing
Affordable housing projects raise capital to fund development costs through investor equity, referred to as tax credit equity. An investor receives credits over a 10‐year tax credit redemption period. The tax credit consists of a dollar-for-dollar reduction in taxes owed. Pricinge for tax credits is based on investor demand for credits and investor discount rates. Tax credit pricing is typically stated as an amount per dollar of tax credit. Applicants must include their expected tax credit pricing in their TCAC applications to demonstrate the amount of tax credit allocation available to fund development costs. Per Table 11 below, federal tax credit pricing for San Jose Projects averaged approximately $0.92 for applications submitted in 2020 and approximately $0.90 for projects submitted in 2021, reflecting a $0.02 decline in 2021. Other City Projects averaged a federal tax credit pricing of $0.91 in 2020 and $0.90 in 2021, reflecting a decline of $0.01 in 2021. State tax credit pricing for San Jose Projects reflected an reverse pattern with prices increasing from $0.80 in 2020 to $0.82 in 2021. This may be due to higher demand from state taxpayers for projects in San Jose due to various factors including Community Reinvestment Act obligations, the type of investor and the creditworthiness of the developer. State tax credit pricing for Other City Projects reflected a downward trend consistent with federal tax credit pricing with an average price of $0.81 in 2020 and $0.78 in 2021.

PAGE 14 Page 406 of 460
As the amount of LIHTC available for allocation is fixed each year, the pricing of tax credits directly affects the number of units that can be financed through public funding sources. A lower tax credit price requires more state and local subsidy to fill the gap.

Table 11. Tax Credit Pricing Average by Year
Application Year
Federal Tax Credits
2020
San Jose Projects Other City Projects
$0.92
$0.90
$0.91
2021 $0.90
State Tax Credits
2020
2021
$0.80
$0.82
$0.81
$0.78
Share of Development Costs Funded by City Subsidies and Other Sources Market-rate projects are generally financed with two primary funding sources: developer/investor equity and conventional construction/permanent debt. In contrast, affordable housing projects require multiple layers of capital to fund the gap between the supportable amount of permanent debt and tax credit investor equity and the cost to build the project.

San Jose Projects averaged approximately six funding sources per project with three projects requiring eight funding sources. Each additional funding source typically adds potential costs due to extended timelines and/or operational requirements. In discussions with market participants, layering of capital was cited as causing long delays, which can add significantly to hard costs in a fast-rising construction cost environment. As projects become more complex, projects also experience higher soft costs such as increased legal and consultant fees as well as syndication costs associated with financial consultants needed to manage multiple funding streams and partners. In addition, public funding in California can be highly fragmented creating a need to coordinate between state, county and local funding sources.

Affordable housing projects are typically funded with LIHTC investor equity, city funds, county funds, state funds, privately issued debt, developer equity, and other public subsidies, such as project-based vouchers, and tax-exempt bond funds. The City provided a subsidy to 11 of the 15 San Jose Projects, which averaged approximately $74,000 per unit across units in all 15 projects, a decrease from the prior study subsidy average of approximately $119,000 per unit. City subsidies averaged approximately $83,000 per unit for special needs projects, which is largely unchanged from the prior study, and $110,000 per unit for non-targeted projects, of which there were no projects in the prior study. 13 of the 27 Other City Projects received a local subsidy, which is a lower proportion than the San Jose Projects, but nevertheless reflects a large portion of the Other City Projects. This underscores the reliance of affordable housing developers on local subsidies to fund project costs. In limited cases, the local funding was provided by the county rather than the city. San Jose Projects PAGE 15 Page 407 of 460
that were provided with City funding received an average of $120,000 per unit from the City compared to $140,000 per unit received from local funding for projects in other cities.

Table 12. City Subsidy Amount Per Unit
San Jose
Projects
Other City
Projects
San Jose Cost
All Projects Difference
All Projects $60,300
Special Needs
Non-Targeted
Seniors
$74,000
$72,600
$109,700
$0
$53,570
$32,400
$98,800
$23,600
38%
124%
11%
$46,400
$102,500
$17,400 -100%
Graph 6. San Jose City Funding per Unit
Table 13 and Graph 7 below show that, for all San Jose Projects, LIHTC equity is the largest single source of funding for affordable housing projects, accounting for approximately 43% of total development costs. The next largest category of funding sources are subsidy programs provided through the county and state and includes operational subsidies such as project-based vouchers.

These sources fund approximately 25% of total development costs. Permanent debt through either a private bank or tax-exempt bonds represent the third largest source of funding, accounting for approximately 20% of total development costs. City subsidies account for the smallest funding source, contributing approximately 12% of total development costs.

Table 13. San Jose Projects Subsidy Amounts Per Unit by Housing Type Permanent
Debt
Other
City Funds Subsidies
$74,000
Tax Credits
$262,400
$321,600
$244,700
$0
Total
All Projects
Special Needs
Non-Targeted
Seniors
$122,300 $156,400 $615,100
$111,400 $194,500 $700,100
$84,800 $170,700 $609,900
$232,600 $169,600 $402,200
$72,600
$109,700
$0
PAGE 16 Page 408 of 460
Graph 7. San Jose Projects Funding Sources
The breakdown of funding sources for Other City Projects is similar to the breakdown for San Jose Projects, but LIHTC equity and City funding provided slightly lower percentages of funding at 41% and 10% of total costs respectively. Conversely, permanent debt provided a larger share of total costs for Other City Projects.

PAGE 17 Page 409 of 460
Table 14. Other City Projects Subsidy Amounts Per Unit by Housing Type Permanent Other
City Funds
$53,600
Tax Credits
$221,600
$241,700
$237,700
$162,000
Debt Subsidies Total
All Projects
Special Needs
Non-Targeted
Seniors
$124,500 $135,400 $535,100
$99,900 $190,900 $564,900
$120,500 $117,200 $574,200
$32,400
$98,800
$23,600 $174,100 $63,800 $423,500
Graph 8. Other City Projects Funding Sources
Affordable Housing Development Costs as Compared to Market Rate There are key differences between market rate housing and affordable housing that may contribute to the difference in costs between the product types. For example, market rate units tend to be smaller, may have higher end finishes and may have a lower parking ratio. To better understand how affordable housing costs compare to market rate housing, this memorandum evaluates the results of this study and a separate conceptual feasibility analysis performed by Century | Urban for five market rate residential rental and for-sale development prototypes. The conceptual feasibility analysis estimated development costs for three common residential construction types:

Type V, Type III, and Type I. As most of the affordable housing projects evaluated in this study reflect Type III construction, affordable housing development costs were compared to the Type III estimated development costs in the conceptual feasibility study.

PAGE 18 Page 410 of 460
The average acquisition price for the market rate projects is based on seven transactions for new residential development in the City between 2019 and 2021. The hard costs for the market rate projects were estimated by a cost consultant. Soft costs for market rate projects are based on city fee schedules, and estimates of other soft costs such as financing, architectural and engineering, legal, etc. utilizing market-based assumptions as presented in the conceptual feasibility analysis. Due to the difference in unit sizes between the affordable housing projects in this study and the prototypical market rate projects, development costs are compared on a per gross square foot basis as shown in Graph 9 below.

Total development costs for San Jose Projects exceed estimated total development costs for market rate projects by approximately $51 per gross square foot or approximately 8%. While estimated acquisition costs for market rate projects exceed acquisition costs for San Jose Project by approximately $24 per gross square foot, San Jose Projects hard and soft costs are significantly higher than estimated market rate project hard and soft costs resulting in higher overall development costs for San Jose Projects. Provided below is an analysis of factors that may contribute to higher affordable housing costs.

