Item No. 7
Town of Atherton
CITY COUNCIL STAFF REPORT – PUBLIC HEARING
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: BRITTANY BENDIX, CONSULTING TOWN PLANNER
DATE: MARCH 18, 2026
SUBJECT: RESOLUTION TO ADOPT AN INCLUSIONARY HOUSING FEE RECOMMENDATION:
Staff recommends that the City Council adopt the attached resolution to establish an inclusionary housing fee consistent with the Town’s Inclusionary Housing program and the certified Atherton 2023-2031 Housing Element.
BACKGROUND
Since January 2025 the Town has held numerous public study sessions and hearings to discuss and consider recommendations for the Town’s inclusionary housing program and to provide feedback to staff. An Inclusionary Housing Ordinance (IHO) is a policy tool that the Town included in the 2023-2031 Housing Element update to ensure that new multifamily development will contribute to meeting state-mandated affordable housing requirements.
At a City Council meeting on January 21, 2026, the Council discussed various components of a local inclusionary housing program, including the structure and application of an Inclusionary Housing In-Lieu fee. The application of an in-lieu fee is supported by an analysis prepared by BAE, Inc. and is provided at Attachment 1. The analysis was also introduced and discussed at the January 8, 2025 joint study session. The Council considered the analysis and evaluated three approaches to setting fees. On February 18, 2026, the Council adopted the Inclusionary Housing Ordinance, which identified the “point of indifference” calculation method as the upper limit used to set fees. The corresponding resolution that adopts the fee is the focus of this report.
ANALYSIS
Using the “point of indifference” methodology as the upper limit facilitated the Council’s preference, as stated at their January 21, 2026 meeting, to adopt the in-lieu fee structure of $150 per square foot of net residential development for rental developments and $200 per square foot March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction
of net residential development for ownership developments. The alternative methodologies provided by the BAE analysis generated fees that are below Council’s direction.
For reference, the summary of the BAE analysis shared with the Council at their January 21, 2026 meeting, is provided in Table 1. Prototype 1 reflects rental multifamily housing within the RM20/40 districts. Prototypes 2 and 3 reflect rental or ownership housing options within the RM-10 district. Prototype 4 is not applicable as the adopted Inclusionary Housing Program does not include single-family development. Each fee represents an amount that would be assessed based on the product type (rental vs. ownership) and applied per net residential square foot. - Nexus Basis: The nexus analysis estimates the amount that the Town would need to charge in in-lieu fees to make the amount of the fee payment commensurate with the revenue needed to address the estimated affordable housing need associated with the construction of new market-rate development. This approach includes a financial feasibility analysis to determine how the fees would impact development feasibility. - Cost of Construction: This approach analyzes setting in-lieu fees to cover the full cost of constructing an affordable unit. This scenario supports off-site construction of affordable units.
- Point of Indifference: This approach approximates the cost of affordable units within a market-rate project. In this scenario the fee is set to incentivize development of on-site construction.
Table 1: BAE Summary of In-Lieu Fee Analysis
At the January 21, 2026 meeting, the Council sought to simplify the fee and the characterization of the housing types. Prototypes 1 and 2 were discussed as a “rental” category and Prototype 3 as an “owner” category. Additionally, the Council preferred reducing the fee amounts in the Point of Indifference analysis to simpler values, which resulted in the $150 and $200 per square foot assessments for rental and ownership projects, respectively. The draft resolution provided at Attachment 2 reflects these amounts.
As a reminder, the Inclusionary Housing Ordinance does provide a structure by which the fee will be managed and updated. Most frequently, the fee will be applied to fractional units that result from requirements on multifamily development. However, applicants can request Council Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
In-Lieu Fee Findings
Development
Typology
Multifamily
Apartments
Townhouses Townhouses Single Family +
ADU
Nexus Basis $29 $26 $31 $50
Cost of
Construction
$91 $159 $125 $29
Point of
Indifference
$154 $156 $212 $69
March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction
approval to meet their entire affordability requirement through an in-lieu fee payment. Payments of the fee will be deposited into the Town’s affordable housing fund and expended exclusively to provide affordable housing consistent with the Town’s Housing Element and for the administration and compliance monitoring of the Town’s inclusionary housing program. Every four years the Town will review its in-lieu fees to determine how much it has collected and identify projects for uses for which the fees will be made. The Town will also review and update the in-lieu fee feasibility analysis every 8 years, with a specific effort to align this cycle with the housing element cycle.
FINDINGS:
The proposed Resolution is consistent with the Town’s General Plan goals, policies, and implementation programs, as identified below:
Housing Element Goal 3.730 Facilitate the development of faculty and student housing on school campuses to meet a portion of the moderate and very low-income housing need identified for Atherton.
Housing Element Goal 3.760 Encourage special consideration to the maintenance and expansion of housing opportunities for handicapped and
low- and moderate-income homeless persons.
Housing Element Objective 3.761 B. Support the conservation and development of affordable housing for citizens of modest means.
Housing Element Policy 3.795 B. The Town shall continue to encourage the production and availability of more affordable housing through the development of new accessory dwelling units, and
private and public-school faculty and student housing.
Housing Element Goal 3.770 Meet the needs of seniors, in light of the pending growth of this population in San Mateo County.
Housing Element Policy 3.772 B. Support the conservation and development of affordable housing for seniors with lower incomes.
Program 3.814 Adoption of an
Inclusionary Zoning Ordinance
Adopt a new inclusionary ordinance for multifamily
development and a housing fee for all new single-family housing construction and additions. Generate funds to
support an affordable ADU rental program (Program
3.812(B)) and other affordable housing opportunities.
CONCLUSION:
Staff recommends that the City Council adopt a resolution to establish an inclusionary housing fee consistent with the Town’s Inclusionary Housing program and the certified Atherton 2023-2031 Housing Element.
FISCAL IMPACT:
March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction
The cost associated with the preparation of the draft Resolution is included within the annual Planning Department budget. The cost to implement the Resolution will be paid for by the applicants of related development projects.
ENVIRONMENTAL IMPACT:
The project is Categorically Exemption per Section 15061(b)(3) of the California Environmental Quality Act (“CEQA”) Guidelines because CEQA applies only to projects that have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that this resolution and the inclusionary housing in-lieu fee it establishes creates changes in the physical environment, or results in any changes to the General Plan or Implementing Zoning Ordinance land use policies, and any development that occurs in the future that is subject to such policies will undergo an independent analysis pursuant to the requirements of CEQA.
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. Legal advertisement of this hearing was published in The Almanac newspaper. Notice of this hearing was also mailed to all property owners within the Town. 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 District, service providers (water, power, and sewer), and regional elected officials.
FORMAL MOTION:
I move that the City Council adopt the Inclusionary Housing Fee Resolution based on reasons outlined in the Staff Report.
/s/Brittany Bendix
Brittany Bendix, Town Planner
Attachments:
1. Inclusionary Housing and In-Lieu Fee Analysis
2. https://atherton.primegov.com/portal/item?id=2370Draft Inclusionary Housing Fee Resolution