Graph 9. San Jose Projects Funding Sources
Unique Attributes of Affordable Housing that Often Result in Affordable Housing Development Costs Exceeding Market Rate Housing Development Costs Prevailing Wage – Market participants interviewed for this study including a general contractor, two developers, and a cost estimator each cited prevailing wage requirements as a cause of higher development costs, which is significantly more common for affordable housing projects than for market rate projects. This is exacerbated by the general labor market shortage, which has driven up labor costs. Prevailing wages are set by the California Department of Industrial Relations and are usually based on rates specified in collective bargaining agreements. While the LIHTC program does not require prevailing wage in construction contracts, oftentimes other public funding sources require either federal or state prevailing wage or local project labor agreements. According to these PAGE 19 Page 411 of 460
market participants, prevailing wage is estimated to increase construction costs by between 10 and 20 percent. Because most projects are not bid out to general contractors with and without a prevailing wage requirement, this data point cannot be verified through a review of actual construction cost bids; however, there is consensus among market participants as well as a study prepared by the Terner Center that prevailing wages significantly add to the development cost of affordable housing.

In addition to higher direct wage rates, prevailing wage often triggers additional requirements such as payroll certification that can add to costs. Interviews consistently highlighted the additional administrative requirements associated with prevailing wage, which increase development costs and may cause some contractors to avoid taking on a prevailing wage project when demand for labor is strong.

Lower Efficiency – As noted in the prior KMA study, affordable housing projects typically require more common areas for supporting amenities. This is particularly true of permanent supportive housing, which requires additional support services and facilities from which to provide these services. While the efficiency factor for market rate projects typically averages from 75 to 80%, the efficiency factor for affordable projects generally ranges from 70 to 75%.

Higher Density Development – Due to the urgent need for affordable housing, cities seeking to address housing shortages and fulfill their Regional Housing Needs Allocation are pursuing higher density projects on available development sites. Dense residential buildings are more difficult to entitle due to neighborhood concerns. High density projects with prevailing wage and/or work rule requirements and located in high-cost areas such as the City will likely participate in multiple application rounds for LIHTC allocation leading to higher costs. While the cost impact due to a construction start delay is not unique to affordable housing projects as market rate projects facing delays will also see higher costs, a shift to higher density development requires more subsidies.

Number of Funding Sources – As noted above, market rate projects generally draw on two primary funding sources, equity and conventional debt. In contrast, affordable housing projects must layer multiple funding sources to fund all project costs. As these funding sources are generally not coordinated and funding rounds occur periodically, a project that requires multiple funding sources will likely take longer to execute, which results in higher staffing costs to pursue these funding sources. In addition, each of the funding sources may have its own conditions and requirements such as for open space, wage and work rules, affordability, etc., which may lead to higher costs. The market participants interviewed for this study all cited the complexity of funding affordable housing projects as a key barrier to developing affordable housing.

In addition, one affordable housing developer noted that lack of flexibility in determining when to start construction as a key difference between affordable housing and market rate development.

Whereas market rate developers can delay a project until market conditions improve, affordable housing developers must begin construction within 180 days of receiving a tax credit allocation.

Because projects may undergo multiple funding rounds before securing a tax credit allocation, the timing of construction start, which is dictated by the timing of tax credit allocation, is unpredictable, and developers may find themselves proceeding with development in an unfavorable market. For example, developers may forecast improved market conditions and while a market rate developer could delay construction start until construction costs, interest rates or other market factors are more PAGE 20 Page 412 of 460
favorable, an affordable housing developer would need to proceed with development in an unfavorable market or risk losing funding commitments, which are typically time limited.

Permanent Supportive Housing – The state has made funding for permanent supportive housing a priority, which has resulted in an increasing share of LIHTC being allocated to projects that provide housing for individuals and families with special needs or who have experienced chronic homelessness. However, development costs for supportive housing tends to be higher than costs for other housing types such as family or senior housing.

Supportive housing projects tend to include smaller units such as studios, which are more expensive to build as kitchens and bathrooms are more expensive on a per square foot basis than bedrooms.

One affordable housing developer interviewed for this study noted that supportive units often experience more intensive use and, as a result, projects must include construction and design that is more durable, which adds to development costs. Furthermore, the developer noted that local funding partners are increasingly requiring more durable units on all housing types as a result of the shift to more durable construction for supportive housing.

Supportive housing projects entail higher operating costs as they require more on-site staff to provide support services as well as security. These projects also require more capital improvements and renovations over time for the reasons noted above. Furthermore, supportive housing often targets individuals or families that are experiencing or face chronic homelessness. Thus, the tenants are generally at the extremely low-income level, and projects serving this tenant population require operational subsidies to support permanent debt and pay operating expenses. If a developer is unable to secure sufficient operating subsidies through project-based vouchers or other similar subsidies, the developer must capitalize operational reserves into development costs. This can add significantly to total development costs.

Finally, due to the higher cost of developing supportive housing, supportive housing projects tend to have more funding sources than other housing types averaging more than 6 funding sources per project. This added complexity increases development costs.

Local Design, Parking and Environmental Requirements – Local subsidies often come with additional design requirements. For example, some local jurisdictions may require parking ratios that exceed those required of market rate projects. The local jurisdiction may also make fulfillment of certain design requirements a condition to funding a project such as requiring more durable units as described above. Some cities also have requirements for open space that can add to costs. Finally, some local jurisdictions are moving toward parity between market rate and affordable housing whereby design and finishes between comparable market rate and affordable housing projects are similar.

Local Development Fees – Local development fees can be substantial. For San Jose Projects that reported impact fees in their tax credit application, total impact fees averaged $12,100 per unit. One affordable housing developer interviewed for this study noted high impact fees in the City as compared to other cities, as shown in Graph 4 above. While both market rate and affordable housing projects are imposed impact fees and affordable housing projects often receive waivers or a fee reduction, impact fees increase costs and therefore require more public subsidy.

PAGE 21 Page 413 of 460
Local Support to Reduce Cost Burden
Affordable housing development project costs have increased significantly since the prior study was completed in 2019 with average annual increases in construction costs of 6%. This cost inflation combined with a move toward higher density projects, more permanent supportive housing, prevailing wage requirements and the increasing complexity of funding affordable housing projects will continue to put upward pressure on development costs. However, cities such as San Jose may be able to implement changes to minimize development costs and maximize local subsidies. Based on interviews with market participants, provided below is a list of potential strategies the City may implement to support the production of affordable housing.

1. Streamline contractor payment and application process. Complex draw processes and long payment lead times result in delayed payment of contractor billings. In a tight labor market, this may dissuade some general contractors from bidding on projects that involve public subsidies with a track record of delayed payment or may cause general contractors to add contingencies to account for the burden of floating subcontractor and vendor payments.

2. Waive local impact fees to reduce development costs.

3. Streamline entitlement and permitting processes to reduce delays and associated cost escalation.

4. Embrace newer construction technologies such as modular construction, which may generate meaningful cost savings as it becomes more widely adopted.

5. Coordinate among local, county and state funding sources to streamline capital stack assemblage. By coordinating NOFAs and awards processes, the time needed to secure all funding sources may be reduced substantially.

6. To minimize the amount of City subsidy required by a project, require that developers maximize their developer fee contribution and/or deferment.

7. For projects receiving a City subsidy, implement a review process at each phase of construction to identify opportunities for value engineering; but ensure that such review process is streamlined to avoid causing construction delays, which would negate the benefit of value engineering.

PAGE 22 Page 414 of 460
Appendix A
PAGE 23 Page 415 of 460
Appendix A, Table 1 - San Jose Projects
Project Name Project Information Unit Mix (Total)
Total
Units
Total Subsidized
GSF Units
ELI (<=30% VLI (<=50% LI (<=80%
Developer
Eden Housing, Inc.

City Housing Type Stories Application Date AMI) AMI) AMI) Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
San Jose Non-Targeted
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
5 7
5 9
8 13
6 5
4 5
130 116,440 128 4/4/2021
5/25/2021
5/25/2021
5/25/2021
9/9/2021
64 40
34 50
47 112
34 17
47 27
18 0
43 20
9 21
19 34
0 Danco Communities
Affirmed Housing Group
First Community Housing
Reed Community Partners
First Community Housing
Devine & Gong, Inc.

Eden Housing, Inc.

PATH Ventures
Charities Housing
Satellite Affordable Housing Associates San Jose Non-Targeted 80 79
89,020
82,299
79 77
80 108,161
91 65,777
224 324,956
115
46 79
90 29
43 20
31 23
46 54
38 43
96 97
30 0
222
113
45 93
81 9/9/2021
9/9/2021
90 48
5 0
0 30
42 10
0 74,759
43,238
64,696
52,778
94,695
4/17/2020
4/17/2020
1/24/2020
1/24/2020
1/24/2020
9/24/2020
9/24/2020
12/11/2019
94 82
8 87
7 5
4 86
Affirmed Housing Group
MidPen Housing Corporation
Charities Housing
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
San Jose Seniors
87 104,678 85
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
108
147
301 286,230
78,227
95,333
106
145
298
0 48
Pacific West Communities 6 0 268
Project Name Project Information Unit Mix (Percent)
Total Subsidized
Units % of Total Units % of ELI (<=30% VLI (<=50% LI (<=80% Developer City Housing Type Stories Total GSF Total Application Date AMI) AMI) AMI) Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
Eden Housing, Inc. San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
San Jose Non-Targeted
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
5 7
5 9
8 13
6 5
4 5
7% 116,440 7%
5%
4%
5%
5%
13%
7%
3%
5%
5%
5%
5%
6%
8%
17%
4/4/2021
5/25/2021
5/25/2021
5/25/2021
9/9/2021
50%
51%
44%
63%
52%
50%
30%
38%
51%
33%
21%
0%
34%
25%
12%
37%
48%
9%
27%
51%
49%
67%
44%
51%
91%
67%
10%
16%
24%
44%
0%
Danco Communities
Affirmed Housing Group
First Community Housing
Reed Community Partners
First Community Housing
Devine & Gong, Inc.

Eden Housing, Inc.

PATH Ventures
Charities Housing
Satellite Affordable Housing Associates San Jose Non-Targeted 5%
5%
89,020
82,299
5% 108,161
5% 65,777
13% 324,956
0%
9/9/2021
9/9/2021
41%
42%
11%
0%
7%
3%
5%
5%
5%
74,759
43,238
64,696
52,778
94,695
4/17/2020
4/17/2020
1/24/2020
1/24/2020
1/24/2020
9/24/2020
9/24/2020
12/11/2019
0%
8 7
5 4
35%
49%
9%
0%
90%
Affirmed Housing Group
MidPen Housing Corporation
Charities Housing
San Jose Special Needs
San Jose Special Needs
San Jose Non-Targeted
San Jose Seniors
5% 104,678
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
6%
8%
78,227
95,333
0%
33%
Pacific West Communities 6 17% 286,230 0%

Appendix A, Table 1 - San Jose Projects
Project Development Costs (per Unit)
Permits/Thir Financing
Project Name Impact Fees
Construction
Cost
Hard Costs Contingency
Acquisition
Costs
Developer
Fees
Soft Cost Total DeveloContingency pment CostImpact
A&E d-Party Costs Costs Reserves Impact Fees Fee/Unit
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
$18,358
$77,138
$83,282
$11,922
$45,348
$44,089
$0
$94,585
$84,185
$16,100
$52,356
$50,270
$40,956
$9,691
$422,072
$503,669
$569,457
$595,516
$418,990
$390,107
$396,059
$428,057
$298,549
$426,683
$509,222
$522,335
$437,849
$334,030
$251,700
$20,167
$25,158
$40,349
$29,272
$20,249
$19,505
$33,629
$21,793
$28,864
$21,866
$35,356
$36,853
$23,074
$16,671
$13,289
$18,689 $28,100
$58,639
$38,111
$31,936
$34,745
$21,135
$49,631
$41,553
$36,207
$50,520
$31,193
$35,406
$32,239
$35,594
$21,029
$35,447 $9,528 $45,178
$31,250
$44,304
$49,823
$78,458
$32,540
$30,433
$47,826
$22,698
$73,502
$40,230
$45,977
$25,472
$56,812
$39,867
$1,588
$3,945
$3,091
$4,516
$15,484
$5,357
$4,393
$5,806
$3,980
$5,397
$3,066
$6,745
$4,597
$4,519
$2,658
$599,128
$763,650
$847,329
$833,651
$696,957
$590,071
$602,018
$710,177
$543,340
$668,463
$750,602
$761,300
$653,209
$530,355
$402,244
$1,431,114
$0
$1,007,491
$1,137,881
$1,142,392
$0
$11,009
$18,034
$28,797
$36,814
$31,769
$26,829
$29,139
$32,350
$26,085
$27,269
$25,847
$24,351
$22,287
$14,672
$3,272
$36,183
$36,139
$65,087
$39,344
$43,995
$50,918
$25,943
$32,708
$42,419
$49,740
$35,031
$38,044
$50,493
$30,656
$9,634
$3,797
$8,766
$12,571
$6,514
$7,816
$12,263
$10,062
$4,706
$3,592
$4,333
$28,689
$7,874
$8,212
$0
$12,753
$14,224
$12,554
$0
$0 $0
$416,288
$1,235,322
$0
$1,459,621
$521,620
$1,327,413
$0
$9,050
$13,142
$0
$16,777
$5,996
$12,291
$0
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios $31,561 $0 $0
Project Name Project Development Costs (per Unit % of Total) Impact Fees Construction
Cost
Hard Costs Contingency
Total
Developmen
t Cost
Acquisition
Costs
Permits/Thir Financing Developer
Fees
Soft Cost
Contingency
Impact
A&E d-Party Costs Costs Reserves Fee/Unit
2%
Impact Fees
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
3%
10%
10%
1%
7%
7%
70%
66%
67%
71%
60%
66%
66%
60%
55%
64%
68%
69%
67%
63%
63%
3%
3%
5%
4%
3%
3%
6%
3%
5%
3%
5%
5%
4%
3%
3%
3%
2%
3%
4%
5%
5%
5%
5%
5%
4%
3%
3%
3%
3%
1%
5%
8%
4%
4%
5%
4%
8%
6%
7%
8%
4%
5%
5%
7%
5%
6%
5%
4%
8%
6%
7%
8%
4%
6%
6%
7%
5%
6%
10%
8%
8%
4%
5%
6%
11%
6%
5%
7%
4%
11%
5%
0%
1%
0%
1%
2%
1%
1%
1%
1%
1%
0%
1%
1%
1%
1%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
$1,431,114 $19,276,005
$0 $0
$1,007,491 $22,330,592
$1,137,881 $24,905,370
$1,142,392 $21,981,631
1%
0%
1%
2%
1%
1%
2%
2%
1%
0%
1%
4%
1%
2%
$0
$0
$0
0% $0
13%
15%
2%
7%
7%
6%
2%
8%
$416,288 $15,846,093
$1,235,322 $23,011,158
$0 $0
$1,459,621 $29,376,970
$521,620 $10,498,352
$1,327,413 $21,521,298
6%
4%
11%
10%
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
$0
$0
$0
$0

Appendix A, Table 1 - San Jose Projects
Project Name Tax Credit Factor Operating Expenses
Admin.

Expenses
Property
Mgmt. Fees
Repairs and
Maintenance
Real Estate
Taxes
Resident
Services
Replacement Total Annual
Federal Reserve OpEx
$0.90
State
N/A
Payroll
$3,585
Utilities
$1,289
Insurance
$787
Other OpEx
Auzerais $434 $744
$992
$720
$600
$955
$633
$780
$744
$706
$840
$770
$720
$720
$840
$0
$1,125
$1,693
$1,335
$1,538
$840
$1,052
$1,778
$1,920
$1,585
$1,537
$1,250
$1,086
$949
$108 $962 $655
$172
$0
$78
$294
$90
$11
$0
$60
$24
$0
$103
$7
$500 $10,189
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
$0.85
$0.89
$0.92
$0.90
$0.91
$0.95
$0.85
$0.88
$0.99
$0.97
$0.99
$0.86
$0.92
$0.00
$0.88
$0.79
$0.80
N/A
N/A
N/A
N/A
$0.80
$0.80
$0.81
$0.79
N/A
N/A
N/A
$1,686
$1,709
$2,127
$1,990
$1,460
$554
$3,203
$2,658
$233
$1,226
$1,644
$1,874
$669
$993
$2,420
$2,000
$2,473
$2,758
$1,470
$6,483
$1,548
$3,057
$3,142
$2,170
$3,428
$2,722
$0
$2,286
$1,405
$1,988
$1,550
$1,510
$870
$288
$523
$628
$1,374
$394
$450
$1,017
$500
$237
$786
$690
$796
$269
$0
$0
$89
$50
$0
$57
$22
$82
$80
$374
$9
$1,140
$285
$613
$1,385
$357
$1,650
$2,609
$851
$453
$373
$747
$442
$575
$0
$500
$300
$500
$323
$450
$500
$350
$500
$422
$500
$300
$500
$500
$0
$9,750
$8,785
$10,121
$11,182
$8,763
$8,083
$17,100
$9,816
$8,363
$9,400
$9,219
$9,700
$8,735
$0
$691
$1,327
$1,186
$1,344
$1,621
$934
Alum Rock $138
$50
$344
$0
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
$1,518
$0
$1,285
$0
$14
$0 $0
Project Name Tax Credit Factor Operating Expenses (% of Total) Admin.

Expenses
Property
Mgmt. Fees
Repairs and
Maintenance
Real Estate
Taxes
Resident
Services
Replacement Total Annual
Federal Reserve OpEx
$0.90
State
N/A
Payroll Utilities
13%
Insurance
8%
Other OpEx
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
4% 7%
10%
8%
6%
9%
7%
10%
4%
7%
10%
8%
35%
10%
28%
20%
22%
31%
18%
38%
16%
37%
33%
24%
35%
31%
0%
11%
17%
15%
15%
8%
12%
22%
11%
16%
18%
13%
12%
10%
17%
0%
1%
0%
1%
0%
0%
1%
0%
0%
1%
4%
0%
1%
1%
4%
0%
9%
12%
3%
6%
12%
4%
20%
15%
9%
5%
4%
6%
2%
0%
1%
3%
1%
0%
0%
1%
0%
0%
1%
0%
0%
0%
5% 100%
$0.85
$0.89
$0.92
$0.90
$0.91
$0.95
$0.85
$0.88
$0.99
$0.97
$0.99
$0.86
$0.92
$0.00
$0.88
$0.79
$0.80
N/A
N/A
N/A
N/A
$0.80
$0.80
$0.81
$0.79
N/A
N/A
N/A
17%
19%
21%
18%
17%
7%
19%
27%
3%
13%
18%
19%
8%
23%
16%
20%
14%
17%
11%
4%
14%
14%
14%
18%
10%
15%
0%
3%
6%
6%
12%
5%
6%
6%
5%
3%
8%
7%
8%
3%
0%
5%
3%
5%
3%
5%
6%
2%
5%
5%
5%
3%
5%
6%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
8%
7%
10%
0%
8%
5%
7%
0%
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios 0%

Appendix A, Table 1 - San Jose Projects
Project Name Funding Sources (Total $ Amount)
Total
Expenses
Excluding
Services
Deferred
Developer
Fee
Permanent
Loan
County State
Funding
Other
Funding
Total
Tax Credits GP Capital City Funding Funding Sources
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
$9,228 $157,848
$136,053
$113,548
$13,657
$122,611
$72,071
$122,078
$11,957
$88,815
$78,037
$70,516
$129,551
$146,316
$87,231
$232,558
$270,905
$387,163
$521,123
$398,454
$281,479
$244,506
$213,479
$330,697
$261,493
$314,038
$321,916
$327,152
$208,665
$184,953
$144,703
$21,332
-
$0
$0
-
$1
-
$0
$0
$123,438
$0
$141,188
$115,385
$89,286
$111,522
$125,000
$0
$105,024
$138,199
$107,471
$101,583
$125,000
$0
$103,846
$115,781
$200,000
$130,000
$126,374
$117,196
$0
$152,174
$159,574
$123,500
$0
$42,308 $2,890
$1,218
$0
$18,640
$0
$56,704
$8,696
$90,350
$33,457
$4,853
$52,299
$0
$15,495
$1,666
$0
$599,128
$8,610
$8,501
$9,508
$9,797
$8,406
$6,434
$14,491
$8,965
$7,911
$9,027
$8,472
$9,259
$8,160
$0
$0
$0
$107,794
$0
$0
$127,826
$763,652
$847,329
$833,652
$696,957
$590,072
$602,020
$710,177
$543,341
$668,466
$750,602
$761,300
$653,215
$530,355
$402,244
$12,658
$23,918
$51,109
$10,308
$11,304
-
$7,115
-
-
-
$0
$0
$0
$1
$43,014
$5,689
$17,241
$2,779
$39,805
$24,983
$15,111 $146,872
- $179,885
$154,210
$91,700
$0
$0
$0
$0
$0
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios
$24,167
-
-
Project Name Funding Sources (% of Total)
Total
Expenses
Excluding
Services
Deferred
Developer
Fee
Permanent
Loan
County
GP Capital City Funding Funding
State
Funding
Other
Funding
Total
Sources
Auzerais
Mariposa Place
Bascom
Roosevelt Park
Algarve
McEvoy
Kelsey Ayer
Gallup and Mesa
1020 N 4th
Page Street Studios
Arya
Alum Rock
91% 26%
18%
13%
2%
18%
12%
20%
2%
16%
12%
9%
17%
22%
16%
58%
45%
51%
62%
48%
40%
41%
35%
47%
48%
47%
43%
43%
32%
35%
36%
4%
0%
1%
3%
7%
2%
2%
0%
0%
6%
1%
2%
0%
8%
6%
0%
0%
0%
0%
0%
0%
1%
0%
0%
0%
2%
0%
4%
0%
0%
0%
16%
0%
17%
17%
15%
19%
18%
0%
16%
18%
14%
16%
24%
0%
17%
15%
24%
16%
18%
20%
0%
21%
29%
18%
0%
7%
0%
0%
13%
0%
0%
21%
0%
0%
0%
20%
0%
0%
0%
0%
0% 100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
88%
97%
94%
88%
96%
80%
85%
91%
95%
96%
92%
95%
93%
0%
0%
0%
2%
0%
10%
1%
13%
6%
1%
7%
0%
2%
0%
0%
24%
24%
17%
0%
Immanuel-Sobrato Community
Blossom Hill
Virginia Street Studios

Project Name Project Information Unit Mix (Total)
Construction
Cost
Hard Costs Contingency
Subsidized
Units
ELI (<=30% VLI (<=50% LI (<=80% Acquisition
Developer City Housing Type Stories Total Units Total GSF Application Date AMI) AMI) AMI) Costs Ingraham Apartments
Hollywood Arts Collective
Hope on Hyde
Single Room Occupancy Housing Co.

Thomas Safran & Associates Development
Hope Street Development Group
Relevant Group LLC
USA Multifamily Development, Inc.

Mercy Housing California
Affirmed Housing Group, Inc.

Community Builders Group, LLC
Decro Corporation
Los Angeles Special Needs
Los Angeles Non-Targeted
Los Angeles Non-Targeted
Los Angeles Special Needs
Los Angeles Seniors
6 7
5 8
5 6
6 7
5 5
6 5
9 7
7 6
6 9
5 9
7 5
5 6
5 6
6 121
152
98 149
239
94 92
181
97 127
187
90 200
118
258
96 146
130
137
131
63 181
165
48 120
151
97 149
237
93 90
179
96 126
185
88 198
116
120
96 145
129
135
130
63 179
163
47 98,350
235,707
35,200
67,218
230,137
71,484
49,627
55,720
71,786
128,017
173,191
112,093
108,353
151,342
115,235
48,229
11/15/2020
1/24/2020
1/24/2020
1/24/2020
1/24/2020
1/24/2020
2/22/2021
1/15/2021
1/15/2021
4/29/2021
4/29/2021
4/23/2021
4/29/2021
4/29/2021
6/19/2020
12/27/2019
12/27/2019
10/30/2019
4/17/2020
4/17/2020
6/16/2021
4/17/2020
4/17/2020
2/22/2021
4/23/2021
4/29/2021
1/15/2021
90 9
0 16
0 93
46 18
49 13
94 49
40 58
12 0
30 52
97 133
120
0 0
90 0
0 117
0 23
143
0 100
0 $89,620
$1,974
$277,851
$394,940
$277,494
$207,812
$185,175
$333,676
$318,478
$145,768
$330,805
$297,053
$336,087
$365,984
$206,145
$517,999
$243,991
$328,800
$290,659
$502,763
$551,709
$681,824
$529,488
$472,017
$384,561
$369,191
$544,706
$370,572
$262,494
$22,791
$31,827
$6,665
$10,391
$18,340
$34,222
$19,109
$7,288
$22,917
$14,774
$16,974
$36,939
$9,650
$25,719
$12,200
$33,010
$14,613
$25,014
$27,554
$33,260
$24,682
$23,714
$18,702
$19,792
$54,902
$38,007
$23,684
$35,714
$26,838
$44,142
$76,154
$12,826
$30,525
$85,643
$49,380
$68,978
$8,551
$122,958
$34,390
$34,302
$7,396
$50,452
$2,074
5th Street PSH
Vintage at Woodman
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
Los Angeles Special Needs
Alhambra
Pasadena
Special Needs
Non-Targeted
21 18
47 13
91 39
63 36
74 30
44 33
89 55
31 29
54 27
20 25
0 Los Angeles Special Needs
Citrus Crossing Meta Development LLC Glendale Seniors
LTSC Community Development Corporation
Clifford Beers Housing
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
Los Angeles Special Needs
Panorama CitySpecial Needs
Los Angeles Special Needs
Los Angeles Special Needs
San Francisco Seniors
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Special Needs
0 ABS Properties, Inc 95
22 34
66 101
35 32
48 0
104
55 15
10 0
BRIDGE Housing Corporation
Global Premier Development, Inc.

Community Housing Partnership
Mercy Housing California
681 Florida Housing Associates, LP
BRIDGE Housing Corporation
Mission Housing Development Corporation
Tenderloin Neighborhood Development Corporation
BRIDGE Housing Corporation
CORE Winchester, LLC
61,749 0
126,830
149,306
103,893
44,054
223,386
153,219
45,360
102,468
60,090
73,192
61 14
27 32
46 54
5 71
54 37
$0
$153
$60,361
$43,967
$3,820
$192,176
$7,140
Oakland Non-Targeted
Seniors
Seniors
Special Needs
Special Needs
Special Needs
Santa Clara
Cupertino
Milpitas
Santa Clara
Oakland
Pacific West Communities
Resources for Community Development
Allied Housing, Inc.
102
80 95
101
79 94
Kifer Senior Housing
Villa Oakland
$74,947
OakBrook LLC 57 $56,820
Project Name Project Information Unit Mix (Percent)
Subsidized
Units % of
Total
Construction
Cost
Hard Costs Contingency
Total Units ELI (<=30% VLI (<=50% LI (<=80%

AMI) AMI) AMI)
Acquisition
Developer City Housing Type Stories % of Total Total GSF Application Date Costs Ingraham Apartments
Hollywood Arts Collective
Hope on Hyde
Single Room Occupancy Housing Co.

Thomas Safran & Associates Development
Hope Street Development Group
Relevant Group LLC
USA Multifamily Development, Inc.

Mercy Housing California
Affirmed Housing Group, Inc.

Community Builders Group, LLC
Decro Corporation
Los Angeles Special Needs
Los Angeles Non-Targeted
Los Angeles Non-Targeted
Los Angeles Special Needs
Los Angeles Seniors
6 7
5 8
5 6
6 7
5 5
6 5
9 7
7 6
6 9
5 9
7 5
5 6
5 6
6 3%
4%
3%
4%
7%
3%
3%
5%
3%
4%
5%
3%
6%
3%
7%
3%
4%
4%
4%
4%
2%
5%
5%
1%
3%
2%
3%
4%
4%
3%
4%
7%
3%
3%
5%
3%
4%
5%
3%
6%
3%
4%
3%
4%
4%
4%
4%
2%
5%
5%
1%
3%
2%
3%
98,350
235,707
35,200
67,218
230,137
71,484
49,627
55,720
71,786
128,017
173,191
112,093
108,353
151,342
115,235
48,229
11/15/2020
1/24/2020
1/24/2020
1/24/2020
1/24/2020
1/24/2020
2/22/2021
1/15/2021
1/15/2021
4/29/2021
4/29/2021
4/23/2021
4/29/2021
4/29/2021
6/19/2020
12/27/2019
12/27/2019
10/30/2019
4/17/2020
4/17/2020
6/16/2021
4/17/2020
4/17/2020
2/22/2021
4/23/2021
4/29/2021
1/15/2021
75%
6%
0%
11%
0%
100%
51%
10%
51%
10%
51%
56%
20%
50%
10%
0%
25%
34%
100%
89%
51%
0%
0%
60%
0%
0%
49%
0%
26%
80%
0%
79%
0%
18%
0%
9%
56%
73%
70%
63%
54%
52%
73%
59%
58%
66%
62%
65%
42%
66%
71%
62%
60%
72%
77%
76%
66%
68%
70%
49%
70%
54%
53%
5%
6%
2%
3%
5%
5%
4%
3%
4%
3%
3%
7%
2%
3%
4%
6%
3%
4%
4%
4%
3%
3%
3%
3%
7%
6%
5%
5th Street PSH 8%
Vintage at Woodman
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
13%
12%
3%
12%
15%
11%
13%
2%
25%
4%
10%
1%
10%
0%
0%
0%
7%
Los Angeles Special Needs
Alhambra
Pasadena
Special Needs
Non-Targeted
23%
10%
49%
10%
49%
44%
32%
31%
62%
31%
30%
26%
66%
42%
49%
16%
33%
57%
20%
32%
0%
Los Angeles Special Needs
Citrus Crossing Meta Development LLC Glendale Seniors
LTSC Community Development Corporation
Clifford Beers Housing
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
Los Angeles Special Needs
Panorama CitySpecial Needs
Los Angeles Special Needs
Los Angeles Special Needs
San Francisco Seniors
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Non-Targeted
San Francisco Special Needs
0%
ABS Properties, Inc 48%
19%
28%
69%
70%
27%
24%
37%
0%
58%
34%
32%
10%
0%
BRIDGE Housing Corporation
Global Premier Development, Inc.

Community Housing Partnership
Mercy Housing California
681 Florida Housing Associates, LP
BRIDGE Housing Corporation
Mission Housing Development Corporation
Tenderloin Neighborhood Development Corporation
BRIDGE Housing Corporation
CORE Winchester, LLC
61,749 0%
126,830
149,306
103,893
44,054
223,386
153,219
45,360
102,468
60,090
73,192
47%
10%
21%
51%
26%
33%
11%
70%
68%
39%
Oakland Non-Targeted
Seniors
Seniors
Special Needs
Special Needs
Special Needs
6%
1%
26%
1%
11%
11%
Santa Clara
Cupertino
Milpitas
Santa Clara
Oakland
Pacific West Communities
Resources for Community Development
Kifer Senior Housing Allied Housing, Inc.

Villa Oakland OakBrook LLC 61%

Project Name Project Development Costs (per Unit) Impact Fees Tax Credit Factor Operating Expenses Total
Permits/Thir Financing Developer
Fees
Soft Cost Development Impact
Fee/Unit
Admin.

Expenses
Property
Mgmt. Fees
Repairs and
A&E Maintenance
$15,359
d-Party Costs Costs Reserves
$11,894
Contingency Cost Impact Fees Federal State
$0.75
Payroll
$1,931
Utilities
$1,221
Insurance
Ingraham Apartments $14,985 $417
$22,448
$12,072
$10,901
$16,100
$52,036
$18,421
$9,622
$20,108
$20,273
$28,922
$21,849
$18,265
$25,504
$18,515
$23,968
$16,473
$34,730
$24,533
$22,471
$41,969
$45,109
$28,208
$60,245
$48,320
$75,144
$37,003
$41,133 $21,488
$19,803
$25,510
$37,005
$33,323
$62,851
$23,913
$27,579
$60,008
$26,188
$11,592
$59,404
$51,091
$98,453
$8,527
$60,091
$46,613
$40,769
$34,238
$41,985
$32,465
$16,460
$36,364
$45,833
$42,703
$43,738
$56,634
$1,653
$5,312
$2,551
$3,187
$3,288
$3,612
$2,263
$2,210
$6,435
$3,937
$1,855
$3,807
$2,500
$3,253
$0
$4,905
$3,522
$5,106
$6,914
$8,948
$12,385
$3,595
$5,107
$5,208
$4,902
$4,000
$2,316
$496,776
$538,176
$393,982
$330,529
$340,932
$635,984
$437,221
$246,440
$571,545
$452,725
$539,364
$565,226
$491,639
$788,655
$344,973
$533,444
$484,317
$701,391
$719,921
$894,565
$806,481
$690,591
$547,668
$752,547
$782,598
$681,612
$499,621
$394,092
$770,650
$510,000
$370,895
$2,116,100
$366,895
$359,421
$873,447
$840,208
$78,605
$1,604,135
$469,422
$0
$461,785
$3,137,045
$250,000
$355,549
$422,247
$0
$3,257 $0.93
$1.00
$0.94
$0.90
$0.90
$0.89
$0.89
$0.89
$0.87
$0.93
$0.97
$0.89
$0.90
$0.96
$0.85
$0.98
$0.99
$1.00
$0.92
$0.96
$0.89
$0.90
$0.89
$0.84
$0.91
$0.89
$0.85
$1,170 $714 $723
$804
$1,250
$1,454
$520
$2,430
$927
$967
$1,043
$1,122
$1,465
$1,811
$709
$1,237
$2,436
$1,636
$1,862
$1,421
$1,717
$1,788
$1,968
$1,333
$1,556
$1,815
$1,856
$1,578
$547
Hollywood Arts Collective
Hope on Hyde
5th Street PSH
Vintage at Woodman
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
Citrus Crossing
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
$17,887
$8,460
$7,790
$40,414
$17,668
$22,327
$25,814
$35,709
$24,998
$13,584
$20,850
$21,377
$41,815
$45,907
$65,585
$59,625
$12,906
$33,171
$30,862
$53,894
$45,422
$64,182
$30,553
$57,743
$35,821
$32,577
$39,228
$40,854
$34,520
$3,573
$7,848
$4,279
$3,315
$15,428
$3,065
$2,676
$12,817
$4,831
$12,826
$6,350
$4,250
$4,881
$4,687
$4,116
$17,060
$4,683
$5,343
$9,255
$23,819
$9,384
$10,569
$6,796
$11,167
$10,230
$3,522
$5,070
$5,204
$2,489
$8,854
$3,903
$3,907
$4,826
$8,662
$619
$8,578
$5,216
$0
$3,913
$12,159
$2,604
$2,435
$3,248
$0
$0.85
$0.91
N/A
$0.75
N/A
$0.71
$0.75
N/A
$0.80
N/A
N/A
$0.71
N/A
$0.79
$0.80
N/A
N/A
N/A
N/A
$0.80
N/A
N/A
N/A
N/A
N/A
$0.90
$553
$1,050
$440
$1,206
$751
$744
$721
$900
$704
$600
$619
$690
$720
$804
$780
$780
$826
$912
$834
$828
$779
$929
$779
$660
$774
$977
$983
$930
$750
$1,776
$2,322
$2,138
$1,548
$5,017
$1,493
$1,768
$2,562
$1,781
$1,702
$2,600
$1,138
$1,525
$1,925
$5,428
$4,320
$4,101
$2,809
$3,227
$8,501
$2,513
$1,267
$711
$901
$750
$263
$300
$255
$210
$904
$435
$387
$8,505
$500
$841
$770
$158
$763
$280
$1,647
$1,096
$349
$1,062
$649
$1,111
$939
$714
$400
$1,012
$0
$1,040
$1,172
$1,141
$1,245
$1,188
$876
$1,028
$1,123
$1,539
$1,708
$1,327
$1,452
$1,783
$1,572
$2,187
$1,920
$1,924
$1,382
$1,476
$903
$11,435
$22,296
$14,147
$7,188
$11,962
$14,912
$20,314
$16,435
$11,195
$18,831
$9,845
$37,987
$14,064
$32,359
$24,207
$32,488
$50,759
$18,601
$24,515
$20,729
$29,529
$24,120
$22,628
$282
$1,233
$1,750
$276
$639
$374
$1,016
$1,087
$484
$1,190
$737
$3,836
$880
$556
$1,690
$537
$1,174
$1,741
$445
$0 $0
$217,509
$1,512,377
$1,094,848
$2,247,646
$2,535,698
$3,000,166
$350,098
$3,453
$8,356
$6,635
$46,826
$24,860
$37,502
$3,685
$321 $1,473
$1,663
$1,300
$84
$3,102
$2,575
$237
$3,020
$3,232
$2,121
Kifer Senior Housing
Villa Oakland $632
Project Name Project Development Costs (per Unit % of Total) Impact Fees Tax Credit Factor Operating Expenses (% of Total) Total
Permits/Thir Financing Developer
Fees
Soft Cost Development Impact
Fee/Unit
Admin.

Expenses
Property
Mgmt. Fees
Repairs and
A&E d-Party Costs Costs Reserves Maintenance
2%
Contingency Cost Impact Fees Federal State
$0.75
Payroll
25%
Utilities Insurance
Ingraham Apartments
Hollywood Arts Collective
Hope on Hyde
3%
3%
2%
2%
3%
4%
3%
3%
2%
3%
4%
3%
2%
2%
3%
7%
3%
5%
3%
4%
6%
3%
4%
3%
4%
4%
5%
3%
4%
3%
3%
5%
8%
4%
4%
4%
4%
5%
4%
4%
3%
5%
4%
3%
5%
3%
3%
5%
7%
5%
8%
6%
11%
7%
8%
8%
4%
7%
8%
6%
6%
6%
4%
5%
8%
8%
13%
8%
4%
6%
6%
8%
6%
7%
4%
8%
7%
4%
5%
6%
7%
4%
4%
6%
11%
10%
10%
5%
11%
10%
6%
0%
1%
1%
1%
1%
1%
1%
1%
1%
1%
0%
1%
1%
0%
0%
1%
1%
1%
1%
1%
2%
1%
1%
1%
1%
1%
0%
100% $394,092 $11,650,141
$770,650 $18,135,625
$510,000 $18,615,000
$0.93
$1.00
$0.94
$0.90
$0.90
$0.89
$0.89
$0.89
$0.87
$0.93
$0.97
$0.89
$0.90
$0.96
$0.85
$0.98
$0.99
$1.00
$0.92
$0.96
$0.89
$0.90
$0.89
$0.84
$0.91
$0.89
$0.85
15% 9% 9%
12%
18%
21%
11%
17%
13%
17%
7%
19%
17%
17%
13%
16%
29%
10%
16%
13%
15%
16%
12%
13%
24%
28%
13%
10%
11%
16%
14%
11%
15%
24%
8%
17%
21%
6%
17%
13%
14%
31%
17%
17%
11%
13%
20%
17%
17%
8%
15%
14%
23%
11%
9%
5%
4%
4%
4%
4%
6%
6%
7%
55%
8%
10%
7%
3%
10%
3%
10%
9%
3%
9%
6%
7%
9%
11%
6%
7%
0%
12%
1%
2%
1%
1%
2%
1%
1%
2%
1%
2%
1%
1%
1%
1%
1%
4%
1%
1%
1%
3%
1%
2%
1%
1%
2%
1%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
$0.85
$0.91
N/A
$0.75
N/A
$0.71
$0.75
N/A
$0.80
N/A
N/A
$0.71
N/A
$0.79
$0.80
N/A
N/A
N/A
N/A
$0.80
N/A
N/A
N/A
N/A
N/A
$0.90
9%
15%
6%
6%
9%
24%
5%
4%
19%
11%
11%
15%
6%
10%
11%
4%
11%
9%
8%
14%
10%
10%
6%
7%
7%
7%
8%
5%
7%
12%
15%
7%
27%
34%
30%
31%
35%
20%
32%
17%
29%
20%
24%
21%
20%
23%
34%
37%
37%
25%
29%
52%
25%
20%
11%
21%
21%
41%
5th Street PSH $370,895 $8,903,969
Vintage at Woodman
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
$2,116,100 $31,670,668
$366,895 $13,961,526
$359,421 $13,974,445
$873,447 $17,261,436
$840,208 $30,983,753
$2,213,938
$1,604,135 $30,684,443
$469,422 $18,656,917
Citrus Crossing $78,605 6%
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
2% 12%
10%
9%
16%
9%
24%
7%
5%
15%
5%
7%
17%
7%
5%
11%
10%
12%
2%
11%
10%
6%
5%
5%
4%
2%
$0 $0
$461,785 $13,998,347
$3,137,045 $43,493,062
$9,315,104
$8,710,951
$422,247 $11,618,289
$250,000
$355,549
$0
$0
$0
$0
$217,509 $12,349,678
$1,512,377 $29,888,246
$1,094,848 $23,734,978
$2,247,646 $167,496,453
$2,535,698 $88,923,448
$3,000,166 $134,144,922
$350,098 $13,182,111
7%
6%
5%
6%
21%
17%
5%
Kifer Senior Housing
Villa Oakland
6%
11% 15% 2%

Project Name Operating Expenses Funding Sources (Total $ Amount) Total
Expenses Deferred
Developer
Fee
Real Estate
Taxes
Resident
Services
Replacement Total Annual Excluding
Reserve OpEx Services
Permanent
Loan
County
Funding
Other
Other OpEx GP Capital City Funding State Funding Funding Total Sources Ingraham Apartments
Hollywood Arts Collective
Hope on Hyde
$417
$197
$0
$101
$86
$53
$109
$0
$119
$78
$53
$111
$85
$17
$56
$52
$61
$38
$131
$38
$75
$11
$24
$179
$268
$38
$534
$579
$230
$0
$503
$75
$1,936
$380
$106
$464
$228
$656
$1,361
$170
$254
$0
$123
$266
$75
$44
$85
$173
$0
$0
$0
$0
$381
$89
$0
$74
$456
$49
$0
$332
$53
$772
$78
$8
$500 $7,793 $7,215 $51,884
$128,289
$116,963
$181,208
$155,858
$24,479
- -
-
-
$0
$118,504
$0
$0
$0
$50,000
$0
$66,658
$0
$0
$0
$103,093
$0
$99,174
$0
$245,444
$232,777
$97,674
$28,649
$0
$0
$0
$0
$0
$0
$75,877
$0
$322,814
$0
$211,864
$122,757
$203,874
$191,666
$0
$50,913 $178,674
$251,081
$440,273
$297,660
$385,998
$413,261
$364,743
$475,699
$228,416
$343,044
$47,617
$249,627
$200,000
$478,724
$228,761
$504,861
$742,318
$383,838
$379,000
$178,005
$386,586
$126,071
$232,188
$497,369
$84,446
$300
$300
$300
$250
$500
$300
$250
$500
$250
$500
$500
$250
$500
$250
$500
$600
$500
$450
$500
$500
$600
$350
$250
$500
$500
$250
$6,497
$6,798
$7,017
$4,950
$14,288
$7,343
$5,542
$15,327
$6,052
$8,458
$10,673
$5,480
$7,668
$8,418
$15,842
$11,757
$11,183
$11,394
$11,145
$16,368
$9,971
$6,456
$6,400
$14,696
$15,147
$5,155
$6,266
$6,798
$6,514
$4,874
$12,352
$6,963
$5,436
$14,863
$5,823
$7,801
$9,312
$5,310
$7,414
$8,418
$15,842
$11,225
$10,313
$10,610
$10,362
$15,567
$9,281
$6,033
$6,150
$12,544
$12,152
$5,155
$4,287
$495
$16,938
-
$41,024
$2,174
$9,162
$34,994
$4,661
-
$1,356
-
$79,809
-
$139,308
-
$23,147
$15,479
$25,954
-
$0
$0
$86,091
$0
$0
$0
$10,496
$0
$210,831
$0
5th Street PSH $13,423
Vintage at Woodman $18,276
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
$1
-
-
-
-
-
$175,000
$77,778
$89,216
$76,087
$0
$80,917
$108,502
$117,335
$127,551
$47,617
Citrus Crossing $0
$0
$0
$0
$0
$0
$0
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
$0
$0
$0
$4,582 $31,627 $108,969
$40,000
$136,364
$0
$160,000
$122,055
$228,761
$120,109
$232,427
$21,431
-
-
-
-
$41,322
$0
$0 $0
$0
$89,653
$142,727
$0
$0
$532
$870
$784
$783
$801
$691
$423
$250
$2,152
$2,995
$0
$35,205 $152,672
$138,122
$0
$100,990
$0
$89,237
$13,812
$0
$2,309
$0
$11,409
$0
$53,830
$0
-
-
-
-
-
-
$192,144
$48,752
$291,892
$106,375
$165,333
$125,000
$50,291
$94,694
$0
$0
$163,389
$0
$0
$0
$0
$0
$0
$0
$0
$8,287
$17,273
-
$12,745
$11,232
$30,486
$0
$0 $49,582
$155,150
$13,021
$0
$24
$139
$2,000
$0
-
$8,389
$2,204
-
Kifer Senior Housing
Villa Oakland
$51,172
$114,428
$0
$250,809
$53,337
$8,688
$117,945
$113,123 $517,533
Project Name Operating Expenses (% of Total) Funding Sources (% of Total) Total
Expenses
Replacement Total Annual Excluding
Reserve OpEx Services
Deferred
Developer
Fee
Real Estate
Taxes
Resident
Services
Permanent
Loan
County
Funding
Other
Other OpEx Funding
2%
GP Capital City Funding State Funding Total Sources
Ingraham Apartments
Hollywood Arts Collective
Hope on Hyde
5%
3%
0%
1%
2%
0%
1%
0%
1%
1%
1%
1%
2%
0%
1%
0%
1%
0%
1%
0%
0%
0%
0%
3%
2%
0%
10%
7% 6%
5%
4%
4%
5%
3%
4%
5%
3%
4%
6%
5%
5%
7%
3%
3%
5%
4%
4%
4%
3%
6%
5%
4%
3%
3%
5%
100% 93% 29%
51%
27%
61%
40%
6%
22%
23%
51%
37%
100%
2%
80%
25%
100%
24%
31%
6%
51%
27%
76%
84%
71%
25%
60%
43%
22%
0%
2%
0%
6%
0%
10%
1%
2%
15%
1%
0%
1%
0%
17%
0%
28%
0%
6%
4%
15%
0%
7%
0%
0%
0%
5%
5%
0%
0%
0%
0%
0%
0%
13%
0%
0%
0%
0%
5%
0%
0%
0%
0%
0%
0%
0%
10%
2%
0%
0%
47%
0%
0%
0%
12%
0%
14%
0%
0%
0%
41%
0%
21%
0%
49%
31%
25%
8%
0%
24%
0%
0%
33%
0%
0%
0%
0%
0%
0%
42%
0%
73%
0%
55%
30%
56%
40%
0%
0%
0%
0%
0%
0%
0%
0%
21%
36%
0%
57%
0%
28%
0%
0%
29%
0%
0%
0%
2%
0%
61%
0%
44%
20%
28%
0%
0%
12%
4%
0%
1%
0%
9%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
4%
0%
7%
2%
14%
5%
2%
3%
4%
8%
13%
3%
3%
0%
0%
5%
8%
7%
7%
5%
7%
7%
4%
15%
20%
0%
4%
1%
1%
2%
1%
0%
0%
0%
0%
5%
1%
0%
1%
5%
0%
0%
3%
0%
7%
0%
0%
0%
0%
1%
13%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
96%
100%
93%
98%
86%
95%
98%
97%
96%
92%
87%
97%
97%
100%
100%
95%
92%
93%
93%
95%
93%
93%
96%
85%
80%
100%
5th Street PSH
Vintage at Woodman
6th and San Julian
Nadeau
Pasadena Studios
Brine Residential
42%
21%
19%
33%
Citrus Crossing 0%
Santa Monica & Vermont Apartments
Corazon del Valle II
Residency at the Entrepreneur
Vermont Manchester Family
Ocena Views
53 Colton
833 Bryant Apartments
681 Florida Street
4840 Mission Street
Balboa Park Upper Yard
78 Haight Street
Fruitvale Transit Village Phase 11B
Agrihood Senior Apts
Westport Cupertino
Sango Court
0%
0%
0%
9%
0%
0%
0%
23%
38%
0%
0%
0%
0%
0%
0%
0%
0%
0%
7%
0%
15%
10%
6%
21%
31%
15%
0%
0%
11%
0%
45%
2%
Kifer Senior Housing
Villa Oakland
0%
48% 22%

Report on the
Cost of Residential Development
City Council Study Session
November 1, 2022
Jerad Ferguson, Housing Catalyst, Office of Economic Development and Cultural Affairs Nanci Klein, Director, Office of Economic Development and Cultural Affairs Jacky Morales-Ferrand, Director, Housing Department
Rachel VanderVeen, Deputy Director, Housing Department
Chris Burton, Director, Department of Planning, Building and Code Enforcement Rosalynn Hughey, Deputy City Manager

Background
2 2018
• First Cost of Development Report
• Council Study Session
• Housing Crisis Work Plan Adopted
2019
• Second Cost of Development Report
• First Cost of Affordable Analysis
2022
2020
• Planned update to Report
• Delayed due to COVID-19 pandemic
• Third Cost of Development
Report

Why?
Important tool to understand
barriers to new housing
construction
Factors within City control
• Impact Fees
• Taxes
• Permitting
Factors outside City control
• Cost of Construction
• Interest Rates
• Supply Chain
Regular Updates
• Inform policy decisions
• Understand trends Page 425 of 460
4 Rental Conceptual Prototypes
Low-rise Mid-rise High-rise
7 stories
Density: 90 DU/AC
Avg. Unit Size: 900 sf.

Parking Ratio: 1.0
Submarkets: Central,
West, North
22 stories
Density: 350 DU/AC
Avg. Unit Size: 900 sf.

Parking Ratio: 0.8
Submarkets: Downtown,
Central, West, North
5 stories
Density: 65 DU/AC
Avg. Unit Size: 900 sf.

Parking Ratio: 1.0
Submarkets:

Central, South & East

5 Residual Land Value
Hard
Costs
Soft Costs
Profit
Residual
Land Value
Total Cost to Build

Feasibility Study Results – Residual Land Values Per Unit 6 Rental Prototypes /
Location
Low-Rise
(5 stories)
Mid-Rise
(7 stories)
High-Rise
(22 stories)
Central ($270,000) ($350,000) ($510,000)
West ($230,000) ($390,000)
Downtown ($440,000)
North ($320,000) ($490,000)
South and East ($272,000)
For Sale Prototypes /
Location
Low-Rise
(5 stories)
High-Rise
(22 stories)
South and East ($410,000)
Central and West ($320,000)
Downtown ($520,000)
• No prototype was shown
to be feasible
• All values negative
• Extremely challenging
market conditions for
multi-family housing

7 San José Overview
2020
The Taft
(477 S. Market St.) 130 units
Sparta505
(505 E. Santa Clara St.) 77 units
2021 Winchester Ranch
(585 S. Winchester Blvd.) 366 units
2022 Bascom Station
(1350 S. Bascom Ave.) 590 units
1,163 units

8 San José Overview
1187 1155
2167
2389
1097
207
366
590
0 500
1000
1500
2000
2500
2015 2016 2017 2018 2019 2020 2021 2022
Market-Rate Multifamily Development 50+ Units | 2015-2022 Units Obtaining Building Permits Page 430 of 460
Cost of Construction
9 • Cost of construction most
significant barrier to
housing
• 17% increase in Bay Area
since start of pandemic to
Q2 2022
$557,000 $580,900
$779,000
$400,000
$450,000
$500,000
$550,000
$600,000
$650,000
$700,000
$750,000
$800,000
2018 2019 2022
7-STORY MID-RISE
COST PER UNIT IN WEST SAN JOSÉ